On February 2, 2012, the European Parliament issued a resolution expressing support for an opt-in class action system for Europe, rejecting the opt-out mechanism, and portraying the U.S. Supreme Court’s decision in Wal-Mart v Dukes as an attempt “to limit frivolous litigation and abuse of the U.S. class action system” which is a puzzling description of the Court’s actual decision applying Rule 23 requirements for class certification. Read the resolution: http://www.europarl.europa.eu/sides/getDoc.do?type=TA&language=EN&reference=P7-TA-2012-21#ref_1_8.

The reasons for the resolution’s rejection of the opt-out mechanism remain unclear.  Intense lobbying by industries who are represented by 14,000 lobbyists in Brussels has been criticized in Euronews for the lack of transparency and accountability.

In addition, the resolution expressed the view that, in any EU wide system of collective redress, “there must be a clearly identified group, and identification of the class members must have taken place before the claim is brought.”  In practice, such a system would rarely be used.  In Member States that already have opt-in class actions, the opt-in class actions are very rarely used even without the onerous requirement to identify class members before filing the action.

In Sweden, only about 12 opt-in class actions have been filed in the past 10 years.  One of the Swedish opt-in class actions, NCC Marina, involved 32 owners of property near a marina.  With such valuable claims, they arguably did not even need the class action mechanism.  Any requirement to identify group members in advance (which is not a feature of the Swedish model) would be likely to further reduce the number of claims of any EU-wide system abiding by this part of the resolution.

To require lawyers to identify class members before a lawsuit is even filed would be the death knell for litigation. It would require enormous up-front expenditures to publicize a grievance and identify class members, many of whom would not bother to identify themselves over small damages before there is any class settlement to which they can submit a claim.

In the United States, even where there is a class settlement fund to which claimants can apply for damages, it frequently happens that very few claimants step forward to identify themselves and collect small amounts of damages.  In some U.S. class actions, less than 1 percent of class members have filed claims.  Although a low claim-filing rate may reflect the inadequacy of a class settlement based on an unenthusiastic response by claimants, some U.S. courts have approved such settlements despite objections lodged by class members.  Given the U.S. experience with claims filing rates where there are small amounts of money to be claimed from a settlement, it is likely that even fewer claimants would identify themselves before a lawsuit is filed under the proposal in the European Parliament’s resolution.  There would be little incentive for claimants to step forward prior to the filing of litigation.

To provide an open forum to discuss different viewpoints and address misconceptions about U.S. experience with class actions, Robert J. Gaudet, Jr.of RJ Gaudet & Associates LLC is helping to organize a conference that will take place in Brussels on November 12 and 13, 2012 on the topic of “Increasing Access to Justice Through Collective Redress: A Conference For Policy-Makers and Practioners.”  Guest speakers will include former Minister of Justice for Ireland Michael McDowell who will speak about the access to justice provision in Ireland’s Constitution; distinguished Members of the European Parliament; academic experts; practitioners; and lawyers in different Member States who have created and used different systems for collective redress.

Like many Member States, Ireland does not have any system of collective redress and, when there is a catastrophe such as the Stardust disco fire that killed hundreds of teens, Ireland has set up ad hoc fact-finding tribunals that can distribute compensation.  For smaller claims with less publicity, there is little chance that similar ad hoc tribunals will be established.  For all of these reasons, the time is ripe for a careful examination of misconceptions about the U.S. model and the pros and cons of various models under consideration in Europe such as the opt-in class action, the test case procedure, and other methods.

The November conference in Brussels will be jointly presented by Union Internationale des Avocats; the Netherlands Bar Association; AIJA (International Association of Young Lawyers); the National University of Ireland Maynooth Department of Law; the American Bar Association Section of International Law International Human Rights Committee; and other organizations.

Robert J. Gaudet, Jr. & Judge Koen Lenaerts

On Saturday, June 16, 2012, Judge Koen Lenaerts of the European Court of Justice gave an inspiring talk to a crowd of Fulbright alumni who gathered in honor of Margaret (“Maggie”) Nicholson, the retiring director of the Fulbright Commission of Belgium.  In his remarks, Judge Lenaerts reflected on his own study of law in the United States for a year with the support of a Fulbright grant.

Judge Lenaerts said, “I started out in 1977 … comparing the EU evolving community with the United States legal system” with reference to a “supra-national system.”  He studied constitutional law with Prof. Laurence Tribe where he learned about federalism, a concept about how the United States legal system functions at two levels, one for the States and a separate level for the Federal government.  Judge Lenaerts’s studies were supported by a Fulbright grant. However, to get the grant, he first needed to submit a proposal to the Fulbright commission.

The young Mr. Lenaerts drew up a proposal and discussed it with members of the Fulbright Commission of Belgium who he now described, over 30 years later, as a “skeptical jury asking me questions.”  He was told by one member commenting on his proposal that “it’s probably unrealistic but he’s only 22 and who else is doing out-of-the-box thinking.”  The funding was granted and Mr. Lenaert’s out-of-the-box thinking and study of U.S. federalism has contributed to the development of the E.U.’s own unique structure of supra-nationalism in a framework that respects the sovereignty of Member States while creating a supra-national E.U. framework of mandatory rules.

Judge Lenaerts noted that, in the 1970s, comparative legal research was difficult. He had argued in his doctoral dissertation that comparative research was feasible and helpful.  Many professionals now agree.  Judge Lenaerts remarked in his talk, “we now have – thought it might not bear the name – a Constitution for the European Union.”  He noted that every national rule, to be valid, must now comply with a set of rules under E.U. law.  “I learned this in Prof. Tribe’s class” in the United States, Judge Lenaerts noted.

Some of Judge Lenaerts’s remarks then veered in a different direction and spoke more about the unique characteristics of the European Union which distinguish it from the United States.  He said, for example, “a United States of Europe will never exist.”  Some audience members wondered whether this was true since a more cohesive European Union seems possible, especially for younger generations that have grown up with more firmly entrenched E.U. rights such as E.U. citizenship.

Judge Lenaerts suggested that, even if the two legal systems are different, comparative study helps you to better understand your own system.  “I use concepts of American law in my daily practice as a judge,” Judge Lenaerts noted. His frank statement was refreshing.  United States jurists might take notice, especially since U.S. Supreme Court justices have been criticized for citing foreign legal decisions in a small number of recent opinions.

To illustrate the differences between the E.U. and U.S. legal systems, Judge Lenaerts described the role of religion in the U.S. legal structure.  He noted, “Europe will never be one nation indivisible under God, certainly not under God.”  He was making a reference to the Pledge of Allegiance in U.S. schools.  The remark was somewhat puzzling given that many European Member States have official state religions, e.g., the Lutheran church is the official state religion of Sweden whereas the United States bars the establishment of any religion and U.S. government endorsement of religion is limited to de minimis trappings such as the Pledge of Allegiance.

Judge Lenaerts’s experience as a law student in the United States taught him about the First Amendment of the U.S. Constitution and the Establishment Clause prohibiting the establishment of any official religion, which he described to Fulbright alumni in attendance.  Judge Lenaerts noted, however, that at a session of the U.S. Supreme Court that he once attended a “janitor opened the door and cried out, ‘God bless the United States of America, this honorable Court.’”  The man who makes the statement is not actually a janitor although he does work for the Court.  He also says, “oyez, oyez.”  Although Judge Lenaerts did not say so, these minor trappings are a far cry from the establishment of religion that exists in some European Member States.

To Judge Lenaerts and his colleagues, this symbolic announcement at the opening of the Supreme Court was astonishing.  He said that one member of his delegation “was absolutely shocked.”  Judge Lenaerts noted that a 1925 decision of the U.S. Supreme Court, Pierce v. Society of Sisters, 268 U.S. 510 (1925), held that it was not a violation of the Establishment Clause for public authorities, i.e., the fire department to enter a Lutheran school if it was on fire.

Contrary to the creed of civil religion in the United States, Judge Lenaerts noted that the “EU is not one nation indivisible.”  “To begin with, it is not a nation.”  He noted that the concept of “nation” is “suspect” after the fighting in two World Wars.  The EU, he noted, was a structure that allows Europeans to keep their own identities but otherwise work in common.  The EU provides, he said, a “common space without borders” and an “internal market” with free movement of goods, services, and capital.  There are also convergence criteria for the financial budgets.  This assures there are no excessive deficits or national debts.

Drawing perhaps on his years of study of comparative law, Judge Lenaerts noted that the free movement of capital, services, and goods is “very common, that part, with the Commerce Clause of the United States Constitution.”  He said it is a matter of “federalism”, to use a concept from American law, how different local entities, i.e., nations, interact with the whole, i.e., the European Union.  To appreciate this interaction, Judge Lenaerts said it is “critical to study the U.S. model.”

Judge Lenaerts concluded that the Fulbright program improves comparative understanding.  Judge Lenaerts also made very gracious remarks about Mrs. Nicholson in whose honor the event was organized.  After remarks made by Judge Lenaerts; Mr. De Croo, the Belgium Minister of State; and Prof. Meunier of EORTC, there was a fantastic piano performance of Bach, Gershwin, and other composers by a Fulbright alumnus; and then a reception. The event took place at the majestic Paleis des Académies in Brussels, next door to the Belgium Royal Palace.

Fulbright alumni from 5 or 6 different decades were in attendance including Robert J. Gaudet, Jr. of RJ Gaudet & Associates LLC; Jodie Kirshner, Lecturer at Cambridge University Faculty of Law; and Maud Piers, Lecturer in the University of Ghent Faculty of Law.

On May 31, 2012, the United States Court of Appeals for the Third Circuit reversed a lower court decision approving a class action settlement with Volkswagen and Audi over leaky sunroofs in Dewey v. Volkswagen AG, Appeal No. 10-3618(3d Cir. May 31, 2012).

The settlement attempted to resolve legal claims that Audi and VW’s sunroofs were defective in that they leaked if they were not properly maintained, e.g., by removing pollen and plant debris on a periodic basis.  Plaintiffs sued over the defect design with legal claims under the New Jersey Consumer Fraud Act, negligent misrepresentation, fraud, and other state law claims.

The Third Circuit reversed the lower court’s order on the grounds that the class representatives were inadequate under Federal Rule of Civil Procedure 23(a)(4) (“representative parties will fairly and adequately represent the interests of the class”).

Specifically, the class settlement allowed certain class members who belonged to a “reimbursement group” (who already suffered sunroof damage) to file claims for reimbursement from an $8 million settlement fund but required class members who belonged to a “residual group” (who had not yet suffered sunroof damage) to wait until the first group received reimbursement before they could file their own claims for damages.

The Third Circuit held that the Class Representatives of the “reimbursement group” were not adequate representatives for the “residual group.”  Rule 23(a)(4) requires a Class Representative to pursue the best interests of class members.  The full text of the Third Circuit opinion is available at this link.

This decision is not likely to be the end of this class action. Plaintiffs will continue to litigate and, likely, will reach another class settlement with terms that are more favorable for the “residual class” members.  In fact, the Third Circuit gave some possible solutions of its own, writing that the plaintiffs should “simply do away with the distinction between the reimbursement group and the residual group and allow all members of the class to submit reimbursements with no difference in priority.”  Such a solution will, of course, require the agreement of defendants and approval by the lower court after a fairness hearing.  Owners of vehicles that are a part of this litigation should monitor the litigation and be alert for any future class settlement.

The class members in the United States class action who belong to the “reimbursement group” own the following cars: the 2001-2007 VW New Beetle; the 2001-2005 VW Jetta A4 Sedan; the 2001-2005 VW Jetta Wagon A4; 2001-2006 VW Golf A4 and Golf GTI A4; 2005-2007 VW Jetta A5; 2006-2007 VW Golf/GTI A5; 1995-2005 VW Passat B5; 1997-2006 Audi A4; and 1998-2005 Audi A6 C5.  The class members in the “residual group” are those who own the following cars: 1998-2000 and 2007-2009 VW New Beetle; 1997-1999 VW Jetta A3; 1999-2000 VW Jetta A4s; 2008-2009 VW Jetta A5s; 1997-1999 VW Golf/GTI A3; 2008-2009 VW Golf/GTI A5; 1998 VW Passat B5; 1997 VW Passat B4; 2006-2009 VW Passat B6; 2004-20 VW Touareg; 2005-2008 Audi A4 B7 Platform; 1997 Audi A6 C4; 2005-2009 Audi A6 C6; 1997-2009 Audi A8.

In Europe, similar claims could be filed and even aggregated in a class action in one of those Member States (e.g., Italy, Poland, Sweden, Denmark, Norway) that allows for opt-in class actions.  At this point, it is not clear whether any individual claims over leaky sunroofs have even been filed in European courts over Volkswagen and Audi’s allegedly defective sunroofs.  The Dewey litigation suggests similar claims might be viable in Europe.