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Posts Tagged ‘global class action’

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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I will be presenting on one of my favorite topics, developments in international class action litigation, at an upcoming webinar co-sponsored by The Knowledge Congress, BakerHostetler, and KCC.  Breaking Down Global Class Action Cases will be broadcast live on Thursday, August 22, 2013 from noon to 2:00 p.m. EDT.  We’ll be discussing the implications of the Supreme Court’s recent decisions in Kiobel and Morrison as well as trends in the development of class action law outside the U.S.  See below for more information. 

To sign up for free, courtesy of BakerHostetler, click this link.

Event Summary

Remaining up-to-date with the issues revolving around class actions and knowing the best practices is key to effectively defending clients and raising the bar.  Join us in this two-hour, live webcast as our panel of key thought leaders and practitioners discuss significant developments in global class action litigation with key updates on class action law.

Included in their discussions are the following:
•Overview of the Recent Global Class Action Cases
•Class Action Settlement Principles
•Impact of Class Action Law to Other Laws, such as: Privacy, Employment and Labor, Financial Services
•Best Practices and Latest Trends in Defending Class Action Litigation
•Up-to-the-minute Regulatory Update

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The wait is finally over!  World Class Actions is finally out in print, and the book is available for order via the Oxford University Press website.  For those of you who have been holding your breath in anticipation of the book’s release… well, you’ve probably long since passed away from asphyxiation.  For those who have not heard about the book, however, here’s a short summary.

Class action and other group litigation procedures are increasingly being adopted in jurisdictions throughout the world, as more countries deal with the realities of increased globalization and access to information. As a result, attorneys and their clients face the ever-expanding prospect of a class or group action outside their home jurisdictions.

World Class Actions: A Guide to Group and Representative Actions around the Globe is a guide for attorneys and their clients on the procedures available for class, group, and representative actions throughout the world. It helps lawyers navigate and develop strategies for litigation and risk management in the course of doing business abroad, or even in doing business locally in a way that impacts interests abroad.

Part I of the book provides a jurisdiction-by-jurisdiction survey of the class action, group, collective, derivative, and other representative action procedures available across the globe. Each chapter is written from a local perspective, by an attorney familiar with the laws, best practices, legal climate, and culture of the jurisdiction.

Part II provides guidance from the perspective of international attorneys practicing in foreign jurisdictions and the art of counseling and representing clients in international litigation. It also covers a variety of topics related to transnational, multi-jurisdictional, and class or collective actions that involve international issues and interests.

Each chapter offers practice tips and cultural insights helpful to an attorney or litigant facing a dispute in a particular part of the world. Many of the chapters introduce key books, treatises, articles, or other reference materials to foster further research. Its focus on international class and group litigation law from a practitioner’s perspective makes World Class Actions an essential guide for the lawyer or client.

Many thanks to the more than 50 authors from all over the world who contributed to the book.

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For those of you interested in the forthcoming book, World Class Actions, here’s a quick update.  The page proofs should be ready by the end of next week, and barring unexpected delay, we are still on pace for an early summer publication date.  For those that haven’t yet heard about the book, it is a guide to class and collective action litigation around the world.  Here’s a link to the Oxford University Press web page for the book where you will find a more detailed synopsis.  I’ll continue to post updates as the publication date approaches.

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NOTE: The following is a copy of a post that I did for the recently-released Baker Hostetler Class Action Lawsuit Defense Blog. Be sure to check out the new blog for other fantastic class-action-related content!

Globalization has brought with it the growing problem of how to deal with mass disputes that transcend jurisdictional boundaries, as well as ever-increasing creativity among the members of the plaintiffs’ bar in bringing ever-larger class and mass actions. There is no single global court or other forum for bringing international or cross-border civil disputes, let alone disputes that involve allegations of mass harm. One of the key challenges for lawyers, policymakers, consumers, and businesses in the 21st century is how to efficiently resolve international mass disputes given the realities of globalization and the lack of any clear forum.

From the late 1990s through the first decade of this century, there were several trends favoring the U.S. courts as a global forum for litigating international disputes. However, recently, that trend has reversed, and the U.S. courts are becoming increasingly reluctant to entertain international class action litigation.

One of the hottest trends in securities litigation in the latter part of the last decade was what became known as foreign-cubed (or “f-cubed”) class actions, securities fraud class actions filed on behalf of foreign investors against foreign companies involving securities traded on a foreign exchange. The trend came to an abrupt halt, however, when the U.S. Supreme Court issued its decision in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), holding that section 10(b) of the Securities and Exchange Act does not have an extraterritorial reach and only applies to securities traded on a U.S. exchange or other transactions that occurs within a U.S. state or territory. Although lower court decisions following Morrison, including a recent Second Circuit Court of Appeals decision, may breathe some life back into the idea of litigating a small subset of primarily foreign securities disputes in the U.S. federal courts, Morrison has generally closed the U.S. courts to foreign-cubed class actions.

Another promising avenue for litigating global mass disputes was international arbitration. A developing strategy was for plaintiffs who had signed form arbitration agreements to seek to compel arbitration on behalf of both themselves and others who had signed the same form of agreement. (Several arbitration associations have implemented specific rules for how class arbitrations should be conducted. Here is a link to the AAA Supplemental Rules for Class Arbitration). The Supreme Court put an end to this strategy when it decided the international price-fixing case, Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010). In Stolt-Nielsen, the Court held that a party to an arbitration agreement could not compel class-wide arbitration unless the parties had expressly agreed to allow class, rather than individual, arbitration.

In the human rights area, the U.S. Alien Tort Claims Act has increasingly been used as a tool to litigate international disputes involving alleged violations of international law over the past two decades. Several circuit courts of Appeals have even allowed actions under the ATCA to be brought against private corporations, under the theory that those corporations aided and abetted a foreign government or foreign official in committing human rights abuses. However, the Circuits split on the issue, and the Supreme Court accepted certiorari to resolve the split in the case of Kiobel v. Royal Dutch Petroleum, No. 10-1491. Following an oral argument held last month, the Supreme Court issued an order directing the parties to submit supplemental briefing to address the extent to which the ATCA should permit the exercise of extraterritorial jurisdiction at all over acts that took place within a sovereign jurisdiction other than the United States. Questions posed during oral argument, especially by the conservative wing of the Court, suggest skepticism about the allowing U.S. Courts to adjudicate human rights disputes that have nothing to do with the United States.

At the same time that avenues for global mass redress in the U.S. Courts have been closing, doors have been opening in other parts of the world. Class action law continues to develop in Canada and Australia. Israel has a class action procedure that closely mirrors U.S. law. Dozens of other countries in all corners of the world now have procedures allowing at least some form of mass redress. A very recent example is a class action law enacted in Mexico that permits a form of collective litigation that, while quite different from class actions in the United States, provides express mechanisms for seeking collective redress. In 2006, the Netherlands passed a law that allows mass settlements of claims (although it does not provide a procedure for litigating contested class claims), and arguably allows residents of other EU countries to be included. In other countries, the lack of a specific class or collective action procedure has not kept courts from fashioning remedies for mass redress.

The continuing lack of a single global forum for litigating mass disputes and the proliferation of new procedures permitting collective litigation abroad, are likely to have at least one near term practical impact. That is, the development of areas of law dealing with the enforcement of foreign class or collective action judgments. This has already become a reality in a huge environmental contamination case involving the drilling operations of a formal Chevron subsidiary in Ecuador. In 2010, a court in Ecuador entered an $18 million judgment in the case, and proceedings are ongoing in both the U.S. courts and in international arbitration proceedings relating to the enforceability of the judgment.

In a related vein, U.S. courts increasingly find themselves adjudicating disputes under 28 U.S.C. § 1782, which allows litigants discovery in the United States for use in connection with foreign proceedings (see this recent Second Circuit Court of Appeals decision interpreting the statute).

What does this all mean for potential litigants in global disputes? For any company or even small business that does business internationally, these developments highlight the necessity of keeping up with the constant changes in local laws as well as international trends. The procedures that might have been applicable, and arguments that might have been persuasive a year before, may no longer be viable, but new avenues and theories will have almost certainly taken their place.

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Fellow class action blogger and defense lawyer Andrew Trask has posted some key insights from his notes of the 5th Annual Conference on the Globalization of Class Actions, on his excellent blog, ClassActionCountermeasures.  I had the pleasure of finally meeting Andrew in person at the conference, and he was every bit as engaging in person as he is online.

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I am just about set to head overseas to the Netherlands to attend the Fifth Annual Conference on the Globalization of Class Actions and Mass Litigation, which starts on Thursday, December 8.  At last count, there were more than 150 registrants for this year’s conference, including yours truly and Andrew Trask of the blog ClassActionCountermeasures.  The faculty includes the world’s top authorities among academics, policymakers, and practitioners on global class and collective litigation.  I’ll be sure to post a summary of my notes following the conference.  If you happen to be attending, please drop me a note so that I can look out for you there.

On a related note, I’m excited to announce that the manuscript of a book of collective works that I’ve been editing on the topic of global class action litigation is finally complete and set to go out to Oxford University Press tomorrow.  The book, currently titled World Class Actions, is a practitioner-focused guide to international class and collective action litigation.  The list of contributors includes many of the world’s top practitioners in global class action litigation, in addition to authorites on local class and collective action litigation in every corner of the globe.  I’ll be posting more about the book in the coming months.

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