ALMOST two months have passed since the historic introduction of class action lawsuits in Scotland. Given the ongoing coronavirus pandemic, it is inevitable that our national and international businesses will face the risk of group proceedings.
Because many Scottish businesses operate on such a large scale, employees, consumers, patients, or investors are only a few examples of potential claimants who may take legal action due to the impacts of Covid-19. So how should businesses prepare for group proceedings?
One of the most effective ways starts before the action is even raised. Stress-testing relevant internal policies and procedures and being able to evidence appropriate reviews of such internal governance will greatly assist in preventing class actions being brought and, crucially, defeating those that are.
Failure to implement effective framework can create multiple difficulties further down the line. Such risks can be mitigated by ensuring company policies and procedures are clear, with processes in place to audit adherence and flag failures. Regular reminders should be provided to staff and refresher training introduced at appropriate intervals.
If a group proceeding is raised, businesses must assess the nature of the claims, the makeup of the claimant class and the potential claimant pool more generally to effectively determine the risk presented to the business.
Class actions, which are not geographically unique, often follow trends and understanding the risk in one jurisdiction, which may later be faced by another, can prove invaluable.
As with every litigation it is important to make an early assessment and adopt a desired strategy. That remains the case with class actions and it is especially important when considering the amplified nature of the proceedings and the significant amount of resource needed to address it.
The question that invariably needs to be answered is whether a business is best advised to defend the action or to settle it. This can be answered relatively easily depending on the liquidity of the business and, in many cases, there can be no option but to defend the proceedings.
Though it often requires serious consideration before a final verdict can be agreed, it is important that the decision is made quickly so the business, and its legal team, can decide on how best to channel their resources and which avenues of inquiry should be progressed.
The same strategic decisions must be made when it comes to handling any media attention generated by a class action being raised. Good PR can prove to be a useful tool when defending class actions, however media tactics should not be permitted to dictate the legal strategy.
Resolving a class action is no different to resolving any other legal proceedings brought against a business. To end the dispute, both parties must come to a mutual agreement whereby the action is settled and proceeds no further.
However, by their very nature, class actions often involve substantial financial sums which can challenge the liquidity of even the largest corporate entities. As such, businesses should not be afraid to be creative when it comes to the structure of a settlement as the success of the proposal hinges on the agreement of both parties.
As group proceedings are in their infancy in Scotland it will take time for practitioners and the Court to become accustomed to them. However, during the bedding in process, businesses must seek advice and guidance from legal experts to understand the potential risk group proceedings pose their day-to-day operations.
James McGachie is legal director of DLA Piper, and Patrick Fulton is senior associate in the firm’s Litigation and Regulatory practice
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