Litigation 2017 | Page 2

Litigation & ADR annual report

Getting squeezed

Law firms that defend clients in class actions are buckling under the weight of the thousands of claims they have to contend with – consequently they face the choice of turning down work due to lack of resources or bolstering their teams to meet demand
Class actions are becoming increasingly popular as the public seek to hold financial institutions , in particular , to account for alleged misdemeanours . This phenomenon is enabling law firms that represent plaintiffs to dramatically increase their revenue , but for the firms that represent defendants in such cases , it is a trend that is proving difficult to adjust to . The sheer volume of claims being made in class actions means that some firms admit that they simply do not have the resources to provide their client with the service they expect . And this situation is going to get worse before it gets better

Very sophisticated , well-heeled global entities are financing very large claims .

Clifford Hendel Araoz & Rueda
– various financiers have spotted an opportunity to make money by financing class actions and have identified Spain in particular as having significant potential in this respect . Hence , lawyers report that potential investors are busily trying to identify what other financial products could potentially be the subject of a mass consumer lawsuit . Meanwhile , in Portugal , dispute resolution lawyers are still overwhelmingly occupied with untangling the mess left by the collapse of Banco Espírito Santo .
Consumer cases rising Disputes relating to restructuring and pre-insolvency matters are creating a lot of work for lawyers , according to Miguel Virgós , partner at Uría Menéndez .
He adds that , during the crisis , there were fewer transactions completed and consequently , there is now less M & A-related litigation , though it is growing . However , Virgós says there has been a “ huge rise in consumerrelated litigation ”. He continues : “ In the financial sector , there have been many class actions and also thousands of individual claims being made against the same defendants – to the point that
this has created a new brand of law firm , which will be here for a long period . We think that there will also be more disputes in the field of competition law .”
José María Alonso , managing partner of Baker McKenzie says that an increase in class actions against banks has seen some law firms – that survive on contingency fees – build up huge structures with around 300 lawyers . He claims that there has been an increase in “ post- M & A claims ” due to an increase in transactions involving midsized companies . Meanwhile , white collar crime cases are also generating dispute resolution work for lawyers .
Another trend is for certain groups to see opportunities in class actions and therefore they seek to “ invent new types of claim ” that could involve telecoms companies or insurance companies , for example , according to Ontier ’ s Spain managing partner Pedro Rodero . He adds that it can be very problematic for a law firm that is defending a major client against a class action because of the volume of claims . Rodero says that there is a “ real industry building up in class actions – investment funds are trying to find opportunities to finance massive class action claims .” Araoz & Rueda partner Clifford Hendel says there is a trend of “ very sophisticated , well-heeled global entities financing very large claims ” with a particular focus on the Spanish market . Alonso says that new firms handling class actions could create a problem for law firms that defend clients in such cases in that they “ will be forced to add more resources , paralegals included , to properly support such clients ”. Meanwhile , Pérez-Llorca partner Guillermina Ester says a series of rulings from the European Court of Justice have encouraged increases in consumer litigation .
However , some law firms are having to scale down the size of their dispute resolution teams due to decreases in activity in certain areas , according to Linklaters partner Francisco Málaga . “ There has been a fall in banking litigation as well as a decline in insolvency cases , so law firms will have to adapt to this new environment ,” he says .
Public suspicion Every few years , a new sector is hit by massive consumer claims , says Cuatrecasas , Gonçalves Pereira partner Alberto Fortún .
38 • IBERIAN LAWYER • January / February 2017 www . iberianlawyer . com