Appeals Court Upholds Commission's Decision in Apple Dispute
A Landmark Judgement Shakes Up Collective Proceedings
In a notable decision that's been making waves this year, the Court of Appeal of England and Wales unanimously upheld the ruling by the Competition Appeal Tribunal (CAT) on April 16th. The case, Gutmann v Apple Inc & Ors, has significant repercussions for litigation funders and class members in group litigation matters. Here's a breakdown of the ruling:
The Court's Ruling
At the center of the most critical case since PACCAR is the question of litigation funding agreements (LFAs) and the remuneration for funders. The Court of Appeal's decision upholds the CAT's stance on this matter, clarifying important issues regarding CAT jurisdiction, class member interests, and the controversial question of funder's cut in collective proceedings.
The Background
The genesis of this case dates back to November 2023, when the CAT certified the proceedings, with scrutiny of the LFA following the Supreme Court's decision in PACCAR v Competition Appeal Tribunal [2023]. The LFA in the present case was revisited, with its terms closely analyzed by the CAT.
In the CAT
The CAT's decision sided with Justin Gutmann, the class representative, stating that placing hurdles in the way of third-party funding might compromise the ability to bring meritorious claims. Acknowledging potential conflicts of interest between funders and class, the CAT emphasized safeguards within the legal framework to mitigate their impact. The CAT also referenced Gormsen v Meta Platforms and the Merricks v Mastercard case, which emphasized the importance of ensuring a reasonable funder's return and the protection of class interests.
In the Court of Appeal
Dismissing Apple's appeal, the Court of Appeal validated the CAT's interpretation of its jurisdiction, stating that it has the power to order the funder's fee paid from damages awarded to the class ahead of the class members, providing the CAT exercises its supervisory jurisdiction to ensure this is justified. The Court also approved the class representative entering into an LFA that allows for such payments.
Future Developments
Apple has yet to exhaust its appeals, with a further ground of appeal set to be heard in June, where the company claims that Mr. Gutmann's funding arrangements contravene PACCAR. However, this judgment does not bode well for Apple, as Sir Julian noted there was no discussion in PACCAR regarding a funder being paid from the damages award in priority to the class.
Implications for Parties Involved
This judgment has significant implications for both litigation funders and class members:
- Litigation Funders
- Priority Payment: Funders can take their fees before distributing damages to class members, as long as the CAT's supervisory jurisdiction ensures this is suitable.
- Legitimacy of LFAs: The ruling further legitimizes LFAs, confirming that class representatives can enter into agreements that allow funders to receive payment from awarded damages before the class.
- Class Members
- Damages Distribution: While class members will get their damages after litigation funders, this decision paves the way for funded support in litigation, potentially increasing access to justice for groups.
- Tactical Implications: The ruling may encourage more class actions as it offers clarity and security for litigation funders, potentially driving an increase in collective claims against powerful corporations like Apple.
In conclusion, the Court of Appeal's judgment strengthens the role of the CAT in overseeing and ensuring fair distribution of damages in collective proceedings, striking a balance between the interests of funders and class members in these cases.
- The Court of Appeal's ruling in the Gutmann v Apple Inc & Ors case has established that litigation funders can receive payment priority from damages awarded to class members, as long as the Competition Appeal Tribunal (CAT) exercises its supervisory jurisdiction to ensure this is justified.
- The judgment has also legitimized litigation funding agreements (LFAs), confirming that class representatives can enter into agreements that allow funders to receive payment from awarded damages before the class members, minimizing the financial risks for the funders in the business of finance.
- Consequently, the decision may lead to an increase in class actions, as it offers clarity and security for litigation funders, unenforceable barriers for potential litigants might be lifted, and subsidiaries of powerful corporations may face more collective proceedings.
