On October 1, 2014, new statutory provisions went into effect in France allowing consumers the means to seek and obtain relief on a class–wide basis. Though these provisions have been in force for over two years now, the use of the class action mechanism has not really caught on. Because the class action procedures have not yet been widely taken up, there have already been at least two revisions of the original provisions adopted that expanded the scope of the original class action model, and further revisions seem likely. In a November 17, 2016 memo entitled “The Implications of the Expanded Scope of the French Class Action System on Potential Liability and Insurance Coverage for Companies Domiciled in and Doing Business in France” (here), Kevin Dreher and Laura Ferry of the Reed Smith law firm take a look at the modified French class action mechanism and examine the mechanism’s implications for companies doing business in France.
In adopting a class action mechanism, the French legislature wanted to avoid what it perceived as excesses of the U.S. class action model. In order to avoid having plaintiffs’ lawyers running the cases, the originally adopted version of the French class action model provided that the only groups authorized to act on behalf of consumers in bringing class action litigation were 15 associations representing consumers at the national level. In addition, the French class action system is based on an “opt-in” model, whereby consumers must actively seek to be a part of the class, by contrast to the U.S. “opt-out” model in which everyone within the defined group is automatically a part of the class unless they affirmatively opt out. Refer here and here for further background about the French class action procedures as originally created.
As the authors note, because the French class action model was built to limit the number of class actions and to narrowly define who can initiate claims, the “French class action model has not achieved any significant impact on protecting consumers since only six class actions have been filed.”
The class action claims that have been filed so far have involved rental real estate, financial services, electronic communications, and tourist accommodations. Only one of these actions has so far concluded with a settlement, which in that case involved a €2 million settlement intended to compensate over 100,000 consumers for alleged elevator surveillance. The other cases remain pending. Further details regarding the class actions that have been filed so far under the French consumer class action laws can be found here.
According to the authors, the lack of take up of the class action mechanisms “had been blamed in part on the public’s perceived ineffectiveness of the consumer associations,” which have not proactively initiated claims to protect consumers.
As a result of the “perceived ineffectiveness and the lack of success of the French class action model,” several different amendments have already been made to the class action procedures as they were originally adopted.
First, on January 21, 2016, the legislature introduced and ultimately adopted a law broadening the scope of the class action model to protect consumers in the health care field. This expanded law will allow any of the 486 authorized associations in the French health care system to initiate a class action for the protection of their users. Since July 1, 2016, health care consumers have been able to seek compensation for damages resulting from personal injuries. Class actions in the health care field extend to consumers of health care services or products.
Second, on October 12, 2016, the law was broadened even further to extend the French class action model to discrimination (including employment discrimination), the protection of personal data, environmental issues, and trade union issues.
In addition to these amendments that have already been adopted, additional efforts are underway “to increase the number of class actions” by broadening the role of private lawyers, through an initiative of the Paris Bar. The associations often lack the financial resources to pursue claims and have been perceived as ineffective. In November 2016, the Paris bar launched an Internet website dedicated to enabling class actions led by lawyers instead of associations. The Paris Bar seeks to broaden the types of actions that can be initiated and to increase the leverage of the class action mechanism to allow for the increase of compensation for each individual victim.
Beyond that, the authors note, the French legislature intends to broaden the scope and reach of the class action system to other fields, and to increase the number of associations with authority to initiate actions.
The authors conclude by noting that the expanded scope of the French class action system will impact the potential liability and insurance coverage of corporations domiciled and doing business in France.
All of this is very interesting to me. I have been fortunate over the last few years to have been able to travel to many different countries to talk about corporate liability issues. I am often the only American in the room. I have grown very accustomed to hearing the U.S. class action system reviled and its perceived excesses denounced. But as the years have gone by, I have noticed something else. Little by little, many countries, including those in which the U.S. class action model was most loudly deplored, have adopted procedural reforms that borrow features of the U.S. model. While the reformers in these countries are very careful to declare that they are avoiding the features of the U.S. model that they say contribute to the perceived excesses, the fact is that the existence of class action litigation is becoming increasingly common, in part because many countries have found that a class action mechanism can be an efficient way to resolve a large number of claims at once.
I find the French experience particularly interesting in that regard. In just a very short amount of time – less than two years – the French legislature has already made a number of substantial revisions to the class action mechanism as it was originally adopted, in order to encourage the mechanism to be used more broadly.
I think is particularly interesting that among the revisions that the legislature has already adopted is the expansion of the scope of the French class action to include a variety of additional areas, including employment discrimination and data privacy. The pending initiative suggest that the mechanism’s scope will be broadened even further, and the efforts of the Paris Bar to try to adapt the law to allow for greater lawyer involvement suggests that even further reforms may be ahead.
I stress all of this because I hear frequently that I shouldn’t get too excited about consumer-oriented class action reforms; these procedures I am told are there solely to protect consumers, and are not there to be sued in corporate or commercial disputes and certainly are not there to facilitate U.S.-style securities class action lawsuits.
I recognize that all of these caveats are true; at the same time, I look at the expansion that has taken place with respect to the French class action model in the short two-year period that it has been in place, and I wonder how long the mechanism will restricted to consumer-focused disputes. It has already been expanded to allow the mechanism to be used for employment discrimination claims and data privacy claims. It is, I think, a relatively short leap from what is already permitted to what may be next, which is the use of these kinds of procedures for corporate and commercial disputes, including even securities class action. All it would take, I think, is for some corporate scandal to emerge at a French company resulting in widespread shareholder disgruntlement. At that moment, aggrieved investors might well turn to the existence of the class action model and seek to use it as a tool to seek redress; if the limitations on the model stymie their efforts, the ensuing result might well be legislative reform.
Whether any of these things unfold as I have predicted remains to be seen. But in any event, regardless of what happens, I think it is very interesting that class action mechanisms are becoming increasingly common around the world.
By way of illustration of this increasingly universal adoption of class action litigation model around the world, at least for consumer litigation, I refer to my recent post discussing the development of class action litigation in Latin America, here.