The CAT's new approach: I can't afford a carriage (dispute)
Since the collective proceedings regime in the UK's Competition Appeal Tribunal (CAT) kicked off, a number of carriage disputes have arisen. So-called 'carriage disputes' arise when there are two or more competing proposed class representatives (PCRs) seeking certification (and therefore 'carriage') of overlapping class actions.
In a recent ruling, the CAT departed from its previous approach and ordered that carriage should be heard as a preliminary issue rather than "rolled up" as part of the certification hearing.
We take a closer look at the CAT's previous approach to carriage disputes and the significance of its different tack.
I. Previous approach – carriage as part of certification
Certification and competing claims
By way of recap, the CAT’s certification assessment for collective proceedings1 comprises two limbs:
(i) the authorisation of the proposed class representative (Rule 78 of the CAT Rules) (authorisation criteria); and
(ii) the certification of the claims as eligible for inclusion in collective proceedings (Rule 79) (eligibility criteria).
Under the authorisation criteria, if there is more than one applicant2 seeking approval to act as the PCR in respect of the same claims, the CAT shall consider which PCR would be ‘the most suitable’ (Rule 78(2)(c)).
The CAT previously considered rival class actions in two key cases (FX and Trucks):
FX: competing opt-out claims
The FX case involved two competing applications for an opt-out collective proceedings order (CPO) following the Commission's infringement decisions regarding foreign exchange spot trading.
One application was brought by Michael O'Higgins FX Class Representative Ltd (O'Higgins PCR) and the other by Phillip Evans (Evans PCR). See our previous update here. Both PCRs sought damages on an opt-out basis. Given the similarity of the claims, a class member might fall within both classes. Therefore, the issue of carriage arose.
The CAT refused to determine carriage as a preliminary issue in advance of certification. In its decision on the carriage dispute timing, the CAT recognised the UK regime was in its infancy but considered the assessment of both the authorisation and eligibility criteria were interrelated such that the carriage issue could not be heard before certification. The CAT considered the carriage dispute would only arise once it is satisfied that each application meets both the authorisation and eligibility criteria. Therefore, the issue of carriage was to be determined as part of certification.
However, the CAT refused to certify either of the CPO applications on an opt-out basis. It proposed that both PCRs should refile their claims as opt-in instead. Given the majority concluded that certification on an opt-out basis was not appropriate, it was not necessary for the CAT to determine the carriage dispute (if the CPOs were certified as opt-in, the issue of carriage would not arise given the represented class members choosing to opt-in would be different).
While there was no formal determination of the carriage dispute, the CAT nevertheless set out some guidance:
• Relative test: the authorisation criteria have an explicit relative aspect and require consideration of the relative suitability of each PCR. While there is no express relative element referred to in the eligibility criteria, the CAT clarified that the condition of ‘suitability’ as part of the eligibility criteria involves both an absolute and a relative test. Therefore, where there is more than one application for certification, the factors going to the eligibility criteria are also to be taken into account as a means of differentiating between rival applications. The various certification criteria allow one application to be evaluated as against another, which is ‘the essence of how a carriage dispute is determined.’
• Timings: the CAT stated that relative timing of the two applications was immaterial in that case (O’Higgins PCR had filed approximately five months before Evans PCR). However, as it was the first carriage dispute, the CAT made some general observations and noted that a late applicant who does not attend the first CMC in another certification application should be under ‘no illusions’ that the first in time will have a significant advantage in terms of any carriage dispute.
Although it was not required to determine which application it preferred, the CAT stated that, if it were minded to certify on an opt-out basis, carriage should be granted to Evans PCR. It considered Evans PCR’s application was ‘better thought through’ and a ‘marginally better attempt at capturing an elusive loss.’ Several case specific factors were considered by the CAT in reaching a preference for Evans PCR.
Trucks: overlapping CPO applications
The Trucks case also involved two rival class actions. The Road Haulage Association had applied for a CPO on an opt-in basis and UK Truck Claim's CPO application was opt-out (with opt-in as an alternative basis). As with FX, the certification hearing in Trucks was held jointly.
Although the proposed classes in the RHA and UKTC applications were not identical, they substantially overlapped. This raised the jurisdictional question whether the CAT was able to certify two overlapping sets of collective proceedings and, if that were possible as a matter of law, whether it would be appropriate to do so. The CAT did not determine the jurisdictional position, as it considered it would be wholly inappropriate to approve both applications. The CAT confirmed it would only certify one.
Having concluded that both claims were in principle eligible and suitable for inclusion in collective proceedings, the CAT then considered which of the two applications was preferable. The CAT compared the differences between the applications, including class definition, funding, the run-off period and the impact of the availability of data on the respective experts’ methodology. Overall, the CAT considered that the RHA opt-in claim was preferable to the UKTC’s claim (even if the UKTC’s claim had been opt-in).
Court of Appeal guidance awaited
The CAT's FX and Trucks certification decisions are both currently on appeal. The appeals were heard during spring 2023 and the Court of Appeal's judgments are expected soon.
II. The CAT's different tack – carriage as a preliminary issue
While the Court of Appeal's guidance in FX and Trucks is awaited, the CAT has already departed from its previous approach to determining rival class actions.
In a recent ruling concerning two competing CPO applications brought by Claudio Pollack and Charles Arthur, the CAT decided that the issue of carriage should be determined as a preliminary issue, not as part of certification. The certification hearing would then follow (involving only one of the PCRs).
Marking a significant change from previous decisions, the CAT clarified that while each case will be considered on its merits, in most carriage disputes there is no advantage in hearing carriage together with certification. Following the Supreme Court's guidance in Merricks, the CAT considered the questions arising on certification are likely to be quite technical (whether or not the authorisation and eligibility criteria are satisfied), and are unlikely materially to inform the outcome of any carriage dispute.
A few key highlights from the recent ruling:
• Costs: the CAT considered that determining carriage in advance of certification can lead to considerable costs savings, as otherwise both PCRs would be required to prepare for the certification hearing.
• Role of proposed defendants: this is expected to be minimal. Unless to assist the Tribunal, proposed defendants should not be entitled to much of a say as to which PCR will be seeking to carry on proceedings against them. The suggestion is that proposed defendants may not have to participate in a carriage dispute at all - unless they choose to - and are entitled to reserve their position until the certification hearing.
• Timings: which PCR was 'first to file' is not determinative. However, where significant time and money has been spent in framing a carefully considered standalone claim, the CAT recognised that some credit is to be given for filing first. Although it was stressed that 'no potential class representative, considering making an application for certification, should assume that speed trumps consideration.' The CAT observed that the longer the delay before the second claim is filed (and the closer the applicant first to file is to a substantive resolution), the harder it will be to displace that first applicant.
• PCRs to cooperate: rival PCRs should cooperate regarding the hearing of carriage. Issues of delay relating to service should not hold up the resolution of carriage issues.
III. Rewriting the rulebook
The CAT did not consider itself constrained by previous decisions where carriage and certification had been heard together, although it noted the FX decision was correct (reflecting the 'first in time' status and the novel nature of the certification jurisdiction at that time).
The CAT now considers that issues of carriage and certification should normally be determined separately and determining carriage as a preliminary issue will lead to significant savings in terms of time and money (removing one PCR from the scene prior to the certification assessment). The importance of cost control was emphasised in the ruling. It was stressed that costs need to be kept to the proper minimum to ensure the continued viability of the collective proceedings regime which has its principled foundation in access to justice.
This recent decision is another example of the CAT reconsidering and adapting its procedures, drawing on lessons learned from the significant number of collective proceedings already underway.