National Economic Research Associates, Inc. (NERA), an excellent source for statistics on litigation, has released a report on the recently-implemented class-action law in Italy: Italian Class Actions Eight Months In: The Driving Forces.
The report describes (for those of us in the US) the law governing class actions in Italy. Class actions are opt-in, not opt-out like in the US. And they are limited to contractual claims, products-liability claims, anti-competitive claims, and "unfair commercial practices" claims. Classes are deemed "admissible" (roughly equivalent to certified) unless the claim is "manifestly unfounded," there is a conflict of interest, the rights at issue "are not homogenous" or the lead plaintiff cannot adequately represent the interests of the class. In addition, the lead plaintiff must be a consumer, and must have "an interest" in the suit.
In addition, the Italian law provides that there can be no more than one class action for a given matter (which implies some kind of automatic consolidation of additional lawsuits), and conforms to general Italian civil practice in that there is no pretrial discovery. (That’s not a misprint: no pretrial discovery.)
The authors also observe that nonprofit consumer associations, rather than plaintiffs lawyers, are the primary drivers behind class-action litigation. As a result, they anticipate that these plaintiffs may push more for reform of business practices than for large damages awards. Specifically:
Consumer associations may aim to send a signal to the overall industry and push for changes in current business practices; they are thus less likely to be enticed to settle by monetary offers alone. An example is the Intesa case: Codacons [a consumer association] sought monetary damages but also sought to change the way in which the bank operated in charging fees and interest on lines of credit. During mediation, Codacons was willing to forsake its claim of €1,250 per account holder in exchange for a settlement of €1 per account holder and a change in the bank’s contract renouncing the challenged fees for all account holders.
Concurrently, consumer associations also have (maybe only implicitly) the goal of increasing the clout of the association. Thus, consumer associations may aim to increase their own visibility. This is a further reason why they are less likely to be enticed to settle by monetary offers alone. They may aim to increase their own visibility because part of consumer associations’ power comes from their reputation and the widening of their association base; thus, publicity is likely to be more important to them than to US plaintiff law firms. Consequently, the reputational damage suffered by defendants could be larger in the current Italian situation than it would be with US-like plaintiff law firms.
(Internal footnotes omitted.) This leads to what I consider the most interesting part of the paper, which is NERA’s description of the effects of the law. In eight months, consumer-association plaintiffs have filed six actions, only one of which (the Intensa case, mentioned above) reached the admissibility stage. (The court denied admissibility because the lead plaintiff had not personally been charged the fees challenged in the lawsuit.) From these six cases (and another fifteen that have been "announced" but not filed), the authors infer that
Consumer associations seem to be adopting different strategies with respect to class action. Some, like Codacons, have been filing a comparatively high number of class actions and announcing claims for billions of Euros; others, like Unione Nazionale Consumatori, have filed fewer and financially less ambitious class actions, promoting themselves as more realistic in their aims. Unione Nazionale Consumatori’s Secretary General stated that the class action law needs to be used with moderation, intelligence, and practicality. He vowed to follow these principles by choosing the suits that could be brought to a conclusion in a short time and maybe choosing those defendants that would be more prone to settle. He has not spared criticism towards those consumer associations following the strategy of filing many claims and issuing loud proclamations. Indeed, he compared some of the announcements of claims for billions of Euros to a farce.
(Internal footnotes omitted.)
What can we learn from the Italian case so far? Not much, with only eight months of experience on which to draw. But it does suggest that reducing the monetary incentive to file a class action could reduce the number of actions filed per capita. And it also suggests that even when one removes that incentive, finding good plaintiffs remains difficult. Which is unfortunate, because, as I’ve mentioned before, I might be willing to switch sides to bring cases in Florence.
(Photo from Wikimedia Commons, used under GNU license.)