Visy legal battle gets messy
Tuesday, April 22, 2008/
A new twist in the legal battle between Visy and the alleged victims of the packaging industry cartel with Amcor has prompted calls for reform of the class action legal process.
Visy sought an injunction against law firm Maurice Blackburn yesterday to prevent it making what believes are misleading statements about the amount of damages class action members could receive in order to increase the number of participants, according to newspaper reports today.
Visy also asked the Federal Court to require Maurice Blackburn to pay for corrective advertising and an extension of the period of time potential members of the class action have to opt out of the litigation.
Maurice Blackburn yesterday denied that it had misled class action members – largely small business clients of Visy at the time of the cartel – and Justice Brian Tamberlin reserved his decision on the question.
Whatever the outcome, however, the move by Visy will intensify and further prolong what is already looming as complex and expensive legal action for those seeking damages.
Although Visy’s claims in this case are unusual, it is common for companies defending class actions to adopt legal strategies designed to reduce the number of class action members and increase their legal costs, according to Slater & Gordon trade practices expert Van Moulis.
“Class action litigation is highly strategic and parties with lots of resources do engage in preliminary legal skirmishes to exhaust the more limited funds available to claimants,” Moulis says.
Frank Zumbo, a trade practices expert at the University of NSW, says the legal arm wrestle taking place in the Visy case is a perfect example of why the legal process surrounding class actions should be reformed.
Zumbo points out that Visy has already been successfully prosecuted by the Australian Competition and Consumer Commission for engaging in cartel conduct, but under current laws victims of the cartel are required to prove their case anew in order to receive damages.
The system could be streamlined if claimants were able to lodge claims for damages directly with the judge who heard the original ACCC case, Zumbo argues.
“The primary judge has already heard all the evidence in the ACCC case, can see the strengths and weaknesses of a claim and make an informed decision upfront on damages in a quick and cost effective manner,” Zumbo says.
And, he points out, the change would have the advantage of presenting a greater disincentive to companies considering engaging in cartel behaviour.
“The evidence suggests defendants are more concerned about what they will have to pay out for damages in private actions than the penalties imposed by regulators – Visy’s $36 million penalty may have been big, but damages in these kinds of case can be $700 million,” Zumbo says.