01 November 2023
“Oh, I have lost my reputation! I have lost the immortal part of myself…” These words, uttered by the disgraced Cassio in Othello, illustrate that reputation is highly prized – and sorely missed when it is lost. This remains true today, 400+ years after Shakespeare’s Company was performing to audiences full of lawyers at the Inns Of Court in London.
In the latest episode of our class actions mini-series, we consider the reputational risks for companies caught up in class actions. Simon Pugh from Portland Communications explains the wider implications of such legal proceedings “which can be substantial from a financial point of view”; the importance of understanding what is driving claimants’ behaviour, and why class action PR and legal strategies need to work hand-in-hand.
To illustrate some of the reputational issues, Ashurst’s Jon Gale talks through some recent cases under the relatively new Competition Appeal Tribunal (CAT) regime. The role of litigation funders is also explored, as well as public perceptions and potential apathy toward class members receiving distribution/damages.
Finally, the trio discuss emerging PR trends for class and group actions, including public interest litigation, the impact of parent company law, and the increasing importance of ESG-related cases.
To follow this continuing class actions series, subscribe to Ashurst Legal Outlook on Apple Podcasts, Spotify or wherever you get your podcasts.
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Listeners should take legal advice before applying it to specific issues or transactions..
Welcome to this episode of our litigation Trending Spotlight on class action podcast miniseries. My name is Tim West and I'm a partner in Ashurst London dispute resolution practice. In this episode, we are looking at the issue of public relations in class actions.
I'm joined by Jon Gale, who's a partner also in Ashurst London dispute resolution team. And Jon and I are delighted to welcome Simon Pugh from Portland Communications. Simon is a crisis communications expert and has worked with many international clients who face significant threats to their reputation. He's worked on an array of high profile issues, but most relevantly to today's discussion on group litigation and both claimant and defendant's side in collective proceedings in the CAT. Welcome, Simon.
Thank you for having me on.
Simon, I thought I might kick off by framing our discussion in terms of why, when we're doing a podcast miniseries about class actions, it's important that we consider PR as part of that. From a solicitor's perspective, we're increasingly asked to solve the whole problem and obviously our legal strategy is a very important part of that, but it is just one plank of a broader strategy to get to a particular desired legal outcome for our clients. And in a class and group action context, do you want to briefly explain to our listeners how communications can contribute to that broader solution?
Yes, absolutely. So I think through the work that we do when we're talking to lawyers on a daily basis, I think we absolutely recognise that point that you made about being asked to look at the whole problem. I think 90% of the problem is a legal one, but there is this 10% that comes down to comms and reputation. Particularly in a class action setting, whether you're the claimant or the defendant, the perception that the class have of you is vital. Therefore, that is a comms and reputation problem.
I think if you are the defendant in a class action, you have a preexisting link with the class and with the claimants. In a lot of instances we think of that as being large amounts of customers in a large mass consumer claim, but actually there are also other examples where it can be shareholders or investors or even actually large groups of employees who get together to sue their employer. And therefore the way in which you communicate both in and outside of the courtroom is hugely significant, because what separates a group or a class action from, I suppose a kind of classic commercial litigation where two parties will have fallen out, that will probably be irreconcilable, they might not think of themselves as ever working again. Actually in a class action for all of the kind of reasons I just listed, you will want to ensure that your reputation is maintained against that or maintained with that group of people in the class.
That's really interesting, Simon. Thanks for that. Just sort of stepping back a little bit, can I ask you about the overall awareness of class actions? And I've read your fairly recent, I think annual report, which touched on this was really interesting, helpful document. When you're dealing with opt-in class actions, obviously an awareness of the action and indeed a trust in that action is important, but is an awareness also important in opt-out actions? Obviously if you get to the stage of distribution, I can see how it's important there, but would you say that an awareness of class actions is nevertheless important for opt-out actions?
Yeah, I'd say it's significant in both. And you mentioned the Portland class action report, and that's something we do on an annual basis where we poll a group of consumers, a nationally representative group on their perceptions of class actions. Because we often consider class actions to be in a bit of an American import. In the UK and in our last report, we had about 20% of people who said that they understood how a class action is used in the UK and that is increasing, albeit by a small amount year-on-year. And about 60% of people said that they would join a class action if they were eligible. Now when we look at the US, which we think of as being a bit more of an advanced method of law in the US, we see about 41% of people polled saying that they have an understanding of class actions and about 68% of people saying that they would join if they were eligible.
So we see a doubling of awareness, but not a commensurate amount of increase in the number of people who would be willing to join. So perhaps we might infer from that that there is ultimately a bit of a plateau and as you continue to drive awareness, that doesn't necessarily lead to participation for all sorts of reasons. As you rightly identified in an opt-in regime, it's kind of obvious why those statistics are significant.
In an opt-out regime, I'd say there are two things that are also important to think about as well. One is the point you made about collection of damages at the end in the event that it is settled, because obviously unclaimed damages will be returned to the defendant in the CAT. So that obviously has a big financial significance for the defendant. But the other thing is also considering other steps that consumers might take around the litigation where reputation has a bearing. So would they consider boycotting a particular brand or particular service, because of the litigation? And that's something that, from a reputation point of view, we find is hugely significant. And something we talk to clients about quite a lot is you're not just thinking of litigation in the kind of silo, actually we're thinking about the wider implications on a business which can be substantial from a financial point of view.
Fascinating. Personally, I'm sort of a bit surprised that the differences between the consumer awareness in the UK and in the US aren't actually greater than that. And maybe that's a sign of just how far things have come here and as you say, albeit slowly the awareness is increasing.
Perhaps you've touched on some of this, Simon, already, but in terms of what distinguishes the importance of PR considerations in a class action compared with perhaps a traditional piece of litigation, are there any comments you'd make on that beyond what you've already said?
I would reiterate that point about in a class action, the reputational threat is potentially more significant, because the claimants are linked to the defendants. Whether they are customers who were using or who were or are using your product and you might still want them to do so, or at the very least people like them. As you say, they could be your shareholders or investors or they could even be your employees. I think that brings into play the use of research and that's something we talk to clients about quite regularly is as the defendant, you have a broad understanding already of the makeup of the class, you will understand the aggregated groups that will make up the class. I think there is a real strategic importance to understanding what is driving their behaviour, what is it making them sign up to a legal case against your business.
Now for some people it will simply be that they have been promised some cash and that will be kind of significant. For others, it might be something slightly different. They may feel that they have been wronged, they may feel that this is an opportunity to hold a business to account. For those groups of consumers, there are potentially things that you could do with your communications that might help sort of mend some of that seen damage done to your reputation.
So for example, we do talk to clients about whether issuing an apology for example might be something that it's sensible to do and obviously an apology has potentially legal significance. So that's where we would obviously be working very closely with the lawyers and legal team to ensure that that legal significance is managed. But actually that might be something that customers want to see and if they see a business has acknowledged that it got something wrong, it's apologised, it's put in place something, various measures to ensure that it's not going to do the same thing again. That might be enough to effectively allay some concerns about what's happened.
Yeah, I've very much been in that situation where there are different voices about apologies and some people saying, "Well, actually it's right that we do this." And the lawyer's saying, "You need to give that more thought both from the perspective of litigation, but also it impacts potentially on the insurance position as well, which needs consideration." But that's really, really interesting, Simon.
Tim, can I bring you in on that and some of the comments that Simon was making about members of the class. It's not just PR experts that have to grapple with this. And I think there's been some interesting recent decisions on communications with the class and how that's dealt with. Can you just talk us through that?
Yeah, certainly. So the issue arises in particular in the relatively new regime in the CAT, and there was a decision, there've been two decisions that have touched on this issue. The first was in the so-called RoRo cartel claim. And the issue there was that the proposed defendants had written a series of letters to various potential class members, predominantly large businesses, concerning their participation in the collective proceedings. Essentially warning them that they would face large disclosure exercises if they didn't opt out of the proceedings.
And the proposed class representative solicitors became aware of that, brought it to the attention of the tribunal, and the tribunal ruled that there was this inherent restriction. There's nothing specifically on the face of the rules, but there is this inherent restriction that says that that is not permitted. And their reasoning is that the whole point of collective proceedings is that there is a represented person and that the represented person is represented by a class representative and it is the class representative who is a party and they are the ones that should be communicating with other parties. It sort of goes against that if you are making direct communications with members of the class.
Now that I think it makes good sense, and I can certainly see why the CAT didn't particularly like the fact that it was sort of undermining the proceedings to have defendants writing directly to class members. But there's the second decision that's earlier this year in CICC, it brings about a really interesting and potentially tricky issue for defendants to have to navigate, sorry. And what happened there was that the defendants having been made aware of the decision in the RoRo cartel raise an issue with the tribunal and said, "Well, we understand this restriction, but we just want to seek direction from you, because we're not initiating these communications, but we are receiving communications from customers of ours who have also got claims against us, but might be potentially in the class and we want to know what to do about it."
And the tribunal said, "Well, you're absolutely right. It's appropriate that you've raised this with us, but you can't communicate with them about the collective proceedings." And relevantly, those communications in CICC were communications about settling claims. The reasoning of the tribunal is that you can't, if there are separate proceedings that are going in parallel to the proposed collective proceedings, you can't engage in settling those proposed collective proceedings, because they say they're part of it, because there is this interconnectedness between those other proceedings and the main proceedings. The reason that is that if you're ultimately going to join the class, you've got to give up those other proceedings. Now that again, I think makes sense, but it does really raise the issue from a defendant's perspective as to what it means to be concerning the collective proceedings. I think when it comes to settlement on the reasoning in CICC, that's clear enough, but I think given how new this issue is and how novel the law is in this area, there are going to be lots of interesting issues in relation to what it means to concern the collective proceedings.
And you can certainly see from a PR perspective that there are going to be times when, for all the reasons that Simon's articulated, you're going to want to be able to communicate with potential class members, but you're potentially falling foul of the restriction in the CAT rules. Is there anything that you'd add to that, Simon?
I think one thing that is interesting, which is not specifically limited to the CAT, but we do see an increase in the trend of defendants having some form of articulation of their case in the public domain, often on their website. And broadly speaking, I think that's something that we would advocate for, because when you Google a particular claim, you see lots of stuff from claimant firms. They will often have their own claimant websites. In many cases there might be a number of different claimant firms, all of whom have a slightly separate website.
So the average consumer is, broadly speaking, inundated with claimant side material, but not necessarily anything from the defendants. So we do see a sort of increase in defendants using their website or their f own content as a way of articulating their side of the story as it were, and ensuring that the narrative around the case remains balanced. And I think that's probably something that wouldn't necessarily fit into that kind of direct communication in the way that it did in the RoRo case. But it still provides an opportunity for, as I say, the defendants to rebalance the narrative.
I want to move on to the role of funders from a public relations perspective. As I get the sense, Simon, that you'll tell me your research suggests there is somewhat of a disconnect between the public perception about what funders do and what I think are the reasonably clear current judicial attitudes to funding, which as I see it, very much sees the industry as being a cornerstone of access to justice and the ability of these group and class actions actually being viable.
Yeah, I think the data shows exactly that. I think litigation funding as a sector is probably not really permeated the public consciousness too much. But when we do, as part of this research explain the role of funders, we do see a sort of certain unease about them. So our data showed that 63% of people polled believe that all of the compensation should go to those affected. But when you kind of slightly dig down in the detail, 52% do accept that in order to bring a class action, there needs to be some funding, someone footing the bill. So ultimately we see a sort of slight unease, but probably ultimately accepting their role.
I think the other kind of interesting stats that our research shows is 24% of the public would be dissuaded from signing up if they thought the funder was to take a large portion of the compensation. And perhaps as we start to see more and more claims reach their conclusion, either through damages being awarded by the court or through settlement, and we start to see a bit more of the makeup of where damages goes, perhaps that will start to lead to a bit of a shift in how the public perceives funders. I think that poses some interesting challenges both for defendants, but also for the funders themselves and the claimant legal sector more widely.
Yeah, I agree with that. I think the nature of the conversation around funding in this jurisdiction is likely to change as there is an increased public awareness of the role that it is playing once we start getting to the stage of distribution in a lot of these CAT claims. You've alluded to earlier the position in the US, which is, as I understand it, there's a pretty significant degree of consumer apathy when it comes to actually collecting damages. I think I'm right in saying that studies show that it's sort of around about the 10% mark of people who actually come forward. I think you've already alluded to the bespoke regime that the CAT has, the incentives that it places on defendants to settle with a possibility of this reversion to defendants of unclaimed sums for settlement, if people don't come forward and collect the amounts. That bit doesn't apply where there's an award of damages where any unclaimed amounts would go to a charity, which at the moment is the Access to Justice Foundation.
Yeah, I think that consumer apathy point is absolutely key to the future reputation of collective proceedings more generally. I mean, our polling shows that in general the public perceive that lawyers and funders are the kind of main beneficiaries from this type of litigation. I think as you start to see these kind of claims come through and whether pie is apportioned in a big way to... All the lawyers take a big cut, the funders take a good return on their investment, which obviously the case wouldn't have proceeded without that, but nevertheless, they are there to make a profit. Then if you see the damage is awarded, as you say in America, it's kind of around 10%, I think that kind of wider public interest argument to this type of litigation becomes just that little bit harder to make.
Fascinating stuff. Stepping back then, Simon, and to finish this off, what trends are you seeing from a PR perspective in class and group actions at the moment?
So one of the things we often, I suppose often grouped together, is wider public interest litigation. So we kind of think of class actions and ESG type claims as often being in that same kind of bucket of public interest litigation. I think that's the kind of area that we are seeing some quite interesting trends in. So when we looked at the types of sector that people would most be interested in kind of joining a class action for, finance was the largest at 48%, followed by healthcare at 44%, followed by technology at 36%. So I think that gives you a little bit of a kind of window into the types of sectors where people perhaps feel the need or feel that there is a role for a judicial intervention. Perhaps with a view of, I suppose, improving the public good in the broadest sense of the word that people see in those sectors.
I think one of the things that's quite interesting at the moment is the evolution, and actually to be fair, quite firm establishment of parent company law, which means that defendants can be sued in the jurisdiction of their parent company for an issue that happened outside of that jurisdiction. And obviously from a London perspective, that is quite fascinating, because obviously what you see in London is a fairly open judicial system where we have a kind of vibrant press looking at it. And actually that means that from a reputation point of view, perhaps it is heightened having the litigation happen in London or indeed another kind of financial capital versus perhaps in other jurisdiction. So that's something I think that we'll probably see more of, and I think defendants are and should be alive to.
Yeah, I think all of that very much chimes with our experience as well, particularly in terms of the awareness and focus on ESG litigation, both in a class action context and otherwise. Simon, thank you very much indeed for your time. That has been fascinating. I'm sure our viewers will have learned a lot. I know I have.
Thank you very much for having me.
Thank you all for listening. Be sure to check out our other episodes in this series on class actions. We welcome any feedback or questions, so do get in touch with any of us. Our details are on the website. And to ensure you don't miss out on any future episodes, do subscribe now on Apple, Spotify, or your favourite podcast platform. And while you're there, please feel free to keep the conversation going. Leave a comment, leave a rating, leave a review. And until then, once again, thanks for listening.