Term and Definition of Class Action
Die Class Action is a legal instrument that enables multiple entitled individuals to assert their similar claims against one or more parties in a joint legal proceeding. The aim of a class action is to efficiently combine individual legal interests, simplify proceedings, and relieve the judiciary. The class action is particularly used in cases where a large number of persons are affected by the same or similar damaging behavior, such as in consumer rights violations, antitrust infringements, or environmental harm.
Internationally, there are various forms of class actions, the most well-known being the American ‘class action’ procedure. In the German and European context, collective enforcement mechanisms such as association actions, model declaratory actions, and similar forms are prevalent.
Legal Foundations of Class Action
International Perspectives
United States (Class Action)
In the USA, the class action has been established for a long time. Originally based on common law, it is now codified in Rule 23 of the Federal Rules of Civil Procedure. A class action enables a group of plaintiffs (‘class members’) to bring an action through a representative person or organization. The binding effect of the judgment generally extends to all members of the class unless they expressly object. Typical areas of application are product liability cases, antitrust violations, and discrimination proceedings.
European Union
The European Union has been aiming for the harmonization of collective legal enforcement for several years. With the so-called Representative Actions Directive (Directive (EU) 2020/1828) , a Europe-wide minimum standard for collective forms of action was created, which had to be implemented by the Member States by 2023 at the latest. The directive grants qualified entities (such as consumer organizations) the right to file actions in the interest of a group of consumers.
Class Action in Germany
Historical Development
In Germany, for a long time the bundling of similar claims was only possible through joinder of parties (§§ 59 ff. ZPO). Efforts to adopt the foreign model of the class action led to the introduction of special forms of collective action in German law.
Model Declaratory Action
An important milestone was the introduction of the Model Declaratory Action by the Act Introducing Civil Procedure Model Declaratory Action (2018). Under §§ 606 ff. of the Code of Civil Procedure (ZPO), qualified entities may obtain a binding determination on the existence or non-existence of conditions for a claim in cases involving similar facts. Consumers affected by comparable damages can join this action via a claims register.
Collective Legal Protection in Consumer Law
Elements of class action can also be found in other areas of law, for example in the form of the association action under the Injunctions Act (UKlaG), the Capital Investor Model Proceedings Act (KapMuG) for capital market law, or specific types of proceedings in competition law.
Functionality and Requirements of the Class Action
Admissibility and Requirements
The admissibility of a class action depends on the respective legal system and the way it is regulated there. The basic requirement is always that a large number of persons are affected in a similar manner. In German law, the following main requirements must be met:
- Uniformity of Claims: The claims must be based on similar facts and legal questions.
- Qualified Entity as Plaintiff: Only recognized organizations, such as consumer associations that are appropriately registered and equipped, are entitled to sue.
- Minimum Number of Affected Parties: Usually, a minimum number of affected persons (e.g. 50 consumers for the model declaratory action) is required.
- Registration of Claims: The affected individuals must register their claims, for example, in the claims register.
Procedure Sequence
The course of a class action typically consists of the following stages:
- Filing of the Action by a qualified entity.
- Announcement and Entry in the Register: Potential claimants are informed and can register.
- Declaratory Proceedings: Examination of the factual and legal situation by the court, often including the taking of evidence.
- Effect of the Judgment: The rendered judgment has effect for and against all registered claimants with regard to the established facts and legal issues.
- Individual Enforcement of Claims: After a successful lead case, affected individuals can pursue their individual claims based on the declaratory judgment.
Advantages and Disadvantages of the Class Action
Advantages
- Efficiency: Procedural bundling reduces the effort for courts and parties.
- Cost Sharing: The costs of the proceedings are distributed among a large number of claimants.
- Improved Legal Enforcement: Legal protection is also made possible for minor individual claims whose individual pursuit would not be economically viable.
- Preventive Effect: Companies are encouraged to act lawfully due to the increased risk of collective actions.
Disadvantages
- Risk of Abuse: Especially in US law, the class action system is sometimes used to exert pressure and negotiate settlements with excessive amounts.
- Complexity: The coordination of a large number of affected persons and the processing of payouts can entail considerable organizational effort.
- Individual Peculiarities: In individual cases, personal circumstances may not be adequately taken into account despite the collective nature.
Special Forms and Developments
Capital Investor Model Proceedings Act (KapMuG)
The KapMuG serves to bundle actions related to matters in capital market law. It enables the binding clarification of fundamental legal and factual issues in disputes involving capital market law.
Association Actions under the UKlaG
The Injunctions Act enables qualified entities to take action against abusive general terms and conditions or unfair business practices in the collective interest, with the aim of stopping or eliminating unlawful acts.
Distinction from Similar Types of Proceedings
The class action is to be distinguished from the following procedures:
- Joinder of Parties (§§ 59 ff. ZPO): Several individuals act together as plaintiffs or defendants, without the collective binding effect for non-participants.
- Association Action: Serves mainly to defend against collective rights violations, without enabling direct performance or compensation claims.
- Group Proceedings in Austria: In Austrian civil procedure, a pragmatic bundling via ‘umbrella action’ is possible, though comprehensive codification is lacking.
Class Actions in Legal Practice
Class actions have gained significance in practice, especially in consumer law. Notable examples include lawsuits related to diesel vehicles (the so-called ‘Dieselgate’), software errors, or widespread antitrust infringements. The increasing Europeanization of civil procedure and the growing importance of collective legal protection are set to further strengthen the role of class actions.
Summary
The class action is a significant instrument of collective legal protection aimed at enabling the effective enforcement of similar claims by a large number of affected parties. While far-reaching class action proceedings exist internationally, especially in the USA, the German and European legal area primarily relies on model proceedings and qualified association actions. With the progressive harmonization of European regulations, the importance of class actions continues to grow and helps to efficiently and effectively enforce the collective interests of those entitled to claim.
Frequently Asked Questions
Who can join a class action?
In principle, anyone affected by the same matter or legal violation as the claims represented in the class action can join a class action. In Germany, the classic concept of a ‘class action’ was not provided for a long time; with the introduction of the so-called model declaratory action (MFK), consumers were given, for the first time, an opportunity to collectively assert their rights. The requirement is that an association (such as consumer centers or qualified entities) files the lawsuit and at least ten affected parties register their claims within two months of the publication of the claims register. In the European context, especially following the implementation of the EU Directive on representative actions, the participation is also expanding for companies in the B2B sector. Participation in a class action occurs through proper registration in the claims register, which is maintained by the respective courts. Participants may no longer bring an individual action in the same matter or must suspend it. If affected parties decide to withdraw, this is generally possible until the end of the oral hearing in the model proceedings.
What advantages does a class action offer compared to an individual lawsuit?
The greatest advantage of a class action lies in the bundling of similar claims, from which the individual claimants benefit in many ways. On the one hand, the joint action minimizes cost disadvantages for the individual, as the procedural costs are spread across many shoulders. On the other hand, the evidentiary situation is often simplified, since facts are established jointly and legal questions are fundamentally clarified. This generally increases the pressure on the defendant to possibly accept settlement offers. Moreover, class actions, particularly in the consumer sector, considerably strengthen the enforcement of rights, as ‘small’ claims are also asserted that might otherwise be overlooked because the hurdles of an individual lawsuit would be too high. Class actions thus make an important contribution to so-called ‘access to justice.’
What costs are incurred by participants in a class action?
Cost participation in class actions can differ significantly from classic civil proceedings. In the German model declaratory action, for example, the cost risk of the proceedings is largely borne by the suing associations, so that the individual financial burden for claimants is minimized. Registration, participation, and enrollment in the claims register are usually free of charge for consumers. Only if, after a successful model declaratory judgment, an individual lawsuit is necessary for personal enforcement, court fees, attorney’s fees, and potentially further expenses may arise. Internationally and especially in US class actions, the cost models may differ; often, the opt-out principle applies, meaning there is no cost pressure on the individual and attorneys often work on a contingency basis. In Germany, however, potential claimants should always examine carefully which costs could arise in each case by joining a class action—especially in the commercial sector or with private class action initiatives.
How does the judicial process of a class action work?
The judicial process differs from classic civil disputes through several procedural stages and a greater institutionalization of the plaintiff side. First, the competent court examines the admissibility of the lawsuit and the qualification of the suing association. After publication of the lawsuit in the claims register and enrollment of potential claimants, the actual proceedings begin before the court. In the case of the model declaratory action, the relevant factual and legal questions are discussed and determined by the court through its judgment. The judgment is binding for all registered participants. After the proceedings become final, individual compensation is processed in a separate step—generally via settlement or subsequent individual actions. Internationally, further specifics may exist, such as the possibility of group-organized settlements that are subject to court supervision.
What areas are typically covered by class actions?
Class actions are frequently used for cases involving mass harm or collective interests. Typical areas of application are consumer law (e.g., automotive (value) losses due to emissions manipulation, unlawful bank fees, faulty investment products), competition law, and data protection violations (e.g., breaches under the General Data Protection Regulation). Class actions are also used in insurance law and antitrust violations. In the commercial sector (e.g., illegal price cartels) or for environmental damage (e.g., contamination in communities), the class action instrument is of growing importance. As the model declaratory action has so far only been available to consumers, current legal developments are also allowing companies to bring claims for damages, provided the legal framework explicitly permits such collective action.
Is there a statute of limitations for claims related to class actions?
The statutory limitation periods for civil claims also apply to class actions. However, a special feature is that with registration in the public claims register under § 204 Sec. 1 No. 1a BGB, the limitation period for the relevant claims is suspended. This means that during the course of the model proceedings, registered claims cannot lapse due to the expiration of the limitation period. After completion of the proceedings, the limitation continues. It is therefore advisable for affected persons to register in the claims register in good time before their limitation expires in order to safeguard their claims.
What is the significance of a class action judgment for registered participants?
The judgment in a class action has binding effect for all those who have registered in the correct form and within the deadline. Under the German model declaratory action, the judgment applies both for and against the participating consumers, provided they have not withdrawn from the proceedings in due time. Legal certainty is created for the party being sued with regard to disputed facts or legal situations. This facilitates the subsequent enforcement of individual claims, as the court has already made a binding decision regarding the relevant factual and legal issues. Should the proceedings end with a settlement, the terms are normally determined uniformly for all involved, provided the settlement is approved by the court. However, the legal binding effect does not extend to external parties who have not registered.
What role do attorneys and qualified institutions play in the context of a class action?
Unlike with an individual lawsuit, individual affected parties are generally not able to participate directly in a class action but only through qualified institutions or associations. These associations must meet certain admission criteria, such as a minimum number of members and independence from economic interests. Subsequently, the association takes over the conduct of the proceedings, recruiting participants, and public relations. Attorneys advise both associations and consumers, and assist with entry into the claims register, representation in later proceedings (such as in follow-up litigation), and the calculation of individual damages after the conclusion of the collective part of the proceedings. Collaboration between attorneys, affected parties, and qualified institutions is essential for effective legal enforcement and the correct procedural handling.
