Product Liability & Safety 2020

Last Updated June 24, 2020

UK

Trends and Developments


Authors



Kennedys is a global law firm with particular expertise in litigation and dispute resolution, especially in defending insurance and liability claims. The firm has 59 offices, associations and co-operations across the UK and Europe, the Americas, Asia Pacific and the Middle East. Kennedys has a market-leading team handling large-scale product liability, recall and mass tort litigation and international claims. Its core team is comprised of nine partners in London supported by more than 40 associates, as well as many partners and colleagues across the firm's international offices. A number of Kennedys lawyers have requalified in the law following careers in relevant industries (such as engineering, construction and medicine), which broadens their expertise to their clients’ benefit. The firm acts for parties across various industries and has gained in-depth expertise in high-profile and complex matters involving a wide range of products, including automotive, chemicals, pharmaceuticals, medical devices, healthcare products and consumer goods.

Group Litigation and Product Liability Trends in England and Wales

Introduction

Many of us may be familiar with the term “class action”, and understand that it relates to a procedural mechanism by which multiple claimants, with similar claims or interests and common characteristics, can collectively initiate a single set of proceedings against one, or multiple, defendants. However, there are other mechanisms by which these kind of collective claims can be brought. These are described in more detail below but we refer to them variously as group litigation orders, representative actions, collective proceedings, and – generically – as group actions or group litigation.

Class actions and their counterparts are often a source of consternation amongst defendants and their insurers as they are notoriously expensive and time consuming. Their proponents maintain that leveraging the scale of large numbers of claimants is an effective way to make redress affordable to individual victims of loss, particularly where proof of liability is complex and/or where individual losses are small. Opponents often see them as benefitting the claimants’ lawyers as much or more than the claimants seeking redress. Still, class actions and their counterparts are used on an increasing basis by claimants in ever expanding types of claims, and are popular for product liability disputes where the defendant is often a global, well-funded company with significant resources (and often backed by insurance) to mount a robust defence. Why group actions are increasing, and whether this trend is likely to continue, is a topic of discussion amongst lawyers globally.

The number, size and complexity of group actions is likely to increase, including in product liability cases, on an international scale as a result of continued globalisation, improved information and data sharing, and technological advances, all of which facilitate such actions.

Whilst the most-developed class action regimes can be found in the USA, Israel and Australia, there has been a notable increase in the number of group actions brought in England and Wales in recent years. The predominant drivers for this include the introduction of a US-style "opt-out" collective action regime enshrined in the Consumer Rights Act 2015 (CRA) in the field of competition law, coupled with the rise of high-profile, international, mass tort product liability claims, sparking a growing interest from both international law firms and third party litigation funders in entering the English market. This growth is likely to continue, with the EU’s pending legislation on collective redress mechanisms seeking to increase opportunities for consumer groups to advance group litigation, including in the product liability arena. This is very likely to impact on the direction of travel for group actions in England and Wales, opening up its availability and scope.

These factors, in addition to a highly regarded judiciary and controlled approach to litigation, make England and Wales an increasingly attractive jurisdiction in which to commence group proceedings. This was evident in the recent case of Vedanta Resources Plc v Lungowe [2019] UKSC 20 in which claimants cited the knowledge and experience of the English courts in managing group actions as a reason for England being the proper place for the trial of the case, which concerned not product liability, but claims for environmental damage brought by Zambian villagers against a UK-domiciled company and its Zambian subsidiary.

Group action mechanisms old and (relatively) new

The development of the available mechanisms by which parties are able to advance group litigation in England and Wales has been fuelled by the demand for collective redress.

Although the provisions governing group litigation in England and Wales are well established, being rooted in civil procedure and statute since the late 1990s and early 2000s respectively, this is an evolving area of procedural law. As recently as 2015, we have seen the creation of a mechanism which – depending on the outcome of the ongoing case of Merricks v Mastercard (UKSC 2019/0118) (the Mastercard litigation), discussed below – could signal a change in the future direction of group litigation in England and Wales.

Whilst English courts have the power to manage group litigation informally, by consolidating individual sets of proceedings brought by multiple claimants, other formal mechanisms are now available.

In particular, a Group Litigation Order (GLO) can be requested where claims give rise to common or related issues of fact or law. A GLO requires claimants to "opt-in" to the group litigation by expressly registering their interest to be part of the action. This is a tried and tested method of group litigation, and tends to be more suitable for smaller groups of claimants, requiring all individual claimants to be identified and named on a group register, and benefits from active case management by the English High Court. It is also currently the most appropriate mechanism for group product liability actions in England and Wales.

Alternatively, and subject to certain parameters, group litigation may be pursued on an opt-out basis by way of (i) representative actions, or (ii) collective proceedings. Representative actions can be brought in the English High Court in any type of action, by one or more individuals on behalf of an undefined set of claimants who are purported to have the “same interest” in the claim. However, the limited scope of this test has made it difficult to pursue group actions via this mechanism and it is therefore rarely used. In 2015, an opt-out collective proceedings regime was established by the CRA for bringing private competition claims in the Competition Appeal Tribunal as the existing regime for such claims was considered too narrow to provide effective redress to claimants.

These opt-out regimes are the closest mechanism available in England and Wales to a US-style class action regime, where claimants who fall within the scope of the class are automatically assumed to be part of the class unless they actively elect to opt out.

Although the collective proceedings regime is currently available for private competition claims only, in light of the impending implementation of the EU’s directive on representative actions (discussed further below), and subject to the outcome in the Mastercard litigation, legislators in England and Wales may need to consider widening its scope to enable other types of claim to be pursued by this, or a similar, mechanism, to ensure that the regime in England and Wales keeps travelling in the same direction in which group actions are moving in the EU. 

Whilst, in the context of product litigation, group actions may be a suitable vehicle for multiple consumers with similar interests to seek redress for, eg, the cost of a non or under-performing product, product liability is concerned with liability for injury to persons or damage to property. In England and Wales this is likely to require assessment of causation and quantification of loss on an individual basis and therefore, in the context of product liability, it is often adopted as a mechanism to determine preliminary issues arising in respect of liability and defect.

Given that the English legal system has sought to keep pace with demand in its development of group litigation systems, we consider below whether the stage is set for England and Wales to embrace, cautiously or otherwise, the apparently increased appetite for group actions.

The rise of group litigation in England and Wales and the impact on product liability

The rise of high-profile mass tort product liability, environmental and shareholder class actions across the globe has been a predominant influence over the group litigation landscape in England and Wales.

In recent years, GLOs have increasingly been used as a mechanism to bring mass tort product liability claims, often in respect of medical devices and pharmaceutical products, where group and class actions in respect of such products had already been commenced in other jurisdictions.

Examples are the GLOs made by the English High Court in October 2008 with respect to claims arising from Glaxo Smith-Kline’s anti-depressant drug, Seroxat (Bailey and others v GlaxoSmithKline [2019] EWCA Civ 1924), and in July 2014 with respect to claims arising from DePuy’s Pinnacle Ultamet metal on metal hip replacements (Gee & Others v DePuy International Limited [2018] EWHC 1208 (QB)) (the Pinnacle GLO).

The Pinnacle GLO was actively case managed by the English High Court, determining the issue of "defect" under the Consumer Protection Act 1987 in the context of six lead cases and enabling the registered claimants’ claims to be dealt with expeditiously, whilst at the same time the court stayed many other similar claims (against other manufacturers) pending the outcome of the trial. In May 2018, the English High Court ruled in favour of DePuy (the defendant manufacturer) in what has been described as a landmark group action ruling in the field of product liability.

Generally, the outcome of group litigation proceedings may differ across jurisdictions due to the fundamental difference in the approach to not only the legal principles and framework, but also case management and the trial itself; for example, in the USA, cases are usually heard before a civil jury. In England and Wales they come before a single judge who is a qualified and experienced legal practitioner. This allows emotion and storytelling to be minimised and means the English approach is more similar in style to that of the EU and Australia. In these jurisdictions, a judge-led and expert-reliant approach can help more accurate predictions of outcomes, which will inform parties and their lawyers when selecting a preferred jurisdiction.

The differences in approach between the USA and England mean that although US class actions have a tendency to permeate across the globe, that will not always be the case. For example, unlike in the USA, there are no opioid group proceedings in England and Wales. While there has been much speculation as to whether the opioid litigation will eventually head this way, it is questionable whether such an action against pharmaceutical companies would be viable, partly because of the more structured way in which the UK healthcare system operates compared to that in the USA. England and Wales provides, for example, stricter control on the availability of opioids via registered GPs and an established national healthcare system.

Growing concern about Perfluoroalkyl and Polyfluoroalkyl substances (PFAS) – which are complex and expanding groups of man-made chemicals found in a variety of products used by consumers and industry and which have recently been alleged to have an impact on health – have already resulted in class actions in the USA, with multimillion-dollar verdicts. Although there is currently no active litigation regarding PFAS in England and Wales, mutterings amongst environmental activists, MPs and English claimant law firms suggest that these may come to the fore in the future. Environmental actions of this nature are likely to proceed by way of group litigation and it is expected that claimants may make attempts to do so via the opt-out regimes discussed above, given their potential to impact thousands, if not millions, of individuals.

Despite local limitations that may ultimately impact the commencement or otherwise of such actions in England and Wales, US influence remains prevalent. More recently, US law firms, in tandem with sophisticated US third party litigation funders, are increasingly establishing themselves in England and Wales by partnering with UK national claimant law firms and garnering support for group actions, some of which have been advanced successfully in the USA, such as those in respect of birth control and surgical mesh products. Furthermore, increased collaboration and information sharing between US and English claimant legal representatives means that these law firms are prepared to pursue group litigation in England in respect of actions which are already underway in the USA and Australia, for example the Volkswagen emissions litigation. This litigation is also demonstrative of increased access to third party funding being a significant driver in group litigation in England and Wales. 

Previous restrictions on funding have meant that there have been few high-profile product liability actions in England in recent years, with claimants relying on conditional fee agreements and after-the-event insurance as a means of progressing their claims. However, with the emergence of third party litigation funding over recent years and, in particular, the proliferation of US funders in England and Wales, we are seeing an increase in group actions being funded on this basis. In the Volkswagen emissions litigation (Crossley & Ors v Volkswagen Atkiengesellschaft & Ors [2019] EWHC 783 (QB)) (discussed below) lawyers representing over approximately 91,000 claimants obtained funding via Therium Capital Management, a global provider of litigation finance and arbitration funding. Similarly, Mr Merricks, the claimant in the Mastercard litigation, is also supported by litigation funders. The increased availability of such funding, coupled with what appears to be a shift by claimants in favouring it over traditional methods, means we may see more product liability group actions progress in the future. Furthermore, consumers wishing to pursue a product liability group action (where personal injury arises) will be encouraged by the introduction of the Qualified One-Way Costs Shifting (QOCS) regime in 2013 as part of wider costs reforms in England and Wales, which provides that a losing claimant does not pay the defendant’s costs, save in limited circumstances.

The Volkswagen emissions litigation is one of the largest consumer actions to come before the English High Court. It is the subject of a GLO granted in May 2018. Emissions litigation first emerged in the USA in early 2015, including a civil lawsuit filed by the Justice Department for violations of the Clean Air Act, as well as numerous class actions and private law suits, resulting in a USD15 billion settlement in 2016. This settlement undoubtedly served as a catalyst for the emergence of class actions against Volkswagen internationally, with class actions filed in Australia in 2015 and European courts introducing new domestic legislation to pave the way for claimants to bring large scale class actions on the continent. It has also prompted the issuing of group proceedings against car manufacturer Daimler, the parent company of Mercedes-Benz, also alleged to have installed “cheating” software in its diesel engines.

It is noteworthy that the Volkswagen emissions litigation, in addition to the PIP breast implant “scandal”, has been the trigger for the European Union to progress its collective redress agenda. This incorporates a draft Directive for representative actions for the protection of the collective interests of consumers, designed to promote access to justice for citizens and companies, but without the perceived excesses of US-style class actions. Implementation of the draft Directive may lead to a rise in group actions across the EU, partly because, if approved in its current form, it allows each member state a choice of either an opt-in or an opt-out procedure, or a combination of both.

This drive towards ensuring all EU member states have mechanisms in place to provide for collective redress, at a time when the UK is leaving the European Union, has the potential to persuade the English courts to become more open to the certification of large-scale opt-out class actions generally, including in mass tort product liability actions, to ensure that England remains an option as a jurisdiction in which to bring group proceedings in claims of this nature in Europe.

Product liability claims have, to date, utilised either informal group management or a GLO. However, it is clear that an opt-out mechanism would favour claimants in the product liability arena, albeit that may represent the stuff of nightmares for potential defendants and their insurers. The boundaries of opt-out group actions in England and Wales are currently being tested, largely by claims for data breach and in competition law, but it is these cases, as well as the direction of travel in the EU, which may pave the way for the potential opening up of the opt-out group system to cater for mass tort product liability claims.

In Lloyd v Google [2019], a matter relating to a large scale data breach, the Court of Appeal showed flexibility by permitting the use of the opt-out representative action procedure, reversing the lower court’s decision that the action had not met the requirements of a representative action. We are currently awaiting a significant decision from the English Supreme Court in the Mastercard litigation in which judgment is expected to be handed down in the latter part of 2020. Walter Merricks, a former financial services ombudsman, is applying on behalf of the group for a collective proceedings order under the CRA which, if approved, would be the largest opt-out group action in English legal history. If the collective proceedings order is granted, signalling a willingness by senior judiciary to take a more flexible and open approach to approving a collective proceedings regime across the board, and if the claim is eventually successful, not only could it see up to 46 million consumers compensated hundreds of pounds each, but it could also pave the way for future large scale group actions generally, and not just in the field of competition law.

It is, therefore, the level of rigour the courts now apply in allowing applications for group actions to proceed which is likely to govern whether or not the English courts will open up these opt-out, class action style avenues of group redress to product liability claims. If they do, one could predict a change in the landscape for mass tort product liability claims in England and Wales, with movement towards opt-out group actions rather than GLOs, in light of their potential to capture huge claimant numbers and the consequently increased potential sums involved, both in terms of compensation and costs.

Product liability trends and the impact of COVID-19

As industries continue to evolve within an increasingly digitised and technological landscape, with smart devices and emerging technologies becoming common place in businesses and households, the scope for group litigation in relation to them is significant. Artificial Intelligence, robotics, 3D and 4D printing and nanotechnology are increasingly used to produce products for the mainstream consumer market.

While these products offer benefits to individual consumers and stakeholders alike, their increasing use invariably raises myriad product liability considerations regarding the associated risks of such products (many of which may be unknown when put to market) and supply chain considerations, particularly given the rapidity with which they are developed, put to market and subsequently updated. For example, liability for these products may fall on potential multiple defendants, from those involved in the design, manufacture and supply chain of the product, to those who are involved in the updating and physical use of the product (such as software programmers and operators) to medical professionals and institutions.

With no business or industry escaping the impact of the COVID-19 pandemic, and many of the long-term effects yet to be fully seen, it is possible the pandemic will give rise to an environment conducive to group actions, particularly where producers seek to take advantage of the cross-border opportunities afforded by digital technologies and of some of the regulatory short cuts that have been adopted in order for governments, health trusts and private sector suppliers to quickly obtain products like ventilators and emergency protective equipment. As businesses increasingly operate remotely and online, and where restrictions in supply due to global demand require the rapid production of emergency products and alternative ways of doing things, there is likely to be a greater reliance upon data-driven technologies such as smart/connected devices, robotics (eg, those used in surgery to maintain social distancing) and 3D and 4D printing, one effect of which is to reduce the number of parties in the supply chain.

The potential product liability exposures are considerable, and include those that could arise from software or data vulnerabilities that result in property damage or personal injury (for example, where remote diagnostic systems provide inaccurate data to medical professionals who go on to treat patients in accordance with that data). Other risks may arise through the use of augmented reality and robotics where healthcare professionals seek to treat patients remotely, or where companies seek to manufacture products via accelerated or novel mechanisms in order to meet global demand (for example, using 3D printing to produce personal protective equipment). The inherent risks in these emerging products, coupled with the complexities of the liability considerations they pose, may make them prime targets for group actions in the future.

Insurers offering product liability cover to manufacturers may focus more acutely on the processes used to bring products to market and factor in any risk when pricing premiums for insurance cover accordingly.

Whether the current European regulatory and legal framework regarding product liability is suitable for emerging digital technologies is a topic currently debated at European Parliamentary level. The potential for stricter obligations to be placed on producers of products within these specific markets may discourage group litigation if such measures are implemented into European and, potentially, English law. This may be some comfort to product liability insurers who fear the legal defence costs associated with group actions.

Conclusion

The recent English decisions and ongoing group actions referred to above are evidence that the courts have shown a willingness to accept group litigation as a means for claimants to seek redress, with the mood increasingly mirroring that adopted in the EU, Australia and the USA.

Despite the growing appetite for group litigation, England and Wales is unlikely to see a proliferation of class actions of the nature seen in the USA in the short or medium term, primarily due to the fundamental differences in the applicable legal framework and the approach to litigation and case management generally. This is particularly pertinent in product liability group actions in England and Wales which are governed by the Consumer Protection Act 1987 (which implements the EU Product Liability Directive), which has a high threshold with regard to the test for defect in respect of consumer products. However, legislators and industry stakeholders will no doubt be watching the outcome in the Mastercard litigation closely; it may offer a glimpse of the courts' willingness to eventually broaden the scope of the available opt-out mechanisms for claimants, beyond those only available in private competition claims.

Kennedys Law LLP

25 Fenchurch Avenue
London
EC3M 5AD

07710 118173

Samantha.silver@kennedyslaw.com www.kennedyslaw.com
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Trends and Development

Authors



Kennedys is a global law firm with particular expertise in litigation and dispute resolution, especially in defending insurance and liability claims. The firm has 59 offices, associations and co-operations across the UK and Europe, the Americas, Asia Pacific and the Middle East. Kennedys has a market-leading team handling large-scale product liability, recall and mass tort litigation and international claims. Its core team is comprised of nine partners in London supported by more than 40 associates, as well as many partners and colleagues across the firm's international offices. A number of Kennedys lawyers have requalified in the law following careers in relevant industries (such as engineering, construction and medicine), which broadens their expertise to their clients’ benefit. The firm acts for parties across various industries and has gained in-depth expertise in high-profile and complex matters involving a wide range of products, including automotive, chemicals, pharmaceuticals, medical devices, healthcare products and consumer goods.

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