What are the 5 biggest class actions of all time?

Although it has taken its time to arrive, the UK and many EU jurisdictions now have functioning class action regimes. But what are class actions and why are they important?

What are class actions

Class action lawsuits, group actions, mass torts and group claim lawsuits are all different ways to describe lawsuits brought by multiple claimants. They are usually brought against large businesses and seek financial redress for alleged or proven wrongdoing.

They can be 'opt-in' or 'opt-out'. Opt-in claims are claims in which potential claimants need to give the lawyers bringing the case permission to represent them. Opt-out cases are the inverse.

A lead claimant fights a claim representing a category or people. Nobody else is required to ‘sign up’ to the claim. If the lead claimant wins, everybody who meets the criteria of the claim is entitled to compensation. Any individual can, however, choose to ‘opt out’ of receiving compensation.

Cases can represent any number of claimants, from hundreds to millions. Often, they seek a relatively small amount of compensation per person, but when multiplied by the number of people involved in the claim, the total award can be in the billions of dollars.

Why are they important?

One of the most important aspects of class action lawsuits is that they can act as a way to check the actions of large companies. Because a small payout to a large number of people can add up to a large sum of money, the class action mechanism discourages companies from doing wrong by their customers.

If class action weren't possible, it often wouldn't be economic or practical for customers to take legal action if they are only going to recover a small sum of money. In addition, class actions allow claimants who might not have the money to hire a law firm to get representation and compensation.

What is the history of class action lawsuits?

The USA is the country that is best known for class action lawsuits.

While the US legal system has always had provisions for group claims, modern class actions came to the fore in the 1960s. They are now a major part of the legal landscape.

Class action lawsuits are also well established in Canada and Australia.

Class actions in the UK and EU

Class actions took longer to get established in the EU and UK. That’s why in 2018 the European Union proposed what it called ‘The Directive on representative actions for the protection of the collective interests of consumers.’ It came as part of the EU’s New Deal for Consumers, a strategy to strengthen and modernise consumer protection across the bloc.

The directive means that a ‘consumer champion’ working with a single law firm can bring a case on behalf of potentially millions of claimants, and if that consumer champion wins the case, so too does the entire group.

The Directive put jurisdictions across Europe on notice that, at some point in the future, they would be required to adopt some sort of class action framework that made group redress easier. 

And it spurred action. The UK, despite Brexit has been bringing in various measures aligned with the Directive. Germany introduced a class action regime in 2018 as did the Netherlands in 2020. Across Europe lawyers and lawmakers are working out ways to improve or create group action cases.

The European Parliament endorsed the Directive in November 2020. As with all Directives, EU Member States have 24 month and 20 days to implement the measures. That means that, by the end of 2022, all of the EU 27 are required to have a class action consumer redress system in place.

This means that we are on the brink of a new era of class action in the EU and UK.

What are the biggest class actions of all time?

There is no central international register of class action lawsuits, so it is impossible to put together a comprehensive ranking of group actions. However, there are a number of high profile claims that are good illustrations of the biggest large group claims.

Number 1: The 1998 Tobacco Master Settlement Agreement

There is no doubt about the biggest-ever class action settlement. The 1998 Tobacco Master Settlement Agreement is also the biggest civil litigation settlement in US history. At USD246 billion, it is unlikely to be beaten any time soon.

The case was brought against all the major tobacco companies by more than 40 US states. The first person to bring a claim was Mike Moore, Mississippi's state attorney general.

Lawsuits filed by smokers and their families had generally failed as the courts held that they had chosen to smoke. However, in 1994 Moore argued that that his state shouldn't have to pay the costs of smoking-related disease.

It led to the 1998 settlement, in which the tobacco industry agreed to pay billions of dollars over 25 years that would be spent by US states on smoking-related projects.

This article from the US's NPR looks at the history and aftermath of this landmark case. https://www.npr.org/2013/10/13/233449505/15-years-later-where-did-all-the-cigarette-money-go?t=1646756993624

Number 2: BP's Deepwater Horizon oil spill of 2010

In April 2020 BP's Deepwater Horizon oil ring blew up after gas got into the well that that was being drilled. It killed eleven crew members and started an oil spill. Over the next 87 days around 5 million barrels of oil flowed into the Gulf of Mexico devastating sea life and coastal communities.

Litigation followed swiftly and has not yet ended.

The company was hit with hundreds of lawsuits, a large number of them representing classes and also paid huge fines.

So far it has paid out more than USD18 billion

Number 3: Dieslegate: the VW emission scandal

Volkswagen's admission that it had been falsifying the green credentials of its diesel-fuelled vehicles led to a flurry of litigation. In 2016 a San Francisco judge approved a $14.7 billion settlement with regulators and the owners of almost half a million vehicles. [https://www.reuters.com/article/us-volkswagen-emissions-idUSKCN12P22F].

The case is far from over. Other class actions are still ongoing in other jurisdictions, including the UK. [https://www.theguardian.com/business/2021/dec/05/dieselgate-british-car-buyers-claim-vw-reaches-high-court]. The total final total may well exceed USD20 million.

Number 4: The Enron securities fraud

The Enron fraud of 2001 was the first major fraud of the 21st century and also brought down its auditor accounting giant Arthur Andersen.

 The energy-trading company, at the time one of the biggest firms in the USA, had been hiding tens of billions in debt off its balance sheet. When it came to light, the company imploded. Mass shareholder and regulatory litigation followed as well as a major criminal investigation.

 In 2008 a judge in Houston approved a USD7.2 shareholder class action settlement alleging that the company defrauded investors immediately before its collapse

 Number 5: Dutch Fortis Bank settlement

 In 2018 the Amsterdam Court of Appeal approved a EUR1.3 billion group action settlement on behalf of shareholders of Benelux financial services company Fortis, which was forced to break itself up following the financial crisis of 2008.

The case and the litigation surrounding is was hugely complicated. It may not be the fifth-biggest of all time, but is is the biggest so far in Europe and proves that high value shareholder litigation has it place in European jurisdictions.