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Class actions on the rise: firms

Class actions on the rise: firms

ONCE CONSIDERED a purely American phenomenon, class actions are becoming a firm fixture of the Australian litigation scene. With firms such as Slater & Gordon and Maurice Blackburn now…

ONCE CONSIDERED a purely American phenomenon, class actions are becoming a firm fixture of the Australian litigation scene.

With firms such as Slater & Gordon and Maurice Blackburn now having dedicated class action practice areas, and the High Court having given litigation funders the green light, class actions are becoming an increasingly viable route for individuals seeking legal redress, particularly against larger corporations.

Slater & Gordon, which has been involved in a number of high-profile class actions including the recent shareholder class action against Telstra, is now advising clients in respect of a potential class action against pharmaceutical companies.

The case concerns the companies’ alleged “failure to warn” about the potential side effects of a family of drugs called bisphosphonates used to treat osteoporosis. The bisphosphonates — Fosamax being the primary one — have been linked to a condition known as osteonecrosis, or “dead jaw”, which causes the jaw bone to rot and crumble away. The condition has been found to occur in people taking the drugs who have undergone significant dental work.

James Higgins, a principal lawyer at Slater & Gordon, explained: “It’s a very specific and quite horrific side effect. In our view, that side effect was not appropriately warned of, particularly in the early stages, and in more recent times it didn’t flow though to people such as dentists treating people taking Fosamax. We literally have dozens of people with this condition who have contacted us.”

According to Higgins, the case is still in the preliminary stages and the firm has not yet confirmed whether it will go ahead as a class action. “We are examining each individual case and from that we will determine whether the appropriate legal action is to be a class action or by way of individual actions,” he said.

One of the main advantages of class actions is that they give individuals the opportunity to seek legal redress when they wouldn’t otherwise be able to individually finance the claim. Class actionsalso have the potential to save considerable time and resources. Higgins used the action in the US against the manufacturers of the drug VIOXX, which was prevented from proceeding as a class action, as an example.

“Up until they settled I think there had been around 16 or 18 full trials in which millions of dollars were spent on both sides with each individual case running the exact same issues. The same witnesses, same experts and same issues all before the court over and over again. [Running the claims individually] was grossly inefficient and enormously expensive for all parties,” he said.

While Higgins doesn’t think that class actions have become common place in Australia, he agrees that the number of shareholder class actions in particular is increasing.

A factor he believes is contributing to this is the rise of “litigation funders” — companies that put up the funds and bear the risk of the litigation in return for a cut of the winnings if the claim succeeds.

“In the past, a class action would have to be run by the law firms themselves from their own resources,” Higgins explained.

“Now there are commercial operators in the market who seek to fund them and take on that risk, meaning that law firms become service providers rather than investors in the particular action. The fact that there is a commercial risk-taking entity out there wishing to seek such opportunities means that there will inevitably be more litigation.”

There has been considerable debate surrounding the propriety of litigation funders, one of the main concerns being that they may exert undue control over the action at the expense of the actual plaintiff. However in a decision handed down in 2006, the High Court gave litigation funders the go-ahead, holding that litigation funding is not in itself contrary to public policy.

“[The High Court] has basically said that there’s nothing inappropriate about litigation funding. It just needs to be properly disclosed and obviously there needs to be merit in the action,” Higgins said.

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