Partner Guillaume Buell and Associate John C. Coyle IV are the authors of the informative article “Global Class Actions: Causes, Effect, and What’s Next” published in Mealey’s Litigation Report: Class Actions.  The article examines the key forces driving the recent growth of class and mass actions outside the U.S., explores why institutional investors are increasingly pursuing litigation outside the U.S., and assesses how the rise of opt-out collective-action mechanisms and the growth of third-party litigation funding might reshape the global class action landscape.

In 2010, the U.S. Supreme Court’s decision in Morrison v. National Australia Bank Ltd. held that Section 10(b) of the Securities Exchange Act applies only to transactions in securities listed on domestic exchanges and to domestic transactions in other securities.  Since the landmark decision in Morrison, there has been a rise in similar actions filed abroad, and Guillaume and John signal that this increase in global actions is an instructive trend worth observing.  They point to the hundreds of securities class or group actions that have been filed outside the U.S. since 2021 which coincide with a broader change in patterns for various types of global actions that are driven by new collective-redress frameworks, more active institutional investors, and a maturing litigation-funding market.  Commenting on the potential implications of this increase, Guillaume and John note that, “As more suits are filed in jurisdictions that previously saw few class or group actions, including securities actions, aggregate global settlement values should rise, and more cross-border and regulatory enforcement activity increases, non-U.S. securities litigation will likely come into a more robust form, sooner rather than later.”  

Asserting that the recent proliferation of global actions does not stem from a singular cause, “but rather is a confluence of factors, including recent changes to statutory procedural frameworks for collective actions and the injection of third-party funds to finance collective litigation,” the authors highlight how removing procedural hurdles may promote collective actions and make litigating actions outside the U.S. more appealing.  They point to legislative reforms in New Zealand and Singapore as prime examples underscoring the “efforts to remove procedural obstacles to filing representative actions.”  Guillaume and John illustrate how, in 2022, New Zealand’s Law Commission recommended statutory reforms to class actions and Singapore’s Monetary Authority signaled expanded investor recovery options as a policy priority.

The authors further contend that the increasing prevalence of opt-out collective actions in Europe also supports the ability of legislative reform to spawn change.  Guillaume and John emphasize that the opt-out mechanism alleviates the collective action problem that comes from opt-in cases by automatically including class members unless they choose to opt out.  “This expands potential recoveries, reduces transaction costs for claim aggregation, and increases leverage in settlement negotiations, among other things,” they maintain, further asserting that “In markets where opt-out regimes are permitted or courts are receptive to broad aggregation, plaintiffs can bring larger cases with more ease and less cost.”

In addition to opt-out mechanisms, Guillaume and John discuss litigation outside the U.S., which could bring larger and more cases by shifting the primary risk from plaintiffs’ counsel to the third-party funders.  They note that proponents of the increasing use of litigation funders argue that it promotes access to justice while its critics point to concerns of excessive litigation, windfalls for funders, and ruinous cost exposures to defendant businesses.  Guillaume and John further contend that, while litigation funding has not been widely utilized throughout the EU, there is a large potential for this trend to grow.  The EU Parliament initiated a robust conversation about use of litigation funding in 2022, which “demonstrates that it enables claims and invites counter-measures that will shape its future impact for years to come.”  Together, the authors argue that opt-out regimes and litigation funding “may lead to growth in non-U.S. securities litigation filings, since arguably, opt-out opportunities increase class size and recovery potential; funders place capital behind cases that would otherwise be uneconomic; and counsel assemble cross-border portfolios of claims.”

While the authors acknowledge that “legislatures across the world may further shift the legal landscape as they continue to grapple with crafting procedural rules and regulations concerning the future of collective redress actions in their own countries,”  they ultimately conclude that “All things considered, it is safe to make at least one definitive conclusion—the international securities litigation environment will continue to evolve and is worth watching.”