Class action representative “too reliant” on her lawyers


Riefa: Academic did not show sufficient understanding

The Competition Appeal Tribunal (CAT) has refused to certify a £500m collective action because the proposed class representative (PCR) was insufficiently independent of her solicitors and funder.

It is the first collective action to be refused certification outright, without the class representative being afforded an opportunity to reformulate the application and seek fresh approval.

The CAT said: “A class representative is not, and cannot be, merely a figurehead for a set of proceedings being conducted by their legal representatives, but must act as the independent advocate for the class.”

Professor Christine Riefa, a consumer law expert who teaches at Reading University, failed to show she would ensure the proceedings were conducted in the best interests of the class, it held.

The claim alleges a secret deal that saw Amazon restrict sales of popular Apple products by independent merchants on Amazon marketplace. In return, it says Apple offered Amazon preferential wholesale prices on all Apple and Beats products, which it could sell directly to customers itself.

The claim arose from an approach by Dr Chris Pike, an economist at Fideres Partners, to leading class action law firm Hausfeld & Co, which in turn instructed disputes finance firm Exton Advisors and signed heads of terms with funder Asertis. Asertis has committed £17m to fund the claim.

Hausfeld then approached Prof Riefa to act as the PCR, through a specially created company of which she is the sole director. Dr Pike is her expert.

Asertis has agreed to pay her paid £180 an hour, up to a maximum of £800 a day, for her work on the claim.

The CAT said its “overall impression” from an earlier hearing in July was that Prof Riefa was “extremely reliant on her legal advisers”.

It explained: “We were not convinced that she had properly understood the arrangements into which the PCR had entered on behalf of the proposed class members, and we were concerned about her ability to protect the interests of the class robustly and independently.”

The evidence submitted ahead of the certification hearing in September “did little to mitigate” these concerns, the tribunal said, nor did her oral evidence.

“Throughout her cross-examination, we found Prof Riefa to be hesitant and uncertain in her answers. Overall, she did not demonstrate that she had a strong understanding of the arrangements she had entered into on behalf of the PCR.”

To be authorised as the class representative, she had to show she had “a clear view of the interests of the class and can engage robustly and independently with advice received”.

This required “at the very least” a good understanding of the effect of the terms being offered and the overall context in which it was being advised, “including the position of its legal advisers [acting under a conditional fee agreement], and the risks of any conflicts of interest arising from that position”.

The CAT went on: “In our view, the evidence of Prof Riefa falls well short of demonstrating a good understanding of either of those things.”

Prof Riefa said she was prepared to appoint a consultative panel, which many class representatives have (indeed, she serves on one herself for another collective action), and that she had identified one potential member. But the CAT said it was “much too late” to suggest this – it would need to see full details of the panel prior to the hearing.

While both Amazon and Apple challenged the potential return to Asertis of 5.75x the drawn funds as “manifestly excessive”, the CAT said it was reluctant to venture into an assessment of the commercial terms of the LFA unless they were “sufficiently extreme to warrant calling out” – which here they were not, especially given evidence of the uncertainty in the market following the Supreme Court’s PACCAR ruling.

But it remained unsure about two key provisions in the LFA, including that, in the event of success, Prof Riefa would be obliged to apply for Asertis to be paid in priority to the distribution of damages where “appropriate in all the circumstances”.

These concerns were exacerbated by Asertis requiring the LFA to remain confidential. Although it had waived confidentiality in relation to two key clauses, “we can see no justification in withholding any of the terms of the LFA from the scrutiny of the public and in particular the potential class members”, the CAT said.

“In an opt-out class action it is crucial that sufficient information is made available to the class members, so as to enable each of them to make an informed decision about whether to opt out.

“The tribunal was struck by the fact that Prof Riefa has only engaged with the confidentiality issue in terms of the need to respond to the tribunal’s concerns. She is clearly alive to the interests of the funder. She does not, however, appear to have considered sufficiently where the interests of the class members lie.”

The CAT said it did “not wish to be harsh to Prof Riefa, who is no doubt an accomplished scholar in her field”, and said it appear it was “quite common” for a PCR to become involved after solicitors have found a funder.

“The tribunal does not criticise this, but the case does underline the importance of the process by which those promoting the proceedings identify and recruit the PCR.”

In a statement, Hausfeld said: “We are disappointed by the ruling but it is important to note that this judgment does not criticise the substance of the case against Apple and Amazon.

“We are carefully reviewing the tribunal’s reasoning and reserve further comment as we examine our options.”




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