The Continued Rise of the Class Action Lawyer
Ben Thompson, LawFuel Contributing Editor
Recent successes in class actions from the United States to Australia have been the continued rise of class action lawyers and their potential to build hugely remunerative business models that could see substantial growth in the future.
Will class actions see class action lawyers and existing personal injury law firms becoming the new legal behemoths, challenging even the massive growth of Kirkland & Ellis, a law firm that has beaten its largest competitors by twofold with its revenues exceeding $7 billion.
The ‘secret’ – if that is the word for Kirkland’s growth – may be that it has developed highly focused practice areas, building on the private capital market niche that has provided multiple workstreams and both good market timing and market penetration.
Class Action Lawyers Successes
Recently, the number of major legal successes with class actions has seen litigation law firms achieve notable wins that continue to propel their growth.
In the United States, the home of class actions, a landmark victory was handed down by a New York court that adjudged the Argentine government liable to pay $16.1 billion to Burford Capital-backed plaintiffs.
This class action windfall potentially translates into a monumental payout of up to $6.2 billion for the litigation funder—an amount nearly equalling Kirkland & Ellis’s annual revenue from a single case.
While subject to appeal and potential adjustments, the New York win would see even a fraction of the $6.2 billion a substantial financial win.
In the United Kingdom a class action was taken by a group of 555 sub-postmasters against the Post Office over the Horizon scandal, which involved faulty data from the Horizon computer system leading to false accusations of theft, fraud, and false accounting. In 2019, the Post Office agreed to pay £58 million in compensation to the affected sub-postmasters as part of a settlement.
The Post Office scandal resulted in the government overturning a Supreme Court ruling rendering numerous litigation funding agreements unenforceable. The UK moves underscores a perceptible shift in sentiment towards such cases, notwithstanding fervent lobbying efforts against it. Notably, a high-profile rugby brain injury claim involving nearly 300 former rugby union players exemplifies litigation funding’s pivotal role in facilitating large-scale litigation.
The culmination of the first of many anticipated Competition Appeal Tribunal trials against telecommunications conglomerate BT in the UK presents a harbinger of potential victories and heightened investor interest.
In Australia, Maurice Blackburn scored a major win against Uber, who were ordered to pay $272 million – the fifth highest class action resolution ever in Australian legal history. The action was facilitated by funding from Harbour Litigation Funding.
And so too has the growing importance of litigation funding in the growth of class actions.
Burford’s growth has seen that revenues in its standalone business had almost quadrupled in 2023 to nearly $1 billion.
For firms aspiring to replicate such triumphs, the imperative lies in identifying their own highly remunerative markets poised for substantial expansion in the foreseeable future.
One such avenue lies in class actions. Though longstanding, recent developments have propelled their prominence, sparking increased traction worldwide.
Litigation Funding Changes
While Burford’s prominence may not perfectly mirror the broader global litigation funding landscape, such a sizable payout serves as a compelling marketing tool likely to captivate investor interest in the future. Notably, excluding proceeds from this case, Burford’s consolidated revenues surged to $1.1 billion in 2023, quadrupling revenues for the company.
In recent years, other jurisdictions such as Scotland and China have introduced their first formal class action mechanisms that will further growth the class action ‘market’. Class action advocates in Hong Kong hope China’s reforms may push lawmakers to make changes that will facilitate such litigation.
Global Class Action Growth
Class action growth is seen in jurisdictions like the UK, Australia and Europe.
As of 2022, the 44 active funders in the U.S. had a combined $13.5 billion in assets under management, which represented a 9 percent increase from the previous year, according to a report from Reuters.
And there are also burgeoning opportunities extend to Latin America, evidenced by UK firm Mishcon de Reya’s acquisition of a majority stake in a Brazilian group actions business Somos.
Anticipation is also mounting for a surge in class-action lawsuits targeting Asian companies listed in the US, alongside other notable cases worldwide, indicating a burgeoning trend.
The US-style class action practice was recently the topic of a white paper from major big law player Jones Day:
Class actions have been a feature of the litigation landscape in the USA for decades. Claimant-friendly procedures combined with an aggressive and well-funded plaintiffs’ bar have created fertile ground for these large, long-running, and often high-profile cases. These trends are no longer confined to the USA. The growth of group litigation in the UK and Europe over recent years has been exponential, and its significance to businesses as a key corporate risk will only continue to increase.
This growth is partly driven by a greater legislative and judicial openness to mass claims, including in particular the broader acceptance of so-called “opt out” mass claims, where claimants can bring a representative action on behalf of a “class” of potential claimants, without seeking the consent of all claimants. In parallel, the litigation funding market is booming in the UK and Europe. Funders and claimant law firms are working together to pursue novel claims that previously would not have been economically feasible. UK litigation funder assets have increased from just under £200 million in 2011 / 2012 to £2.2 billion in 2020 / 2021. The value of the litigation funding market in the EU was estimated to be €1 billion in 2019, with this projected to reach €1.6 billion in 2025. As a result, mass claims are now affecting almost every industry sector, and claimant law firms continue to develop innovative case theories to impose liability in new areas. Source: Jones Day
Despite regulatory hurdles, the number of class actions filed in Europe and the UK has steadily risen, signaling latent potential for growth in the class actions and litigation funding areas.
Forecasts suggest a tipping point wherein significant victories and streamlined legal proceedings could catalyze increased investment in litigation funds, that would fuel a surge in claims and bolstering revenues for legal advisors on both sides of the class action divide.
Class Action Lawyers Growth
The opportunities provided by growing international class actions clearly holds major potential for law firms, which can transcend the difficulties and costs associated with client acquisition. The growth in such actions across multiple jurisdictions could transform the legal landscape, from the US and Europe to the UK and Australia.
Could such growth eclipse even the major revenue bounds of a legal giant like Kirkland & Ellis?
Quite possibly, given the continued results from class action lawsuits and the changing attitudes towards litigation funding.
