Foreign enforceability of class action judgments is an important question facing any litigant or court involved in international or transnational class action litigation.  Even when it is permitted (see this CAB entry discussing the Supreme Court’s Morrison v. Australia National Bank decision addressing foreign-cubed class actions), obtaining a class action judgment against a foreign defendant in the United States may be a hollow victory if the defendant lacks sufficient US assets and is located in a country that does not recognize US class action judgments as enforceable.

Paths to (Mass) Justice

To wrap up the conference, Dr. Sam Muller, Director, Hague Institute for the Internationalization of Law, led an all-star panel of academics, lawyers, and industry executives in a discussion about where we are heading over the next five years in global class, collective, and mass litigation.  The panel included program co-organizer Professor Deborah Hensler, international plaintiffs’ lawyer extraordinaire Michael Hausfeld (who more than ably filled in for Professor Hodges), Mr. Robert W. Hammesfahr, Managing Director Claims & Liabilities, Swiss Reinsurance Company Ltd., Mr. Richard Murray, The Geneva Association, Special Advisor on Liability and Legal Affairs and Liability Dynamics Consulting LLC, Mr. Daniel Girard, Partner Girard Gibbs LLP, and Mr. Martijn van Maanen, Partner BarentsKrans.

This is the only presentation not framed by a particular case study.  However, the panel did focus on a common question, what are we likely to be discussing at the 10^th annual conference on the globalization of class actions?

Dr. Muller began the discussion with some general themes and questions that both summed up the conference generally and framed the last panel’s discussion.  They included:

• Whether the internationalization of class action law will continue;
• Whether we will see an increasing divide between public and private mechanisms for the enforcement of collective interests;
• What will be the impact of social media and changes in mass communication?
• Is globalization and the development of systems of collective redress driving changes to the legal profession or the legal profession driving changes to mechanisms for collective redress?

Pointing to the example of the development of competition law in the EU, Hausfeld remarked that changes in policy are happening on their own but that they are not happening quickly.  He argued that it is up to the legal profession to change policy through practice; in other words, through litigation brought by counsel and through court decisions.  Hausfeld also made a key observation based on a recurring theme throughout the conference: the engine of change in the development of private enforcement mechanisms is, at least in the near future, likely to come from large corporations and institutional investors, rather than from consumers or popular political pressure.

Hensler predicted that the future will be more of the same.  The development of collective enforcement mechanisms will not go away because the scale of commerce drives the scale of mass harms, and globalization is increasing the scale of commerce.  Moreover, citizens are more likely than ever to want redress for injuries.  In modern societies, people are no longer willing to blame God for their misfortunes.  Hensler predicted that the transformation into a truly international system of collective redress will take 25 years, not 5 years.

 Hammesfahr was optimistic about change.  He noted that “where there’s a vacuum, the law will fill it,” and that therefore, the growing need for systems of collective redress will require reforms in even those countries that are most politically resistant to change.  There has to be a remedy for harms, and the younger generation will not accept delays in avenues to redress in the same way as previous generations.  However, he also predicted that Europe will find its own solutions for the problem of mass harm without copying the U.S. model of class actions. 

Murray observed that what was discussed in the 2011 conference as being a practical reality was foreseen during the first global class actions conference in 2007, but was still being debated.  For example, 5 years ago in Europe, people were saying that “we don’t do that here,” but now, Europe has begun to recognize the need for private enforcement mechanisms for collective harms.  Murray made a variety of other observations and predictions, including

• There has been a significant growth in the scale and economic consequences in things that require aggregation.
• There has been a change in the nature of litigation globally.  It used to be unique, to be avoided.  In the past few years, we have become compensation driven rather than fault driven. 
• In the future, litigation will be investment driven rather than party driven, and there will be a transformation of litigation funding to litigation ownership.  Litigation will become an investment of choice.
• There will be more climate change and catastrophe-related litigation in the coming years.  There will be a convergence of liability and reparations processes, a socialization of the humanitarian loss compensation system.  This will be driven by huge need for redress, combined with someone to blame for mass harm.

Girard was more pessimistic about significant developments in global collective redress, based in large part on events in the United States over the past several years.  

He divided aggregated litigation into 2 types of cases:

1. “Train wrecks” – cases with a very high public profile, and a clear sense of public injustice.  This, he said, “is good work if you can get it.” 
2. Private regulatory actions – i.e., mass lawsuits based on a private right of action that challenge conduct not widely recognized as being wrong.  This category would include many current class actions in the United States, such as those involving alleged deceptive trade practices and dangerous products.

While policymakers will almost certainly agree on the need for collective redress in the first category of cases, the second category is quite a bit more challenging, and there is a greater potential for abuse.  The resolution of cases in category 2 is quite a bit different than the deal brokering that goes on in category 1.

Girard pointed out how the recent trend in the United States has been to restrict class actions.  But, he went on, plaintiffs’ lawyers are nothing if not creative and persistent.  In the end, he predicted that we will see things swing back into an equilibrium, since “the law will tend toward justice.”  However, he admitted that we may have seen the end of the fully empowered private attorney general in the United States.

Girard concluded with a word of wisdom for policymakers in Europe.  As you are being urged toward a system like the American system, he said, keep in mind that lighter regulatory framework was intended to come with it a strong right of private enforcement.

Van Maanen was much more positive about change.  Using competition law as an example, he said that in the past, the it was economical for defendants to form cartels.  Now, however, corporations are taking on the role of ally with plaintiffs.  This will drive a push toward private enforcement in Europe.  He noted that there is some level of competition between European countries in the development of systems of collective redress.  For example, he observed that with its resistance to collective action legislation, the UK has fallen behind the Netherlands in recent years.  He concluded with the observation that a challenge for policymakers will be in developing a system that will make it more profitable for corporations to comply with the law.

In the Q&A session, the panelists were asked whether we are moving toward coordination or competition between jurisdictions, and if so, are we going to a race to the bottom or a race to the top?  In Hensler’s opinion, we are in a period of competition.  In the short term, there is an incentive to maintain a system of multiple forum choices.  Murray agreed, and commented that “we will do the right thing after we try everything else.” Girard returned to the theme that the United States is a microcosm of the world.  He pointed to example of the so-called reverse auction process discussed by Judge Vaughan Walker earlier in the conference and pointed out how competition helped to reduce attorney’s fee abuse.

Other topics addressed in the Q&A included the role of social justice.  Hensler commented that social media will have an effect on litigation, as it did during the recent Arab Spring movement.  Hammesfahr discussed the potential impact of social justice movements with respect to catastrophic events claims.  He observed that if the civil justice lawyers are going to have a role, they will have to look at transaction costs and efficiencies.

A final, and perhaps fitting, point (unfortunately, I did not note which panelist made it) had to do with the different way that European law is developing in comparison to the system of class actions in the United States.  In Europe, the prevailing view has been to consider anything but the “American horror story.”  In developing systems of collective redress, European systems haven’t built on the U.S. system, they’ve rejected it, but they are working toward a completely different system intended to solve some of the same problems.

In closing out this series of posts, I want to reiterate how impressed I was with both the content and organization of the conference.  The organizers say that they are uncertain whether this will continue to be an annual event going forward, but I hope that the demand will convince them otherwise.

The individual sessions all followed a similar general presentation format, which was very effective.  Each panel presentation was focused around a case study based on the facts of a real case or set of cases.  An academic would present the case study and generally introduce a set of issues flowing from that case study.  A panel of practitioners, judges, and industry or consumer experts would then discuss the application of the problem in different geographic regions, political or judicial frameworks, or other contexts.  The idea was focus the discussion on what is actually happening “on the ground” in the areas of class actions and mass litigation, which was a welcome perspective to those of us for whom what’s happening on the ground is what matters the most.  The panels were diverse enough to offer a variety of viewpoints, but the topics were well-matched to the experiences of the panelists so that the presentations had continuity and a clear focus. 

In the interest of not having to wait another week to post my thoughts on all of the sessions (and in not having a single post of such length that it will put some of you to sleep), I’ll be posting them separately over the next week or so.  Here are my notes of the first session:

Session 1: The Challenge of Mass Communications: Problem or Opportunity?

The case study for this session was presented by Professor Ianika Tzanokova of Tilburg University, who also hosted the conference.  The panel was chaired by Mr. Michael Seymour, International Director of Crisis & Issues Management, Edelman, and the panelists were Mr. Arnold Croiset van Uchelen, Senior Partner AllenOvery LLP, Mr. Ben Knüppe, Trustee of DSB Bank/Former CEO of Dexia Bank, Mr. Jan Maarten Slagter, Director Dutch Retail Shareholder Association (VEB) and Mr. Stephan Holzinger, Holzinger Associates Nederland.

The case study was of the Dexia investment products litigation in The Netherlands, mass litigation that was influenced greatly by media exposure.  The litigation involved financial products called securities lease products, in which customers of Dexia’s predecessors in interest would loan money to consumers to fund investments, a scheme that worked well until the market downturn of the late 1990s.  Dexia had been the subject of a TV program in Holland that resulted in tens of thousands of angry customer calls to the station that broadcast the program. Ultimately multiple special purpose consumer associations were set up for the purpose of aggregating, and ultimately settling, claims.  Throughout the course of the litigation, both the defendant and the competing plaintiffs’ groups had to deal with complex and challenging public relations issues.

Understanding the panel’s discussion requires a basic review of how mass or collective actions are litigated in The Netherlands (and other European civil law jurisdictions).  Dutch law allows consumer associations to represent the interests of consumers, but only to the extent that individual consumers affirmatively consent to the representation.  Essentially, as Arnold Croiset van Uchelen explained, the system is one that relies on assignments and powers of attorney.   When mass claims arise, as they did in the Dexia case, this means that consumer or plaintiff groups compete to round up members, and then compete for the court’s and the defendant’s attention based on the number of claimants that they purport to represent.  One of the practical problems tends to be that victim’s advocates make claims to the media about how many of the claimants that they represent, in the interest of attracting attention to their cause.  Certainly, many of these claims are legitimate, but the opportunity exist for a particular advocacy group to exaggerate the number of claimants that it represents in the hopes of gaining media attention and, ultimately, negotiating leverage.

Speaking from the industry perspective, former CEO of Dexia, Ben Knüppe presented a simple and direct argument about how to deal with the problem of media communications in European mass actions.  The media is always looking for the simple message.  The most radical position tends to get the most press, and as a result, the media often presents the view of fringe groups rather than the more reasonable views of the majority (as an aside, it stuck me how apt this commentary is in describing American politics).  However, it is impossible to regulate how the media will portray the litigants’ competing messages.  So, in Mr. Knüppe’s view, the system is in need of reform to regulate who should be permitted to represent plaintiffs’ interests in mass litigation.

Jan Maarten Slagter offered the unique perspective of someone who represents consumer interests but who has also been a member of the media.  He defended the media by saying that the media always tries to get to “a truth” but pointed out that there are always multiple truths to a story due to differing perspectives.  He then offered some specific guidance to organizations representing plaintiffs’ interests:  A plaintiff’s organization has to play a difficult and subtle game.  It’s important to be the first out of the gate in getting media exposure.  You must show strength in the position of your argument, but you have to be careful to manage expectations.  And when a consumer group achieves a settlement with the defendant, it often has to deal with competing groups and objectors.  In this context, he noted that it is important to take the “wind out of the sails” of these competing interests by showing to the media, and ultimately the public, that you have negotiated the best deal.

Arnold Croiset van Uchelen talked about the roles of different types of media in mass litigation.  Commenting on the role of social media, he noted that it plays an important role in modern litigation because unlike traditional media, it allows for two-way conversations between the media and the public.  However, echoing one of Ben Knüppe’s points, he cautioned that it also tends to allow the most radical elements to come to the forefront.  After commenting that the media tends to side with the plaintiffs in mass litigation because the media “loves misery,” he focused on the potential positive role of traditional media in mass litigation.  He argued that the traditional media could play a stronger role in pointing out distinctions between competing plaintiffs’ groups in order to better serve the public about their choices in obtaining representation.  Later in the presentation, one of the panelists gave an example of a TV station asking consumer groups to provide information about their organization and financing.

Stephan Holzinger had some good advice for those who represent defendants in mass litigation.  Most fundamentally, he remarked on something that should be obvious but that may not be the first instinct for many defendants, “you run best with the truth.”  He also counseled for the need for defendants to engage the media proactively in high-profile litigation as a way to head off problems with other interests, such as employees, suppliers, shareholders, and competitors.  As a specific example, he pointed to Taco Bell’s successful public relations campaign in response to a would-be class action suit accusing it of consumer fraud for not using 100% beef in its tacos.  Ultimately, Taco Bell was able to turn the lawsuit into a successful advertising campaign.

Public relations expert Michael Seymour anchored the panel with some comments about the dynamics of media impact on public perception.  He found it interesting that several of the other panelists had commented about “using” the media in the context of litigation.  He noted that in understanding traditional media, you have to consider that it must always move fast and that it always has only the partial attention of its audience.  He added that social media tends to be effective because people have the most trust in “someone like myself” and that social media creates the impression of a more intimate, one-on-one communication (in case you’re wondering, I wrote this post just for you, seriously).  Seymour offered a few specific points that a party to high-profile litigation should consider in developing an effective PR strategy.  The first is to walk the fine line of advocating your position in the case without going too far in vilifying your opponent, since you may well find yourself sitting across the negotiating table later.  Slagter echoed this point counseling plaintiffs to always be mindful of the “end game” in litigation in developing their media strategy.   Seymour’s second piece of advice to litigants is to understand the “shape” of the case, i.e. how the case will develop and how long each phase will likely take. 

There were several interesting questions posed during the Q&A portion of the presentation.  One question involved what happens in the middle of the case, after the initial media exposure has died down but before a final resolution.  Knüppe noted that in the Dexia case, opposing counsel was very good about not leaking information to the press during negotiations that led to a final settlement.  However, in order to maintain a flow of information during the negotiations, periodic newsletters were sent to concerned shareholders to advice them on the status of the case.

Another series of questions asked about the relationship between media and the judiciary.  First, the panel was asked to what extent courts in different jurisdictions may take into account media publicity about a case in their decision making.  The general consensus was that the media should not impact judicial decision making, but panelists provided examples of instances where courts either commented on media exposure in their judgments or admitted after a case that media exposure had been on their minds at the time of the decision.  Second,  the panel was asked to what extent it is appropriate for a judge to make use of media in case management.  This question generated a discussion about a key distinction between truly representative class actions in the United States and mass actions in Europe.  In the United States, the court has an obligation to ensure that absent class members are provided information about the case and to take on an affirmative role in managing the delivery of that information.  In Europe, by contrast, the role of communicating with individual consumers is left to the firm or association that the consumer selects as his or her representative, and if the court has any role at all, it is merely to ensure that attorneys represent who they say they represent. 

Oxford Professor Christopher Hodges had an interesting observation to wrap up the session.  He talked about the media’s social responsibility in seeking an ultimate truth with regard to high-profile litigation rather than simply reporting on the allegations being made.  He pointed as an example to litigation claiming that infant vaccinations caused autism.  He noted that although the litigation had been based on a medical hypothesis that was later debunked, the initial media attention that had been given to the plaintiffs’ claims generated among some segments of the public a fear of vaccinations that continues to have serious negative public health consequences, long after the litigation.

On a related note, I’m excited to announce that the manuscript of a book of collective works that I’ve been editing on the topic of global class action litigation is finally complete and set to go out to Oxford University Press tomorrow.  The book, currently titled World Class Actions, is a practitioner-focused guide to international class and collective action litigation.  The list of contributors includes many of the world’s top practitioners in global class action litigation, in addition to authorites on local class and collective action litigation in every corner of the globe.  I’ll be posting more about the book in the coming months.

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

According to the article, a Madrid court issued an order requiring the Spanish bank BBVA to produce electronic customer data to consumer association ADICAE so that the association could solicit customers to opt in to a collective action against the bank.  The bank produced the data to the court but asked that the data not be passed on to the association until a request for an injunction is considered by the Constitutional Court.  The question apparently to be raised there is whether Spanish data privacy law prevents an order requiring a company to produce private data to the plaintiff representative in a collective action so that the plaintiff can give notice of the opportunity to opt in the lawsuit. 

Like many civil law jurisdictions in Europe, Spain allows collective litigation only on an opt-in basis (would-be group members have to affirmatively opt in to be bound).  (For more on Spanish Collective Litigation, see this article by Pablo Gutiérrez de Cabiedes Hidalgo, available courtesy of the Stanford Global Class Actions Exchange).

Baz points out that there is a practical alternative to requiring the defendant to turn its customer data over to the plaintiff in a collective action that arguably does not violate privacy rights: requiring the defendant to give the notice to the class members directly.  It is unclear, under either procedure, who bears the cost of sending the notice.

In articulating the standard for what constitutes “the same” interest sufficient to justify treatment of a case as a representative action under Civil Procedure Rule 19.6, Lord Justice Mummery was careful to say that “[t]his does not mean that the membership of the group must remain constant and closed throughout. It may indeed fluctuate. It does not have to be possible to compile a complete list when the litigation begins as to who is in the class or group represented.”  Opinion ¶ 63.  Instead, he articulated two problems in treating the case as a representative action, both of which would also be potentially fatal to class certification under Rule 23. 

First, he observed that there were problems in ascertaining who was a member of the proposed class:

The problem in this case is not with changing membership. It is a prior question how to determine whether or not a person is a member of the represented class at all. Judgment in the action for a declaration would have to be obtained before it could be said of any person that they would qualify as someone entitled to damages against BA. The proceedings could not accurately be described or regarded as a representative action until the question of liability had been tried and a judgment on liability given. It defies logic and common sense to treat as representative an action, if the issue of liability to the claimants sought to be represented would have to be decided before it could be known whether or not a person was a member of the represented class bound by the judgment.

Id.  Second, he observed that certain defenses might be available as to some members of the would-be class, but not others:

A second difficulty is that the members of the represented class do not have the same interest in recovering damages for breach of competition law if a defence is available in answer to the claims of some of them, but not to the claims of others: for example, if BA could successfully run a particular defence against those who had passed on the inflated price, but not against others. If there is liability to some customers and not to others they have different interests, not the same interest, in the action.

Id. ¶ 64.  In conclusion, Lord Justice Mummery returned to his concern about the inability to determine class membership without first ruling on the merits:

In brief, the essential point is that the requirement of identity of interest of the members of the represented class for the proper constitution of the action means that it must be representative at every stage, not just at the end point of judgment. If represented persons are to be bound by a judgment that judgment must have been obtained in proceedings that were properly constituted as a representative action before the judgment was obtained. In this case a judgment on liability has to be obtained before it is known whether the interests of the persons whom the claimants seek to represent are the same. It cannot be right in principle that the case on liability has to be tried and decided before it can be known who is bound by the judgment. Nor can it be right that, with Micawberish optimism, Emerald can embark on and continue proceedings in the hope that in due course it may turn out that its claims are representative of persons with the same interest.

Id. at 65.

The primary concern raised by Lord Justice Mummery is the problem of a “fail-safe” class, a common obstacle to class certification in the U.S.    Even under the seemingly more liberal US Rule 23, a class cannot be defined in such a way that requires the case to be adjudicated on the merits before it can be determined who is in the class.  (See recent CAB review quoting Anderson & Trask’s, The Class Action Playbook, comparing fail-safe classes to Schrödinger’s cat).  Thus, classes consisting of “all consumers who were defrauded” or “all purchasers who paid inflated prices due to the defendant’s act of price fixing” are not sufficiently ascertainable to be certified under Rule 23.

The secondary concern could also prevent certification under US law.  The fact that a defendant’s defenses may vary from person to person is often a consideration in denying class certification under Rule 23.

In short, it appears to this outsider that it may be too early to tell whether Emerald Supplies is truly the death knell for US-Style class actions in the UK, or whether it is simply the first in a line of decisions defining the contours of a more robust law of representative actions across the pond.

One thing is certain, though.  There are very few US judges who could get away with using the word “Micawberish” in an opinion.

As reported by Jane Croft and Pilita Clark at the Financial Times and Eric Larson at Bloomberg, the Court of Appeal of England and Wales ruled yesterday that an antitrust suit filed by two shipping businesses against British Airways may not go forward as a collective action on a representative basis.    Based on the description of the ruling in the media reports, the decision seems to reaffirm the conventional wisdom that opt-out representative actions are not viable in the UK under existing procedure and that new legislation will be necessary before US-style class actions come to the UK.

Here is a link to the text of the decision, courtesy of BAILII.org 

The law firm Ashurst LLP also has a summary of the decision and related commentary available for download at its website:

www.ashurst.com/page.aspx?id_content=5559 

Check back in a few days for more commentary on this decision…