Defendants in UK Class Action Reprimanded for Improper Letters to the Class
By Simon Yeung and Andreas Killi
In the first ruling of its kind in the UK, the Competition Appeal Tribunal (“CAT” or “Tribunal”) has ruled that lawyers representing the Defendants in a class action should not have sent letters directly to potential class members seeking to persuade them to opt-out of the class. The CAT rebuked the Defendants and their attorneys in a ruling issued 28 November 2022 for “undermining the potential benefits of collective proceedings.”
The ruling arose in the context of an opt-out follow-on class action against five shipping companies that the European Commission found had engaged in a cartel to fix the prices of deep-sea carriage of new cars (McLaren v MOL and others). The CAT certified the claim in May 2022. One of the slightly unusual features of this case was that the class was certified on terms that included some very large purchasers of vehicles as well as individual consumers; this was contentious as the UK opt-out regime had previously been seen as focused more on consumers and small businesses. One effect of this certification decision was to greatly increase the potential exposure of the defendants.
After the certification decision, there then followed a period within which members of the class could choose to opt-out if they did not wish their claims to form part of the action. Some of the defendants evidently decided to use the opportunity to try to persuade the larger potential claimants to opt-out. Two of the defendants’ law firms wrote letters on behalf of four of the five defendant shipping companies to the potential class members with the largest claims. The letters, sent on 26 and 27 July 2022 (just before the end of the period for opting-out), suggested to the recipients that “if they did not opt-out (of the class action) they would likely become involved in a time-consuming and expensive disclosure process” and that the recipients should obtain their own legal advice regarding the proceedings.
The class representative, whose own lawyers were copied on the letters, made an urgent application on 3 August 2022 to the Tribunal for a direction that the defendants should not communicate directly with actual or potential members of the class.
Although the class representative conceded that the CAT’s Rules (the “Rules”) did not contain an express prohibition on defendants communicating with potential class members, he contended that it could nevertheless be implied out of what the Rules do say. The Respondents (the term used by the Tribunal in its judgment to refer to the four defendant companies behind the letter, but not the remaining defendant) contended there was no such implied restriction in the Rules, and that the Tribunal should be slow to read such an implied restriction into the Rules as it was an inhibition on the Respondents’ right to freedom of expression.
The Tribunal agreed with the class representative. It did not suggest that there was an infringement of the rule of professional ethics forbidding lawyers from directly contacting parties who are legally represented, since they were not actually parties to the proceedings, but it found that there was no legitimate reason for contacting the purchasers precisely because they were not and never would be parties. Class members are not parties, as the point of class actions is that members are represented by the class representative. It was the class representative who would incur the costs of bringing the claim. If communications about the class action were directed at members, that could result in costs being incurred for no purpose and undermine the class regime.
As to the Respondents’ right to freedom of expression, the Tribunal noted that the right was itself qualified. The Tribunal could not accept the Respondents’ submission that rules controlling communications between parties to litigation (consistent with Article 6 of the Convention) could constitute infringements of Article 10. Although there is no restriction on a litigant contacting a third party who was not subject to the proceedings (and as the Tribunal found, class members are not parties to the action), the Tribunal noted that statutory provision had been made for class actions giving class representatives a special position and role that had been recognised in the Rules. A requirement for defendants’ lawyers to communicate with class representatives, and a requirement for them not to communicate with class members, could not therefore be sensibly attacked on Article 10 grounds.
The Tribunal concluded that the Respondents should not have written to the class members and that was not proper conduct on the part of their lawyers. Although the Respondents had provided assurances not to contact the class members on matters concerning the class action, the Tribunal, in an indication of the seriousness of the Respondents’ conduct, nonetheless made an order to the same effect. It is also of note that the President of the CAT, Sir Marcus Smith, sat on the Panel in place of one of the regular members docketed to the action specifically in order to make this ruling.
Whilst this is the first time the issue has arisen in the UK, where class proceedings are still at a relatively early stage of development, it was noted that it has previously been the subject of rulings in the US and Canada. In Canada, the Ontario Supreme Court noted that the role of the court is to ensure communications to the class are fair to all litigants rather than to protect the class, and it had to be persuaded that its intervention in any communications was necessary. In the US, the analysis as to whether the defendants’ lawyers can communicate with class members depends upon whether the communication is: (i) before certification; (ii) after certification but before the opt-out period has expired; or (iii) after certification and the expiry of the opt-out period. Although the position appears to be reasonably clear that there is no attorney-client relationship between class counsel and class members before certification, and that such a relationship exists after the opt-out period has closed, the position is less certain in the intermediate period (i.e., the period relevant in this case). Although the majority position (according to Richmond) is that there is a relationship, albeit only “potential” or limited” in nature, other courts have discounted these relationships in the period before the opt-out period has closed. What is clear in both Canada and the US is that the courts will intervene if the defendant is deceiving or misleading class members in its communications in order to, for example, persuade members to opt-out, thereby reducing participation and undermining the class action.
Whilst the CAT took a broader position banning any communications, it may well be the case that it would have cracked down on the communications in this case even if it had followed the more restrained approach of the courts in Canada and the US. In a scathing post-script to the judgment, the Tribunal did not accept the Respondents’ suggestion that the letters were “conspicuously fair” in indicating that if the recipients did not opt-out, “they would be likely to become involved in a time-consuming and expensive disclosure process”. The Tribunal also noted that in advising recipients to take legal advice, the Respondents envisaged that recipients would expend time and/or money in doing so.
The Tribunal also dealt with the “canard” that its ruling would inhibit defendants to collective proceedings from properly exercising their rights of defence. The Tribunal rejected the argument that there was a need to write to the class members in this case because of the need to secure disclosure, noting that if disclosure from class members is sought or required, that is a matter that should be raised with the class representative and/or the Tribunal.
The judgment brings clarity to a grey area in the fast-developing body of law relating to UK collective proceedings. Because of the newness of the regime, class actions will continue to raise novel issues until the law settles down.
Written by Simon Yeung and Andreas Killi
Edited by Gary J. Malone
 Mark McLaren Class Representative Limited v MOL (Europe Africa) Ltd and others,  CAT 53
 A special purpose vehicle incorporated for the sole purpose of acting as the class representative of which Mr McLaren is the sole director and member. The benefits of using an SPV includes limiting Mr McLaren’s personal liability.
 Article 10 of the European Convention on Human Rights, which at sub-paragraph (1) provides “Everyone has the right to freedom of expression…”, but at sub-paragraph 2 states “The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals, for the protection of the reputation or rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary.”
 See paragraph 22 and footnote 24 of the judgment, referring to a Canadian case (Del Giudice v. Thompson, 2021 ONSC 2206) and US text (Newberg and Rubenstein on Class Actions, 6th ed, 2022), and two articles that the Tribunal was not referred to by the parties (VR Johnson, ‘The Ethics of Communicating with Putative Class Members’, 17 Rev Litig 497 (1998); and DR Richmond, ‘Class Actions and Ex Parte Communications: Can We Talk’, 68 Mo L Rev (2003)).
 Del Giudice v. Thompson, 2021 ONSC 2206, paragraphs 26 and 29, and 53 to 55
 DR Richmond, ‘Class Actions and Ex Parte Communications: Can We Talk’, 68 Mo L Rev (2003), section IV at page 845 onwards.