Board Priorities 2024: Class actions
11 January 2024
Class actions enable large number of claimants to bring claims raising the same or similar issues against defendants. England, in common with a number of other jurisdictions, has witnessed a significant growth in class actions in recent years - over £100 billion is currently being claimed against defendants in class actions in the UK alone. Customers, investors and activists are increasingly scrutinising corporate behaviour, particularly in relation to ESG, and are willing to pursue class actions in order to obtain recompense and/or seek to hold corporates to account. The growth in litigation funding and specialist claimant law firms has also contributed to the increase in class actions.
Importantly, in some circumstances, class actions can be pursued on an 'opt-out' basis. These are claims brought on behalf of a defined group or class without identifying all of the claimants or obtaining their authorisation. For example, the class might be defined as 'all persons who subscribed for shares in reliance on the prospectus issued by ABC plc' or 'all persons who suffered loss as a consequence of the cyber-attack on ABC plc'. Essentially, anyone who falls within the group is included in the claim unless they specifically opt out.
Boards need to be aware of the significant reputational and financial consequences of class actions, particularly following a major event such as a cyber-attack or product recall. Claimant law firms also often scrutinise decisions or investigations by regulators in order to identify the basis for a class action. Boards would be well-advised to undertake a risk analysis by reference to the trends in ongoing class actions in the industry in which they are operating. Finally, Boards should also consider whether there are potential or ongoing class actions which give rise to claims that they could pursue, for example following the discovery of a cartel in their supply chain.