CAT rebukes City law firms for going around class action representative


Smith: CAT president chaired panel

Two City law firms acting for the defendants in a £150m class action have been rebuked by the Competition Appeal Tribunal (CAT) for writing directly to class members.

The CAT said this was “not proper conduct” on the part of Steptoe & Johnson and Baker Botts, US firms operating in London.

The panel, led by CAT president Sir Marcus Smith, said that, despite assurances from the solicitors that they would not do it again, it would issue an order preventing any further correspondence “as an indication of our views of the conduct of the respondents”.

The claim, headed by Mark McLaren, a member of the Legal Services Consumer Panel, alleges that a cartel operated by five shipping companies led to increased delivery costs for car buyers.

The CAT granted an opt-out collective proceedings order and named Mr McLaren as the class representative.

There are 11 defendant companies in all, and CAT recorded how Steptoe and Baker Botts – acting for one and six of the defendants respectively – sent letters on behalf of 10 of the defendants to various large business purchasers of vehicles.

The letters warned that, if the recipients did not opt out, they would “likely” face an application for disclosure, which “could involve a commitment of time, effort and cost”.

They warned: “Any obligation to search for and disclose documents would not be confined to documents in the public domain, and would extend to finding and disclosing documents which are confidential.”

The letters suggested that companies which did not intend to opt out “should take legal advice as to its duties to preserve relevant documents and to exclude them from routine document destruction processes”.

Following an urgent application from the claimant to prevent any further correspondence, the CAT held there was a restriction “inherent” in the CAT rules that precluded defendants from communicating with class members, including when the application for a collective proceedings order was being sought.

The CAT said any concerns about disclosure should have been raised with it and/or Mr McLaren, although it acknowledged that the letters were at least copied to his solicitors, Scott+Scott.

If direct communication with class members was necessary or desirable to obtain evidence, “that is a process that should be conducted under the overall supervision of the tribunal and not as a litigation ‘free for all’”.

The panel rejected an argument based on the defendants’ article 10 right to freedom of expression, saying a requirement that their lawyers only communicate with the class representative could not be “sensibly be attacked on article 10 grounds”.

The CAT disagreed with the defendants’ description of the letters as “conspicuously fair”.

While “deliberately and carefully couched” so as to suggest a disclosure application was only likely, the letters’ “overwhelming tenor… was that if they did not opt-out they would be likely to become involved in a time-consuming and expensive disclosure process: a process, we might add, that this tribunal had not ordered”.

The CAT went on: “Furthermore, in advising these potential class members to take legal advice, the defendants in effect envisaged that they would expend at least either time or money – or both – in doing so.

“The content of the letters, therefore, cut across and undermined the potential benefits of collective proceedings, at least for these particular class members and potentially for all class members if and in so far as it influenced the potential make-up of the class.

“Even if we were wrong in our construction of the rules, therefore, in our view the terms of the letters were such that they should plainly not have been written.”

In a postscript, the panel made clear its view that the obligation not to communicate with class members did not inhibit defendants to collective proceedings from properly exercising their rights of defence.

We have approached both Steptoe & Johnson and Baker Botts for comment.




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