Strategic and practical considerations – 9 key factors
Adopting a calculated and robust settlement strategy is crucial for any party involved in collective proceedings in the CAT. In view of the unique settlement approval requirements for these claims, we set out below key factors for parties to consider when approaching settlement in CAT collective proceedings.
By their nature, (alleged) infringements of competition law often give rise to claims from different angles, with claimants from different levels of the supply chain and in multiple jurisdictions. Consider how settlement of collective proceedings in the CAT might impact (or prompt) other related claims. Frame the terms of the settlement appropriately. Are there members of the class who have opted-out of the class action?
Unlike traditional settlements, approved settlements in CAT collective proceedings may not be confidential. Absent an order from the CAT, the terms of the settlement will be discussed at a public hearing and attract media attention. Consider whether to seek confidentiality protection in respect of settlement materials, and means of pre-empting coverage, particularly in standalone claims where no infringement of competition law has been admitted.
3. Evidence-based settlement
The CAT may require an explanation of the proposed settlement figure and how it was arrived at, supported by expert/legal input. The CAT Guide says that “The Tribunal will wish to be satisfied that the class (or settlement) representative and its lawyers had sufficient information in order to assess the reasonableness of the settlement to the class members. Accordingly, it may be relevant to ascertain whether and to what extent the class (or settlement) representative has received disclosure from the settling defendant(s), either voluntarily as part of the negotiations or in the course of the collective proceedings”. If settlement is realistic at an early stage of proceedings, consider whether early disclosure (potentially on a without prejudice basis) may be fruitful as a means of satisfying the CAT that sufficient information has been made available to reach a reasonable settlement.
4. Ongoing proceedings
There may be a delay of some months between agreeing the terms of the settlement and receiving the CAT’s approval. Will the claim continue as usual during this period? This could be a particular issue in multi-party proceedings, or where important hearings/trial are upcoming (as in the RoRo settlement). Be prepared for the procedural hurdles of a pre-trial settlement in collective proceedings.
5. Applying costs pressure
In non-collective claims, specific rules enable without prejudice settlement offers to be made that attract specific costs consequences. These are known as Rule 45 offers in the CAT, and Part 36 offers in the High Court. Parties often use Part 36/Rule 45 offers as tactical devices to encourage settlement and/or provide costs protection if the claim goes to trial. However, settlement offers in collective proceedings in the CAT cannot be made under Part 36 or Rule 45. When exploring settlement in collective proceedings, consider how settlement offers are framed (for example, as without prejudice save as to costs Calderbank offers) and understand the potential costs consequences of doing so.
6. Understand stakeholder incentives
Within the unique collective actions settlement regime, the interests of the class representative, their funder, the class itself, and the defendant(s) diverge at important points. Close understanding of the CAT’s settlement provisions, as well as the likely costs/risks of fighting the claim through to trial, is invaluable in navigating, and exploiting, these competing interests to achieve successful litigation outcomes.
7. Get redress right
Early indications from the CAT and the Court of Appeal in Le Patourel and Trains suggest that adequate distribution mechanisms will be an important part of the settlement approval process. This reflects the approach taken in other jurisdictions. Parties settling collective proceedings will need to engage with different distribution mechanisms, drawing from the approaches adopted to ad hoc voluntary redress schemes.
8. Mind your communications (but don’t settle twice)
Defendants should be cautious to communicate using the right channels when settling a mixture of collective and non-collective proceedings. Communications with class members regarding settlement of potential claims within the scope of the collective proceedings requires the CAT’s prior permission. This is unlikely to be granted before certification. Think carefully before reaching out to individual members of the class for settlement discussions.
9. Consider contribution
In multi-party claims arising from loss or damages suffered before March 2017 (i.e. claims that are not covered by the UK’s Damages Directive implementing legislation), consider whether a CAT-approved settlement really is the final say. Even if the CAT approves a settlement proposal as “just and reasonable”, could contribution claims be brought under the Civil Liability (Contribution) Act 1978 for a “fair and equitable” contribution? Defendants should be careful to include appropriate wording in the settlement agreement to mitigate this risk.