Rights, Corona, Action!
The coronavirus has arrived in Australia just as class actions are becoming increasingly profitable and popular. The people who benefit most are likely to be lawyers. By James Mathias.
Whilst industries across Australia continue to shut and workers lose their jobs, class action law firms and litigation funds are gearing up to exploit the pandemic.
In a presentation released to the ASX on March 17, litigation funder Omni Bridgeway (formerly IMF Bentham) implied to investors that the coronavirus, like other pandemics, offers an opportunity to make profits and boost its stock price.
In the presentation, the company suggested that if previous pandemics were anything to go by, its investors should soon expect a large dividend. “During the SARS outbreak in 2003 Omni Bridgeway’s share price rose 164 per cent,” it said, and “during the Swine Flu (H1N1) outbreak in 2009, Omni Bridgeway’s share price rose 26 per cent.”
Omni assured investors that its share price was “not correlated” to the ASX300 Diversified Financials index, and its income in these uncertain times did not rely on “China and any supply chain disruption.”
Omni identified only one potential obstacle to these increased profits: the courts closing as a result of coronavirus.
COVID-19: Read the MRC’s coverage of the debate and policy implications here
Funding class actions has low risk and high profits. Omni Bridgeway has a success rate of almost nine out of 10 actions funded and has made a cumulative return on invested capital of 134 per cent.
Australia is even more profitable for class actions than the United States, according to Omni. In another investor presentation in February, it said it made 3.7 times more on Australian cases than in the US, and that its deployed investments had increased from around $100 million in FY15 to around $650 million in FY2020.
Omni Bridgeway disputes that it is profiteering. “To suggest that Omni Bridgeway views the COVID-19 pandemic as a ‘great opportunity’ to make profits is highly offensive,” Marella Gibson, the chief marketing officer for Australia and Asia, told The Australian.
On Monday, law firm Quinn Emanuel initiated a class action on behalf of Boral investors. The case revolves around Boral’s disclosure to the market on inventory levels, raw material and labour costs for its North American windows plant, which the investors say caused the stock price to drop 6 per cent.
Boral, an Australian company with 17,000 workers worldwide, has, like many companies, suffered a significant drop in its share price, dropping from $4.61 on December 6 to $2.01 today.
After multiple profit downgrades during the past two years, and having lost its CEO Mike Kane in February, it is no secret that the company is struggling. This class action will add to the company’s woes.
Shine Lawyers, Australia’s equal-second-largest class-action law firm, has announced it is prepared to work for people who believe they have a case against various authorities regarding COVID-19.
It is “arguable that there is a claim in negligence” against both the NSW Government and the operators of the Ruby Princess, the cruise ship which allowed 2,700 passengers to disembark in Sydney last week, a spokeswoman for Shine told Lawyers Weekly.