While the US has been known as a litigious nation for many years, it is just now happening in the UK, especially in the area of employment law. And hedge funds are a target

According to Wendy Robinson and Ramier Mogadishu, founders and partners of Peregrine Law LLP, hedge fund managers in the UK are not paying enough attention to the potential for employment law suits brought for age and sex discrimination.

They point to the case of F&C Asset Management in London, which recently lost a sex discrimination case and had a judgment of GBP13.5m (US$26.4m) won against it by its former in-house counsel. It is the largest judgment every won from a hedge fund in the UK and Robinson and Mogadishu (who weren’t involved in the case) think it bodes ill for the future.

“Hedge funds need to be more aware of potential problems,” says Robinson. A primary example is the trading floor, according to Mogadishu. “There’s the culture on the trading floor that people can say whatever they want as long as they make money,” he says. “But the trading floor is not exempt from rules,” he says, pointing to incidents where female traders have been angered by what are perceived to be sexist comments by their male counterparts.

When hedge funds were raking in money hand over fist they tended to simply “throw money at claimants,” to settle the charges, Mogadishu says. Now, many hedge funds have smaller financial resources to pay claims, but the number of lawsuits is growing, he points out, rising by over 100% in the last 10 years.

The UK still has several advantages over the US when it comes to discrimination suits. There are no depositions with cross examination of witnesses done in the discovery stage of a lawsuit before it goes to trial in the UK as there is in the US. Cases tend to move through the system faster as well, because a claim must be filed within three months of leaving the firm, whereas in the US there is a three-year window.

Robinson and Mogadishu say there are things that can prevent suits from every happening, and that’s what their law firm is focused on. Most hedge funds don’t have large human resource departments to handle employee problems. “We offer hedge funds the ability to get advice (on employment issues) on a daily basis,” says Robinson. They now have two clients who have been guaranteed daily access to them, whenever they need it, wherever they are.

But if the retainer helps them avoid million-dollar judgments, it will prove to be a bargain.