#14949 - Class Actions - Principles of Civil Procedure

Class Actions

UK does not have opt out class action regime. Currently Bill before parliament proposing such a procedure for competition cases.

Question on exam geared to allow to write about own jurisdiction on exam.

Principles arising

• Collective action v personal autonomy - rule of opt out process is that action ca be brought in your name without your knowledge and you will be bound by it.

  • Court makes effort to inform, but no requirement of express consent

• Stare decisis and res judicata

  • Courts can be reluctant to allow plaintiffs to litigate on own behalf if class action going on

  • If d loses, can they re litigate substantially the same claim re claim later arising in same circs

• Democratic participation - how to choose representative, level of involvement and decision making.

  • Generally little participation and representative chooses themselves. Assumption is that they will be passive.

• Undue pressure - concern that unbalances scale in favour of plaintiffs

• Public v private enforcement

  • More desirable to empower public regulators to litigate on behalf of groups that have suffered loss.

  • But leaves decision to public bodies rather than private autonomous parties

• Commodification of legal rights

  • Third party litigation funding - companies develop business model to fund litigation

  • Funds access to justice but causes plaintiffs to lose their rights in commercial transaction

• Ethical duties of lawyer to client

  • Duty to client - becomes difficult if clients in group litigation have conflicting interests - impossible to act in accordance with group as a whole.

• Procedure as barrier to litigation

  • Costs are too high for small claims, aggregation makes litigation viable

  • <> some economic barriers to litigation are sensible and don't want to encourage litigation culture

    • De minimis non curat lex

• Concern about proliferation of frivolous litigation

  • Why not worry about trivial claims? Allows minor bending of laws to occur without any recourse to remedy. Is the whole point of class litigation

Practical questions

• Due process

  • Claimants - right to opt out, right to notice? Defendants - are they entitled to confine to one case?

• Adequacy of representation

• Blackmail suits - suits to extract money for unmeritorious claims?

• Should it be confined to certain sectors? Eg competition?

  • In aus & us, general right of class actions

  • In UK, contemplating only for sectors - labor suggested financial services, now bill for competition cases

• Management - to what extent should merits of individual claims be determined? Bad claims and good claims can come together in class action

  • Damages to be calculated on aggregates basis? Cy pres basis, where cost of distributing damages or identifying claimants? Eg donation to medical research fund, reduced prices for set period of time for competition breach

• Settlements - risk of collusion, balancing fairness and finality

  • What if some members of the class object?

• How should class actions be funded?

  • Eg in UK, ban on contingency fees - to avoid ambulance chasing lawyers

Procedures by justification

Where access to justice a problem - not economically rational to bring claims

• Representative proceeding

  • Where access to court is a problem

    • Minor claims or high costs or risk of litigation makes economically irrational

  • CPR 19.6

    • Consent and notice not required

    • Where litigants have the same interest - narrowly interpreted - for a long time not available in damages claims because interests will be different - or where direct and indirect purchasers in the same supply chain as direct purchasers may pass on inflated price

• Opt out

  • Some say opt out isn't even necessary - if opt out of unviable action there is no other recourse in any event.

• Action by regulator or authorised NGO

  • Has no financial interest in the matter so risk of manipulation of procedure is removed.

  • But potentially regulators judgment not as good as individual litigants

  • Regulatory inertia - depend on regulators funding

  • Potential for corruption - relationship between regulators and the regulated

• Opt in class actions

  • Query whether viable - legal advice costs etc in signing up litigants

  • Technology may make viable. And must be more legitimate

  • In Australia, mainly opt in even though opt out is available

Cost and consistency

• Rationale

  • Even if individual claims viable, saves litigant and court time and funds to do together

  • Good for defendants as well as only face one case

  • Consistency if judgments - especially where juries are used

• Joinder

• Representative proceedings

• Group litigation orders CPR 19.10-15

  • Every person has to file a claim - very opt in. Has consequence that access class actions can't be supported by this mechanism

  • Everyone severally liable for costs

  • Successful for case management of large, viable claims but not for small ones.

• Follow on class actions - 47B competition act.

  • Cannot bring separate class action to establish liability

  • Opt in. Not very effective

• Mandatory proceedings

  • In us - can require people to participate in collective action where risk of inconsistency

Equity

• Rationale

  • Claimants that are first in time shouldn't have priority in insolvency

  • Bankruptcy procedure to avoid bankruptcy

  • Should bring together to ensure equity of distribution of compensation

• Eg mandatory proceedings for bankruptcy actions

• Can also be where don't know who the appropriate defendant is - eg if not sure who made particular pill - damages based on market share

Abuse of collective redress

• Are there cases that are so small that not worthy of adjudication

• argument from public costs

  • But Defendants will develop tolerated zone of noncompliance

• Argument from costs of defendants

  • Costs of distributing settlement monies for minor breach could be excessive and punitive on defendants

    • But critique applies equally to individual actions

    • D shouldn't get windfall just because reversing gain would be too high

  • Can pressure defendants into settling unmeritorious claims

• Firms can bring class actions in order to establish market position as representative for class actions

  • Market pressure to act quickly even if merit of case in doubt

  • Defendants willing to settle to avoid risk

  • Claimants get very little, but lawyers get their costs back

• Group members not adequately represented

  • Lawyers are the real drivers

• Defendants pressured into settling unmeritorious claims - settling cheaper than successfully defending - and want to avoid potential for greater liability exposure

• Greater exposure in class action

  • All or nothing. Especially if chances of success are on liability rather than damage

  • Especially where juries are involved and prospects of success are speculative

  • But if question is one of law, then applies as precedent- on the other hand, if a question of fact, is defendant exploiting limits of res judicata by having essentially same factual question re determined

Blackmail actions in US

• Raises exposure — all or nothing

  • Individual actions — 10k claimants x ($10k x 30%) = $30m

  • Class actions — (10k x $10k) x 30% = $100m or $0

• Doctrine of precedent <> res judicata — forecloses repeat litigation

  • BUT Doctrine of precedent res judicata — ideological plaintiffs can continue to reagitate same point

C2 not bound by C1s

• Not bound by previous, identical claims

  • Taylor v Sturgell 533 US 80 (2008) (FOI claims re aircraft – several members of same club sought same information – aviation authority applied to block other proceedings – argued unnecessary expense to authority & therefore taxpayers cannot expand res judicata to persons not before the court – due process = must be present to be bound)

    • Would amount to common law opt-out class action — forcing other parties into action

    • Ideological litigants not necessarily rational

    • If they were, would force claimants to litigate in class action

• But can use case management powers to

  • Taylor v Nugent [2004] 3 All ER 671 (suit against D=care home – T missed cut-off date to opt in to class action – filed own claim – D claimed abuse of process not abuse of process – but court can use case management powers to reduce inconvenience to D)

    • Can stay until after group litigation

    • Can impose generic decisions in group action

    • Can protect D from additional costs

    • In the end, T applied to & was joined to class action

• Due Process — requires Cs receive notice & opportunity to present objections or to opt-out

  • Hansberry v. Lee 311 U.S. 32 (1940) (internal migration leading to racial tension – white residents entered into covenant preventing leasing/sale to blacks – some residents breached – challenge to validity & effectiveness of covenant – had been previously determined in representative proceedings (without consent) due process requires that representative must adequately represent the class – clearly not so in this case – some residents happy to sell to African Americans)

<> D may be bound by its own losses?

• US Doctrine of “one-way issue preclusion” — losing party bound to issue in subsequent litigation, even if different context

  • But unbalanced — if win on an issue, 3^rd party won’t be bound next time

  • Incentive for claimants to separate actions — bring lots of separate actions until D loses on an issue, then bind them

    • doctrine is discretionary to avoid such tactics

• NSW Procedure – can rely on evidence in previous case, even if several years ago

Arguments

• Arguments against binding other Cs

  • Autonomy/due process of C <> efficiency, consistency

  • Tactical

    • Quality of lawyers, tactical...