Class action lawsuit

A class action lawsuit may be filed subject to any harm to a group of persons. Such claims are justified when a large group of people have the same claims against the accused, and individual claims are very small in money terms and are not profitable if filed separately.

In world practice, class action suits are classified according to the way the group is formed into opt-in and opt-out. In claims of the opt-in type (used mainly in the UK), a group will be formed only if each member of the group expresses his will to join the group through active action. With the opt-out model, which is used mainly in the USA, on the contrary, people who do not want to participate in a class action must take active steps to leave the group. ^[one]

A class action lawsuit is filed in the same manner as an individual action. In this case, a number of conditions ^[2] must be met:

1. The multiplicity of the group. In administrative proceedings - at least twenty persons, in arbitration - five.
2. The homogeneity of the subject of the dispute and its foundation.
3. The presence of a common defendant.
4. The use by all members of the group of the same way of protecting their rights.

The lawsuit must be signed by all the plaintiffs, or the plaintiffs trust to file a class action lawsuit with one representative of the entire group of plaintiffs or a lawyer.

The filing and consideration of class action lawsuits are provided for by the Civil Procedure Code of the Russian Federation (CCP), the Arbitration Procedure Code of the Russian Federation (AIC) and the Code of Administrative Procedure of the Russian Federation (CAS). Article 46 of the Code of Civil Procedure of the Russian Federation ^[3] provides for the possibility of filing a lawsuit in defense of the interests of an indefinite number of persons. According to this article, in cases stipulated by law , state authorities, local authorities, organizations or citizens have the right to apply to the court with a statement in defense of the rights, freedoms and legitimate interests of an indefinite number of people.

With regard to arbitration, according to article 225.11. APC RF ^[4] cases on the protection of the rights and legitimate interests of a group of persons can be considered by:

1. corporate disputes;
2. disputes related to the activities of professional participants in the securities market;
3. other requirements, if by the day of appeal to the arbitration court of a person, at least five persons have joined his request.

In administrative proceedings, an appeal to a court of a group of persons with a collective statement of claim is provided for in article 42 of the Code of Administrative Procedure of the Russian Federation ^[2] . Also, clarifications regarding the filing and consideration of class action lawsuits were given in the Resolution of the Plenum of the Supreme Court of the Russian Federation of September 27, 2016 N 36 Moscow “On some issues of the application by the courts of the Code of Administrative Procedure of the Russian Federation” ^[5] .

Private class actions in Russia ^[6] :

Indirectly, the possibility of going to court to protect an indefinite number of people is also provided for in a number of other laws, for example, in the Federal Law of 23.06.1999 N 117-ФЗ “On Protection of Competition in the Financial Services Market” ^[7] .

According to the Federal Law of 18.06.1995 N 108-ФЗ On Advertising ^[8] (Article 26), in force (July 26), the federal antimonopoly authority was entitled to file a lawsuit with the court to protect the rights and interests of an indefinite circle of advertising consumers.

To date, a class action lawsuit is still rarely used in Russia. However, several plaintiffs may participate in a civil case and several lawsuits filed by different plaintiffs may be considered within the framework of a single civil case. Usually they are used when the defendant infringed on the rights of a large number of plaintiffs. Provided that such a case is won, the amount awarded is divided among all members of the group in proportion to the size of the claimed claims.

The most common class action cases:

• The lawsuit of depositors of large banks in their bankruptcy;
• Claims of parties to the contract for shared housing construction;
• Claims of tenants to the management company;
• A lawsuit from a group of clients of insurance companies dissatisfied with insurance policies sold to them;
• Claims of buyers to sellers of goods and services;
• Claims for corporate disputes;
• Claims for disputes related to the activities of professional participants in the securities market;
• Claims for compensation for damage caused by an environmental violation
• Claims for tour operators;
• A lawsuit to reinstate a group of redundant workers in the workplace.

One of the largest cases in Russian practice, which included three class action lawsuits at once, was the case against the Labyrinth tour operator. As a result of the consideration of claims, the court decided to recover from the defendant about 37 million rubles in compensation. The lawsuits were filed due to the fact that the tour operator, having suspended its activities in August 2014, did not fulfill its obligations to more than 55 thousand tourists and was accused of embezzlement of at least 100 million rubles that were received from customers for payment of tourist services .

The class action institute was first formed by the practice of the English courts of justice in the 16th century. Later, in 1873, the Act on the Administration of Justice was adopted, which established a rule according to which all those interested in the substantive basis of a claim should be given the opportunity to participate in the process as parties, regardless of how many there are.

The modern class action lawsuit arose in the United States in 1970 to better protect the rights of minority shareholders in disputes with corporate leadership, after which it also began to be used to protect the rights of groups of individuals and trade unions. Class action lawsuits are still widespread in the United States.

In accordance with US law , a class action lawsuit may be filed if the following conditions are met ^[9] :

• community - there must be one or more legal or factual requirements common to the whole group;
• adequacy of the parties - the representative must adequately protect the interests of the group;
• group size — the number of people must be so large that individual claims become impractical;
• typical requirements - objections should be typical for plaintiffs or defendants.

The national group of plaintiffs may be different, but such claims must have common issues in different states. This can be difficult if the civil rights in different states are different.

The law does not require the consent of each member of the group to file a class action lawsuit, but the entire group must receive full information about the process and be able to control the actions of its representatives in court.

The procedure for filing a lawsuit is as follows: a lawsuit is filed in court by one or more plaintiffs on behalf of the alleged group. The intended group should consist of a group of individuals or business entities who have suffered general damage or injury. Typically, these cases are the result of actions by the business or a specific product or policy defect that apply to all prospective group members in a typical manner. After filing the application, the plaintiff must file a class action petition.

In the USA, class action lawsuits are usually filed by lawyers who themselves look for the plaintiffs, bear the costs themselves, and then receive a fee of success for the successful case.

In the 90s, class action suits also began to be applied in Europe, in particular in the Netherlands, Portugal, since 2001 - in Spain, since 2002 - in Germany. The impetus for the development of the class action institute in Germany was the lawsuit of 17 thousand shareholders against Deutsche Telekom , which was accused of providing false information that prompted the purchase of shares. ^[9]

The advantages of a class action over an individual suit are as follows ^[10] :

• Save time spent on resolving a dispute. When filing a class action lawsuit, the decision is made immediately with respect to all groups of persons within the framework of a single court proceedings, while when filing a lawsuit by each group of persons, the number of court proceedings will be equal to the number of persons in the group.

• The collective filing of a lawsuit increases the efficiency of the proceedings and saves money on legal expenses. The cost of legal services when filing a class action lawsuit is less than the total cost of all individual claims. If it is necessary to conduct an examination, it can be carried out alone for all plaintiffs, since in the case of an individual filing of a claim, an examination would be required for each court case separately.

• Increased uniformity of case handling. When considering individual claims, there is a risk that the court will make various decisions in similar cases, and in case of collective consideration of the claim this is excluded.

• The possibility of damages to all plaintiffs. Practice shows that in individual cases, plaintiffs who filed a lawsuit earlier often receive more compensation than those plaintiffs who filed a lawsuit later. If the class action is satisfied, all participants in the process receive compensation in proportion to the losses incurred.

• A class action lawsuit helps psychologically resist a financially strong side.

• Collective high-profile lawsuits attract the attention of the public and the media, which increases the chances of an impartial trial.

Disadvantages:

• The APC of the Russian Federation provides that if, after filing a class action lawsuit, another person appeals to the court, the requirements of which will be similar to those of a class action, he will be invited to join the group application. If such a person refuses to join, then a class action will be considered first, and then an individual one. Thus, the time for consideration of an individual claim can be delayed until it is considered collective.

• After consideration of a class action lawsuit and a court decision, it is not possible for one of the plaintiffs who participated in the group to file an individual lawsuit on the same issue.

Critics point out that in case of abuse of collective claims, they have a negative effect on the companies that are defendants, since collective claims with large claims can lead to bankruptcy. ^[11] For example, in 2002, the American telecommunications company WorldCom was on the verge of bankruptcy, which, as a result of a class action lawsuit, paid the plaintiffs $ 6.3 billion. ^[12] In general, about one third of the companies against which class action lawsuits are filed go bankrupt. ^[9] In this regard, in 2005, the United States passed the Class Action Fairness Act class action law, which limited their application. In particular, the law provided for a minimum amount of claims to initiate a lawsuit of $ 5 million, and the number of plaintiffs should be at least 100 people.

• The Code of Civil Procedure of the Russian Federation dated November 14, 2002 No. 138-ФЗ (as amended on December 19, 2016) (as amended and supplemented, entered into force on January 1, 2017) (Russian) . consultant.ru.