A top-tier partner has told a conference that plaintiff law firms acting on class actions can expect competition from top-tier firms in the future.
Clayton Utz litigation and dispute resolution partner Greg Williams was speaking on the topic of "Class actions and insurance: Can it be a classy act?" at the firm's "Risky Business Day" yesterday afternoon (30 March).
When asked by Lawyers Weekly if top-tier law firms would start to look at acting on the plaintiff side - in light of commercial firms Piper Alderman handling the Vodafone class action and MacLachlan Thorpe Partners negotiating the recent $67 million settlement between affected parties to the now defunct Pan Pharmaceuticals and the Therapeutic Goods Administration (TGA) - Williams said the lure of working for institutional investors who traditionally have existing commercial links with national firms could open the door to that type of work in the future.
"The book build aspect of what they [plaintiff law firms] do is not actually not entered in. That is, getting the model right to get the most cost effective way to recruit your clients and manage a group that may be 100,000 to 200,000 people," he said. "We [Clayton Utz]are not set-up to do that at the moment, and I would be surprised if any of our top-tier competitors are, so there is an investment that needs to be made."
However, Williams believes that change is in progress.
"One of the things that the funders coming into the market have done has been to move the plaintiff pool from being a 'mums and dads' pool to involving a much higher proportion of institutional investors, and institutional investors are naturally clients of top-tier law firms," he said
"I don't think it will happen overnight but I do think it will be a distinct possibility that it will happen in the medium to longer term."
Praising the opposition
In a presentation that credited much of Monash University Professor Vince Morabito's September 2010 report into class actions, Williams said that although the number of class actions had not changed significantly since the 1990s, the types of actions now being launched have.
He said that before 2000, around 37 per cent of class actions were centered around claims for product liability, with this only accounting for seven per cent of claims since then.
Williams also said claims involving shareholders had increased over the same period from less than three per cent to 18 per cent.
Williams also referred to the Morabito Report that examined 18 class actions between December 2009 and September 2010. Ten of those class actions settled, for a combined payout of $311 million. Litigation funders got a cut of over $90 million, with the class members and plaintiff lawyers sharing in $219 million.
"The biggest shift that I am seeing in recent times is that the model for that classic 'middle of the road misleading the market' style securities class action is almost at the stage at which it is commoditised," Williams said.
He then went on to praise Slater & Gordon and Maurice Blackburn for the level of sophistication with which they run class actions.
"Slater & Gordon and Maurice Blackburn have virtually got that sort of litigation to the point where they can just about cookie cut it," he said. "They have sorted out their model, they know how to run these things and they know how to book build, to bring together their clients to a sufficient critical mass to justify running the action. They know what the retainer and funding agreements will look like, they know what the pleadings look like, they know what issues will be raised in relation to the pleadings.
"We are living in an environment where that sort of litigation becomes much more predictable."
Williams was joined at the seminar by his colleagues at Clayton Utz, commercial litigation partner Dr Jocelyn Kellam and law insurance partner Fred Hawke.
Kellam discussed whether it is insurers or corporations who decide to fight or settle a class action. She ran through various clauses that cover the appropriate protocol to follow when a dispute arises, including the "senior counsel clause", where a dispute with an insurer can be referred to an independent senior counsel to determine if a claim can be settled or defended.
Hawke ran through the various issues at play that frame discussions between policy holders and insurance companies about whether to settle or fight a claim, explaining that there are times when companies will settle against the advice of underwriters, telling them; "I have got to settle, I am liable, I have ASIC coming down my throat, I have the class action sharks circling, the media going berserk and we have a focus group on Facebook which is trashing my share price. I have no choice but to settle."