Group proceedings – the numbers behind the Merricks v Mastercard settlement

Wars of words, public feuds, eyewatering numbers – the group proceedings case of Merricks v Mastercard has made headlines across the litigation world since it was filed in 2016. The dispute is still ongoing, with a hearing into the settlement agreement currently progressing through the Competition Appeal Tribunal due to the third-party funder's disappointment about the settlement sum agreed by Walter Merricks, the group representative.

In this blog, we take a look at some of the key numbers in the settlement agreement and how they tell the story of the case more broadly, before considering how the case shines a light on group proceedings and the general direction of travel.

1. Figures

• £14bn: the initial value of the claim. This represented the biggest ever damages action raised in the UK and was the first mass consumer claim brought under the new collective action regime under the Consumer Rights Act 2015.
• £200m: the "Settlement Sum" agreed by Merricks and Mastercard. Whilst not to be sniffed at, this represents under 2% of the sum claimed, a reduction that is, in part, explained by the various adverse judgments against Merricks made in the course of proceedings. It was nonetheless approved as just and reasonable by the Competition Appeal Tribunal. This sum is to be split into three pots.
• £100m (pot 1): the sum ringfenced for distribution to the class on whose behalf the case is brought. This amounts to only 50% of the Settlement Sum, evidencing, to some degree, the vast expense of bringing complex group proceedings.
• £45m (pot 2): reserved for the litigation funder, Innsworth Capital Limited. Innsworth is challenging the settlement agreement and has reportedly issued arbitration proceedings against Merricks for failing to use best endeavours to deliver a higher return.
• £54m (pot 3): the remaining £54m is to be made available to Innsworth subject to any further sums that need to be used to effect distribution if more than 5% of the class comes forward to claim (see below). However, the tribunal may use its discretion to order than some of this pot is redirected to the class or to non-participating class members indirectly through a payment to a consumer charity.
• £18m: the estimated fees incurred by the law firm representing Merricks. It is anticipated that Mastercard's lawyers will have billed a similar sum. These are not accounted for in the Settlement Sum and will require to be agreed between the lawyers and Innsworth, but give an indication of the complexity of the work and the financial opportunity of group proceedings work for lawyers
• £10m: the "Arbitration Sum" for Merricks. Separate to the Settlement Sum, Mastercard agreed to pay this additional amount to fund Merrick's defence against Innsworth's anticipated arbitration proceedings against him for agreeing the Settlement Sum.
• £143,000: the fee for Merricks, the group representative. This appears to cover all his work on the case for the previous eight years and comes to under £18,000 per year. A quick search of job vacancies in London suggests that Merricks could have earned the same amount as an ice cream van operator or part-time delivery driver.
• £2.27: the payment that each member of the class would receive if all 44 million members came forward. There is an extensive, £3 million advertising and noticing campaign planned to maximise the claim rate, but it is estimated that only 5% of the class will come forward. In that event, the amount paid to each claiming class member would be £45, with a cap of £70 if less than 5% of the class claims.

2. Context and trends

Drawing all of this together, these figures are enlightening as to the context of group proceedings, key trends, and some of the thorny challenges facing this burgeoning sector.

• The sums earned by the law firms working on the case and the likely return for the litigation funders are more or less equal to the amount reserved for the class. This leads critics of third-party funded group proceedings to conclude that group proceedings litigation simply represents a new funding stream for investors and big law firms.
• The arbitration proceedings pursued by the funder against the group representative because of disapproval over the Settlement Sum once more begs the question of who is actually controlling the case – the client, the lawyers or the funders.
• The counter argument to all of this is that, without the financial input of the litigation funder, the case may never have progressed and the class members would not have been in line to receive anything.
• The increase in the frequency of group proceedings and the headline amounts sought may also positively impact future legal compliance. The prospect of group proceedings litigation for non-compliance is a significant and growing risk for companies and organisations that they will want to avoid.
• Driven by the prospect of burgeoning pay days, law firms are rapidly shifting their growth strategies to boost their capacity and expertise to bring group proceedings and this will change recruitment and investment patterns.