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Caution allays prospect of US-style class actions

A briefing note by McCann FitzGerald lawyers says that draft legislation to enable consumers to sue for breaches of any of 66 different EU consumer protection laws, stops well short of introducing US-style class actions in Ireland.

Roddy Bourke, David Hurley, Daniel Lucey, and Conor Cunningham point out that the view that class actions encourage large numbers of weak or frivolous claims, and can unfairly pressurise defendant companies to settle, appears to have influenced the cautious approach taken in the EU directive and in the proposed Irish legislation

US class actions have an opt-out model whereby a court may permit a claimant to sue a company on behalf of all those who have suffered similar injuries or losses. 

Any judgment is binding on those people, except those that opted-out after receiving notice of the action. 

In opt-in class actions, there is no automatic enrolment and  claimants have to sign up specifically. 

No opt-out

The proposed legislation does not include an opt-out option for Irish residents, even though the directive permits “opt-out” actions. 

However, non-Irish qualified entities acting on behalf of consumers elsewhere in the EU may sue defendants based in Ireland using the opt-out procedure, if permitted in their own country.

Only not-for-profits

The proposed Irish legislation requires the qualified entity to be an independent, not-for-profit body involved in the protection of consumer interests, the McCann FitzGerald lawyers point out.

This requirement may discourage actions, as Ireland not-for-profit consumer organisations may not wish to take on the cost risks of large-scale litigation.

Public bodies such as the Competition and Consumer Protection Commission (CCPC) may not wish to do so for budgetary reasons, the lawyers believe.

Affordable

The EU directive requires that such actions be kept affordable and while the draft law does not propose government funding, courts will not charge administrative fees.

A qualified entity may charge individual consumers a small fee to join an action.

However, the  lawyers believe that these measures may not be enough to encourage qualified entities to bring actions since the individual consumer will not be liable for legal costs, which could be substantial if a case failed.

The McCann FitzGerald lawyers comment that the proposed legislation, if enacted, may not achieve its objectives.

Instead, individual consumers may continue to avail of the Irish small claims courts. In those courts, claims cannot exceed €2,000, the use of lawyers is not encouraged and there is no costs risk if the consumer loses.

For groups of clients with higher value claims, lawyers will typically seek a High Court ‘lead case’ judgment or settlement, and then try to persuade the defendant to settle the other cases.

Third party speculative litigation funding will remain illegal in Ireland, so lawyers must fund their clients’ claims in the hope of recovering substantial fees if they win.