A U.S.-style class action regime looms large in the European Union. The current draft legislation imports certain hallmarks of the system celebrated by U.S. plaintiffs' lawyers, but there is uncertainty over what safeguards will apply. While the timing of the European Council's review and the scope of any legislation remain to be seen, some form of classwide device appears all but certain in the EU. Businesses would be wise to stay abreast of developments in the coming weeks and months. Multinational corporations operating in the United States and abroad encounter complex and dispositive legal frameworks that govern not only substantive rights, but also procedural rules that dictate who may assert such rights and, importantly, on whose behalf they may be asserted. Most businesses operating in the United States are, unfortunately, all too familiar with its class action device available in state and federal courts. Indeed, the 1966 amendments to the Federal Rules of Civil Procedurethe rules governing procedure in civil cases litigated in federal courts in the United Statesbrought with them the modern articulation of the procedural rule governing class actions: Federal Rule of Civil Procedure 23. And while state courts have adopted their own individualized class action procedures, they commonly look to federal law for guidance.
In the intervening five decades, class action filings increased exponentially in the United States, bulwarked by the potential for crushing aggregate monetary damages, classwide injunctive relief and significant attorneys' fees (while the Unites States generally does not have looser pay rules for attorneys' fees, successful class actions are one exception). These cases are often filed by individuals, such as consumers or employees challenging purported conduct on behalf of all others similarly situated. The rise in litigation was met with judicial and legislative reformations in class action procedure. On the judicial side, federal courts have become increasingly vigilant in their efforts to ensure that plaintiffs strictly comply with the class Rule 23's certification requirements. As for legislation, Congress passed the Class Action Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4 (2005) (CAFA), which relaxed some of the requirements defendants face to access federal courts, which are perceived to be better venues, in class action lawsuits. Nevertheless, enterprising plaintiffs' lawyers and their counsel leverage the class action device to put substantial pressure on businesses to consider settlement of claims, even where there are valid and potentially dispositive defenses. The defense costs alone can be significant, the potential exposure great and the sensitivities and disruption to the business that accompany litigation of this magnitude considerable.
Across the Atlantic, collective redress litigation has not yet taken hold in the same fashion, at least in part because there is serious disparity in the processes and procedures available in the different European Union Member States. But that may very soon be changing. At a time...