The giant killers
29 October 2001
It would be all too easy to dismiss this small, two-partner London firm as an inconsequential upstart. But mock the name and satirise its size at your peril, because Class Law is a terrier with viciously sharp teeth. Royal & SunAlliance and RAC can both testify to the tenacity of the firm, which has turned upsetting the applecart into something of a speciality. In each example, the corporate giant, with full legal consort in tow, was bitten by the underdog.
Stephen Alexander and Howard Epstein are the two partners driving what has to be one of the most interesting firms in London at the moment. Both boast a strong background in business in addition to their legal qualifications. According to Alexander, this is a factor that works in the firm's favour. "Because I and other members of the firm have experience of working in business, we've seen things from the other side," he argues. He believes that clients find the mixture of pure law and commercial nous appealing.
The two men rather fell into practising together. Alexander had eschewed his original legal career path in order to indulge his more commercial leanings. However, the untimely death of his US partner and an aborted attempt to refinance the business propelled him back into law.
Having previously encountered Epstein at his previous eponymous firm, the two formed Class Law and a legend was born. Perhaps that is a little strong, but the impact upon the world of financial litigation was certainly quick in coming.
The first client to come wandering through the doors gave the firm its focus and generated a level of publicity that would become typical for the media-loving Class Law. The client expressed dissatisfaction with the way the Royal Life Insurance and Sun Alliance merger was proceeding.
|"There is a way to get justice, provided you have motivated clients. There have been occasions where you have a good case, but your clients don't have the stomach for a fight"|
Stephen Alexander, Class Law
The formation of Royal & SunAlliance brought together the life funds of the two parties. Class Law's client was a policyholder in Royal Life who objected to a merger between two funds in contrasting states of health. Epsten took the case to court to prevent the deal completing and Royal & SunAlliance backed down, abandoning its scheme. Subsequent renegotiations of the deal were more acceptable to Royal Life policyholders, and as Alexander eloquently puts it: "That was the one that kicked everything off."
Reticence is clearly not Alexander's watchword. Throughout the Independent Insurance debacle, both his and the firm's name featured prominently in press articles.
The often acrimonious relationship between law firms and the press plays no part in Class Law's vision. During the past month, the firm has hit the business headlines as its involvement with Railtrack, Equitable Life, Independent Insurance and Prudential racks up the column inches.
The firm relies on its appearances in the press to drum up interest in its actions. Word of mouth and exploiting media interest are key ways in which Class Law musters the necessary impetus behind a claim.
What it lacks in tradition, Class Law more than compensates for in ambition. Although Alexander is reluctant to pigeonhole the firm as US in its ethos, parallels with US specialists in class actions are immediate and undeniable.
One phrase to be avoided at all costs is 'ambulance chasing'. Alexander is adamant that the firm does not seek to encourage disaffection. Not for him are the advertising campaigns boasting "no blame without claim". Class law does not solicit business - it acts if and when there is a claim which is demonstrable in law and where there are clients to pursue it.
"It's not like America, nor do we wish to be like America. It's not the case that just because someone's lost money, we sue," says Alexander. "There has to have been a legal wrong committed by someone."
Alexander has worked in the US. He admits freely to studying class actions, gleaning experience of how they are initiated, structured and carried out. He has isolated two main differences between the attitude of the US and that of the UK to mass actions.
In the first instance, US lawyers have been forced to become more proactive. Conditional success fees have contributed to a culture where business has to be generated. Alexander says that in the UK, solicitors have to wait for someone to approach them. In this way, he believes that the UK client is already one step ahead of their US counterpart.
If a client has come to you, they are more likely to be prepared for legal action, having considered their options and chosen to seek advice. When the role is reversed, clients can almost be coerced into pursuing claims which otherwise they might have written off.
On the other hand, the US is far ahead of the UK in terms of legislation to protect the rights of individual shareholders. In a culture where speculation in stocks and shares is more prevalent than traditional savings accounts, regulations have been put in place to mitigate against severe unaccountable losses.
Alexander confides: "I hope there'll be changes made to the law to give shareholders more rights when things go wrong." As it stands, auditors owe a duty of care only to the company and not to its investors.
Despite standing up for the 'little man', Alexander refuses to accept the charge that Class Law is anti-institutional. He says that institutional shareholders are also joining the Class Law bandwagon.
The British Biotech claim, where Class Law has been madated to sue over the collapse of the company's share price, is just one of a number of recent instructions. The firm has also been approached to act on behalf of shareholders in Railtrack, an ongoing case against Prudential could soon be concluded and Independent Insurance's creditors may soon see some movement in their claim against the collapsed insurer.
The Government, too, could face the ingenuity of Class Law. Alexander says that the firm has received some interest in the possibility of seeking reparation against the Government for its conduct during the Foot-and-Mouth crisis. If this case goes the distance, Alexander could finally get his chance to take the Government to task.
Last year a case he was working on for the fuel protesters was shelved, despite Alexander's best efforts at resuscitation. Looking back, he says the protesters could not organise themselves into a coherent unit, which is the risk that Class Law runs. "If you give people the framework, they'll join in," he says. "There is a way to get justice, provided you have motivated clients."
If people are not sufficiently inspired to take the financial risk of pursuing a claim, it can go no further. "There have been occasions where you have a good case, but your clients don't have the stomach for a fight," explains Alexander. There have also been occasions where Class Law could perhaps have prepared itself a little better.
The firm gained considerable notoriety when it unveiled plans to act for UK boxing fans who had made their way to New York to watch a fight between Evander Holyfield and Lennox Lewis in 1999. The result of the fight was a draw. This controversial conclusion prompted accusations that the bout had been rigged. Class Law could proceed no further with the action once the FBI made it clear that it would not undertake an inquiry.
Of his ability to juggle so many high-profile and complex cases, Alexander simply says: "We tend to do things with a great deal of enthusiasm, and in these cases you have to go beyond the normal efforts."
Forensic deconstruction of the situation is the first element to take care of once a client has brought a prospective claim to the firm's notice. If the research suggests that there is a case to be answered, and it is a matter for a collective approach, the firm will start the process of generating interest among other interested parties.
Although a self-confessed Luddite, Alexander's firm has embraced the opportunities presented by the internet. Details of potential action are posted online, and for a fixed fee people can add themselves to a growing campaign. A committee is elected to liaise with Class Law and the wheels of justice are put in motion. Should evidence be required, the necessary information can also be requested via the firm's website.
The ongoing case management can also be coordinated by specific software. "Fortunately," says Alexander, "technology has really meant that the administration can be managed electronically."
The committee is imperative to the claim. The actions that Class Law coordinates generally have a vast client base. If, for example, every Railtrack shareholder participating in the claim wanted direct access to their solicitor, no one at the firm would get anything done.
Alexander thus perceives a strong committee as fundamental to the satisfactory running of a case. His ideal conditions for a claim comprise a good case, motivated clients and strong relations with familiar barristers.
"We look upon the bar as an important resource for these cases," says Alexander. He extends this sentiment to add his belief that Class Law uses the bar as it is meant to be used. In essence, that means regular contact with preferred barristers and QCs who know the firm and its methods, in addition to the innate jargon of the often complex financial matter and audit trials.
Alexander views one factor as absolutely essential to the firm's success. "We're seen as independent. We don't have any conflicts of interest," he asserts, arguing that it is for this initial reason that clients are drawn to the firm. It could, however, cause problems for Class Law's future development.
On the back of well-publicised David Goliath-type cases, Class Law has become quite the blushing ingénue. So far, it has protected its modesty from the advances of City satyrs. "Do we expand internally, or find a match with a firm with similar interest?" muses Alexander.
A merger would undoubtedly make sound business sense for Class Law. The firm would benefit from an injection of resources as well as the support of a more general practice, and to prevent it from simply slipping into a 'one-trick pony' rut, the firm may need the confidence brought from allying itself with a larger established firm.
"We're happy to work with other firms on cases," observes Alexander. "We've developed ways of doing things." Adding cheekily that, should City firms require his assistance, it is readily available, as he is "not aware of anybody who's doing it the way we are."
This is a debatable and somewhat disingenuous statement. Naturally, other firms operate in the same area, Edwin Coe being just one example. But if Alexander is referring simply to the systems in place and the commitment to handling cases for disenfranchised shareholders or creditors, he may have a point. No other firm in just three years of existence has approached the legal market with such a confident swagger. Class Law's name could soon be synonymous with daring financial litigation.
It must, though, tread a careful line. Among the outraged voices commenting on Railtrack, a number are expressing incredulity at the idea that shareholders did not realise that they had invested in an ailing company. Class Law may have a difficult job convincing the public that people with sufficient spare cash to invest in stocks and shares deserve our sympathy when those investments go wrong.
Class Law probably has little interest in convincing the public. As long as there is a case to be answered - a legal, if not moral, wrong to right - and enough client momentum, the firm will continue to act.
The next year will prove an interesting time in the development of Class Law. The firm's ethos precludes standing still, but it is as yet unclear where the path it has cut for itself leads.
|Class Law - a case history|
| Royal & SunAlliance |
During the merger of Royal Life Insurance and Sun Alliance it emerged that the life fund of Royal Life was in a better state than that of its prospective partner. Class Law's client was a policyholder with Royal Life who was not in favour of integrated funds. A case was brought before the courts to stop the deal. It succeeded and merger terms were renegotiated more to the liking of Royal Life policyholders. Class Law had made its mark, and in some style.
Class Law was instructed by overseas members of the Royal Automobile Club (RAC). The RAC sold its roadside services business and a contingent comprising overseas members was informed that it would not be given a share of the windfall. The members sued and the case was settled out of court.
The Treasury changed the rules of self-invested personal pension schemes, excluding the purchase of traded endowment policies. Class Law's interest forced the Chancellor to amend these rules.
Prudential policyholders approached Class Law with an objection to the insurer's plans to distribute an £8bn orphan asset fund. Negotiations are ongoing.
Creditors and shareholders are to pursue a group claim against the failed insurer's auditors, KPMG, and actuaries Watson Wyatt.
Mandated to sue over the collapse in the company's share price. The firm is investigating legal options.
Impending legal action against a number of former executives at Claims Direct by shareholders and former franchisees. Targets could include the company's financial advisers, Investec Henderson Crosthwaite, and its auditors, PricewaterhouseCoopers.
The firm has launched the Railtrack Action Group, which is looking at the avenues open to shareholders. The Government's role will be studied carefully.
International policyholders in Equitable Life have instructed Class Law to argue that they should be recognised as a separate class for the purposes of a compromise scheme. Equitable determined originally that there should be only two classes of voters. The provisional scheme has been put on the table in an effort to secure the mutual's future financial stability. A deal has to be completed by March 2002 to ensure payment of £250m from Halifax to Equitable. Halifax bailed Equitable out earlier this year with a £500m payment for Equitable's operational assets.
|Class Law partner profiles|
| HOWARD EPSTEIN |
Howard Epstein is one of two partners steering the continued growth of Class Law. Now in his 30th year in practice, Epstein qualified in 1969.
For the first 20 years of his legal career, he was based not in the heaving metropolis, but in the provinces. This, he says, makes him unique among London lawyers. He has sampled variety and never narrowed his focus on one particular specialisation. For many years, Epstein's principal focus was on commercial property, but his move to London coincided rather unfortunately with the property recession of the early 1990s.
This turn of events was to have almost providential consequences for Epstein. Forced to consider his options, he retrained as a litigator. In this field, his property expertise has come in useful, enabling him to generate a formidable reputation as a commercial dispute resolution practitioner.
Of the numerous disputes handled by Epstein, he claims that only two went to trial. In every other instance the case was settled by negotiation. One case in 1970 went to the County Court, while the other made its way in 1998 to the High Court. Epstein has so far preserved a 100 per cent success record of cases gone to trial, winning both of them. Epstein has lectured on the acquisition of businesses and technology in the legal profession, which is something that Class Law has taken full advantage of.
With the bad old days of recession behind him and Class Law in the ascendance, Epstein now handles a broad range of work. He concentrates on commercial property, commercial litigation and employment law.
The younger of the two presiding partners at Class Law, Stephen Alexander can only correctly be described as a 'character'. Gregarious and charming to journalists, the man has something to say on an alarming number of subjects. His charm seems to be working. Class Law has to raise interest in its actions in order for them to proceed. This process of inspiring clients and spurring people on requires an enormous amount of energy, which is something that Alexander has in abundance.
Having qualified in 1975, Alexander has amassed a considerable amount of experience in all aspects of corporate and commercial work. He practised for 15 years before moving away from legal work and going into business.
In no chronological order, he was for six years engaged in investment banking and was a member of the Securities Association. Alexander has also spent a number of years working in and for clients in the US.
He has been involved as a director in the leisure, retail and telecommunications industries. While in business, he helped raise money for projects that included the Collingtree Park Golf Course in Northamptonshire and fire-resistant cladding for trains.
In essence, Alexander delivers an interesting mix of corporate finance, legal advice and ebullience to individual, institutional and commercial clients.