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Posts Tagged ‘class action reform’

After years of debate, France has finally passed its first “class action” law. Act No. 2014-344 of 17 March 2014 (relatif à la Consommation) went into effect on March 18. Chapter One of the new law introduces a new collective action procedure to adjudicate claims arising out of anti-competitive behavior and certain other consumer protection claims. Like the group action laws of many other civil law countries in Europe, the new procedure is very different from consumer class actions as they are known in the United States and other common law countries. The law creates a simplified opt-in collective action procedure that can only be enforced by an approved consumer association, not by individual litigants.  However, it is a significant development for a jurisdiction that has long resisted implementing collective action procedures of any kind.

Here is a link to the google translation of the Act in English.

Thanks to friend of ClassActionBlawg Larissa Clare Pochmann da Silva for tipping us off to this new development.

For a more detailed summary of the various aspects of the new law, see this Lexology article authored by Jérôme Philippe, Maria Trabucchi, Stephane Benouville, Dimitri Lecat and Alexandra Szekely of Freshfields Bruckhaus Deringer LLP.

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My article for the University of Denver Law Review’s Online Edition entitled Statutory Penalties and Class Actions: Social Justice or Legalized Extortion?  was posted today.  The article discusses potential reforms to address the problem of class actions for statutory penalties giving rise to potentially annihilating liability in cases involving little or no actual harm.  Please check it out.  While you’re there, check out some of the other excellent content on a wide variety of legal topics that the DU Law Review has to offer in its online supplement to its regular print publication.

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On Monday, I summarized proposed Arizona class action reform legislation forwarded to me by Shawn Aiken of Aiken Schenk Hawkins & Ricciardi P.C.  Yesterday, Aiken forwarded the final version of the class action bill as introduced before the Arizona Senate.

Click here for a copy of SB 1452.

Aiken also noted that there could be challenges to the legislative power to enact a new class action rule:

Our state constitution has many unique provisions. The one that will be invoked here is this: “The supreme court shall have . . . [the] [p]ower to make rules relative to all procedural matters in any court.”  Arizona Constitution, Article 6, Section 5.  The question will be what is more procedural than judicial certification of class actions?

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Brian Wolfman, Co-director of the Institute for Public Representation at Georgetown University Law Center, has two excellent recent posts on Public Citizen’s Consumer Law and Policy Blog that provide food for thought on the need for class action reform, and the best way to achieve reform if it is needed.

In the most recent of the two articles, Paying the Lawyer’s Expenses in Class Actions, Wolfman discusses the social importance of allowing plaintiffs’ attorneys to recover their reasonable costs incurred in successfully pursuing a class action settlement or judgment, but discusses a recent case in which two attorneys from a prominent plaintiffs’ firm were sanctioned for having claimed reimbursement for fancy dinners and first class airline tickets.  Wolfman warns about the negative impact that this type of conduct has on public perception of class actions, and makes the valuable point that even minor abuses of the system for personal gain threatens to bring scrutiny to the class action mechanism more generally, which limits access to justice that class actions may provide in meritorious cases.

In an earlier article, Important 7th Circuit Decision Rejecting Shareholder Derivative Suit, Wolfman applauds Judge Frank Easterbrook’s opinion throwing out the settlement of a shareholder derivative suit after finding that the underlying suit lacked merit and should be dismissed.  Wolfman makes the point that rather than approving a settlement that provides little or no benefit to class members on the grounds that the merits of the claims are weak, the better solution from a public policy perspective is to dismiss the case entirely.  He sums up this point concisely, “[a]n obviously meritless case should not benefit the lawyers and no one else.”

The two articles illustrate two important conceptual principles on which many consumer advocates and corporate interests may find themselves in complete agreement: First, it is the potential for abuse of class actions, and not the class action mechanism itself, that often provides the basis for legitimate criticism.  Second, courts can preserve the fairness and integrity of class action mechanism without the need for systematic reform simply by applying common sense restraints in the face of clear abuse.  I think that both of these points are correct as a matter of principle, and they are both eloquently illustrated by Wolfman’s posts.

My only question is whether the idea of preventing abuse through the application by the courts of common sense constraints, while pure in theory, is truly realistic in practice.  It only works to the extent that all judges will act as carefully and thoughtfully as the judges in the two cases highlighted above.  If courts do not dismiss all frivolous cases when a defendant files a motion to dismiss, what choice does a defendant have as a practical matter but to consider buying peace on the best terms possible, which often means paying off the lawyers at the expense of a class that the defendant doesn’t believe was harmed anyway?  And, if some courts continue let frivolous claims proceed in the hopes that the parties will settle, or turn a blind eye to small excesses in fee and cost petitions, then basic human nature says that some (but certainly not all) plaintiffs’ lawyers will continue to commit these abuses, and some (but not all) defense lawyers will play along to serve their own interests.  In the end, the cynic will question whether relying on the diligence and intellectual honesty of the judiciary and the professional integrity of the bar is a realistic path to reform.

On the other hand, for those of us who are practitioners and not policymakers, professional responsibility, appeal to reason, diligence, and intellectual honesty are the only tools we have at our disposal at maintaining the integrity of the judicial process.

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According to Pete Kasperowicz at The Hill’s Floor Action Blog, Senator Al Franken (D-Minn.) and Representative Rosa DeLauro (D-Conn.) have introduced legislation in Congress intended to reverse limitations on employment discrimination class actions recognized in the Supreme Court’s 2011 decision in Wal-Mart Stores, Inc. v. Dukes

A fact sheet available on Senator Franken’s official website describes the key provisions of the bill as follows:

The Equal Employment Opportunity Restoration Act will restore workers’ ability to challenge discriminatory employment practices on a class-wide basis. It adds to Title 28 of the U.S. Code a new section 4201, which does the following:

  • Section 4201(a) creates a new judicial procedure – called “group actions” – that workers can use when bringing employment discrimination cases. The requirements for establishing a group action are the same as the pre-Dukes requirements for maintaining a class action under Rule 23 of the Federal Rules of Civil Procedure—namely, clarifying that the merits of the case need not be proven to certify the group action.
  • Section 4201(b) provides that group actions can be used regardless of whether the group is challenging an objective employment practice, a subjective employment practice, or a mixed employment practice (such as the use of a written test to qualify for an interview).  It also provides that employers’ written anti-discrimination policies can be considered as a defense to certification only insofar as the employer demonstrates that the policy actually has been implemented in practice.
  • Section 4201(c) says that the group actions authorized by this section are subject to the same procedural requirements as class actions authorized by Rule 23. These include notice and opt-out requirements. This section also preserves the application of the Class Action Fairness Act and the availability of appeals.
  • Section 4201(d) says that courts can use statistical analyses and any other procedures they deem necessary to provide justice to prevailing plaintiffs.

It does not appear from Senator Franken’s fact sheet that the bill has significant bipartisan support, and having just been introduced, there is no telling how far it will go towards becoming law in its present form.  However, we’ll keep an eye on any future developments here at CAB.

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A recent article by Ann Woolner of Bloomberg offers an interesting profile of class action pioneer William Lerach, who has been traveling the world and relaxing in his seaside mansion since his release from prison last year.  Lerach was convicted in 2007 for his part in a kick-back scheme in which lawyers agreed to split fees with clients in order to convince them to participate as representatives in class actions.   Whatever you might think about Lerach, it’s hard to deny his influence on the development of modern U.S. class actions.  However, the hubristic conduct that led Lerach to prison, his public lack of remorse for his actions, and the idea that he is now left to live happily ever after, will continue to make him a poster child for those who argue that our U.S.  system of class actions is in need of drastic reform.

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On Friday afternoon, I received a comment to a December post entitled Are Class Actions About to Make a Run for the Border? that deserved a more conspicuous mention.   The comment came from Mexican attorney Jorge de Hoyos Walther, who had the following update on the status of legislation in Mexico introducing collective actions:

In April 2011 the Mexican Parliament approved a legislative package that regulates such actions, foreseeing the publication of the same in the Federal Official Gazette during the month of July. The amended laws are six: (1) Federal Code of Civil Proceedings; (2) Federal Civil Code; (3) Federal Law of Economic Competence; (4) Federal Law of Consumer’s Protection; (4) Organic Law of the Federal Judicial Power; (5) General Law of Ecological Equilibrium and Environmental Protection; and (6) Law of Protection to the User of Financial Services. On August 30th 2011, the Federal Official Gazette published this amendment to the federal law.

Legislation limits collective actions to matters related to the consumption of goods or services (public or private) and the environment.

jdehoyos@dha.com.mx

Jorge de Hoyos Walther

http://www.dha.com.mx

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