Lloyd -v- Google: How low can you go?
Now the dust has settled on Lloyd -v- Google, FinLegal’s Steve Shinn looks at an important point raised by the judgment: how much does a class action cost per claimant, and when does it become uneconomic to run a case?
Much has been written about the Supreme Court’s decision in Lloyd -v- Google, a data protection opt-out group action that was seeking to sue Google on behalf of 4.5 million iPhone users. A great deal of it seems to ring the funeral bell for non-competition group actions. This, I think, is premature.
The impact
In fact, what struck me most about the ruling was the comment that Supreme Court Justice Leggatt made when giving judgment that went to the heart of the current business case for class actions.
I don’t intend to give a legal analysis of the judgment. There have been plenty of those already. Suffice to say, the case was about whether consumer champion Richard Lloyd could sue Google for misuse of data for around £3 billion on behalf of more than 4 million iPhone users and then, if he won, distribute the damages equally amongst the group.
At its most basic, the court found that Lloyd could indeed sue Google on behalf of the group. However, instead of seeking a large sum in damages and splitting it equally, damages would have to be assessed on an individual basis. Each claimant would have to demonstrate how badly they had been affected.
While giving judgment SCJ Leggatt said that, with millions of potential claimants Lloyds legal team “has not proposed such a two–stage procedure, doubtless because the proceedings would not be economic if it is necessary to prove loss on an individual basis.
Doubtless?
It is the use of the word “doubtless” that interests me because, as somebody whose business is predicated on helping make group actions affordable, and providing legal technology for the business of disputes, I have doubt. I know how much class actions cost. I also know that many people in the legal community, from judges down underestimate quite how effective AI and automation mixed with economies of scale can be for claims management.
Without the use of AI and automation, dealing with 4.5 million claimants individually would indeed be an expensive proposition.
It would have to be done using call centre workers. If each call handler took, on average half-an-hour to fully process each claim, it would amount to 2.25 million working hours. The wage bill alone, based on a national living wage of £9.90, would be more than £20 million.
That is before other costs such as inventory and rent are factored in.
Management by Exception
That is not how FinLegal processes claims.
We use a process called ‘management by exception’ which means that human case handlers are only needed in the minority of situations. We set up a tailored web portal for each group action. The software asks potential claimants targeted questions, gets data from them and processes it.
In most cases, the software can guide a claimant from onboarding to payment.
If there are problems, the case file gets sent to a human claims handler.
In our experience, more than 75% of claimants can be handled automatically, drastically cutting down on processing costs.
So, how low can you go?
How much does it cost? Or, as my clients often ask me, ‘how low can you go?’
A global, overall figure is meaningless as it doesn’t take account of scale. The most economic way of looking at it is cost-per-claimant. That is the amount it costs, per claimant, for FinLegal to process the claim. If the costs per claimant become too high, the case becomes uneconomic to fight. FinLegal’s solution costs anywhere from £5 - £40 per claimant, depending on the number of claims including third-party ID checks, digital signature through to settlement payment.
Lloyd was seeking £3 billion in the Google case. That’s an average of £750 per claimant. If the case management and data collection task necessary to get enough information to work out individual damages was three times more complicated than usual (and it wouldn’t be) that would reduce the average revenue per claim by £735.
So, when clients ask me how low we can go the answer is usually “prepare to be pleasantly surprised.”