David Shapiro: EU needs a class action of its own
It is fair to say that I have some first-hand knowledge of the so-called excesses of the class action system in the US, having been one of the country's leading plaintiffs' class action lawyers from 1966 to 1980. Many of these claims are nonsense, and what isn't can be controlled. One does not have to change the cost-shifting rules, permit contingent fees, have jury trials, institute treble damages or run the risk of having claimants lose control of the proceedings N the last danger being fixed by strong case management. Yet these are the hobgoblins that stand in the way of effective collective redress.
April 23, 2008 at 08:03 PM
3 minute read
It is fair to say that I have some first-hand knowledge of the so-called excesses of the class action system in the US, having been one of the country's leading plaintiffs' class action lawyers from 1966 to 1980. Many of these claims are nonsense, and what isn't can be controlled. One does not have to change the cost-shifting rules, permit contingent fees, have jury trials, institute treble damages or run the risk of having claimants lose control of the proceedings – the last danger being fixed by strong case management. Yet these are the hobgoblins that stand in the way of effective collective redress.
The European Commission's (EC's) White Paper on collective redress for breaches of antitrust rules recommends the use of opt-in class actions, or representative actions provided they are brought by a designated consumer organisation. But every expert and honest practitioner in the field knows that the opt-in class is totally incapable of providing effective collective redress. At the same time, the EC recommends the adoption of a 'passing on' defence which, absent effective collective redress, will allow price-fixers and the other antitrust violators to escape civil liability. Perhaps the White Paper is better called The Great Escape.
The EC's proposed fig-leaf to give end-of-the-line consumers a rebuttable presumption that they were the ones overcharged does not redress the balance. What good is the presumption when only 1%-2% of the victims will ever file an opt-in claim?
Andrew Holroyd, president of the Law Society, made the point for me. He said: "This is about consumers and businesses getting access to justice. It is about those claimants who are not able to seek the compensation they are due under the current system. Collective actions must be seen as only one of the building blocks of an effective justice system. It is not about introducing the excesses of the US litigation system. We need to stop obsessing about what happens in the US. Nobody wants that here or elsewhere in Europe. There are plenty of other moderate models of class action systems to study that are geared more towards ensuring proportionality. So let's keep talking about a system that meets identified needs in the UK and the EU."
Unfortunately, the time for talking about this issue is long since past. Forty years ago, in Hanover Shoe v United Shoe Machinery, the US Supreme Court said: "These ultimate consumers, in today's case the buyers of single pairs of shoes, would have only a tiny stake in a lawsuit and little interest in attempting a class action. In consequence, those who violate the antitrust laws would retain the fruits of their illegality because no-one was available who would bring suit against them." Can the EC continue to ignore this simple truth? As professor Rachael Mulheron argued in her Civil Justice Council report, Reform of Collective Redress in England and Wales: "A more effective method of collective redress [the opt-out class] is urgently required." Those of us who have read Competition Commissioner Neelie Kroes' speeches on the importance of private enforcement of the competition laws are disappointed. The EC's White Paper has restricted, not strengthened, private enforcement.
David Shapiro is a mediator and arbitrator based at Quadrant Chambers.
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