Irwin Mitchell joins US class action firm in vitamin assault

As England walloped Croatia last week, Irwin Mitchell was preparing for a different type of battle. The national firm is gearing up to launch a multi-party action for damages against the companies fined by the EU for operating an international vitamin cartel. If successful, it will be the first ever group action of its kind.

Irwin Mitchell has teamed up with US class action law firm Cohen Milstein Hausfeld & Toll to bring a claim for damages on behalf of clients in the poultry and animal feeds sector, which allege that the activities of the cartelists unfairly inflated the price they paid for vitamins. Cohen already has some experience in this area. In early 2002 the firm teamed up with London-based group action specialist Class Law to bring a similar claim on behalf of auction houses Sotheby’s and Christie’s.

A significant number of claimants have already joined the action, including, it is understood, UK-based turkey supplier Bernard Matthews.

The background to this is that in November 2001, the EU hit a number of European and Japanese companies, including Switzerland’s Hoffman-La Roche and Germany-based BASF, with fines totalling a whopping €855m (£567.9m) for operating an international vitamin cartel.

In an ideal world, the claimants, which comprise UK and EU-based companies, would probably have preferred to seek compensation in the US. (In fact, the US aspect, plus the fact that Cohen advised on the Christie’s-Sotheby’s class action, is probably the reason the firm was brought on board.) The reasons
for this are fairly simple – contingency fees and treble damages are both available in the US. Additionally, the losers do not have to pay the winners’ legal fees.

Another advantage relates to ‘passing off’ a defence under which it can be argued that the claimant simply passed the inflated price on to the consumer and therefore did not suffer a loss. Unlike in the UK, in the US this cannot be relied upon as a defence at federal level.

However, the US Supreme Court’s landmark ruling earlier this month in the case of Empagran v Hoffman-La Roche et al means it will be virtually impossible for the claimants to take the US route.

In Empagran, the Supreme Court ruled that claimants cannot rely on US antitrust law when the main basis of the legal claim is harm caused outside the US. The Supreme Court reached this decision because although Hoffman-La Roche and its co-defendants did sell some vitamins in the US, the bulk were sold elsewhere.

Since a US class action is no longer an option for the claimants, an alternative route would be to bring a claim to be heard by the Competition Appeals Tribunal (CAT). This is now possible because the Enterprise Act, which came into force in June 2003, provided the CAT, headed by Sir Christopher Bellamy, with the jurisdiction to hear damages claims. But until earlier this year, this new power has gone largely unnoticed.

More and more claimants are expected to push for damages hearings to go through the CAT because there is a strong feeling that it is more complainant-friendly than the courts. It also takes a much softer view on causation.

The first ever damages claim to be heard by the CAT relates, oddly enough, to the vitamin cartel. As first reported by The Lawyer, egg and poultry company Deans Foods, advised by Cambridge firm Taylor Vinters, is suing Hoffman-La Roche and Aventis because the defendants’ activities allegedly artificially inflated the price it paid for vitamins (The Lawyer, 22 March). However, there is some doubt as to whether Irwin Mitchell can bring an action to the CAT, as this route is only open to consumer groups.

It is also unclear whether the limitation period for bringing a damages claim in the CAT against the vitamin cartel members has expired. The CAT rules broadly state that the limitation period expires two years after the last date on which a company would have appealed against an EU decision (where it did appeal), or two years from the disposal of an appeal (where it did appeal).

Jon Lawrence, the Freshfields Bruckhaus Deringer litigation partner handling the case for Hoffman-La Roche, therefore argues that for these reasons there will be no more damages claims in the CAT against his client.

Alan Owens, the Irwin Mitchell partner leading the claim, concedes that a claim against Hoffman-La Roche would not be permitted. However, he argues that a claim against BASF may still be possible, because the German company, which received the second-highest penalty, is currently appealing against the EU’s decision.

“If it’s possible, we’d push for the CAT route. But in all likelihood, if the claims are primarily against Hoffman-La Roche, then we’ll go through the High Court,” says Owens.

That sounds like a sensible approach, because to bring multiple claims in different forums would
be significantly costly and therefore unsatisfactory.
Fortunately, despite all the procedural hurdles that Irwin Mitchell needs to overcome, it is not all bad news: last month the Court of Appeal made its first ever award for damages for breach of EU competition law in the case of Crehan v Inntrepreneur Pub Company.

It still remains to be seen whether or not any action brought against members of the vitamin cartel will be successful. It is, however, clear that Irwin Mitchell has a number of obstacles to overcome.

On the other hand, whatever the outcome, the potential for any group action or series of individual actions will attract attention from spectators, regardless of whether or not they are group action groupies.