Australian Federal Court to decide if law firms can be involved in funding class action litigation

FRT Admin
Site administrator
September 20, 2013

An interesting situation arose in Australia recently affecting securities class actions down under. The Australian Federal Court has been asked to take on the issue of whether a litigation funder which is run by a plaintiff law firm may fund a class action brought by that firm.

For background, Aussie class actions are considered “opt-in” mechanisms, in contrast to the “opt-out” class actions that are typical in the United States.  Most Australian cases are privately-organized by a litigation-funding company that underwrites the risks associated with taking on legal fees. Plaintiff law firms typically release press alerts seeking investors meeting the criteria they believe best captures the damages caused by the proposed defendant. If the plaintiff lawyers choose to go forward with the case, they will often coordinate with a litigation funding company to fund the suit.

australiancourtsystemtoolThe recent issue came to light when litigation funder Claims Funding Australia Pty Limited (“CFA”) sought approval to co-fund a class action filed by plaintiff law firm Maurice Blackburn in New South Wales. Since Maurice Blackburn’s Chairman is a CFA Director, Maurice Blackburn’s Chief Executive and national head of employment and industrial law practice are CFA shareholders, and all the firm’s principals are beneficiaries of the discretionary trust formed to set up CFA, you can see why this might raise a red flag.

If the Australian Federal Court decides it has jurisdiction over the matter, its decision will have a significant impact on the development of the litigation funding industry and the participation of plaintiff law firms in that market. This is a particularly interesting situation, seeing as though there is a lot of class action activity in Australia relative to other non-U.S. jurisdictions across the globe. FRT will continue to follow any new developments in this case, as we do with all securities class action news, internationally and domestically.

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