Archive for July 2nd, 2008

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 hereThe 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. 

Read Full Post »