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Archive for the ‘International Class Action Law’ Category

For those who weren’t able to travel all the way to Israel for the University of Haifa’s recent international class action conference, you’re in luck.  Videos of all of the panel presentations are now available on YouTube.  To access them, go to the conference website at https://lawers.club/ and scroll to the bottom of the page and you’ll see links for both photos and videos from the conference.  You can also visit the YouTube channel directly by clicking here.  I’m still working on my commentaries from the conference and will link to each presentation individually in those commentaries.

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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.

Panel 2: Enforcement of consumer rights by associations and regulators

CLICK HERE FOR THE FULL VIDEO REPLAY

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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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

CLICK TO SEE THE VIDEO REPLAY OF THIS PANEL

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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I’m very pleased to report that I will be moderating a panel on the use of statistics in class actions at the 3rd Annual International Conference on Dispute Resolution of Consumer Mass Disputes Collective Redress, Class Action, and ADR, sponsored by the University of Haifa in Haifa, Israel.  Our panel presentation will be just one of many excellent presentations on a variety of topics in the ever-evolving area of international class actions and collective redress.  The faculty includes titans of the bench and bar from a variety of jurisdictions, as well as top academic minds from universities around the world.  Registration is still open to attend this excellent conference in a beautiful venue.  Click the link below for more information:

https://lawers.club/wp-content/uploads/2019/03/Agenda_compressed.pdf

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A new civil procedure code has come into force in Brazil, and Larissa Clare Pochmann da Silva, Law Professor at Candido Mendes University and long-time friend to ClassActionBlawg.com, has prepared a summary of some of the new procedures that could impact multi-party and collective proceedings in that country.  Co-authored by Aluisio Gonçalves de Castro Mendes, Professor of Complex Litigation and Civil Procedure at Rio de Janeiro State University, the article is entitled Incident of Resolution of Repetitive Demands (IRDR) and Repetitive Appeals in the New Brazilian Civil Procedure Code.  Click the following link to download the article: Repetitive Pleas in the Brazilian New Civil Procedure Code.

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After becoming one of the hottest trends during the latter part of the last decade, developments in international class action law have waned a bit over the past couple of years, but a new case may be changing that trend.  An Austrian law student, Max Schrems, made news earlier this week (see examples here and here) when he announced a “class action” against Facebook Ireland, the subsidiary that offers the popular social networking service outside of North America.  Schrems has filed a lawsuit in Austria seeking to pursue, on behalf of himself and other non-North American claimants, a variety of legal claims relating to Facebook’s use of consumer data as well as alleged illegal tracking and surveillance activity.  As reported yesterday by Natasha Lomas at Tech Crunch, more than 25,000 individuals have “joined” the lawsuit so far, by signing up at a website set up for that purpose and assigning their claims to Schrems.

This is by no means the first data privacy lawsuit ever filed against Facebook, and it is difficult to say at this point whether the legal claims have any prospect of success.  However, the case is intriguing from a procedural point of view because it is a suit seeking collective redress on behalf of thousands of non-North American consumers in a jurisdiction that is not known as a hotbed of class action litigation.  Many features of the case serve to illustrate differences between US-style class actions and “class actions” as they are developing in other parts of the world.  I’ve highlighted a few of them below.

Opt In Versus Opt Out

Outside common law jurisdictions like the United States, Canada, Israel, and Australia, collective action procedures generally follow an opt-in model, where each individual litigant has to take affirmative steps to participate in the lawsuit. This is a major distinction with the Rule 23 model followed in the United States, where a certified class binds all class members unless they expressly opt out of the case, and it creates a major limitation to the leverage created by grouping claims together.

Class Action through Private Contract and Novel Application of Existing Procedures

Many civil law countries lack an express mechanism for grouping large numbers of similar claims together into a single case except in very limited circumstances.  Even when specific collective action procedures exist, they can often be pursued only by a consumer association or government regulator rather than by private litigants.  Private litigants have filled the gap by entering into private agreements in which they group together on their own by assigning their individual claims contractually to a single plaintiff who will pursue the claims as a group.  Aggregation of claims by assignment has become a popular practical vehicle for pursuing group litigation, especially in continental Europe.

In Austria, a July 12, 2005 decision by the Austrian Supreme Court set out a two factor test for deciding whether assigned claims can proceed in a single case.  loosely translated, the standard requires that there be some central or significant question common to all claims, and that the factual and legal issues arising out of the individual claims be homogenous in nature as they relate to the common questions.  The Commercial Court of Vienna has applied this standard in several cases to make an initial determination of whether to “admit” the action, or in other words allow the assigned claims to proceed in a single case.  This initial evaluation does bear a resemblance to the class certification procedure applied under Rule 23 of the Federal Rules of Civil Procedure, applicable to class actions in the U.S. courts.

For a more detailed description of the “Austrian-style class action” procedure, see Christian Klausegger‘s chapter on the subject in the World Class Actions book that I have shamelessly promoted on this blog since its publication in 2012.

Litigation Funding

In Austria, as in many other parts of the world, contingent fees are prohibited.  At the same time, however, court fees are often assessed based on the total amount in dispute, so the more money in dispute, the higher the fees are that have to be paid to the court, in addition to the hourly fees to be paid to counsel. These factors combined significantly limit the incentive to pursue collective litigation in these jurisdictions. They have also led litigants to have to look for alternative ways of funding litigation, the most prevalent of which is private litigation funding by a for-profit institution that is not itself a law firm.  The litigation funder finances the litigation, including payment of court fees and hourly attorney fees, in exchange for a contractual right to earn a profit if the litigation is successful.

Litigation funding is also available in the United States, but it has been slower to develop, primarily because contingent fees and agreements to advance litigation costs do not typically violate rules of ethics or public policy. In fact, the opposite is true: rules prohibiting fee-sharing with non-lawyers can make private litigation funding a tricky proposition in the United States.  As a result, private law firms have the financial means of funding litigation (either on their own or by associating with other firms) and are driven to pursue litigation without the need for financing through the promise of a percentage of the recovery if the case is successful.

The Impact of Morrison and Kiobel

The United States Supreme Court has issued two key recent decisions limiting foreign litigants’ access to the US Courts as a forum for pursuing class actions.  Limitations on access to the class action procedures available in the US courts may lead foreign litigants to experiment more frequently with alternatives  in foreign jurisdictions.  Whether the Facebook class action in Austria is part of a trend in this direction remains to be seen.

What Drives Claims for Collective Redress?

In the United States, the promise of a large contingent fee can incentivize an entrepreneurial lawyer with a creative legal theory to pursue class action litigation even in the absence of widespread public awareness of a perceived wrong.  The procedural and financial barriers to pursuing claims for collective redress largely prevent this phenomenon from occurring outside the United States, Canada, and a few other jurisdictions.  Instead, “class actions” can be pursued as a practical matter only when there is enough public outrage or concern over a particular event or business practice that large numbers of individuals are willing to take the time to participate (or when there is a sufficient number of institutional plaintiffs with the financial resources and incentive to pursue the suit, such as in certain securities fraud and competition/antitrust cases).  This means that both mainstream media and–somewhat ironically in the case of Facebook–social media have a necessary role in the success or failure of collective litigation abroad.

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

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

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

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

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