The Supreme Court, in its long-awaited decision in Lloyd v Google, unanimously overturned the decision of the Court of Appeal and refused Mr Richard Lloyd’s request to proceed with a class action on behalf of all iPhone users in the UK against Google. What does this mean for the future of similar “opt-out” representative actions in the UK?
Mr Lloyd, backed by a litigation funder (Therium Litigation Funding), issued a claim against Google alleging breach of its duties as a data controller under s4(4) of the Data Protection Act 1998 (“the DPA 1998”). The essence of the claim was that, during late 2011 and early 2012, Google secretly tracked the internet activity of millions of Apple iPhone users across the UK and used the collected data for commercial purposes without the users’ knowledge.
Significantly, Mr Lloyd was not just claiming damages in his own right, but rather claimed to represent all those in England and Wales (a class of around 4 million people) who owned an Apple iPhone at the relevant time and whose data were obtained by Google without their consent. Mr Lloyd asserted that he was entitled to recover damages on behalf of the class.
Fundamentals of Representative Class Actions
Class actions, in which a single person is permitted to bring a claim and obtain redress on behalf of a class of people who have been affected in a similar way by alleged wrongdoing, have long been possible in the United States and, more recently, in Canada and Australia. Whether legislation to establish a class action regime should be enacted in the UK has been much discussed.
The Supreme Court flagged that, in 2009, the Government rejected a recommendation to introduce a generic class action regime applicable to all types of claim, preferring a “sector based approach”. Since then, the only sector for which such a regime has so far been enacted is that of competition law.
In an attempt to circumvent this, Mr Lloyd presented, in the words of the Court of Appeal, “an unusual and innovative use of the representative procedure” in rule 19.6 of the Civil Procedure Rules. Specifically, it was Mr Lloyd’s case that as a matter of law, compensation can be awarded under the DPA 1998 for “loss of control” of personal data without the need to prove that the claimant suffered any financial loss or mental distress as a result of the breach. Mr Lloyd argued that each class member had suffered damage equally and that a “uniform sum” of damages (approximately £750 per member or £3bn in the aggregate) could be awarded without the need to investigate any circumstances particular to each individual case.
The Supreme Court concluded that the representative action could not proceed. It unanimously held that class members did not have the “same interest” in the claim (an essential requirement of the representative procedure under CPR 19.6) because the impact of Google’s tracking varied from individual to individual according to their use of Safari. Mr Lloyd’s argument that each member had suffered a “lowest common denominator of damage” was also rejected as this level of damage would be too trivial. He had failed to show that the individual suffered any material damage or distress as a result of a breach of the Act by Google. The Supreme Court concluded that, without proof of these matters, a claim for damages could not succeed.
Impact on Representative Class Actions
The Supreme Court decision is undoubtedly a significant blow to claimant lawyers and litigation funders looking for innovative ways to expand the availability of “opt-out” class actions in this swiftly evolving litigation landscape. The broad nature of “opt-out” classes, where individuals are included in the class unless they express their wish to opt out, means the cumulative value of the damages is so vast that this puts significant pressure on defendants to settle, perpetuating the trend of bringing class actions. It is hoped the assessment of damages hurdles will prove too difficult for many claimants and appetite for bringing such claims will now wane. The decision will be welcomed by businesses.
Representative actions are expected to remain viable where harm can be quantified on an equal basis (as opposed to an individual basis) across the whole class, for example where each class member has wrongly been charged a fixed sum or fee. Proceedings may also be viable where they can be brought on a bifurcated basis, with issues of liability being established as a primary issue and individual claims of compensation being held over as a secondary issue. Claimant law firms and their funders will, no doubt, be considering creative ways of approaching these issues going forward; claims which can be packaged on a “uniform damages” basis or can be sculpted into the bifurcated model on a profitable basis will continue to be brought.
The decision does not affect “opt-out” anti-trust class actions brought under the collective proceedings regime of the Consumer Rights Act 2015. The landmark decision of the Supreme Court in Merricks v Mastercard remains unaffected; here the Court held a low threshold should be applied when certifying the suitability of a claim under this regime and in doing so it paved the way for allowing this class action (brought on behalf of 46.2 consumers seeking £14bn for allegedly inflated prices) to continue. The claim is currently back with the Competition Appeal Tribunal and all eyes will be on the Tribunal’s approach to quantifying and distributing an aggregate damages award of this magnitude (if the claim succeeds) given the wide implications for class actions.