Band 19, Heft 1

On paper, class actions run like clockwork. But practice suggests the need for tune-ups: sometimes judges still approve settlements rife with red flags, and professional objectors may be more concerned with shaking down class counsel than with improving class member’s outcomes. The lack of data on the number of opt-outs, objectors, and claims rates fuels debates on both sides, for little is known about how well or poorly class members actually fare. This reveals a ubiquitous problem — information barriers confront judges, objectors, and even reformers. Rule 23’s answer is to empower objectors. At best, objectors are a partial fix. They step in as the adversarial process breaks down in an attempt to resurrect the information-generating function that culture creates. And, as the proposed changes to Rule 23’s handling of objectors reflect, turmoil exists over how to encourage noble objectors that benefit class members while staving off those that namely seek rents from class counsel. The U.S. class-action scheme is not the only one that relies on private actors to perform public functions: citizens privately fund political campaigns, and private lobbyists provide research and information to lawmakers about public bills and policies. Across disciplines, the best responses to those challenges have often been to level up, not down. This Article therefore proposes a leveling up approach to address judges’ information deficit such that they can better perform their monitoring role. By relying on public funds to subsidize data collection efforts and nonprofit objectors’ information-gathering function, we can disrupt private class counsel’s disproportionate influence.

This Article proposes a thought-experiment with regard to the administration of class actions. It is almost axiomatic that class actions are determined through a single “certification.” However, class actions can be certified through a tiered certification, e.g., a preliminary certification on a more lenient standard, followed by a full certification. Flattening the certification process allows a richer set of solutions to familiar dilemmas. Currently, a noncertified class does not bar subsequent certification attempts. Focusing on this problem, this Article demonstrates that tiered certification is a superior solution — members of a class that passed the first certification but not the second receive at least minimal procedural protection and thus could be precluded from serial certification attempts. More generally, tiered certification can better handle several species of collective litigation, which can be referred to as semi-class actions. Collective proceedings, whose certification costs are greater than their social benefit, do not justify a comprehensive class treatment. But to the extent that these cases entail some modest social value, they deserve to pass a less onerous, preliminary certification. The Article discusses cases that fit this pattern, for instance prospective, class-wide relief for technical regulatory violations.

In the United States, there has been tremendous growth in a form of third-party litigation financing where investors buy pieces of lawsuits from plaintiffs. Many scholars believe that this new financing helps to balance the risk tolerance of plaintiffs and defendants and thereby facilitates the resolution of litigation in a way that more closely tracks the goals of the substantive law. In this Article, I ask whether these risk-balancing virtues of claim investing carry over into class action cases. This is a question that has not yet been addressed by scholars because many think it is not possible for financiers to buy pieces of class action lawsuits in the United States. But I show that such investments are neither impractical nor unethical; indeed, it appears that they are already here. It is therefore worth considering whether the investments confer the same social benefits they do in other cases. I argue that although class members do not need a risk transfer device in class action cases because they are almost always risk-neutral in light of their small losses, their lawyers do need such a device. Although this does not necessarily mean that claim investing is socially desirable overall in class actions, the social costs that have thus far been identified with claim investing seem modest compared to the benefits.

The “American-style” class action, when combined with private rights, is an important tool of American regulatory policy. And just as American regulation has global reach, the global class action is not unfamiliar to U.S. courts. Yet, global U.S. class actions are facing ever-stronger headwinds. In addition to the recent retrenchment of class actions and international litigation generally, U.S. courts have raised additional barriers to global class actions in particular. This Article’s first goal, therefore, is to document these developments and their consequences for regulation. Against this backdrop, this Article also reviews the options available to foreign lawmakers, foreign courts, foreign litigants and litigation funders, and foreign public enforcers. Foreign lawmakers may provide alternatives to global U.S. class actions; foreign courts and foreign litigants may explicitly or implicitly coordinate to approximate global class resolution; and foreign public enforcers may achieve the goals of global regulatory litigation while avoiding some of its legal impediments. Finally, this Article evaluates these various foreign responses from an institutional perspective, with special attention to the institutional incentives for lawmakers and law enforcers.

Unlike most countries, the United States and Israel have employed the class action procedure for decades. This Article compares the two countries’ class action regimes and examines how the device has evolved in those countries. It examines the current procedures, as well as proposed reforms. It also compares class action statistics in the two countries relating to filings and outcomes. We demonstrate the many common features between the United States and Israeli class action procedures. As we illustrate, these common features have led to robust class action practices in both countries. At the same time, there are profound differences between the types of class actions filed and their outcomes. Thus, while Israel has many more class actions than the United States on a per capita basis, the cases are much less consequential from a monetary and subject matter perspective. We explore possible explanations for these observations. Furthermore, this study identifies features — utilized by the United States and Israel — that can serve as models for other countries that are adopting or amending their own class action regimes.

The EU Collective Redress Recommendation has invited Member States to introduce collective redress mechanisms by July 26, 2015. The claim of the well-known reservations concerns the potentially abusive litigation and potential settlement of not well-founded claims resulting from controversial funding of cases by means of contingency fees and from “opt-out” class action procedures. The Article posits that apart from that claim, at bottom there may be some danger that the European Commission and private interest-groups may try to pursue the enforcement of their regulatory agendas in this way at the expense of individual claimants’ interests. However, in contrast to the situation in the United States, the need to complement regulatory enforcement by collective action may not appear as strong because of the relatively strict regulatory control and enforcement, which may explain EU Member States’ longstanding reluctance to adopt collective proceedings due to their concern for plaintiffs’ individual rights. Therefore, a comparative analysis is carried out to see to what extent individual rights as opposed to regulatory goals are taken into account in the different newly revised systems in place across Europe. As an interim result, the Dutch settlement procedure for mass damage claims, the English Group Litigation Order and the German test case procedure turn out to be relatively well-suited to dealing with mass damage claims. At the same time, none of them can quite reach an optimal balance between individual rights and regulatory goals and therefore each of them is subject to criticism. That is why the further question is raised as to how far these procedures could complement each other, thus contributing to the enforcement of individual rights without overregulating markets in Europe.

This Article examines consumer law enforcement in the EU. It shows how the effectiveness of collective and individual redress is intrinsically linked to the interplay between administrative and judicial enforcement and alternative dispute resolution (ADR). It addresses the trends and the contradictions of EU enforcement policies and their impact on national systems by looking at the role of general principles and fundamental rights, in particular Article 47 of the European Charter of Fundamental Rights (CFR). It concludes with policy recommendations concerning how the various consumer enforcement mechanisms should be coordinated at the EU and national level to ensure comprehensive and effective protection in compliance with fundamental rights.

This Article attempts to clarify a proposition of certain Canadian authors that while class actions represent a significant part of our court activities, they may not truly be compensating our citizens. I argue that leading up to the present study, we did not know for certain whether a class action was an effective mechanism to compensate class members. Through empirical data collected up by the Class Actions Lab from the past twelve years from cases filed in the province of Quebec, District of Montreal, analyzed through the lens of a collective approach to compensation, I demonstrate that Quebec citizens are in fact being compensated by class actions.

In an effort to ensure access to justice, Australian courts have fashioned a unique hybrid opt in-opt out process known as “closed classes.” The rationale that underlies closed classes is to prevent free-riding that may undercut the position of funders and class action law firms reliant upon entering into agreements with a critical mass of class members. However, multiple closed classes also pose problems for respondents seeking the comfort of finality. To secure settlement and thus ultimately benefit participating class members, Australian courts have formulated a procedure whereby the closed class is opened and nonparticipating class members are invited to either register their claims or opt out so that thereafter those who do not register and those who opt out are effectively precluded by res judicata from making further related claims. We argue that Australian courts’ support of closed classes, while driven by pragmatism, has produced unintended consequences. Many relate to the ethical dilemmas faced by class action law firms and litigation funders seeking to advance the interests of participating class members over and above those of nonparticipating class members. The Full Federal Court has recently approved an alternative common fund approach. However, questions remain as to whether Australian courts are appropriately equipped to measure and compare the alternative transaction costs associated with the current and proposed approach, and whether they are appropriately equipped to determine the commercial rectitude and fairness of litigation funding agreements.

China has a civil procedure for collective litigation, which is dubbed Chinese-style class action, as it differs from the U.S.-style class action in some important ways. Using securities class action as a case study, this Article empirically examines both the quantity and quality of reported cases in China. It shows that the number of cases is much lower than expected, but the percentage of recovery is significantly higher than that in the United States. Based on this, the Article casts doubt on the popular belief that China should adopt the U.S.-style class action, and sheds light on the much-debated issue concerning the relationship between public and private enforcement of securities law. The Article also discusses the future prospects of securities class action in China in light of some recent developments which may provide its functional equivalents, including the regulator-brokered compensation fund and public interest group litigation.

This Article highlights that when procedural rules are legislated and there is substantial coordination between the executive and legislative branches, procedures with potential structural impact are weighted against alternative means of policymaking and implementation. This makes many Continental law countries, parliamentary countries, and countries governed by solid national majorities with substantial control over elected branches, and in general places where power is less fragmented, less likely to encourage American-style class actions. This is manifested in legislative choices of a private enforcement regime for class actions, which, when allowed, is designed to be subordinate to or to piggyback on the enforcement of preexisting bureaucracies. The theory is illustrated with the enactment of class actions in Chile, which is a civil law country that has experimented with class actions since 2004.