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Archive for April, 2019

Editor’s Note: The publication schedule for my notes of the recent international class action conference at the University of Haifa has suffered various setbacks due to staffing constraints.  Of course, since I have a staff of one, I only have myself to blame.  In any event, here is the third installment.  Expect additional installments in the coming weeks.  I will also be posting links to the YouTube videos of the various presentations when they are on-line.  Stay tuned…

Panel 2: Enforcement of consumer rights by associations and regulators

The second panel presentation focused on the enforcement of collective rights by regulators and associations, a phenomenon that is the current norm for many types of collective redress proceedings throughout the world.  The panel discussed developments and case studies in Brazil, France, Germany, the UK, and other jurisdictions where regulatory and associational enforcement is more common, and juxtaposed those developments against the US collective redress regime, which focuses on private enforcement, particularly through the class action procedure.

The discussion touched on the pros and cons of private entrepreneurial litigation versus regulatory or nonprofit public interest enforcement, as well as the benefits and disadvantages of the US class action model as compared to public and associational regimes common in Europe and Latin America.  The panel repeated the theme that policymakers outside the US often believe that private enforcement easier creates an unacceptable risk of “letting the wolves in” and encouraging frivolous litigation.  On the other hand, there is a recognition that the US model can result in more frequent and higher recoveries for injured parties, oftentimes with lower overall transaction costs.

The panel discussed criticisms that regulatory/associational enforcement model may be illusory in many cases.  Regulators have the power to enforce in many EU countries by don’t often exercise it.  Many public authorities don’t like the idea of pursuing redress for individual consumers, preferring to act in more of a traditional regulatory enforcement role where they seek penalties or injunctive relief, but not individual damages for injured parties.  Nonprofit or special purpose associations often lack the financial incentive to pursue collective litigation, leading to a void in enforcement that is now being filled by emerging litigation funding models.  However, there is an ongoing debate about whether litigation funding should be limited to not-for-profit public interest organizations or whether for-profit, venture capitalist litigation funding should be allowed.

The panel also discussed the significant impact of the lower pays rule, where an unsuccessful plaintiff is responsible for paying the legal fees of the defendant, in discouraging private enforcement in jurisdictions outside the US. The loser pays rule creates a greater need for associational or public enforcement that is not generally present in the US, where the “American Rule” generally makes both sides responsible for their own legal costs despite the outcome, in the absence of a statutory cost-shifting provision.

Another factor discussed by the panel as impacting the effectiveness of a collective redress regime is whether the model allows for an opt in collective action or opt out class action.  In an opt-in proceeding an individual claimant has to take affirmative steps to participate.  In an opt-out proceeding, exemplified by the US class action rule, potential claimants can be passive beneficiaries to the litigation and reap the benefits of a successful case without taking any affirmative action at all, but risk having their rights barred if the action is not successful.   Panelists discussed situations in which opt-in regimes incentivized potential claimants hold back and await the outcome of regulatory or associational legal action before deciding whether to act at all, something US class action procedures have the practical effect of discouraging in most cases.

I found this presentation intriguing because it offered a summary of the key comparative differences between collective redress regimes available outside the US as compared to the US class action model, and offered key insights into many of the policy rationales underlying those differences.

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Later this month, the ABA Section of Litigation Class Action and Derivative Suits Committee (CADS), will be sponsoring a one-hour roundtable teleconference on trend in litigation funding.  The program is a free benefit of Section of Litigation membership.  A summary description of the presentation is below.  For more information and to register, click this link.

Program Title: The Evolving Landscape of Litigation Funding

Program Description:
The use of third-party capital to pay for costs related to litigation in return for a portion of the financial judgment, commonly referred to as Litigation Funding, has been increasing. Join our esteemed panelists for a discussion regarding how Litigation Funding is changing the litigation landscape, the direct and indirect impact on litigants, their counsel, and investors, and criticisms of third-party financing.

Panelists:
Christine Azar, Esq., Burford Capital
Catherine Rowsey, Esq., Thompson & Knight
Kevin Skrzysowski, Risk Settlements

Moderator:
Angela Sabbe, Ankura

Date: Wednesday, April 24, 2019

Time: 10a PT / 1p ET
Duration: 1 hour

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My promise to provide close-to-real-time updates of the Haifa conference was derailed by my lack of a Israeli power cord adapter to charge my laptop.  In truth, Israel mostly uses the same two-pronged circular plugs used throughout Europe, but I forgot adapters altogether, and it sounds better to say that I lacked a specific adaptor unique to one small country.  In any event, I now have to convert my combined typed and handwritten conference notes to a series of blogs in lieu of live-blogging.  

I will not attempt to give a detailed narrative of everything that was said during each presentation.  Instead, I’ll give you just a few of the highlights and insights I gained from each presentation.  What follows is the first installment.  You’ll observe that my notes became less detailed as the conference went on.  Please be assured that this is not a reflection of any diminishing quality in the content, but rather a symptom of my less-than-admirable work ethic.

But don’t fear, the conference was videotaped in its entirety, so very soon you’ll be able to enjoy all of the content as if you were there in person.  Check back for updates (but by now I’m sure you’ve learned, don’t hold your breath).  For now, you can find the conference materials here.

Panel 1: Class and collective redress – Global co-operation and developments

University of California Hastings Law Professor Richard Marcus introduced a theme that would resonate throughout the remainder of the conference: the idea of US-style class actions being the “Big Bad Wolf” of collective redress procedures, at least as viewed by many in other jurisdictions considering similar procedures.  Marcus focused his comments not only on how class action practice has been changing in the US in recent years, but also on the explosion of multi-district litigation over the past 15 years.

The remaining panelists gave updates on developments in collective actions in other jurisdictions, primarily civil law jurisdictions, juxtaposing those developments against the “Big Bad Wolf”.  Professor Astrid Stadler discussed competing proposals being considered for a collective redress regime in the European Union, one proposed by the EU commission, which would cover consumer law only, and a competing proposal from ELI/UNIDROIT, which would be a general procedure not limited by subject matter.  Both proposals would include a limited opt-out procedure, where non-parties to the litigation could be bound by the outcome unless they opt out, as opposed to having to do something affirmative to opt in to the litigation.

Dr. Albert Ruda discussed collective redress for the unauthorized use of personal data in social networks, particular to developments in Spain.  He discussed a particular pending case against Facebook arising out of the Cambridge Analytica scandal.  He noted that the case will be decided under an existing statutory and procedural framework that is untested and confusing.  The court has yet to decide whether the case should be allowed to proceed as a collective action.

Professor Ianika Tzankova next offered insights about developments in the Netherlands.  She pointed out that Dutch law provides for an interesting combination of typical civil law collective redress procedures but also includes a mechanism for settlement of mass disputes that allows for class action settlements similar to those available under US law.  She described a new Dutch collective action law that has recently been passed by the legislature but has not yet come into force.

Professor Claudia Lima Marques discussed the rise of “model” cases resolution and the fall of “class actions” in Brazil.  Brazil has an existing collective action procedure, but a recently enacted law calls for issues common to repetitive cases to be identified by the courts and treated as model cases and put on a fast track for resolution, where the decision in the model case becomes binding on other cases involving similar issues.  She noted that the current law does not give any priority for collective actions to be chosen as model cases, so the effect is often that an individual litigant’s case is chosen as a model while collective actions are stayed.  A bill to give collective actions priority as model cases has failed.

Finally, following up on the “Big Bad Wolf” theme, Professor Miguel Sousa Ferro described Portugal’s collective action procedures as a “sheep in hippy clothing. . . . We’re the Prozac pill telling everyone to chill.”  Portugal’s collective action laws, Sousa Ferro pointed out, are very easy to use with no significant impediments.  A “paradise” in other words, which is why it’s amazing that nobody uses it.  This led into a more serious discussion about why collective action procedures like Portugal’s are in existence but put to limited use.  Economic viability of a lawsuit, challenges to recovering costs, and the loser-pays rule are all impediments to bringing collective actions, even when the available procedures technically make them possible.

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