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Posts Tagged ‘collective redress’

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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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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Editor’s Note: Many thanks to Larissa Clare Pochmann da Silva, complex litigation professor at Cândido Mendes University in Rio de Janeiro, Brazil, who graciously agreed to provide this valuable update on collective and mass action reforms being considered in Brazil. Not all of the reforms discussed in her article are expected to become law in the immediate future. However, they represent unique and creative potential approaches to common problems in collective redress, which should be of interest to anyone who follows trends in representative and multi-party litigation.

Recent Developments in Collective Process and Mechanisms for Solving Collective Conflicts in Brazil

By Larissa Clare Pochmann da Silva

Class Actions

Collective actions in Brazil are not new. The first legislative enactment occurred with the 1934 Constitution, which provided, in art. 113, no. 38, the popular action. From 1934 until today, the collective procedural law has had, in its history, advances and retreats. The most important laws before 1988 were law 4.717/65, about the popular action, and law 7.347/85, about class actions. The 1988 Constitution increased protection of collective rights in a broad sense the constitutional level. Later, in 2009, Law n. 12.016/2009, repealing previous legislation (Law n. 1533), was enacted to regulate the collective writ of mandamus.

Today, the mechanisms used for collective protection are the popular action, class actions and collective writ of mandamus. Each one has its own mechanisms; however there are several general rules applicable to all of them, and they are discussed generally below.

The collective process aims to protect diffuse, collective and homogeneous rights, all of which have explicit definition in the art. 81 of the Consumer Protection Code:

Article 81 – The defense of the interests and rights of consumers and victims can be exercised either individually or collectively.

§ – Collective defense will be exercised when dealing with:

I – diffuse rights or interests, so understood, for the purposes of this Code, the trans, of indivisible nature, they hold people indeterminate and linked by factual circumstances;

II – collective interests or rights, so understood, for the purposes of this Code, the indivisible nature of trans holds that group, category or class of persons linked to the opposing party or by a legal relationship-based;

III – homogeneous interests or rights, herein defined as arising from a common origin.

Unlike the United States and other common law countries, Brazil doesn’t have a certification process for class actions.

Key Current Issues

Two concepts that today represent the greatest difficulties of the collective process in Brazil are standing and res judicata, but res judicata, since 2011, has become a less controversial issue than standing.

Standing, in the words of Professor Barbosa Moreira, is eclectic. Who has standing? This would be the public sector, associations and individual. Individuals only have standing to propose a popular action. Political parties with representation in Congress, union organization and associations legally established and in operation for at least a year, in the interests of its members or associates (art. 5, LXX of the Federal Constitution), have standing for collective writ. The Public Prosecutor; the Public Defender; Union, states, the Federal District and municipalities; the local authority; public corporation; foundation or mixed capital company and associations, which have existed since at least one year (requirement can be waived by the judge in this case, since the social relevance of observed) and has relevance to the topic, have standing for class actions.

There has been much discussion in recent years about the standing of the public prosecutor to pursue legal action for the protection of homogeneous individual rights. The view that predominates today is the importance of verifying whether the homogenous individual interests identified by the public prosecutor have the essential magnitude capable of characterizing a genuine social interest. If so, the Public Prosecutor will have standing for filing the lawsuit.

However, the issue is still in debate. In the Extraordinary Appeal No. 605,533, the Supreme Court of Brazil (STF) accepted review to decide whether prosecutors have standing to propose measures to protect legal rights related to delivery of medicines to patients with serious illnesses. Depending on the STF’s decision, the case may either be an important development in the history of collective protection or represent a phase of retrocession in the protection of rights.

The standing of the Public Defender is also being debated. The Public Defender’s standing in the legal system generally is governed by Law No. 11.448/2007. The role of the Public Defender in collective protection, however, is pending of decision by the Supreme Court, which must rule on that issue in the Direct Action of Unconstitutionality No. 3943-1. Another question is whether standing of the Public Defender is restricted to cases when the group involves persons who are unable to pay a lawyer to protect their own interests or if the Public Defender can act in every case that involves transindividual interests. The prevailing view is that Public Defender cannot act unless the group involves persons who are unable to pay a lawyer to protect their own interests.

The effects of res judicata are specified in art. 103 of the CDC, the systematic secundum eventus litis. In general, the res judicata effect of a sentence (judgment) is formed erga omnes, in the case of diffuse rights, ultra parts, limited to a group, category or class, in the case of collective rights, and erga omnes in the case of individual homogeneous rights to benefit all victims. The exception is when the claim is dismissed for lack of evidence, in which case any legitimate claimant may bring another action with the same basis drawing on new evidence.

Proposed Reforms

Article 16 of the Class Action Law places territorial limits on the effects of res judicata. However, in October 2011, the Special Court of the Superior Court, in Recurso Especial No. 1,243,887, ruled in that “… the effects and effectiveness of the judgment are not confined to geographic limits, but the objective and subjective limits of what was decided.” (STJ. Recurso Especial nº 1.243.887/PR. Corte Especial. Rel. Min. Luis Felipe Salomão. DJ 19/10/2011).

One of the challenges in analyzing the collective process in Brazil is the difficulty of finding accurate data and national level on the collective process. The National Register for Class Actions and for Class Action Investigation, proposed by Resolution No. 2, June 21, 2011, and originally expected to be in force beginning December 2011, so far not been implemented. It is estimated that the National Register will finally enter into force in the second half of this year.

Nowadays, each court has its own system of search, which provides the data processing procedures in the court determined that the search engines have different search parameters, i.e., some courts make the details of the processes by name only the defendant, others only provide process data by reporter, other process per year, which makes an overview of information difficult in national terms.

There are bills to bring improvements to the collective protection, but it’s still hard to think that the changes will occur anytime soon.

A bill for a new law on class actions and the proposed legislative amendment to the Code of Consumer Protection, Draft Law No. 5.139/09, aims to replace Law No. 7.347/85. The Draft Law has had a long course and numerous changes in its text. In general, the project aimed, among other modifications, (a) to substantially reduce judicial activism, restoring the prevalence of the initiative of the parties, (b) to adopt the principle of dynamic evidentiary burden by assigning the responsibility of proving a fact to the party better able to accomplish it, and (c) to emphasize the public prosecutor’s power to conduct a civil investigation preliminary to the class action.

The project also provided for the creation of the Register of Class Actions, mentioned above, and would confer standing to the public prosecutor without any restriction on the defense of individual homogeneous rights, which today is still a controversial point in the collective process of Brazil.

The project sought to clearly express the role of associative entities. Art. 6 would convey standing to the Brazilian Bar Association (including its sections only–subsections were removed from the legal text for a suggested amendment), unions, and associates formed for the purpose of monitoring the exercise of professions (restricted by the interests linked to their category), the political parties with representation in Congress, in the Legislative Assemblies or Municipal Chambers, and civil associations and foundations under private law legally constituted for at least one year, for the defense of rights related to their institutional objectives. According the art. 6 § 1, the requirement that civil associations and foundations must have been constituted for at least may be waived at the judge’s discretion with consent of the committee and the submission of nominal roll of members.

On March 17, 2010, the draft resolution was rejected by the Constitution and Justice Commission of the Chamber of Congressman in a vote by a majority of 17 votes to 14, the ground of lack of debate and public discussion. On March 23, 2010, members of the committee of lawyers responsible for drafting the project appealed against the dismissal. A new opinion in favor of approving the project was issued on April 27, 2010. However, a few days later, the project was declared suspended unless another appeal should be filed. A second appeal was filed later that year.

No decision has been made on the appeal, and so it remains uncertain whether the bill will be transformed into law, which would represent another major step for Brazilian collective protection, or be permanently archived, burying important ideas for themselves the effectiveness of collective protection.

In 2011, there was a proposal to amend the Consumer’s Protection Code, the project PLS 282/12. The proposal does away with one of these controversial points regarding standing, dismissing any discussion on the standing of the prosecutor to the defense of individual rights homogeneous, stating that these rights, by their nature, already have social relevance. The project also dismisses the discussion about the Public Defender: the Public Defenders can act in all the cases of transindividual rights, not only when there is a group that couldn’t pay for a lawyer. Another proposal would widen participation in public actions through the filing of amicus curiae submissions. However, there is, so far, no indication on the adoption of these proposals.

Thus, despite the existence of bills to improve the previsions on collective protection, there aren`t prospects for approval soon. The only reform that is likely to occur this year is the implementation of the National Register for Class Actions and for Class Action Investigation. On the other hand, as we will explain, the mass torts are to gain a new instrument in the near future.

Mass Torts

A mechanism known today in conflict resolution for mass torts in the country is the so called recurso repetitivo (repetitive appeals). It has existed in the law since 2008, when Law No. 11,672 included items 543-543-B and C of the Code of Civil Procedure. The amendment states that when there are multiple claims requiring resolution of an identical point of law, the President of the court of origin may admit one or more representative features of the dispute and refer them to the Supreme Court (543-B of the Civil Procedure Code) or to the STJ ( 543-C of the Civil Procedure Code). The other cases are to be suspended until the final pronouncement of the Court in the representative appeal. The grouping of recursos repetitivos will take in consideration only the essential issue in discussion whenever resolution of that issue can reduce the analysis of other issues in the same plea.

The Court justice in charge of reporting the case may request information, which must be provided within 15 days to state or federal courts concerning the dispute. After receiving the information, and after the demonstration of third parties, if appropriate, the case will be referred to the Public Prosecutor will for a period of 15 days. After the deadline for Public Prosecutors, the process will be placed on the agenda of the section or the Special Court, which must be judged with preference over other cases, except criminal cases and requests by accused of habeas corpus.

After a final decision, the judgment is to be published. Any identical issues in the stayed cases are to be decided based on the judgment of the Superior Court, and any unique issues remaining in the other cases pending in the court of will be re-examined by the Court of origin in the case.

Another procedure to resolve claims massed, but in the court of first instance, is a “preliminary ruling”. When the matter at issue is solely of law and judgment has already been pronounced in other similar cases, the judge can enter the same ruling in the case without notifying the defendant. In spite of the criticisms on this provision, it is important to note that it only applies to issues of law.

There are other legal instruments that aim to reach the speed of the procedure in mass tort cases, but one in particular worth mentioning is an instrument that it likely to join the legal system very soon, when it approved the Project for the New Civil Procedure Code.

Proposed Reform: Incidente de resolução de demandas repetitivas

The design of the new Civil Procedure Code was presented to the Senate President on August 6, 2010 and as of July 2012, after passing the Senate, already proceeding through the house, was in the process of public hearings. One of its innovations is the incidente de resolução de demandas repetitivas (incident for solving repetitive pleas, or “Incident”), inspired by the second version of the German Musterverfahren, but with many peculiarities.

The mechanism is found under Chapter VII of Project of the New Civil Procedure Code, Articles 930 to 941, in the title “Of Processes in the Courts,” which is not just about appeal, but all the processes that proceed through the courts. It exemplifies one of the concerns of the project: a uniform jurisprudence of the courts, trying to avoid conflicting decisions.

The Incident will take place in case of dispute that may generate significant multiplication of processes based on an identical question of law and cause serious legal uncertainty due to the risk of conflicting decisions. The mechanism will only work for identical issues of law not being applied to questions of fact. One of the practical challenges in implementing the new rule will be the difficulty of decoupling the issues of law of the facts. In fact, law and fact are associated, and it is often difficult in practice to make a clear distinction between the two.

The parties with standing to raise the new Incident procedure, which can be done ex officio by the court, are the parties and the public prosecutor, through simple petition, although the prosecutor must intervene to do so. Incidents raised will be recorded in the National Council of Justice.

The judge to whom the Incident is raised (the rapporteur) may inquire of the lower court which handled the process originally, and the information should be provided within 15 days. After the information is provided, the court of appeal will evaluate the request, and if the use of the Incident is approved, all cases that deal with the same question of law in the court of appeal jurisdiction area will be suspended until a ruling on the common legal question. The time period in which other cases are suspended is limited to six months as a rule, but the period can be extended by the rapporteur of the Incident.

The design of the new code specifically provides for the investigation and resolution of a single case to be admitted as a paradigm of the controversy. The code does not specify whether the Incident is to be considered a representative process, an individual process, or a collective process. In any event, all individual actions may be suspended the same as in a collective action if they are not chosen as representative of the dispute process.

Interested parties may participate in the controversy, joined by the request for documents or conducting investigations. They will have fifteen days to present documents and explain the controversy in 15 days, as well as the Public Prosecutor.

In the trial day, all interested parties are limited to a total of 30 minutes of presentation time to the court. This can be a very small amount of time per interested party, depending on the number who seek to appear. Thus, as a practical matter, although the Incident process is described as participatory, stakeholders have a limited practical ability to manifest themselves in the process. Instead, all cases are decided based on a paradigm.

There is a possibility of appeal to the Superior Court (STJ), or in extraordinary cases, to the Supreme Court (STF), from the court of origin where the Incident was approved. The appeal can be brought by any person who is party to ongoing process which discusses the same legal situation.

After the judgment of the Incident, the bill states that a party may file a complaint in the court that issued the judgment is another court disregards the theory adopted in the Incident.

This was just a brief overview of the new Incident procedure, which is expected to be integrated into Brazilian law in the very near future. However, the bill for a new civil procedure code is still in process, and there are a large number of projects of new bills and new codes in analysis in Brazil, so changes can happen at any time.

So, stay tuned!

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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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