A closely divided UK Supreme Court ruled that the specialized court established to hear class actions improperly dismissed one of the first cases before it, a proposed $19 billion lawsuit against Mastercard, although whether the massive action proceeds to trial is subject to further litigation.
In an unusual 3:2 decision where the deciding vote was cast by a deceased justice, the UK’s highest court agreed with an appeals court that the Competition Appeal Tribunal incorrectly determined the Mastercard case wasn’t suitable for collective action treatment. The lawsuit seeks damages on behalf of every adult consumer in the UK between 1992 and 2007, some 42 million people, over alleged excessive interchange fees banks charge merchants.
Given the strong disagreement in what arguably was an evenly divided court, a Mastercard spokesman said the company hopes to defeat class certification again when the case goes back before the tribunal.
“It’s certainly not the end of the road,” said James Thorpe, spokesman for Mastercard UK. “It’s not a green light for the CAT to automatically certify this and push it through to trial.”
The case is a key test of the UK’s collective-action regime, which came into existence in 2015 after Parliament amended competition law to allow the equivalent of American class actions over antitrust claims. To address perceived abuses in the US system, the UK requires proposed class actions to go before the CAT, where a panel of judges including economists decide whether the case is suitable as a collective action. Several large proposed collective actions are lined up behind the Mastercard case and will be affected by how the CAT interprets the Supreme Court’s decision.
The Mastercard case was the second action to come up before the tribunal and by far the largest. Mastercard argued, and the CAT agreed, that the case presented insurmountable difficulties including a lack of data to show how much of the alleged overcharges actually passed through to consumers over such a long period and via such a diverse group of retailers. Some stores, such as grocers, operate in fiercely competitive markets where there is little opportunity to pass through interchange fees to consumers while others, such as high-end jewelers, have broad ability to adjust pricing.
An appeals court disagreed, saying the CAT overstepped its authority by inquiring too deeply into the merits of the case and conducting a mini-trial to examine the theories of plaintiff experts. The tribunal should have stopped at determining whether it involved questions common across the class, the appeals court ruled.
The UK Supreme Court split the difference in a Dec. 11 judgment written by Lord Michael Briggs and joined by two other justices including the late Lord Brian Kerr, who died on Dec. 1. In it, the majority found that the CAT had erred by focusing too much on the question of how class members would be paid, citing decisions from Canada where class actions have allowed for a number of years.
The majority also ruled that the CAT improperly determined the tricky question of how much of the alleged overcharge consumers actually paid wasn’t a common issue. But the court disagreed with the appeals court over whether the CAT should have held mini trials to test the theories of plaintiff experts, saying that was within the specialized panel’s gatekeeper authority.
Where the CAT went too far was in dismissing the case simply because the plaintiffs couldn’t explain how they would obtain enough data to show that consumers had paid higher prices due to the alleged interchange overcharges.
When an injury has been proven, “the court does not then deprive the claimant of a trial merely because of forensic difficulties in quantifying damages,” the majority opinion says.
“In many cases the court unashamedly resorts to an element of guesswork,” such as awarding money for pain and suffering or calculating the rental value of a unique “stately home,” the court ruled.
The two dissenting justices, Lord George Leggatt and Lord Roger John Thomas, agreed that the CAT shouldn’t have dismissed based upon an inability to calculate how individual class members should be paid or that damages weren’t a common issue. But the two justices said the CAT was authorized to dismiss the case for the larger reason that it was unsuitable for collective action treatment because it was unlikely the plaintiff experts could come up with a reasonable estimate of how much the class was overcharged.
Allowing the case to proceed as a class action without a reliable methodology for calculating damages posed “a significant risk that a claim of this magnitude could unfairly be held over Mastercard’s head in terrorem to extract a substantial settlement payment without a proper basis for it,” the dissenters said.
The CAT may give weight to the reasoning of the dissent given the unusual alignment of justices in the majority, said Mark Sansom with the UK law firm Freshfields, representing Mastercard.
“They expressly did not adopt any of the reasoning of what otherwise been the majority opinion,” Sansom said.
The Briggs opinion takes a narrow view of the role of the CAT, Sansom said, under which the tribunal should approve class actions as long as collective action is preferable to individual lawsuits. The dissenters said the CAT should also consider the feasibility of the proposed lawsuit when it involves economic questions of such size and complexity.
“Almost regardless of the legal points made in todays judgment, that practical reality hasn’t gone away,” he said.
The plaintiff in the Mastercard case, Walter Merricks, is a consumer advocate backed by the U.S. law firm Quinn Emmanuel and outside litigation financiers. American law firms could find a rich new market for consumer class actions if the Merricks case is ultimately certified.