Attorney-General Christian Porter has been quoting a terrible case of justice gone wrong as he cranks up a government campaign to cut the funding of class action litigation.
It concerns a group of workers who sued their employer for unpaid entitlements, won a $5 million judgement and didn’t see a cent of it.
“Instead,” Porter intones, “the litigation funder walked away with almost $2 million and the remainder was shared between lawyers and administrators.”
It’s a powerful cautionary tale of what happens when rapacious companies get involved in funding class action litigation: the little guy gets it in the neck while big corporates and lawyers walk away with the loot.
Or, as the attorney-general has put it: “There is something clearly wrong with this situation because the mums and dads who are members of class actions are ultimately the ones who are missing out.”
But there’s one problem with Porter’s example. It wasn’t a class action case at all.
The Huon Corporation case, as it is known, was run in Victoria’s Supreme Court on behalf of employees seeking lost benefits. It dragged on and on for 10 years. The Victorian Law Reform Commission scrutinised the case in 2018 and lamented that “safeguards that exist in insolvency proceedings in class actions did not apply in this case”.
Huon, it emerges, is the very opposite of what Porter claims it to be when it comes to class action litigation.
An Inq investigation has revealed that the Huon case is one of a series of misrepresentations and fudges Porter has made on how class actions in Australia get funded.
So what’s really going on? Why is the Coalition government suddenly so concerned about justice for the little guy and so angered by large corporations apparently ripping off the system?
Over a three-part series Inq reveals there are powerful friends of the government — including the banks, mining companies, car manufacturers and special friends such as Crown Resorts — who have increasingly been the target of class actions enabled by litigation funders and prosecuted by Labor-aligned plaintiff law firms.
Crucially our investigation reveals that Porter has moved in lockstep — including using the misleading Huon example — with high-powered US business lobby group US Chamber of Commerce’s Institute for Legal Reform (ILR).
The ILR pressures governments around the world to restrict the supply of money available to fund class action litigation against wealthy institutions — a hugely expensive undertaking which is well beyond the means of the mums and dads Porter claims to be representing.
It supplies the research and messaging globally to sell the case for stopping litigation funding, and its campaign page for Australia promotes the misleading Huon corporation case — “where the majority of the plaintiffs’ $5 million award was split by their lawyers and Sydney-based LCM Litigation Funding” — as a shining example of why change has to happen.
The ILR also argues that there needs to be a brake applied to “litigation abuse” so that companies can “make available the tools and resources needed to combat the virus”. Porter has also raised the pressure on Australian companies from COVID-19.
The ILR’s CEO is Harold Kim, who worked in George W Bush’s White House.
Last year it hired John Abegg, chief counsel to US Senate majority leader Mitch McConnell. The ILR has an annual budget of over US$42 million according to ProPublica’s analysis of its tax filings. Its parent organisation, the US Chamber of Commerce, is among the most powerful of Washington’s lobbyists, with close ties to the Republican party.
It is not required to declare who it represents, meaning it can lobby for legislative change without revealing who’s paying the bill.
The ILR’s online strategy documents boast that it deploys “a comprehensive communications strategy” which includes “robust and aggressive outreach to key reporters, editorial writers, and bloggers” to achieve its ends.
“Our communications efforts go beyond traditional earned and paid media. We also use alternative media outlets to elevate awareness on civil justice developments in key jurisdictions,” it explains.
The ILR has honed a narrative — also picked up by Porter — casting class action funders as greedy lawyers profiting at the expense of the little guy, warning of plaintiff lawyers filing “meritless” class actions “where consumers receive minuscule amounts, and lawyers walk away with huge fees”.
The US Chamber of Commerce considers it has a right and a duty to influence legislation in other countries where US companies have a presence, to produce what it calls “the orderly administration of justice”.
In the UK it has established a website called Justice Not Profits as part of its campaign to prevent the growth of US-style class actions. It has so far succeeded in holding back class action litigation in the UK.
In Canada, Ontario’s government late last year introduced amendments making class action legislation less plaintiff-friendly with a new certification test.
It has also worked to curb the growth of class action litigation in the European Union. The ILR has singled out the Netherlands, where it warned that third-party litigation funding was “contributing to the rise of the Netherlands as a European venue of choice for group litigation”.
Why is the US Chamber of Commerce interested in Australia?
In 2018 the ILR made a lengthy submission to an Australian Law Reform Commission inquiry into litigation funding, ordered by the government on the grounds that US Chamber of Commerce members had “a direct interest” in how litigation is conducted in Australia, “as many carry on business in Australia or trade with Australians”.
But Inq’s investigation shows very few United States-owned businesses have been the subject of class actions in Australia.
We have found litigation is underway against Monsanto (manufacturers of the agricultural chemical glyphosate which is claimed to cause cancer) and car manufacturer Ford.
The majority of actions involve Australia’s banks and multinational mining companies and car manufacturers not necessarily headquartered in the US.
In truth the ILR has been paying close attention to Australia for well over a decade because of the pioneering role played by an Australian company, then known as IMF Bentham, in the practice of litigation funding which the ILR opposes.
A Bentham company agreed to fund proceedings in 2001 related to the waterfront industrial dispute of late 1990s, marking the first involvement of litigation funders in class action litigation anywhere in the world.
Australia’s High Court magnified the problem by ruling that litigation funding was not an abuse of process or contrary to public policy — a decision seen as a watershed moment in the growth of litigation funding in Australia.
The ILR has published research papers on the impact of litigation funding in Australia prepared by major Australian law firms King & Wood Mallesons and Clayton Utz. Both firms act for defendants in class action cases.
Clayton Utz said it had no continuing relationship with the ILR beyond its work on the research paper. King & Wood Mallesons did not respond to Inq’s questions.
Earlier this year the ILR published a review of its decade-long global campaign to restrict litigation funding. It noted that back in 2009 the practice “was largely concentrated in Australia” and that its warnings of associated dangers including “frivolous and abusive litigation” spreading to the United States had proved “well-grounded”.
The ILR has proven itself to be an influence peddler par excellence.
Despite its activities in Australia and its clear mission to change laws for the benefit of American business the ILR is not registered on the Australian government’s foreign influence transparency register.
Last week the ILR reported some joy when Treasurer Josh Frydenberg announced third-party litigation funders would need to hold a financial services licence and be subject to new regulations.
“Now more than ever we want Australian businesses staying in business and focused on keeping people in jobs rather than fending off class actions funded by unregulated and unaccountable parties,” Frydenberg said.
The Australian — which reported Frydenberg approvingly — has been a key promoter of the idea claiming last year that there has been an “explosion” in litigation funding which “threatened investment and jobs in Australia with more than $10 billion in claims lodged against businesses in 2018-19”.
As Inq reports tomorrow, these figures, too, are one more part of a confected crisis.
A spokesman for Porter told Inq the attorney-general had not mischaracterised the Huon Corporation case in his statement, but Inq stands by its reporting.
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