On The Case

Law firm wants to bring Bentham-funded ‘class action’ in Channel Islands

(Reuters) - There is no mechanism for group litigation in the Royal Court of Jersey, which oversees cases involving businesses incorporated in the popular Channel Island offshore jurisdiction. But the New York-based law firm Kobre & Kim has plans to team up with the litigation funder Bentham IMF to replicate the advantages of a class action in a jurisdiction where mass litigation doesn’t exist.

Kobre & Kim claims that it has uncovered overbilling practices by the world’s biggest intellectual property management company, CPA Global, in CPA’s patent renewal services for CPA clients outside of the U.S. Earlier this year in the U.S., a small group of CPA clients settled a patent renewal overcharging class action for $5.6 million. But most CPA customers, according to Kobre & Kim, can’t litigate in the U.S. because they agreed to forum selection provisions directing disputes to Jersey, which has a British-style loser-pays rule and no means by which plaintiffs can band together to sue as a group.

So Kobre & Kim went to Bentham. “We had to create a mechanism,” said Kobre partner Michael Ng. “This required some creativity.”

Before I go on, I want to highlight two big caveats.

First: CPA denies the overbilling claims. “CPA Global categorically and emphatically denies any wrongdoing in our business,” a company spokesman said in a written statement. “The fees for our service are defined in our agreements with our customers, and we adhere to those agreements fully. CPA Global prides itself on its industry-leading ethical standards.”

It’s true that the company settled the U.S. overbilling class action earlier this year – but the clients in that case were small businesses that signed up with CPA through patent agents and did not reach individual fee agreements with the patent management company. CPA maintained in a filing in the U.S. class action that most of its clients negotiate their patent renewal fees directly with the company and are fully informed about the company’s fee structure. “CPA Global believes that all of its fees are justified and adequately disclosed,” the company’s filing said.

Second: Kobre & Kim hasn’t yet filed any suits in Jersey for CPA clients. Its contemplated mass action is at the moment entirely speculative. And though Kobre partner Ng said the firm and its Jersey co-counsel, Baker & Partners, have reviewed “a large volume” of CPA renewal bills, Ng would not specify who his clients are or even how many of them are contemplating litigation.

Bentham chief investment officer Allison Chock confirmed that Kobre & Kim is investigating and that her shop “has conditionally committed to fund the group proceedings” in the Isle of Jersey. But to repeat, the group proceeding does not actually exist right now.

“We consider any speculation about future litigation that might or might not take place to be a deliberate attempt to tarnish our good business reputation and, as we always have, will continue to vigorously defend ourselves against any such vexatious speculation,” a statement from CPA said.

That said, I’m intrigued by the idea of a U.S. law firm (albeit with offices around the world) teaming up with a litigation funder in an attempt to assemble a mass case in a jurisdiction where there’s no such thing. As you know, U.S. and European law firms have been working for several years with litigation financiers in the U.K., Germany and the Netherlands – but those jurisdictions have procedural frameworks for plaintiffs to band together.

Jersey doesn’t, although its legal systems has previously held that litigation funding agreements are valid for plaintiffs who cannot otherwise afford to bring their cases.

Ng said Kobre & Kim and Bentham have a standard, no-recourse funding arrangement. Under their deal, if the CPA litigation is filed, clients won’t be on the hook for their own fees or CPA fees, even if the case flops. Bentham’s Chock declined to say how much Bentham has committed to the potential litigation.

“Clients don’t want to be out there on their own,” Kobre’s Ng said. “This is a way of making a solution available.”