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UK Court of Appeal Rejects Class Treatment of Claims Against British AirwaysBy Matthew L. Berde Esq. and Christine A. Fujita Esq.
Summary: On November 18, 2010,
the U.K. Court of Appeal affirmed a lower court decision rejecting an attempt
by a pair of plaintiffs to certify a U.S.-style class action against British
Airways. See Emerald Supplies Ltd. v. British Airways PLC, The Court of
Appeal's decision strikes a major blow to class action plaintiffs in the U.K.
at the same time as the European Commission is ramping up its own efforts to
develop a collective action procedure.
I. The High Court's Decision
The lawsuit was brought by Emerald Supplies (a flower importer), along with one
other plaintiff. It alleged that BA had agreed to fix prices on air cargo
services in violation of European and U.K. competition laws. Emerald asserted
that it and its co-claimant were "direct or indirect purchasers of air
freight services" from BA, and as such they were "representative of
all other direct or indirect purchasers of air freight services from" BA.
Emerald asserted that it and the putative class members were damaged by the
price-fixing conduct because they (1) paid inflated prices for the services,
(2) lost sales volume insofar as the inflated prices that they paid for air
cargo services were passed on to their own customers, and (3) lost sales volume
"as a result of brand damage." Emerald sought a declaration that BA's
conduct was unlawful and that damages were "recoverable in principle from
Accordingly, Emerald sought to bring the claim as a representative action under
Rule 19.6 of the U.K.'s Civil Practice Rules ("CRP 19.6"). The Rule
provides that "(1) where more than one person has the same interest in a
claim[,] (a) the claim may be begun; or (b) the court may order that the claim
be continued, by or against one or more of the persons who have the same
interest as representatives of any other persons who have that interest."
BA subsequently applied to strike out the representative element of Emerald's
claim, arguing that the co-claimants did not have the "same
interests" as the putative class members, and, even if they did have the
same interests, that the co-claimants could not properly represent the class.
On April 8, 2009, the Chancery Division of the High Court granted BA's application
to strike. See Emerald Supplies Ltd. & Anr. v. British Airways PLC,
 EWHC 741 (Ch). Beginning with "the rule itself," the
Chancellor articulated two principles for analyzing Rule 19.6: First, while the
rule necessarily contemplates multi-person actions and imposes no limit on
"the number of persons in the class to be represented," "the
more extensive the class the more clearly" should the relevant interest be
defined. Second, and building on the first point, the "relevant
interest" shared among class members must exist both "at the time
that judgment is given" and "at the time the claim is
begun." The claimants and the class must maintain "'a common interest
and a common grievance' and 'the relief sought must in its nature be beneficial
to all'" class members throughout the litigation, even though the
membership of the class "may fluctuate."
Applying these principles, the Chancellor concluded that "Rule 19.6 does
not authorize these claimants to represent the class described in the
particulars of the claim." Emerald's complaint sought relief on behalf of
all direct and indirect purchasers who paid inflated prices. This formulation
rendered it "impossible to say of any given person that he was a member of
the class at the time the claim form was issued." That is, a judgment
would have to be reached on which prices were unlawfully inflated before it
could be known who belonged in the class. This plainly contravened Rule 19.6's
requirement that the same interest exist among class members throughout the
Even if the class did share the same interest, the Chancellor reasoned
"the relief sought in the action...[was]...not equally beneficial for all
class members." Because damages were a necessary element of the claim, the
availability of the pass-on defense created inherent conflicts within the
class. While direct purchasers would logically argue that they did not pass on
any costs to their own customers, those customers-as indirect purchasers-would
claim just the opposite. As the Chancellor explained, "[w]hether or not an
individual member of the class can establish that necessary ingredient [i.e.,
damages] will depend on where in the chain of distribution he came and who if
anyone in that chain had absorbed or passed on the alleged inflated price."
Nor would certifying a liability-only class solve the problem. Excluding
damages "would mean that it would be impossible to ascertain the members
of the class even when judgment had been given" because it would still be
"necessary to determine where in the chain of distribution the loss had
fallen in whole or in part."
Finally, the Chancellor opined that Rule 19.6, as currently drafted, did not
permit the type of class action sought by the claimants. The effect of the pass
on defense was a problem "better dealt with by Parliament than by
stretching the use of Rule 19.6 to accommodate cases such as this." And,
even though Rule 19.6's procedures may have made the proceedings more
convenient, that "overriding objective" should not control
interpretation of the Rule. Rather, the opt-in procedures authorized by the
Group Litigation Rule (Rule 19.11) could adequately address this issue.
Emerald appealed the decision. While the appeal was pending, the European
Commission fined BA and ten other airlines a combined total of €799 million for
their role in the air cargo cartel. (The U.S. Department of Justice has also
levied roughly $1.7 billion in fines on airlines who pled guilty to criminal
violations of the Sherman Act, including a $300 million fine paid by BA in
II. The Court of Appeal's Decision...
Matthew Berde is an associate
in the San Francisco office of Gibson, Dunn & Crutcher. He currently
practices in the firm's Litigation Department. Mr. Berde received his J.D. from
The University of Virginia School of Law in 2008, where he was elected to the
Order of the Coif and served as Executive Editor of the Virginia Tax Review. He
received his B.A. in History and a minor in Economics from Northwestern
University in 2000.
Christine Fujita is an associate in the San Francisco office of Gibson,
Dunn & Crutcher. She currently practices in the firm's Litigation
Department. Prior to joining Gibson, Dunn & Crutcher, Ms. Fujita served as
a law clerk for Chief Judge Irma Gonzalez of the U.S. District Court, Southern
District of California. She received her J.D. from the University of
California, Berkeley School of Law in 2009, where she was an Executive Editor
of the California Law Review and a member of the Order of the Coif. In 2004,
Ms. Fujita received a Bachelor of Arts degree in Journalism from the University
of Nevada, Reno.
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