Class Actions 101: An Introduction to UK Collective Actions and How They Differ from US Class Actions

• Opt-In actions require “would-be class members” to take proactive steps to be included in the class. Opt-in actions have historically been the most common type of UK class actions.

• Opt-out actions are where a claim can be brought on behalf of a defined group without identifying all of the individual claimants or obtaining their authorisation. Opt-out actions are available albeit only for breach of competition law at present. The members of a class in opt-out actions are, by nature, larger than opt-in.

• Another available opt-out action is the Representative Action procedure. It dates back hundreds of years, but to-date has rarely been used. The UK Supreme Court’s decision in Lloyd v Google [2021] UKSC 50 has lowered the threshold imposed for Representative Actions.

• In the UK, opt-in class actions are more developed than opt-out.
• In the U.S., both types of class actions (and, in some instances, mandatory participation classes) exist though claims for monetary damages most commonly proceed on an opt-out basis.
• This fundamental structural distinction with the U.S. model is beginning to become blurred, and we expect UK claimant lawyers and funders to explore innovative ways of structuring litigation to increase the class size and therefore aggregate value of claims. The Court of Appeal’s decision of July 25, 2023 in Evans v Barclays Bank PLC & Ors will likely make it easier for opt-out collective actions in the UK’s CAT to proceed.

OPT-IN

• Obtaining a GLO: A claimant or defendant may apply for a GLO at any time or this may be directed by the court’s own initiative.
• Group members each issue their own claim and the court may grant a GLO if the claims “give rise to common or related issues of fact or law.”
• The court will then set up a Group Register that lists the claims that are subject to the GLO. Judgments and rulings concerning common issues (GLO issues) are binding on all claims subject to the GLO.
• No class representative to represent interests of all in the same class, albeit the court may select test cases to try and encourage efficiencies amongst the group.
  

OPT-OUT (competition collective actions)

• Exclusive jurisdiction of the CAT.
• A proposed representative will attend an approval hearing and apply for a CPO.
• Requires a class certification through the granting of a CPO by the CAT based on 3 criteria: an identifiable class, common issues and suitability.
• Following Merricks v Mastercard, the “Suitability Criterion” requires a relative assessment, to consider whether the claims are more suitable for collective rather than individual action.
• Group members each issue their own claim and the court may grant a GLO if the claims “give rise to common or related issues of fact or law.”
• The court will then set up a Group Register that lists the claims that are subject to the GLO. Judgments and rulings concerning common issues (GLO issues) are binding on all claims subject to the GLO.
• No class representative to represent interests of all in the same class, albeit the court may select test cases to try and encourage efficiencies amongst the group.

OPT-IN

• The UK does not have class representatives in the case of GLOs.
• In the U.S., named class representatives represent the interests of all members of the class in collective proceedings, assuming they meet the requirements for class certification.
• In the U.S., many class actions are litigated in federal courts, though it depends on subject matter and other issues. In the UK, GLOs may be filed with both the County Court or the High Court.

OPT-OUT

• Given the recency (2020) of the opt-out concept, there is limited caselaw on such actions in the UK, compared to the greater availability of caselaw in the U.S..
• Opt-out procedures in the U.S. carry a lower threshold to certify when compared to the UK and permit a prolonged discovery process to determine whether a class can be certified. In hearing early disclosure applications in the UK, courts will not tolerate “fishing expeditions” to establish whether or not the claimants have a good and arguable case or not. That said, the UK courts have demonstrated some flexibility as regards to disclosure at an early stage. For example, in the phone hacking group litigation, Mann J gave directions for an early disclosure regime under which a claimant, on issuing a claim, was entitled to disclosure of data in respect of calls made to the claimant’s mobile telephone and to certain of their associates. The aim was to enable each claimant to assess the level of potential phone hacking at an early stage.

• Damages and injunctions are available for claims brought under the opt-in mechanisms and for representative actions.
• Damages are generally calculated on a compensatory basis.
  Restitutionary damages or an account of profits can be used where appropriate.
• For CPOs, the CAT can make an aggregate award of damages to be calculated on a class-wide basis.
• In principle, exemplary damages are available in English law. They are not available for claims under the CPO regime.
  

• The scope of damages available in the UK is narrower compared to the U.S.
• Whilst punitive and exemplary damages are available in the UK, these are very rare in practice.
• GLOs may allow individualized proceedings for damages, however these are less common than in the U.S. where individualized damages may be determined late in the litigation.
  

• There are no requirements for court approval of settlements of opt-in claims (save that, if the opt-in claim is made in the CAT, the class representative cannot settle the proceedings prior to the deadline for class members to opt-in to the proceedings unless court approval is obtained). Each claimant can make its own decisions in respect to settlement.
• For opt-out CPO claims, settlements must be approved by the CAT in the form of a “collective settlement approval order.” The CAT will only make such an order where it is satisfied that the terms of collective settlement are “just and reasonable” taking account of all relevant circumstances set out under the CAT rules.
• Representative Actions allows for a claim to be begun by or against one or more persons as representatives of any others who have the “same interest” in the claim. Those represented are not joined as parties. In settlement of such actions, the court’s approval is required and will only provide such approval if it is “satisfied that the settlement is for the benefit of all the represented persons”. CPR 19.9(5) and (6).

• In the UK opt-in actions, settlement does not require approval from the courts, unlike in the U.S., where the general requirement to approve class settlements is a protracted process and must follow the rules set out in Fed R Civ P 23(e)(2).

• OPT-IN: No territorial restrictions to who may be group members
• OPT-OUT: court’s jurisdiction restricted to persons domiciled in the UK, but persons domiciled elsewhere may opt-in to such a claim.

• In the UK, personal jurisdiction will not be a ground for dismissing a claim, unlike in the U.S. where it can be a basis to eliminate a class action or narrow its scope.
• Subject-matter jurisdiction is a ground for dismissing a claim both in the UK and the U.S.

• OPT-IN: No special rule for disclosure in collective actions.
• OPT-OUT: The CAT has the power to make an order requiring members of the class to give disclosure.

• Disclosure in the UK is more limited and less adversarial than discovery in the U.S.. Depositions and declarations, available in the U.S., do not exist in the UK.
• Procedure regarding witnesses is more closely controlled in the UK, there is a ban on any sort of “witness coaching” and stricter safeguards are in place regarding witness statements than those in the U.S..

• OPT-IN: No special rule.
• OPT-OUT: appeals are only available on a point of law as to the award of damages or the grant of an injunction. Other decisions of the CAT can be challenged by judicial review. A decision to refuse a CPO in an application that sought aggregate damages is a decision relating to the “award of damages” over which the Court of Appeal had jurisdiction to hear an appeal.
  

• In both jurisdictions, a party does not have an automatic right to appeal, judicial permission must be granted to allow an appeal.
• In the U.S., trial courts are given discretion to grant or deny class certification; however, they are subject to judicial review either immediately or at the end of the case.

• UK courts have the discretion to apply costs shifting mechanisms ordering the losing party to pay some of the winning party’s fees.
• OPT-IN: all claimants bear direct the adverse costs risk.
• OPT-OUT: the adverse costs risk is primarily borne by the representative.
• Litigation funding. On July 26, 2023, the Supreme Court handed down a judgment in PACCAR v. CAT which precludes opt-out collective actions from being funded by litigation funding agreements which provide for a reward-based return. As for opt-in claims, litigation funding agreements must now comply with the formal requirements of the Damages-Based Agreements Regulations 2013. In order to comply, such agreements will need to have a return based on a multiple of costs provided by the funder rather than a return based on a percentage of a damages award.

• Costs rules differ between the UK and U.S.
• In the U.S., each party will pay their own respective costs—though plaintiffs benefit from many fee-shifting statutes that can be implicated in class actions, and practically, very few class action settlements and judgments against defendants do not involve payment of plaintiffs’ counsels’ fees.
• Third-party funding is more mainstream in the UK than in the U.S. since it is rare that plaintiffs or their counsel would be made to pay a defendants’ fees.