Businesses Warned as Class Action Culture Looks Set to Hit Wales

26|08|08

Welsh businesses should prepare for a deluge of Erin Brokovitch-style ‘class action’ lawsuits, the latest trend to hit the UK from America, according to leading law firm John Collins and Partners LLP.

The success of businesses based in South Wales could mean that the explosion of US-style class action lawsuits, when a group of claimants band together, could hit the region sooner than many other locations in the UK. The news comes as a recent survey of company executives and corporate counsel by the Economist Intelligence Unit, concluded that the UK was the most ‘fertile’ ground in Europe for class actions.

In the US, class actions have been brought in a number of high profile cases involving major companies such as Big Tobacco, fast food outlets McDonald's, Wendy's, Kentucky Fried Chicken and Burger King, and clothing company Abercrombie and Fitch. The trend was also famously portrayed in the film Erin Brokovitch, starring Julia Roberts.

Kevin O’Brien, Partner and Head of Commercial Litigation at JCP, said:

"Wales is becoming an increasingly attractive location for businesses to base their headquarters, we now have a number of prestigious and successful companies operating from our cities, especially Cardiff and Swansea. If indeed class action lawsuits are going to become the new trend in the UK, as predicted, companies based in Wales could be hit just as hard as in many other major UK cities. Businesses need to ensure they are ready for such action now, before it’s too late."

"What most people don’t realise is that Group Litigation, which is our equivalent of US class actions have always been around in the UK, though before now this type of lawsuit has been synonymous with the US, not here. The key difference between the UK system and the US system is that here people opt-in to the group and there, people have to opt-out, leading to a much higher number of Claimants.

"The UK is very susceptible to class action-style lawsuits at the moment. Large businesses are not prepared for this kind of legal action, and need to take a good look at their contingency plan in case the situation should arise that they need to defend themselves against this type of claim. If a business does not have the proper protection plans in place they are putting themselves at huge risk of becoming a target."

In the Economist Intelligence Unit poll, fifty-nine per cent of respondents said they expected to see collective litigation take root in the UK over the next three years and consumer goods companies were expected to be the most likely targets, with product liability the key area.

Class actions have come under fire for a number of reasons, one being that billion-dollar verdicts and settlements are being awarded to groups of people who have suffered no injuries, for hypothetical claims. For example, without claiming any smoking-related harm, past, present, and future,  in one class action suit against tobacco companies, claimants were awarded $10.1 billion after claiming to be the victims of deceptive advertising of "light" and "low-tar" cigarettes, despite the companies’ warnings and compliance with strict federal guidelines.