Surprise in the truck cartel: Assignment model of litigation financier null and void

A heavy blow for the legal service provider Financialright in the proceedings before the Munich Regional Court on the largest action for damages against the European truck cartel.

The Munich Regional Court dismissed the action brought by the legal service provider Financialright on behalf of more than 3,000 freight forwarders for almost 900 million euros, as the underlying assignments of claims were void due to violation of the German Legal Services Act (Rechtsdienstleistungsgesetz – RDG) and Financialright was therefore not actively legitimized.

The background: MAN, Daimler, DAF, Iveco and Volvo/Renault had exchanged price information over a long period of time, for which the EU Commission had imposed a fine of almost four billion euros. In 2017, the plaintiff Financialright sued the truck builders for more than 3,000 freight forwarders on the basis of an assigned right to damages amounting to approximately 600,000,000 euros plus interest, because the freight forwarders had bought trucks at excessive prices due to cartel law.

The Regional Court dismissed the action as the assignments were null and void due to violation of the Legal Services Act, citing a decision of the Federal Court of Justice of November 2019. Accordingly, the court made an assessment of the circumstances of the individual case, including an interpretation of the agreements made with regard to debt collection, based on the protective purpose of the RDG, since the RDG serves to protect the parties seeking legal assistance, legal relations and the legal system from unqualified legal services.

The nullity of the assignments is primarily due to the fact that the applicant’s legal services are from the outset directed exclusively towards judicial activity, which is why there is no collection permitted by the RDG. According to the court, the offer of Financialright, for example, which is directed towards participation in a class action, is decisive. This follows from Financialright’s internet presence, where its contractual obligations are from the outset exclusively directed towards the judicial assertion of the claims – accordingly, the freight forwarders have filed a lawsuit to take their vehicle acquisition into account.

On the other hand, the fulfilment of the obligations towards their individual customers is directly influenced and even endangered by other obligations of Financialright, which is why, in the opinion of the court, their legal services violate the RDG. A conflict of interest arose, on the one hand, in her relationship with the large number of clients to whom she had committed herself, among other things, to bundling and joint enforcement of rights. In this way, the individual freight forwarders participate in the risk of the others, which is associated with the filing of the less promising lawsuits.

In particular, a possible settlement could have an adverse effect on the individual interests, as the freight forwarders would not have to agree. According to the plaintiff’s general terms and conditions, the settlement amount is paid to the individual customers exclusively on the basis of quotas and is independent of the concrete chances of success of the individual customer, which means that the settlement amount could be reduced by less promising claims for those whose claims have better chances of success.

The financing of the proceedings also had a direct influence on the performance of the services with the resulting risk to legal protection. Financialright and a company domiciled abroad concluded a contract for the financing of litigation, which provides that the litigation financier receives a certain share of the plaintiff’s commission. The success fee is generally 33 % plus value added tax of the payments actually received on the possible antitrust damages claims. Due to the exemption in the litigation financing agreement, Financialright can largely disregard cost-triggering procedural steps, whereby there is a risk that the considerations of expediency of the litigation financing provider will take the place of their own economic considerations.

The litigation financier is a foreign company with a listed parent company, which is under observation by analysts and the press, so that other criteria could become decisive than in the case of a self-financed litigation. Depending on the process financing, there is a risk that irrelevant decision criteria could influence the enforcement of the law, which could be contrary to the interests of the plaintiff’s clients. The overall weighing of the two factors, taking into account the protective purpose of the law and the plaintiff’s professional freedom, which is protected by fundamental rights, as well as the cedants’ guarantee of ownership, leads to an assessment of the service as a prohibited legal service.

The decision is not final and Financialright has already announced that it will appeal against the decision as the ruling contradicts a ruling of the Federal Supreme Court.

It is now feared that the decision may lead to the claims of the transport companies being time-barred – which is not shared by the plaintiff since one truck manufacturer, Scania, is not part of the group of defendants in Munich. Scania is the only manufacturer to defend itself in court against the fine imposed by the EU Commission. The proceedings before the CJEU are ongoing, which is why the statute of limitations has not yet begun in this case. Potential plaintiffs thus have another addressee up their sleeve.

A second Financialright lawsuit for EUR 541 million is still pending before the Munich Regional Court. The court has not yet ruled on this claim. In addition, there are around 110 other proceedings relating to the truck cartel in Munich. Among them is one of Deutsche Bahn, which has also bundled the claims of several truck customers, such as the German armed forces. This case involves half a billion euros in damages.