Litigation 2019: Trends And Developments

Author:Mr Salvatore Sanzo, Gian Paolo Coppola, Luciano Castelli and Tiziana Boneschi
Profession:LCA Studio Legale

A New Class Action for Italian Consumers

In April 2018, the Italian parliament passed a law shaping a new procedure for class actions. The law will come into force 12 months after its publication in the Official Journal of the Republic; thus, the provisions we examine below will not become applicable before 19 April 2020. This new law entirely replaces the previous regime, which was enacted in 2008 and never really worked.

Under the previous law, only consumers and "users" were allowed to start an action, whereas the possibility of commencing a class action has been expanded under the new law. That possibility will now be granted to whoever intends to assert a claim for damages against a company or public service corporation, either in contract or in tort, due to the violation of "homogeneous individual rights" (diritti individuali omogenei).

Any member of the "class" will be entitled to file a claim, and the same right to commence the class action will also be granted to non-profit organisations and associations which aim to protect "homogeneous individual rights". Such associations must be enrolled in a specific register, to be instituted and held by the Ministry of Justice.

The Tribunal of Enterprises, which is the division of the tribunal specialised in company matters and IP law, will have exclusive jurisdiction in class actions. The venue will be that of the registered office of the defendant.

As with the previous law, the proceedings are separated into two different stages: the assessment of the admissibility of the action; and the preliminary activities and the decision of the case.

The recent law also provides for a third stage, dedicated to subscription to the action of members of the class who have not previously joined the class action. Indeed, the third stage represents one of the most significant changes: any person who is entitled to participate in the action may adhere to the claim even after the court has delivered its judgment.

If the court upholds the claim, the judgment will only establish the defendant's liability. The amount of damages will be determined at the end of the third stage of the proceedings. The court, in its judgment, will appoint a representative of the class, who will be entitled to act on behalf of the whole class, including any claimant who joins the action in the third stage. Moreover, the representative is the only person entitled to enforce the judgment, should the defendant fail to pay the amounts due.

Another significant modification entails the possibility for the court, in the second stage of the proceedings, to suggest a settlement proposal to the parties. The same right is granted to the representative during the third stage.

The new law aims to make class actions easier to institute and more widespread by facilitating the procedure and enlarging the area of potential class claimants. Indeed, the previous mechanism was not successful, as only a few class actions have been declared admissible by the relevant courts, and even fewer have been upheld.

Nonetheless, critics argue that the new set of rules appears to be "punitive" for businesses and, in general, defendants, as "homogeneous individual rights", as defined, seem vague and open to unintended claims.

In addition, the rules on evidence will be different for class actions and more favourable to the class: the court may order the defendant to discover all documents significant to the case, a radical innovation in the Italian legal system, which provides for very limited discovery.

Furthermore, the law provides that the unsuccessful defendant will have to pay the representative a specific fee, in addition to the amounts granted to each member of the class. Such fee will be a percentage of the amounts granted to the class. Also, the losing defendant will have to pay a success fee to the class attorneys, in addition to legal costs.

Most importantly, the opportunity granted to the members of a class to adhere to the action not only during the proceedings but also during the determination of damages phase (ie, the third stage), though aimed at ensuring the largest adhesion to the class by anyone entitled to it, may result in companies being unable to evaluate the risks related to the action in advance. Therefore, a defendant may be unable to evaluate the opportunity of a settlement agreement.

Lastly, the fact that the tribunal will also make preliminary rulings on the admissibility of the action in the new regime, may hinder the success of the new law, as this mechanism has already caused most class actions brought in the past to fail. Also, taking into consideration the high complexity of the proceedings, particularly in the third phase, many doubts have been raised as to whether things really will become easier. As usual, only time will tell.

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