Law firm Squire Patton Boggs is appealing a ruling that permanently stayed its case against technology startup GetSwift in favour of a competing class action.
The firm is challenging the Federal Court’s power to choose one representative proceeding over another, saying Justice Michael Lee erred in exercising his discretion.
Boutique law firm Phi Finney McDonald was chosen over Squire Patton Boggs and Corrs Chambers Westgarth to lead a single shareholder class action against GetSwift.
In the much anticipated ruling on May 23, Judge Lee selected Phi Finney’s case — the last to be filed with the Federal Court — because its funding model was “clearly preferable” to the other two.
In an interlocutory application on Friday, Squire Patton Boggs says Judge Lee erred in concluding that the continuation of more than one open class representative proceeding would unnecessarily increase costs to class members.
The firm said the decision to permanently stay its case “involved errors in the exercise of discretion” and was handed down “in the context of a multiplicity of proceedings being commenced in the shareholder class action space”.
It also came just before the May 31 release of the Australian Law Reform Commission’s discussion paper, Squire Patton Boggs said. That report recommended that judges choose one among competing class actions.
The firm said Phi Finney had not even filed a statement of claim when its case won the beauty contest. Its pending claim, the firm said, would be “similar” to its own claim.
“Squire Patton Boggs has been working in this extremely complex and difficult area of class action litigation for a number of years,” said firm partner Amanda Banton. “We have developed a very competitive funding package based on years of experience and familiarity with how these disputes play out.”
“Our track record, including delivering successful outcomes to class action members over a large number of disputes, demonstrates we have the experience and expertise to run the case efficiently – with resulting cost savings.”
GetSwift, and its managing director, Joel Macdonald, have been accused of breaching continuous disclosure obligations and misleading shareholders with overhyped announcements about business contracts.
Phi Finney, founded by three former Slater & Gordon lawyers, is partnering with litigation funder Therium Australia in bringing its action.
The proposed funding model would entitle Therium to the lesser of a multiple of expenses the funder had paid during the proceeding (either 2.2 times if settlement was reached on or before April 12, 2019 and 2.8 times after that date) or 20% of the net litigation proceeds.
In comparison, the Squire Patton Boggs class action proposed paying International Litigation Partners the lesser of 25% of net proceeds or 22.5% of gross proceeds; while Corrs Chambers Westgarth had proposed a flat commission to backer Vannin Capital of 10% if proceeds were received by the end of the year, 20% if received before September 26, 2019, or 30% if received after that date.
Judge Lee described Phi Finney’s proposed funding model as superior because it aligned the funder’s reward with their increased risks as legal costs rose. The mechanism also prevented windfalls by capping the commissions earned, he said.
“It is not unusual in securities class actions for estimates of damages to be in the range of hundreds of millions of dollars,” he said in his judgment. “At these very high figures, there is a very real danger of a disproportion between the risk undertaken and returns.”
GetSwift is represented by Quinn Emanuel.
The Phi Finney case is Raffaelle Webb v GetSwift & Anor.
The Squire Patton Boggs case is Dwayne Perrera v GetSwift & Anor.
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