French Class Actions: How potentially dangerous will they be?

This post was written by Daniel Kadar

I.
Since the entry into force of the new Law on Consumer Protection 17 March 2014 – also known as “Hamon Law” – France now has its own version of a class action, different by many ways from its American counterpart.

To prevent any of what are considered as abuses on the Eastern side of the Atlantic, the French legislator has framed this legal action in several limits, which in turn seems to call in question the effectiveness of the mechanism.

II.
Pursuant to article L. 423-1 of French Consumer Code, officially recognised national consumer protection associations are now allowed to seek damages before civil courts, in order to obtain compensation for the individual and material losses suffered by consumers placed in a similar or identical situation. The harm must have its common cause in a breach by one or several same professionals of their legal or contractual obligations in the context of a sale of goods or provision of services, or when the harm derives from a breach of competition law.

Therefore, the French class action is restricted by four means:

  1. Only individuals can be provided with some compensation through this action since the Hamon Law, for the first time, also defined the consumer as a natural person acting for non-work-related purposes, excluding legal persons from its scope.
  2. Officially recognised associations of national dimension – only 15 to date – are granted an exclusive right to initiate the proceedings, which puts an important limitation to the role of legal counsels in this field, as opposed to the American class action.
  3. These associations can only seek to obtain damages to compensate losses resulting from material or financial damage suffered by the consumers. Such a limitation excludes moral harm or physical injuries, which may be of particularly great importance in many cases (sale of defective or spoiled goods, for instance). Punitive damages are also excluded so far.
  4. As its place in the French Consumer Code clearly indicates, the scope of this mechanism is limited to consumer claims. The legislator’s purpose here was to avoid class actions in sensitive areas, such as public health and environmental damage. However, the legislator has inserted an unusual provision according to which the exclusion of health and environmental damages shall be reconsidered within 30 months after passing the regulation. In fact, discussions have already started with professional health organisations.

III.
The procedure has been broken down in a three-step process:

  • A judgment must find that the conditions for admissibility are fulfilled, rule on the professional’s liability in relation to the individual cases presented by the association, define the concerned group of consumers, and determine which criteria consumers must meet in order to join the group of consumers to whom the professional is liable.
  • The adhesion of consumers to the class action is based on an “opt-in” system: it is subject to a positive expression of the victim’s will. To make the proceeding operational, the judgment must therefore order publicity measures intended for consumers most likely to belong to the group. The decision also states by which means consumers may join the group (by approaching the professional directly or the association), and in which delay (no less than two months and no more than six months after the publicity measures are taken).
  • Regarding the effective compensation of the consumers, the judgment must fix the timeframe within which the damages have to be paid by the professional and, in the event of a dispute over payment, the judge is required to give its decision in the same ruling.

When “the identity and the number of consumers having suffered harm are known” and “when these consumers have suffered the same loss, or loss of an identical value for a given service or over a given period of time or duration," a simplified procedure is provided, through which the judge may rule on the liability and may order the professional to compensate victims directly and individually, within a fixed delay.

Class actions related to anticompetitive practices suffer a last limitation, since a “follow on” rule is applied in those cases: professionals may only be held liable on the basis of a definitive decision made by competent national or EU authorities or jurisdictions.

Innovative, this class action surely is; its numerous safeguards appear, however, as important obstacles to its success to-date.

An extension to health-related litigation is to be monitored closely.

Law360 Q&A with Jill Lawrie of Blakes

Law360 today has an interesting Q&A with Canadian attorney Jill Lawrie of Blakes (subscription required), who provides good insights and opinions about Canadian class actions and the "waiver of tort" concept in Canada, whereby plaintiffs look to recover disgorgement of revenues instead of tort damages.

Recent Developments in Tort Litigation

Law360.com recently published two articles on decisions involving issues with potential to have long-term effects on tort litigation.

In the June 2, 2011 article, "Case Study: Bauman V. DaimlerChrysler Corp.," Mildred Segura and Nabil Bisharat discuss Bauman v. DaimlerChrysler Corp., a case that expands the use of "agency theory" to impose general jurisdiction over foreign corporations that do business in the U.S. solely through their U.S. subsidiaries. The Ninth Circuit's recent decision in Bauman holds that personal jurisdiction existed over DaimlerChrysler Aktiengellschaft (DCAG), a German company, because DCAG maintained the right to control its wholly owned U.S. subsidiary, Mercedes-Benz USA LLC (MBUSA), such that DCAG could be haled into court in California due to MBUSA’s contacts with that state. Bauman increases the likelihood that foreign corporations will be sued in American courts based on the activities of their U.S. subsidiaries. This opinion — if it stands — has the potential to affect any foreign company that does business in the U.S. through subsidiaries regardless of whether those subsidiaries have anything to do with the parent’s alleged actions giving rise to the lawsuit. To read this article, you may download a .PDF or view on Law360.com (subscription required).

In "Reading Between The Lines: Pooshs V. Philip Morris," published in May, Eric Buhr and Kasey Curtis analyze the California Supreme Court's May 5th decision in Pooshs v. Philip Morris USA Inc., the latest California case addressing how statutes of limitations should apply in cases where a plaintiff alleges delayed discovery of only one of multiple claims or injuries. The background issue that appears to be guiding the Supreme Court’s decisions is the little used doctrine of "primary rights." A close reading of the opinions reveals the court’s careful effort to reach an arguably fair result while avoiding issues that could have a larger and devastating effect on tort litigation. To read this article, you may download a .PDF or view on Law360.com (subscription required).

Tort Reform In Texas: Loser Pays Rule Signed Into Law

With a hat tip to the California Civil Justice Blog, earlier this week Texas enacted a "loser pays" system that proponents say will help rid the system of meritless cases. House Bill 274 takes effect September 1, 2011 and directs the Texas Supreme Court to enact rules providing for the early dismissal of "causes of action that have no basis in law or fact on motion and without evidence." For cases that fall within this "no basis in law or fact" category, the trial court may award the prevailing party costs and "reasonable and necessary attorney's fees . . . that the court determines are equitable and just" whenever it grants or denies a motion to dismiss, in whole or in part.

Given the rulemaking yet to occur and the discretion vested in the trial courts in whether to award fees, the exact contours of this law will take some development, and it remains to be seen whether Texas civil litigants will be ordered to pay attorneys fees rarely or with some frequency. Still, an interesting experiment in civil justice reform that will bear watching.

Tort Reform Heats Up with Hearing in the Senate Judiciary

The National Law Journal's article “Torts once again on the front burner in the House” discusses the March 24, 2011 U.S. House Judiciary subcommittee hearing on tort reform. The hearing, entitled, "Can We Sue Our Way to Prosperity?: Litigation's Effect on America's Global Competitiveness," once again opens the debate regarding the US tort system. Topics included a bill that would cap non-economic damages in cases of medical malpractice, and a hearing on the yet-to-be-introduced Lawsuit Abuse Reduction Act, a proposal to implement mandatory sanctions of attorneys who violate civil procedure's Rule 11 against filing frivolous claims.

Civil Justice Reform Ideas For California

The California Civil Justice Blog has a link to John Fund's article in The Wall Street Journal  "California Dreamin' - Of Jobs In Texas" discussing California lawmakers' recent legislative fact-finding trip to Texas, where they met with businesses that had relocated from California -- and throws a few legal-system reform ideas of its own into the mix, modeled on some changes Texas has made in recent years. Among them: Making the grant of class certification appealable - not just the denial of class certification, and a punitive damages cap.

Changes to Rule 26 Make It Easier To Work With Experts

This post was written by Meghan K. Landrum.

Recent changes to the Federal Rules of Civil Procedure (FRCP) Rule 26 make it easier to communicate with expert witnesses and to prepare them for deposition and trial testimony while still protecting attorney work product. While expert discovery has been a part of federal practice since 1993, the period dedicated to the discovery of attorney-expert communications and draft expert reports has become increasingly time consuming during pre-trial preparation. The amendments to Rule 26 address this development and attempt to create an atmosphere that encourages better communication between attorneys and their experts.

To learn more about the changes made to Rule 26 and the immediate impact this has on working with expert witnesses, read our full alert.

Federal Court Holds That Voluntary Refund Programs Can Defeat Class Certification Under Rule 23(b)(3)'s Superiority Requirement

This post was written by James C. Martin and Colin E. Wrabley

Class action defense litigators should be aware of a recent federal district court decision that endorsed and accepted a creative option for defeating class certification—the defendant’s implementation of a voluntary refund and replacement program providing a comparable remedy to what the putative class might recover in court. See In re Aqua Dots Prods. Liab. Litig., 2010 WL 3927611 (N.D. Ill. Oct. 4, 2010). In so doing, the decision in Aqua Dots extends a growing and important trend in class action jurisprudence concerning the scope of Federal Rule of Civil Procedure 23(b)(3)’s requirement that class litigation be “superior to other available methods for fair and efficient adjudication of the controversy.” While the notion of a refund or replacement program as an alternative to class actions has been around for decades, Aqua Dots provides a new impetus to consider this approach.

For more information, read the full alert.

Health Care Facilities Targeted in Wage and Hour Lawsuits

Across the country, plaintiffs’ attorneys are targeting health care facilities over their alleged failure to comply with meal break rules. These suits claim that employers have automatically deducted 30 to 60 minutes of time for employees’ meal periods, even if employees never took the breaks. Because employees can recover for violations that took place as many as three years before suit is filed, damages in these cases can be substantial.

For more information, including steps you can take to minimize exposure to these types of lawsuits, please see Reed Smith’s Employment Watch Blog.

California Supreme Court Decides Landmark Consumer Fraud Case

This post was written by Keith Yandell and Lisa Baird.

This morning, May 18, 2009, the California Supreme Court issued its ruling in In re Tobacco II Cases, a case that will shape how parties litigate California Unfair Competition Law (“UCL”) claims. At issue was the viability of UCL actions that seek to certify a class despite the fact that not all putative plaintiffs suffered injury as a result of a defendant’s allegedly unfair practice. Since California’s infamous UCL (also known as Bus. & Prof. Code, § 17200 et seq.) is often used to add broad “consumer fraud” claims to product liability lawsuits against the life sciences industry (as well as many other industries), the outcome of In re Tobacco II garnered substantial attention. 

Questions Presented

(1) In order to bring a class action under the UCL, as amended by Proposition 64, must every member of a proposed class action have suffered “injury in fact,” or is it sufficient that only the class representative comply with that requirement?

(2) In a class action based on a manufacturer’s alleged misrepresentation of a product, must every member of the class have actually relied on the manufacturer’s representations?

Background of the Case

The gravemen of the plaintiffs’ Complaint was that defendant tobacco manufacturers and researchers engaged in a decades-long conspiracy to conceal the health effects and addictiveness of cigarettes and, in so doing, made numerous false and misleading statements to consumers.

The Court of Appeal unanimously affirmed the trial Court’s holding that every class member must have suffered injury in order to maintain a class action under the UCL.

The California Supreme Court Ruling

The Court answered the above questions as follows:

(1) “[S]tanding requirements are applicable only to the class representatives, and not all absent class members.” In re Tobacco II Cases, slip Op. at p. 2 (Cal. May 18, 2009).

The Court also repeated the “likely to deceive” standard, and concluded “the language of section 17203 with respect to those entitled to restitution — to restore to any person in interest any money or property, real or personal, which may have been acquired” (italics added) by means of the unfair practice — is patently less stringent than the standing requirement for the class representative — “any person who has suffered injury in fact and has lost money or property as a result of the unfair competition.” (§ 17204, italics added.) . 

(2) “[A] class representative proceeding on a claim of misrepresentation as the basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions.” A class representative, however, need not plead or prove that they actually relied on a particular advertisement or statement when the unfair practice is a fraudulent advertising campaign. Id.

As to whether class representatives actually have standing, the court did conclude that Prop. 64 “imposes an actual reliance requirement on plaintiffs prosecuting a private enforcement action under the UCL’s fraud prong. This conclusion, however, is the beginning, not the end, of the analysis of what a plaintiff must plead and prove under the fraud prong of the UCL. . . .While a plaintiff must show that the misrepresentation was an immediate cause of the injury-producing conduct, the plaintiff need not demonstrate it was the only cause. ‘It is not . . . necessary that [the plaintiff’s] reliance upon the truth of the fraudulent misrepresentation be the sole or even the predominant or decisive factor influencing his conduct. . . . It is enough that the representation has played a substantial part, and so had been a substantial factor, in influencing his decision.’ [Citation.] [¶] Moreover, a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material. . . .Nor does a plaintiff need to demonstrate individualized reliance on specific misrepresentations to satisfy the reliance requirement.” Id. at p. 31.  

Additional Materials

The opinion is available at the judicial branch website and copies are available at the Supreme Court Clerk’s Office.

For a summary of the oral argument in this matter, please see "California Supreme Court Hears Landmark Consumer Fraud Case".

The lower Court’s ruling is available here.

California Supreme Court Hears Landmark Consumer Fraud Case

This post was written by Keith Yandell.

This morning, March 3, 2009, the California Supreme Court heard argument in In re Tobacco II Cases, a case that will shape how parties litigate California Unfair Competition Law (“UCL”) claims. At issue is the viability of UCL actions that seek to certify a class despite the fact that not all putative plaintiffs suffered injury as a result of a defendant’s allegedly unfair practice. Since California’s infamous UCL (also known as Bus. & Prof. Code, § 17200 et seq.) is often used to add broad “consumer fraud” claims to product liability lawsuits against the life sciences industry (as well as many other industries), the outcome of In re Tobacco II is garnering considerable attention.

Question Presented

(1) In order to bring a class action under the UCL, as amended by Proposition 64, must every member of a proposed class action have suffered “injury in fact,” or is it sufficient that only the class representative comply with that requirement?

(2) In a class action based on a manufacturer’s alleged misrepresentation of a product, must every member of the class have actually relied on the manufacturer’s representations?

Background of the Case

The gravemen of the plaintiffs’ Complaint is that defendant tobacco manufacturers and researchers engaged in a decades-long conspiracy to conceal the health effects and addictiveness of cigarettes and, in so doing, made numerous false and misleading statements to consumers.

The Court of Appeal unanimously affirmed the trial Court’s holding that every class member must have suffered injury in order to maintain a class action under the UCL.

Report From This Morning’s Argument

At the argument, Daniel Collins represented Phillip Morris, and Mark Robinson represented the plaintiffs. Justice Moore, of the 4th Appellate District, replaced Justice George who recused himself. Justice Kennard presided as Chief Justice.

Mr. Robinson focused his argument on the Mervyn’s decision1, where the Court held that Proposition 64 did not change the substantive requirements of a UCL cause of action. According to Mr. Robinson, if the tobacco companies’ theory were correct, the UCL would be reduced to “nothing more than a fraud cause of action that does not allow damages.” Justices Baxter and Chin responded with a series of questions focusing the lack of symmetry that would result if absent class members could use the UCL to bring claim they would not have had standing to maintain individually. Mr. Robinson countered that the UCL “has always been broad” and has never included a reliance requirement. Justice Werdegar offered the insightful query, “As a practical matter, what did Proposition 64 change?” Plaintiff’s counsel responded that it changed standing requirements. When pressed, however, he had no answer for how the statute’s new reference to California Code of Civil Procedure Section 382’s class action requirements changed the UCL. 

Mr. Collins ably fielded a number of questions including: from where in the statute he derives his conclusion that all class members must show injury in fact (Justice Kennard); whether a request for injunctive relief as opposed to restitution affected standing (Justice Moore), and whether the term “claimant” refers only to a representative class member (Justice Chin). The theme of Mr. Collins’ responses was that a class member cannot use the class action mechanism to recover under a claim that he or she could not have brought individually. Therefore, Section 17204’s new language mandating compliance with C.C.P. § 382 could only be read to require that all class members must have suffered injury in fact as a result of the allegedly deceptive conduct. This message appeared to resonate with Justice Baxter, who aptly summarized Mr. Collins’ position.

In the end, the Court will balance Mr. Robinson’s argument that Proposition 64 did not change the substance of the UCL against the truism that allowing absent class members to recover for claims they could not have maintained individually would render the UCL’s new reference to C.C.P. 382 a nullity. Regardless of the outcome, as both parties acknowledged, this decision will have a dramatic impact on California class action litigation.

The California Channel, a public affairs cable network, broadcast live coverage of oral argument on many cable stations. It also carried a live streaming Webcast at www.calchannel.com.

We will post the decision as soon as it is released, which should be within the next 90 days.

Additional Materials

The Supreme Court’s website allows users to obtain additional information and sign-up for e-mail notices about this case. 

The lower Court’s ruling is available at courtinfo.ca.gov.



1 Californians for Disability Rights v. Mervyn’s LLC, 39 Cal. 4th 223 (2006).

California Supreme Court On The Consumer Legal Remedies Act

UPDATE: After more than two years, on February 3, 2009, the California Supreme Court finally set argument in an important UCL case, In re Tobacco II for Tuesday, March 3, 2009, at 9:00 a.m., in San Francisco. With the Court's 90-day rule, a decision can be expected by June 1, 2009 in the ordinary course.

California product liability lawsuits against life sciences defendants often include claims under California's Unfair Competition Law (or 'UCL"), Cal. Bus. & Prof. Code § 17200 et seq. Sometimes UCL claims are the main theory of liability against life sciences clients, particularly when the plaintiff, or plaintiff class, has not suffered personal injuries from a medical device or drug they have used.

The UCL is controversial. For many years, critics complained that allowed individuals or groups to sue businesses on behalf of the "general public" over allegedly "unfair", fraudulent, or illegal practices, even if they never suffered any type of loss or harm, personal injury or otherwise. The voters passed Proposition 64 in November 2004, however, and imposed limitations to stem what were fairly viewed as abuses of this law. UCL plaintiffs now must show that they suffered an actual injury and lost money or property as a result of the defendant's alleged practice, and lawsuits brought on behalf of the general public now also must meet must traditional class action requirements. 

In response to Proposition 64, some entreprenurial plaintiffs' lawyers turned from the UCL to another statute, California's Consumer Legal Remedies Act ("CLRA"), Cal. Civ. Code §1750 et. seq., seeking another broad and malleable cause of action. (For more background about the UCL and CLRA, see this page or the always informative UCL Practitioner.

But the CLRA remains more limited than the pre-Proposition 64 version of the UCL. Last week, the California Supreme Court issued an important new CLRA decision, Meyer v. Sprint Spectrum L.P., unanimously affirming judgment for Sprint and concluding that a CLRA plaintiff lacks standing "without some allegation that he or she has been damaged by an alleged unlawful practice." Sprint was represented in the California Supreme Court by Reed Smith's own Ray Cardozo and Dennis Maio.

Meyer began in early 2004 with allegations, on behalf of the general public, that Sprint violated the UCL by including mandatory binding arbitration and other provisions in its customer service agreements. After Proposition 64, the original plaintiff (who was not a Sprint customer) was replaced by new named plaintiffs, and CLRA and declaratory relief causes of action were added. Sprint challenged the amended complaint because even the new plaintiffs had not alleged that the contract provisions had been enforced against them, and they also did not allege that they were personally damaged by the provisions. Although plaintiffs argued that the CLRA imposed no damage requirement whatsoever, the court concluded that California's Legislature had "set a low but nonetheless palpabale threshold of damage." It also noted that with statutes like the UCL and CLRA, "any rule that would expand the ability of individuals to bring lawsuits has costs as well as benefits." There is little to say other than that Meyer is a sound and well-reasoned decision that provides important and clear guidance for future CLRA claims.

On a different subject, more traditional personal injury class actions, the Drug and Device Law Blog has a good post regarding a Washington Legal Foundation paper by John Beisner and Jessica Miller, "Litigate the Torts, Not the Mass: A Modest Proposal for Reforming How Mass Torts are Adjudicated," proposing some long-overdue revisions to American Pipe tolling.

A Baby Step Toward Reasonable Class Action Fees?

On Monday, the District Court of Massachusetts issued a notable attorney's fee award decision in a class action arising from a data privacy breach, In re TJX Companies Retail Securities Litig. Along with a class settlement, class counsel urged the court to approve a $6.5 million attorney's-fees award, arguing that hundreds of millions of dollars in potential value had been created for the class. However, the payout depended entirely on class members making claims, and only a small fraction of the supposed potential - $6 million - were made. The court quite reasonably rejected class counsel's suggestion that the potential (but unrealized) claims supported the requested fees. That said, the court still approved the fee request pursuant to the lodestar method ($3.3m in lodestar * 1.97 multiplier = $6.5m).

The court finished with a cautionary note, which is where the baby step comes in: "In the future . . . Plaintiff's counsel can expect that this court, when confronted with reversionary common fund or claims-made settlements, will award attorney's fees by reference to the value of benefits actually put in the hands of class members." (emphasis in original). In reality, however, it would have been entirely reasonable for the court to use this standard for attorney's fees now, without waiting for the next time.

UPDATE: Drug and Device Law also has a November 11, 2008 post about this TJX case.

The Future of Class Actions: Do We Really Need More?

Over at druganddevicelaw.blogspot.com, Jim Beck and Mark Hermann have a comprehensive summary of the current draft version of ALI's Principles of the Law of Aggregate Litigation, which ALI intends to influence the future of class action litigation in the United States. Despite improvements over the prior draft, Beck and Hermann caution that it "still suffers from the same two fundamental problems that have been there all along: (1) it would do away with predominance as a practical restriction on the types of claims that can be certified as class actions, and (2) it would allow routine certification of what it calls 'common issues' – pieces of litigation or of a cause of action – without regard to the litigation or cause of action as a whole."

Another ALI member who is familiar with the project, Reed Smith's Jim Martin, explains that some in the ALI Members’ Consultative Group seemingly fail to appreciate the real-world hardships that classes create for the targeted companies, and labor under the misapprehension that common adjudication should be preferred above all else under the euphemism of judicial efficiency. With more attention focused on the problems with these draft Principles, it is hoped that the project may yet change course.