Merricks: Best amount possible recovered
The Competition Appeal Tribunal (CAT) last week approved the £200m settlement of former solicitor Walter Merricks with Mastercard, in a case once valued at £14bn.
This means it rejected the objections of Mr Merricks’ funder, Innsworth Capital, to the settlement, although the detailed reasons have yet to be published.
It emerged last month that Innsworth has commenced arbitration proceedings against Mr Merricks personally, claiming he has not acted with best endeavours to secure its return – which the litigation funding agreement (LFA) envisaged as £400m on the basis of Innsworth covering £40m in costs.
In a remarkable twist, Mastercard has agreed to back Mr Merricks in resolving the arbitration with up to £10m.
The first opt-in collective proceedings started under the 2015 Consumer Rights Act was filed in 2016. It was a follow-on action after Mastercard was found to have infringed EU law by imposing charges (known as ‘interchange’ fees) on the use of Mastercard debit and credit cards.
Mr Merricks, the class representative and former chief executive of the Financial Ombudsman Service, said this increased costs for retailers and consumers and that 44m consumers were affected. However, he decided to settle after adverse rulings, particularly on causation and limitation, put 95% of the original quantum being claimed “either at serious risk or not recoverable”.
Under the terms of the settlement, the first £100m will be distributed to those eligible consumers who come forward, which Mr Merricks estimates will be around 5% of potential claimants.
If so, each claimant would receive £45, falling to £22.72 if 10% claimed and ultimately to £2.27 in the “unlikely” event every eligible person claimed.
There will be a cap on the amount any claimant could receive – either £45, as proposed by Mastercard, or £70, as proposed by Mr Merricks. The CAT’s full ruling will say which it prefers. If any of the £100m remains unclaimed, this will go to Innsworth.
The next £45.6m would reimburse Innsworth for the costs it has covered to date and those still to come.
However, Mr Merricks said Innsworth had refused to confirm that it would not then seek a detailed assessment of his lawyers’ fees, which could provide it with an unjustified “windfall”. Without this, “I do not see how I can propose ringfencing money to the funder’s benefit”, because it may not reflect Innsworth’s final expenditure.
Mr Merricks said the remaining £54.4m could be put to two different uses, again to be decided by the CAT. He proposed that it also be paid to Innsworth.
Alternatively, if more than 5% of people have claimed, it could be used to increase their compensation, up to a maximum of £45. Any remaining balance would then be paid to Innsworth.
Mr Merricks said: “I am very pleased that, after more than eight years, where I have given my all to get the best result possible for UK consumers, that the tribunal has confirmed that the settlement I agreed with Mastercard is just and reasonable – in fact, the tribunal went as far as to say it had no doubt about that.
“I had clearly hoped to have recovered more, but the case and facts developed in a way meant I could recover less than I initially planned, but I recovered the best amount possible. I now look forward to distributing the settlement to get it in the hands of UK consumers.”
His solicitor, Boris Bronfentrinker, partner at the London office of US firm Willkie Farr & Gallagher, added: “There have been over 30 rulings, multiple trips to the Court of Appeal and also to the Supreme Court. Mr Merricks has had to adapt as the case and the facts evolved, but he secured the best possible outcome…
“These proceedings started off as a landmark case in setting the foundation for collective actions in the UK and it will end being as equally ground breaking in a settlement achieved under heavy attack and challenge by the litigation funder.
“It is most unfortunate that Innsworth chose to fight the settlement and to also threaten Mr Merricks personally by starting litigation against him. Its efforts have today failed and hopefully they accept that and move on.”
Mr Bronfentrinker, who started the case while at Quinn Emanuel before joining Wilkie in 2021, also cited the comments of tribunal chair Hodge Malek KC, who said: “Being a class representative is a huge responsibility. Mr Merricks has tirelessly fought for the benefit of class members over the last eight years and that is appreciated.
“The fact that the outcome has been disappointing in the light of how the evidence and the rulings had developed does not detract from that.”
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