Rowntree: Banging the drum for songwriters
The Competition Appeal Tribunal (CAT) is “alert” to the possibility that revenue streams are the priority for lawyers and funders where they, rather than the claimants, initiate class actions.
It made the comments [1] in granting summary judgment and striking out a collective action fronted by Blur drummer and qualified solicitor Dave Rowntree.
The CAT noted that his lawyers and funder could well receive more of the damages than the class itself.
Mr Rowntree sought approval as the proposed class representative (PCR) to bring an opt-out collective proceedings action against the Performing Right Society (PRS) over the way it distributes so-called Black Box royalties – those which cannot be matched with the songwriter or publisher because of inaccurate or insufficient information.
In particular, he complains that publisher members of the society receive a share of these royalties when they should be going to songwriter members.
The CAT, chaired by Justin Turner KC, noted that no reasons were advanced to support the contention that the members of the class (all songwriter members of the PRS) were “owed” this money – the only people owed it were those whose work was performed and could not be identified.
Similarly, it was not coherently explained why it was unfair and abusive not to pay the class these royalties, or a greater proportion of them.
“Just because one manner of distribution might be considered preferable to another does not of itself mean exercising a choice is unfair or abusive,” the CAT ruled, granting the applications for summary judgment and strike-out, and refusing to certify the claim.
It additionally refused to certify the claim because the PCR had not identified “a plausible approach” to how he might estimate the sums that should be paid to writer members on a counterfactual of how the royalties should have been distributed.
The CAT had further concerns over the proportionality of the claim. Mr Rowntree’s legal costs were estimated at a little under £18m.
He is backed by litigation funder LCM and under the terms of the litigation funding agreement (LFA) it would likely receive a return of between 4.5 and 6.5 times its investment, plus compound interest, which the PRS argued would be excessive.
The CAT said it could not determine “the appropriateness of a funder’s fee of this magnitude” at the certification stage but that it was “part of the background which needs to be considered when assessing overall the costs-benefit of the proceedings”.
It added: “We are alert to the fact that where preparation of class actions are initiated by lawyers, rather than members of the class – as in this case – it may be that it is the revenue stream to the lawyers and the funder which is the principal incentive to the pursuit of these proceedings rather than the benefits to the class.”
The CAT was hindered by Mr Rowntree’s inability to give a figure for the damages – despite the case having been adjourned earlier this year for that purpose – and said a further concern was that, if the claim succeeded, the PRS might only be able to pay costs and damages by diverting its revenues away from its members.
“The central problem is that the class is, in a manner of speaking, suing itself,” it said, saying the tribunal “remain doubtful that the cost-benefit of these proceedings favours certification”.
“It is in reasonable contemplation that at the end of these proceedings, even if the claim is successful the principal beneficiaries may be the legal advisors and LCM and not the class. The agreement reached under the LFA is to pay a funder’s fee which might reasonably be expected to be as much as, or more than, sums awarded in damages.
“We recognise we will have the power not to authorise those payments but the PCR, having agreed them and having agreed he will seek payment of those sums, means they form part of the overall picture.”
The CAT was critical of the class members’ failure to find alternative ways of resolving the dispute, such as by making representations to the PRS, while Mr Rowntree’s original solicitors, Maitland Walker, told the PRS in 2022 that “we do not consider that any formal mediation or ADR is appropriate”.
The ruling said: “This approach was unfortunate and not in the interest of the class. It is in reasonable contemplation that there was scope for formulating alternative ways of distributing Black Box royalties which might benefit the class more than spending these eye-watering sums on lawyers and funders.”
The CAT did find Mr Rowntree was an appropriate PCR, had the claim gone forward, while noting that he had changed solicitors earlier this year, to Wilkie Farr & Gallagher, without consulting the advisory committee set up for the claim.
“A decision of this strategic importance is precisely the sort of area in respect of which the input of an experienced advisory committee might have been helpful and it would have been preferable if its input had been sought. Mr Rowntree’s view was that it was obvious to him that he should change solicitors and that he did not need to consult on this topic.”
The CAT earlier refused Mr Rowntree’s application to adjourn the hearing so that his new solicitors could propose amendments to the application.
Wilkie Farr had time to read into the case and the adjournment application did not provide “substantive reasons” as why it was needed, it said.