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Opening up of class action, a proposal under discussion.
The law of 17 March 2014 was intended to introduce the principle of the “class action” in a very controlled way, in order to avoid certain excesses observed in the United States that could endanger the industry.
The shortcomings of the text prevented it from becoming a useful tool for the legal protection of French citizens. The need to transpose European Directive 2020/1828 of 25 November 2020 by 2022 at the latest has led to the tabling of a bill to remedy the shortcomings of the current text.
A class action is a legal action brought by one plaintiff on behalf of several natural or legal persons in a similar situation who have suffered damage or wish to put an end to a breach of contract.
The aim is therefore to enable the interests of several claimants to be combined so that each of them can obtain compensation for the damage suffered or an end to the infringement without having to bear the burden of litigation individually.
1- Inadequacies of the current legislation:
The current legislation is the result of the accumulation of initiatives aimed at opening up group actions in various fields such as consumer law, health law, anti-discrimination, etc. Although there are more similarities than differences in the procedures applicable in each case, the texts currently in force create unnecessary complexity, which is a source of inefficiency.
The main limitation of the current legislation is the difficulty of access to the class action procedure. The new law will unify the rules applicable to all class actions and make them more accessible. At present, it is necessary to rely on an approved association in order to bring an action. The proposed amendment to the law, while maintaining the use of approved associations, would widen access to the action of :
– associations that have been in existence for more than two years and have a purpose related to the interest to be defended;
– associations with no previous history, created on an ad hoc basis and made up of more than 50 natural persons, more than 10 companies or more than five local authorities, for the purpose of carrying out a specific action;
– the Public Prosecutor’s Office for actions to put an end to infringements.
The end of the monopoly of authorised associations could significantly increase the use of class actions.
2- Procedure:
Once the plaintiff has been chosen, the various stages of the procedure are as follows:
1. The plaintiff must obtain a ruling on the defendant’s liability, which will define the class of persons potentially interested in the class action, the criteria for inclusion in the action, the damage to be compensated per category of persons targeted and the period of time during which the injured parties must join the group.
2. It will be possible to bring an action directly against the defendant’s insurer.
3. Adequate publicity will be given to the judgment.
4. The judgment may determine whether the damage caused is to be settled collectively or individually. In the case of collective settlement, the persons who have joined the group must give a mandate to start negotiations and be bound by the result. If the settlement is individual, each person must seek an agreement with the convicted defendant.
5. It will be possible to return to the judge at a second stage if the agreement on collective or individual compensation has not been successful. The judge will then have to take over again. If the negotiations are successful, the judge will intervene to approve the agreement reached.
6. In the case of collective compensation proceedings, if no agreement is reached within one year, the law will restore the possibility for each injured party to seek individual compensation for the loss suffered.
In order to remove a major obstacle to the exercise of the right to sue, the draft law provides for the possibility of making a third party (presumably the defendant) or the State responsible for all or part of the legal costs incurred by the plaintiff, if the action is considered serious.
Furthermore, in order to comply with the requirements of the European Directive, persons who have a conflict of interest with the defendant will not be able to finance the association’s action.
3- Compensation:
The funds paid in compensation are deposited with the Caisse des Dépôts et Consignations. It is forbidden to move these funds outside the final compensation procedure.
The State will also make use of the Anglo-Saxon procedure for punitive damages by allowing the judge to transfer to the Treasury the proceeds of the civil fine intended to compensate for the damage caused to the community by the conscious and deliberate intention to make a profit or avoid a loss by causing serial damage to a category of the population. In the case of legal persons, the fine may be as much as 5% of their turnover before tax in France.
4- Prescription and public policy:
In order to preserve the rights of the injured parties in the event of the failure of the class action, the law provides for the suspension of the statute of limitations during the proceedings. In this way, it will be possible to bring an individual action without being affected by the time required for the class action.
It will also be prohibited to prohibit the use of class actions. The right to bring a class action will be a matter of public policy and it will not be possible to derogate from it by contract.
5- In public law:
The administrative courts will have to hear class actions brought against the State, legal persons governed by public law or private persons providing a public service, where serial damage has been caused, using exactly the same procedure as that provided for before the judicial courts.
6- The influence of the opinion of the Conseil d’Etat :
The draft law was the subject of an opinion by the Conseil d’Etat, which proposed a number of amendments to the text, which were adopted in committee. For example, the civil penalty could no longer be requested by the plaintiff, but by the public prosecutor before the courts or by the government before the administrative courts, since the aim is to remedy a disturbance caused to society as a whole.
The Conseil d’Etat has proposed raising the minimum number of people who can form an ad hoc association to bring a class action from 50 to 100. This retrograde step has been compensated for by the adoption of an amendment allowing recourse to the new form of class action for claims brought after the entry into force of the law but where the event giving rise to the claim occurred before the entry into force of the law, whereas the original text only allowed recourse to the modified class action for events occurring after the entry into force of the law.
The forthcoming adoption of the modified class action regime will allow for a wider use of this procedure, which nevertheless remains highly regulated. The simplification of the procedural rules remains to be welcomed. The text resulting from the transposition of a European directive also paves the way for the possibility of cross-border group actions, making it possible to extend compensation for certain losses to the whole of the European Union, thus bringing the European ‘legal market’ closer to that of the United States.