Merricks: Fair and just outcome
The Competition Appeal Tribunal yesterday described the £200m settlement of the landmark opt-out collective action brought against Mastercard as “very far from a success for a class of some 44m claimants”.
Outlining the details of the deal it approved in February, the CAT decided that funder Innsworth – which had opposed the settlement – should receive a profit of 50% on the approximately £46m it will have spent on the case, ie, a further £23m or so.
While Innsworth has so far paid around £40m in costs and funding, certain future costs are still to be determined and the CAT appointed Andrew Gordon-Saker, who retired last autumn as Senior Costs Judge, as an independent adjudicator of them.
The claim was originally valued at £14bn but the ruling recounts how Mr Merricks first offered to settle for £985m in the wake of adverse decisions. Mastercard’s counter was not disclosed in the ruling but was less than the £200m eventually agreed.
The first £100m will be for consumers, who will have six months to claim – the CAT disagreed with the proposal to give class members only three months.
If the expected 5% of claimants (2.5m people) come forward, then they will receive £45 each. Should there be fewer, payments will be capped at £70 each to ensure their recovery is not “excessive”. Any sums unclaimed from this £100m will go to the Access to Justice Foundation.
The second tranche of money will go to repay Innsworth the sums it has spent on the litigation; though the figure is not certain yet, the CAT said it “may well exceed” Mr Merricks’ estimate of £45.6m.
The remaining cash will pay, in order, for: the relatively small other costs and expenses of Mr Merricks for which Innsworth is not responsible; Innsworth’s 50% profit; supplementing the £100m in the event that more than 5% of the class submit claims so that they can receive £45 (or less, depending on how many claim); and then, if any is left, a donation to the Access to Justice Foundation.
The CAT was required to consider whether the terms of the settlement were ‘just and reasonable’ – to the class members, it clarified, rejecting Innsworth’s claim that it should apply to all stakeholders, including the funder.
In the context of how the claim developed, £200m was “well within the reasonable range” of outcomes, plus Mastercard was waiving costs Mr Merricks owed following various hearings, which could be worth up to £6.8m.
The CAT said there were “sound reasons” for Mr Merricks to decide that the settlement was in the best interests of the class – a decision he made before asking for and receiving an indemnity from Mastercard worth up to £10m for the arbitration Innsworth had triggered with him over the settlement.
The CAT found that the indemnity, “in the unusual circumstances of this case, does not in any way impugn our view of the settlement”.
Under the litigation funding agreement (LFA), a spend of £40m should have triggered a return to Innsworth of £520m.
The CAT rejected its submission that the LFA specified an “agreed minimum return” of £179m, saying this only applied to a termination provision.
“It is appropriate to note that there may be a difference in perspective as between a class representative and a funder,” the CAT said.
“A commercial litigation funder has a portfolio of cases and seeks to make a high return on that portfolio. To continue an individual case which has, for example, a 30% chance of achieving £500m as opposed to settling it for £200m may therefore be a commercially sensible approach for the funder, since a much higher settlement is likely to bring it a much higher return.
“However, for the class representative, even a 15% chance that the case will fail altogether may be an unacceptable risk: that would be a disaster for the [class members], for whom this is their only case.”
The CAT agreed Innsworth should see a “profit return” but in assessing this noted: “Although the settlement has secured a positive payment, the outcome of the present case is very far from a success for a class of some 44m claimants…
“A return on investment of 1.5 is here appropriate… recognising the significant risk but reflecting also the poor outcome.”
A payment of £68m constituted 34% of the settlement sum, which was a “useful cross-check”.
Mr Merricks said UK consumers would soon be able to register to receive their payment, regardless of whether they ever held a Mastercard card.
“I started this case because I believed that Mastercard’s fees paid by retailers for processing card transactions had been unlawfully high and virtually all UK consumers had lost out for long by periods paying higher prices than they should have done as retailers passed on those costs.
“As the evidence came to be known through the litigation process, this was the position only in a relatively small proportion of transactions and the settlement reflects that.
“The settlement that has today been finally approved represents a fair and just outcome for consumers. On any view, recovering £200m by way of a settlement is a huge sum.”
Mr Merricks highlighted the CAT finding nothing improper about the indemnity from Mastercard and called on Innsworth to apologise and withdraw its claim.
He expressed concern that the dispute with Innsworth would discourage others from bringing collective actions.
“It is necessary that a light is shone on this to avoid such situations arising in the future. During the course of the case, on two occasions Innsworth used strong-arm tactics against me with the aim of forcing me to concede issues that were not in the interests of my class.
“I would very much hope that the tribunal’s judgment and its findings regarding Innsworth Capital, are carefully considered and acted upon by the funding industry’s UK self-regulatory body, the Association of Litigation Funders.
“It chose to do nothing at the time, despite being aware of concerns, but I very much hope it takes action now.”
Mr Merricks is also chair of the Class Representatives Network and said: “This innovation in the administration of UK justice with the potential to right mass wrongs is firmly here to stay.”
We have approached Innsworth for comment.
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