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The Warsaw Voice » Law » July 30, 2008
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Class Action, Polish-Style?
July 30, 2008   
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A specter is haunting Europe-the specter of class actions. The concept of class actions has traditionally been associated with the American legal system. Along with jury trials and million-dollar compensations in hot coffee cases, it forms part of the popular European notion of "how they do it on the other side of the pond." Now that the European Commission has announced its White Paper on class actions in competition cases, and European states, one by one, adopt legislation facilitating various types of collective claims, maybe it's time to dust off the old Grisham novels?

Class action is a tool for pursuing a large number of individual claims in one court case. Typically, a case is brought by an individual plaintiff or plaintiffs who seek legal protection not only on their own behalf but also on behalf of a whole category of individuals. In these terms the "class" is formed by all other unidentified persons who are in a similar position to the actual plaintiffs. In other words, if you are one of shareholders who purchased junk stock in a publicly listed company on the basis of misleading public announcements by the management, there may be a court case pending which concerns your interests, unless you opt out of the class at the right moment.

This picture of the American-style class action would not be complete without mentioning lawyers chasing clients, hectic settlements and impressive attorney fees contingent on the sums paid by the defendants. For these reasons the American class actions system, originally admired for its role in protecting the weakest (consumers, minority shareholders), has come in for some heavy criticism. Opponents of the system point out that it actually provides fuel for excessive litigation and is sometimes defined as "legalized blackmail" on deep-pocket corporations.

Now a discussion about the idea of collective court actions is likely to start in Poland, as the Ministry of Justice has published a legislative proposal of an Act on Pursuing Claims in Group Proceedings.

Attention should be paid in the first place to what is not proposed by the ministry. First of all, no "opt-out" model is considered. This means that a person would not be affected by any judgment in a case regarding a group claim unless he or she expressly signs into the group. In this sense, instead of "class" action one should refer to a "mass" or "group" action.

Group proceedings could be instigated by a group of at least 10 identified plaintiffs, provided their cases pass the judicial test for common issues of fact or law. At a later stage of proceedings, the court would order a public announcement inviting other members of the class to opt in.

Under the ministry's bill, the plaintiffs would be fronted by a group representative, who is a member of the group of plaintiffs supported by a qualified lawyer or, alternatively, a local consumer ombudsman. The representative sets the running in actively pursuing his/her claims and the claims of other group members, while the rest of the group has limited influence over how their rights are represented. Only the most important actions, like withdrawal of the lawsuit or waiver of claims, require the consent of a majority of group members. If you don't like the performance of your representative, you could either sign out of the group or try to convince a majority of group members to change him.

The ministry proposed that group cases be recognized by selected courts, in three-judge panels, which should guarantee that cases of this sort are heard by more experienced judges. It is proposed that court panels have procedural possibilities to encourage parties to settle and powers to control the content of the settlement so that plaintiffs' interests are not grossly compromised.

A final court judgment should name all members of the group and, where monetary awards are made, should expressly indicate the sums awarded to every group member. If the award concerns non-monetary claims, responsibility for enforcement of the judgment would lie with the group representative. In other cases each group member may demand payment individually.

The ministry decided not to restrict group proceedings to any particular category of cases, damages, claims or claimants. Both consumers and professionals are entitled to bring group claims and there is no cap as regards the sums involved. Under the proposed act, group claims could be brought equally well against the manufacturer of a defective consumer product, the management of a publicly listed company who misinformed the shareholders and a bank that overcharged clients in terms of small commissions.

Although the act, when and if adopted by parliament, may end up looking substantially different, it is worth investigating at this early stage when there is still time to discuss the recipe for class actions Polish-style.

Tomasz Jaworski
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