This week, an Australian judge took a $4 million axe to what he called one of the “worst” proposed class action settlements he’s ever seen.
Justice Bernard Murphy said the portion going to the lawyers from Quinn Emanuel and the litigation funder Vannin Captial in a Bank of Queensland class action settlement was “disproportionate” to the amount going to the class. The original proposal would have given only 2 per cent of the $12 million settlement for the class members.
Quinn Emmanuel lawyers took a 40 per cent cut in fee awards from the judge—from $4.5 million to $2.7—and Vannin was forced to take $2 million less than what it wanted. Class members will now get $4 million, or about 33 per cent of the settlement.
Justice Murphy said the settlement is “an example of an increasing problem in class action litigation in that the legal costs and litigation funding charges are disproportionate to the settlement monies to be distributed to class members”.
Unfortunately, Justice Murphy will not need to look far for more examples of the same trend. In October, a judge in the United Kingdom said the “the main beneficiaries of any award” in a £3.3 billion class action against Google “would be the funders and the lawyers by a considerable margin”.
But bringing unfeasible lawsuits is nothing new in the UK. Just last year, the Competition Appeal Tribunal said there was “no plausible way of reaching even a very rough-and-ready approximation of the loss suffered by each individual claimant” when they rejected a £14 billion class action brought on behalf of roughly 70 per cent of the British population against MasterCard. The outside funder in this case stood to gain at least £135 million and even more money from the unclaimed damages.
Justice Murphy’s comments on his case reflect a broader worldwide worrisome trend. Class or group action lawsuits, where lawyers and funders have strong financial interests, are becoming too expensive and complex. The only parties who truly benefit from these funded actions are the lawyers and the funders. It is time for reform.