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Posts Tagged ‘european class action’

Finally, a Decision in the Groundbreaking Group Action Against Deutsche Telekom

Posted in Class Action Trends, International Class Action Law, tagged , , , , , , , , , , , , , on May 16, 2012 | Leave a Comment »

After 12 years of litigation, a trial court in Germany has finally reached a decision in a landmark case for group actions in European civil law jurisdictions.  The court decided that Deutsche Telekom did not make false or misleading statements of fact in a prospectus for a secondary stock offering in 2000. 

The case was the first of its kind under 2005 German legislation allowing for special model proceedings in mass actions for certain types of securities fraud, which had been enacted as a direct result of the thousands of individual lawsuits that had been filed against Deutsche Telekom for prospectus fraud after the stock dropped following the secondary offering.  The law that created the group action procedure under which the case was tried is known in English as the Capital Market Model Proceedings Act.  Passed in 2005, the Act allows for the trial court to assign a representative plaintiff in a model proceeding that is to be tried first while similar claims are suspended.  The purpose of the model proceeding is to resolve any generic or common issues for all of the cases, but unlike in a U.S. class action, the model proceeding does not have the legal effect of also resolving all of the individual claims.  As a result, although today’s ruling is a victory for the defendant, it does not represent an end to the litigation even if it is upheld on appeal.

This article from Karin Matussek in BusinessWeek summarizes the decision and its potential implications.  According to the article, the attorney for the model plaintiffs has stated that they do plan to appeal.

The case is a “model” proceeding for more than just the resolution of the claims against Deutsche Telekom.  It has been followed by many academics and policymakers in Europe and elsewhere as a test case for the viability of group proceedings in common law jurisdictions.  Time will tell whether the German experiment in group proceedings will be seen as a success.  Concerns that the introduction of group litigation procedures in Europe will usher in a US-style litigation culture will no doubt be tempered by the fact that the defendant ultimately prevailed.  On the other hand, the length of time that the it took for the model proceeding to be resolved raises legitimate questions about the long-term social utility and efficiency of the procedure.   By comparison, class action litigation brought in the United States alleging prospective liability by U.S. investors against Deutsche Telekom arising out of the same offering was settled for more than $120 million more than seven years ago, in 2005.

The German Capital Market Model Proceedings Act and the Deutsche Telekom case are among the many cutting-edge topics addressed in the book World Class Actions, which is still on schedule to be on bookshelves early this summer.  The German chapter is authored by Dr. Luidger Röckrath, attorney with the law firm Gleiss Lutz.  Stay tuned here for more updates on the status of of the book.

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Notes from the 5th Annual Conference on the Globalization of Class Actions and Mass Litigation, Session 6 – Paths to (Mass) Justice

Posted in Class Action Trends, CLE Programs, International Class Action Law, tagged , , , , , , , , , on January 13, 2012 | 1 Comment »

This is the sixth and final installment of a multi-part post summarizing last week’s 5th Annual Conference on the Globalization of Class Actions and Mass Litigation.  Click these links to see the summaries for Session 1, Session 2, Session 3, Session 4, and Session 5.

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 10th 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.

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Notes from the 5th Annual Conference on the Globalization of Class Actions and Mass Litigation, Session II – Who’s Paying?

Posted in Class Action Trends, CLE Programs, International Class Action Law, tagged , , , , , , , , , , , , , , , , , , , , , , , , , on December 17, 2011 | 5 Comments »

This is part II of a multi-part post summarizing last week’s 5th Annual Conference on the Globalization of Class Actions and Mass Litigation.  For the introduction, see part I posted yesterday.

Who’s Paying? New Developments in Funding

Professor Christopher Hodges, Centre for Socio-Legal Studies, University of Oxford/Erasmus University (and a co-sponsor and co-founder of the conference) chaired this panel.  Professor Camille Cameron, University of Windsor/University of Melbourne presented the case study.  The other panelists were The Honorable Vaughn Walker, Chief Judge (ret.) U.S. District Court for the Northern District of California, Dr. Gerrit Meincke, Foris AG, Mr. Till Schreiber, Cartel Damage Claims, and Mr. Wieger Wielinga, Omni Bridgeway.

This session examined an intriguing issue in international class and mass litigation: the emergence of private litigation funders who finance litigation in exchange for a share of the recovery. This is a development that may be unfamiliar to many U.S. practitioners, who are used to a system where class actions are mainly funded by well-financed law firms who can recover a contingent fee in a successful case.  In other parts of the world, however, ethical prohibitions on contingent fees, loser pays fee-shifting rules, and the lack of an organized plaintiffs’ bar have led to the emergence of alternative methods of funding litigation.

Professor Cameron opened the session by introducing three themes relevant to the study of litigation funding: 1) access to justice; 2) the impact of private litigation funding on public regulation; and 3) ethics.  Litigation funders do provide access to justice for litigants who would otherwise not be able to afford to bring their claims.  In Australia, for example, most law firms do not have the resources necessary to fund class action litigation, so the existence of private litigation funders expands access to justice.  On the other hand, Cameron pointed out, the existence of litigation funding institutions has turned law firms away from funding cases that they used to take, and the pool of cases that litigation funders will take on is very small and includes most only securities cases, so cases that used to be brought are now falling through the cracks.  On the regulatory front, the question arises whether the cases that are being brought by private litigation funders would be better left to government regulators.  On the one hand, remedying or deterring wrongful conduct is traditionally a public rather than private function in many parts of the world.  On the other hand, increasing globalization is causing cases involving mass wrongs to become larger and more common, and government regulators are becoming increasingly underfunded and ill-equipped to keep up.  The ethical issues implicated by private litigation funding are somewhat apparent.  Because they have a financial stake in the outcome, there is a strong incentive for funders to take on an active role in the management and strategic decision making in a case.  This can, although it does not necessarily have to, lead to potential conflicts of interest and questions about improper influence over the professional judgment of counsel.  These concerns may be decreased in jurisdictions where the funder can receive outright assignments of claims than in jurisdictions where they merely assist other litigants with financing in exchange for a fee.

The case study for this presentation was an examination two private litigation funders that had funded securities class actions.  The two funders, IMF and ILF used different models.  IMF took a hands-on approach in which it was actively involved both with the selection of counsel and the day-to-day management of the litigation itself.  ILF’s approach was to choose its counsel carefully and let the attorneys handle the management of the lawsuit.  Several litigation funders were asked to compare and contrast their firms’ approach with these two models.

Garrit Meincke is a litigation funder with Foris AG, a small firm that has been involved in litigation funding in Germany for more than 13 years.  It is the oldest and leading litigation funding firm in Germany and has historically had very few competitors.  Recently, three new companies have formed and have generally copied Foris’s approach.  Foris has modified its fee structure over time.  Initially, it charged a 50% fee, but its average fee has been adjusted over time and is now between 20 to 30%.  The firm is very selective about the cases it will fund, funding only about 5% of the total cases it reviews.  Foris is more of a passive rather than an active funder.  It leaves it to the lawyers to run the case.  However, it remains involved in monitoring a case throughout all proceedings.  Litigation funding is not regulated in Germany.  Germans are distrustful of U.S.-style class action litigation and do not have a representative action procedure.  Claims can be bundled by assignment, but there is a risk that bundled claims will be unbundled because German judges are evaluated in part based on the number of cases, which creates a disincentive to allow claims to be joined together.  Litigation costs are relatively low in Germany, attorney’s fees are regulated by a structure of tariffs which increase based on the amount at stake, and private litigation insurance is prevalent.  Hodges commented that these factors make litigation funding a natural development there.

Till Schreiber’s firm, Cartel Damage Claims, funds cartel litigation in Belgium.  It is an active litigation funder that buys assignments in cases rather than financing litigation for a fee.  Obtaining an outright assignment allows the firm to actively manage the litigation and outside counsel without creating conflicts of interest.  Buying cases and aggregating them for litigation also creates economies of scale that allows the firm to be profitable despite the risks of loss and having to pay an opponent’s litigation expenses in unsuccessful litigation.  Schreiber pointed out that aggregating cartel litigation in Belgium has a benefit for defendants as well as plaintiffs.  Because defendants who commit anti-competitive violations can be held jointly and severally liable for damages, aggregation of claims decreases the risk of inconsistent rulings and duplicate recoveries.  Schreiber also pointed out that firms are looking at the possibility of funding end-consumer claims, but the viability of funding mass consumer claims is dependent on the technology available in the judicial system, such as the ability to handle electronic access to files and signatures.

Weiger Weilinga’s firm, Omni Bridgeway, started in the litigation funding business as a recovery specialist in the mid-1980s.  It did not become involved in funding litigation on the merits until recently.  As a recovery agent, the firm handles the recovery of money judgments from defendants in high-risk jurisdictions, such as in war zones or countries with unfriendly or unstable governments.  The firm still handles mostly political risk claims, but has recently branched out into providing litigation funding for cartel cases.  It has not yet taken on any consumer cases.  Omni Bridgway is active in both hiring lawyers and in managing the litigation.  Case management is usually a cooperative effort between the firm, the client, and outside counsel, but Omni Bridgeway gets a full power of attorney from the client and therefore has ultimate decisionmaking authority.  The firm takes only cases with a minimum value and is selective about what it will fund.  The percentage fee ranges from case to case.  It is typically around 30% but has been as high as 60% in a case involving recovery from a North Korean defendant.

Retired U.S. District Court Judge Vaughn Walker talked about the primary method of class action litigation funding in the United States, namely contingent fees.  In particular, he discussed the problem of deciding between competing groups of lawyers vying to represent a class of plaintiffs in order to earn the contingent fees that can be recovered in the event of a settlement or favorable judgment.  During the first 25 years of the modern class action era in the United States, the decision was made using two approaches: 1) the first group to file a class action; or 2) nomination of lead counsel from a group of plaintiffs.  Fees themselves were historically determined by the lodestar method, which involved the court determining an appropriate hourly rate, multiplied by the reasonable number of hours expended by the firm on behalf of the class.  However, the lodestar method had drawn criticisms, including that 1) it encourages firms to churn hours that might not be reasonably necessary for the prosecution of the claim; 2) it created an incentive to generate sub-optimal recoveries because it gave the firm an incentive to wait until late in the case to engage in settlement discussions; and 3) there was no adversarial presentation of the fees requested, as fees were usually requested by agreement in the context of a settlement.  In 1985, the Third Circuit Court of Appeals created a task force on attorney’s fees, which recommended that a percentage fee be used rather than the lodestar method, and many courts adopted this approach in the years that followed.  However, percentage fee awards created other problems, including that the optimal recovery for the client or class occurs after the marginal cost of litigation meets the marginal recovery for the lawyer, which it the point at which the lawyer is incentivized to settle.  Judge Walker was one of several judges to adopt an innovative approach to selecting lead counsel in class actions that both resolved the dispute over who should be lead counsel and encouraged more favorable fee structures.  He asked competing class action firms to submit competing proposals on the fee that they would request in the event of a successful outcome.  Ultimately, this resulted in the winning firm agreeing to a fee that was half the customary rate.

Judge Walker offered a framework for identifying cases in which a reverse-auction selection process works in assigning lead counsel in U.S. class action litigation, which he observed also provides lessens to litigation funders in assessing cases to fund: 1) there has to be a clear identification of both the claims and the defendants (securities and certain employment cases are good candidates); 2) the relief has to be quantifiable in monetary terms; 3) the selection methodology should be simple.  One example of a simple methodology that U.S. courts have adopted is the “X factor” methodology, where counsel is asked to propose an amount X that it will agree to recover for the class at no cost, and the percentage recovery at which the firm will do all additional work.

The Q&A portion of the presentation generated a list of interesting observations from both the panelists and members of the audience.  (Unfortunately, my notes do not allow me to give proper acknowledgement for the specific source for each of these comments.)

  • In Australia, litigation funding has had the practical effect of turning an opt-out regime into an opt-in regime, as litigation funders are reluctant to represent the interests of litigants who do not share in the cost and risk of an unsuccessful lawsuit.  One issue currently being tested in Australia is whether a litigation funder can collect a percentage of all funds recovered on behalf of a class, including those claimants who have not contracted with the funder.  The answer to this question could impact whether class actions are brought as opt-in cases or opt-out cases in the future.
  • The lack of contingency fees in Europe is an important factor in litigation funding, as is the loser-pays cost-shifting rule.
  • There is a common mythology in Europe that litigation funding will lead to U.S.-style class action litigation, which is commonly perceived as synonymous with “ambulance chasing.”  Perhaps Europeans can learn a lot from U.S. litigation rather than being afraid of it.
  • The European civil law system can be criticized for encouraging “book building” activity, because litigation funders and consumer associations are required to sign up claimants in order to create economies of scale that make pursuing mass claims worthwhile.
  • Expect a ruling early next year from the Amsterdam Court of Appeal in a case involving objections to a collective settlement on the grounds that U.S. lawyers would be paid out of the settlement fund, something that would not be allowed for Dutch lawyers under Dutch law.

Finally, an observation of my own.  After listening to this panel presentation, it struck how much corporate, rather than consumer, interests have driven reforms and innovations in procedures allowing access to mass litigation in Europe.  Many of the parties seeking funding from third parties, and many of the parties pushing for access to collective action procedures, are institutional investors who are looking for an inexpensive vehicle for recovering funds on behalf of their clients.  This is a theme that came up in a later presentation titled Who Has Jurisdiction in a Global Market?  Stay tuned for a summary of that presentation…

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Notes from the 5th Annual Conference on the Globalization of Class Actions and Mass Litigation, Session I – The Challenge of Mass Communications

Posted in Class Action Trends, CLE Programs, International Class Action Law, Uncategorized, tagged , , , , , , , , , , , , on December 15, 2011 | 5 Comments »

The 5th Annual Conference on the Globalization of Class Actions and Mass Litigation was even better than advertised.  It was an engaging and enlightened gathering of the world’s top experts in the areas of class, collective, and mass litigation.  And what better environment to have a conference on developments in international law than at the beautiful and historic Raad van State in the Hague.  I can’t say enough about the great job that Professors Deborah Hensler, Christopher Hodges, and Ianika Tzanokova did in putting this year’s conference together.

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.

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Which Side Would Hemingway Pick? Collective Redress Battles Privacy Rights in Spain

Posted in Class Action Trends, International Class Action Law, tagged , , , , , , , , , , , on February 3, 2011 | Leave a Comment »

Berta Baz published this article yesterday in Money Market UK, which may be of interest anyone who tracks developments in class and collective actions abroad.  The article discusses the tension between a collective action notice procedure and the Spanish Data Protection Act.

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.

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UK Facing Identity Crisis in Class Action Debate?

Posted in Class Action Legislation, Class Action News, class action reform, International Class Action Law, tagged , , , , , on August 31, 2009 | Leave a Comment »

Anyone interested in curious in an outsider’s critique of the U.S. class action system should be following the debate over the adoption of an opt-out collective action scheme in the U.K.  Opponents of opt-out collective actions point to the “looniness” of the American system as a reason why not to adopt a similar scheme.  Proponents say that a U.S.-style class action procedure is the only way to preserve justice and access to the courts for consumers.  Should the U.K. try out lawsuits, American Style, or should they follow the European Wayand leave mass justice to government regulators?  This op-ed from the Times Online entitled Class Actions: Why Are We Waiting? offers arguments from both sides of the debate.

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EU Stakeholders Debate Consumer Mass Actions

Posted in class action reform, Class Action Trends, International Class Action Law, tagged , , , , on August 20, 2009 | Leave a Comment »

International law firm Pinset Masons’ blog Out-law.com has an interesting article today on the potential for the implementation of a collective redress system for consumer claims in the European Union.   The article addresses two reports summarizing hearings and comments received by the European Commission on the potential adoption of an EU-wide consumer collective action procedure. 

The reports are less than definitive in proposing a solution or even in defining the problem.  Consumer and industry groups predictably at odds over whether a cross-border scheme for resolving mass consumer claims is a good idea, but there appears to be plenty of interest in the topic.  The report on a meeting held in Brussels in May reports an attendance of more than 200, consisting of consumer and industry representatives, public officials and legal experts.  Attendees came from nearly all EU member countries. 

Both reports offer interesting reading on the debate over collective actions in Eurpoe and the issue of transnational dispute resolution within the EU framework. For the report on the meeting and comments received, see these links: report of public hearing, overview of results of consultation.

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Class Actions Finally Come to Italy

Posted in International Class Action Law, tagged , , , on July 9, 2009 | Leave a Comment »

A Securities Docket post today tipped me off to this Reuters article discussing the enactment of “Italy’s first law establishing class actions.”  The law will take effect January 2010 and will apply only to conduct occuring after the law’s effective date.  At first, I wasn’t sure whether this April 1, 2008, ClassActionBlawg article announcing Italy’s first class action law was just very prescient or an April fool’s joke, but according to the Reuters article, “The law is part of the so-called development package promoted by Development Minister Claudio Scajola, which has been before parliament for nearly a year.”

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Word of Advice for European Class Action Reformers?

Posted in class action reform, Class Action Trends, International Class Action Law, tagged , , , on February 4, 2009 | Leave a Comment »

Laptop Legal‘s “Class Action Thought for the Day” looks to West’s “Headnote of the Day” as food for thought for those considering the expansion of class actions in Europe and the former Soviet Union:

Purpose of a class action is to simplify the resolution of complex litigation, not complicate it.

Ah, if only West headnotes represented real life, I would have more time to blog.  As it stands, however, there is rarely anything simple in class action litigation.  For those who live in countries that have not yet adopted a U.S.-style class action model, the choice may be between overly complex litigation or nothing.  But, reformers looking for simplicity may be wise to consider the nothing option.

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Finland’s Class Action Law a Success Although Never Once Used

Posted in Class Action Trends, Commentary, International Class Action Law, tagged , , , , , , , on July 2, 2008 | 3 Comments »

I have previously commented on various class action reforms being considered or implemented in Europe.  These reforms and the debate surrounding them shed an interesting light on US class action law because proposed reforms are inevitably compared to the US class action procedure.  On one hand, US class action procedure provides the model for the basic structure for many of these proposed reforms.  On the other hand, perceived class action abuses in the US provide ammunition for those seeking to prevent or water down the unfettered right of private litigants to bring class or other collective actions. 

 

As a case in point, Finnish website YLE.fi has a report today on the impact of recent legislation in that country allowing certain class actions.  The article’s caption notes that there has not been “a single group lawsuit” filed under the law despite fears that it would “open a floodgate of litigation.”  The article quotes Outi Haunio-Rudanko, Assistant Director of the Consumer Agency as saying that the threat of enforcement under the law “has worked effectively” in providing leverage for settlements in some consumer cases.

 

US tort reform advocates would probably agree that the most effective class action law is one that never gets used.  And it shouldn’t come as a shock to tort reform advocates or opponents alike why the Finnish law hasn’t “open the floodgates of litigation.”  An unofficial English translation of the final 2007 law can be found here.  The law shares some parallels with FRCP 23 and U.S. state class action rules in terms of the basic requirements for bringing a case as a class action.  However, it differs from U.S. procedure in a couple of major ways.  First, only the “Consumer Ombudsman” has standing to bring a class action.  Second, only those class members who return a “letter of accession to the class”—in other words, only those who opt in—will become class members (not to mention that they get an additional chance to opt out later).

 

A 2003 article from Mondaq.com (free registration may be required to view the entire article) recounted previous efforts to pass class action legislation in Finland.  As outlined in the article, barriers to passage included concerns that 1) other EU countries had not adopted opt-out class action legislation and the potential forum-shopping that could result if Finland were to provide a mechanism for class actions, 2) providing an opt-out model where individual class members could be bound by a decision without ever being aware of the litigation would conflict with the Finish legal tradition of individual choice over legal rights, 3) conflicts of interest could exist between the attorney bringing the case and members of the class, and 4) class action legislation could create a “legal culture towards a ‘litigation-oriented’ society, as in the US”.

  

For a thorough critique of the Finnish law as passed and a comparison between the Finnish law and those adopted by other Noridic countries, see this scholarly article by Mikko Välimäki.  Mr. Välimäki points out that adopting a procedural model for class actions similar to that of the US (including a private right of action and an opt-out procedure) would not be equivalent of adopting US substantive law or US attitudes about litigation.  If Mr. Välimäki is correct, then adopting Rule 23 in Finland verbatim may not have opened the floodgates either.

 

Attorney Joseph K. Hetrick makes a similar point in an interview on the blog Law and More, where he argues that US-style class action litigation has not caught on in Europe due in part to the existence of a larger government safety net and a greater attitude of trust in government programs, making it unnecessary for individuals to seek compensation for injuries through civil litigation and relieving the need to find someone to blame for those injuries.

 

Viewed from this perspective, Americans’ litigious tendencies come not from flaws or inadequacies in our procedural statutes and rules of civil procedure but rather from our societal emphasis on individual economic freedom, small government, and free market economics.  In other words, don’t blame Dickie Scruggs, blame Milton Friedman.

 

Of course, it’s difficult to judge this hypothesis using Finland’s model because the societal attitudes that might prevent litigants from abusing a broader class action rule were the same attitudes that led policymakers to avoid a procedural model that would allow full-scale private opt-out class actions.  However, that may change as more EU countries begin to adopt laws that permit the types of consumer class actions now common in the US.

 

Click these links for additional commentary on the Finnish law and a link to the website for Finland’s Consumer Complaints Board. 

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