Introduction
Defining features of revised class action
New class action structure
Foreseeable issues
Comment
Since 19 May 2021, when Law 31 of 12 April 2019 came into force, Italian law has provided a sophisticated opt-in mechanism for collective redress to protect homogenous individual interests.
While this new mechanism was conceived as a streamlined and accessible procedure (at least, compared with its predecessors), the path leading to it has been anything but linear. As a matter of fact, in the wake of the success of class actions in jurisdictions such as the United States, in 2005 the Italian legislature initially devised an opt-in mechanism for consumers' collective redress, aptly inserted into the Consumer Code as article 140-bis.(1) This was followed in 2009 by the "public class action" – namely, a collective remedy against wrongdoings by public administrations and publicly owned corporations.(2) However, neither of these attempts ensured redress (and, consequently, deterrence) due to limited recourse and the proceedings' duration. Essentially, they were not cost-effective enough to induce class members to pursue small claims.
Deeming that the flaws affecting the existing mechanisms and, in particular, article 140-bis of the Consumer Code could not be cured by an amendment, the legislature decided to start anew; on 12 April 2019 Parliament passed Law 31/2019, which introduced into the Code of Civil Procedure (CCP) a set of provisions (articles 840-bis to 840-sexiesdecies) that comprehensively regulate class actions and collective injunctions.(3)
The enactment of the reform was also hampered by delays. Initially scheduled for April 2020 – one year after the law was passed – the revised class action's entry into force was pushed back several times due to technical issues with the platform run by the Ministry of Justice, on which the procedures rely heavily.
Pursuant to article 7(2) of Law 31/2019, the new procedure applies exclusively to harmful conducts carried out after the law's entry into force on 19 May 2021.
Defining features of revised class action
The main features of the new mechanism drew inspiration from European Recommendation 396 of 11 June 2013,(4) according to which class actions should be "fair, equitable, swift and not excessively burdensome mechanism[s]".(5)
As epitomised by its inclusion in the CCP, Law 31/2019 has established a general remedy that is characterised by a broad scope of application ratione materiae. Collective redress may be pursued – as an alternative to individual action – for the protection of individual homogenous (but not necessarily identical) interests through compensatory and injunctive relief against companies and providers of public services.
In principle, contractual, tort and pre-contractual liability claims could all fall within the scope of this new litigation tool; claims stemming from environmental damage, data breaches, health treatments, unfair competition or unfair trading practices in business relationships may all be pursued in a collective form. This sets the new litigation tool apart from the consumer class action, which the previous legislation restricted to a narrow list of causes of action (eg, product liability or unfair commercial practices).
Likewise, accessibility has also been significantly broadened; no longer limited to consumers, it is now open to individuals, non-profit organisations and entities representing and protecting collective interests, provided that said entities or organisations are enrolled in a special register kept by the Ministry of Justice. However, the capacity in which these entities are supposed to act is debated. While some scholars have suggested that these entities should be considered as class representatives (along the lines of article 77 of the CCP), the prevailing view is that they act autonomously from the other class members, pursuing iure proprio a collective interest (ie, the sum of the individual homogenous interests).(6)
Another key feature is how class members may join in the action. The revised class action is based on an opt-in mechanism requiring express consent. This solution appears appropriate. An opt-out mechanism would likely have been at odds with the right to bring an action as enshrined in article 24 of the Constitution.(7) At the same time, in consideration of the fact that an opt-in mechanism might lead to lower class participation, Law 31/2019 established a platform to facilitate the joinder of new class members and provided for two different time windows in which new members can join.
Moreover, a series of incentives to encourage mass participation was introduced for the opt-in mechanism to function as envisaged, besides adopting a user-friendly platform. Thus, to ensure cost-effective participation (and avoid the main issue which led to the demise of the consumer class action), Law 31/2019 dispensed with the requirement that members joining the class had to be represented by counsel(8) and stipulated that technical consultant fees and expenses, if any, are provisionally borne by the defendant. This innovation raised concern and criticism by operators and business associations. In the same vein, another striking innovation, which also raises much debate, is the introduction of a monetary reward in favour of the class representative and a partial contingency fee in favour of the attorney representing the class,(9) should the class prevail over the defendant.(10) Both the representative's reward and the attorney's fee are based on the overall number of class members and the compensation granted to the class,(11) which in turn makes the financial risk of the action unpredictable ex ante for the defendant.
Although article 840-ter of the CCP states that class actions follow the rules for expedited judgments set out in article 702-bis et seq of the CCP, these proceedings are characterised by several peculiar features that are hardly compatible with expedited judgments. In fact, these sui generis proceedings are marked by three distinct phases centred on admissibility, liability and quantum, respectively.
First phase: admissibility of action
The suit is commenced by applying to the specialised court for business disputes in whose district the defendant has its registered office. Once the application has been filed, the chancery of the competent court publishes it, together with the court's decree fixing the hearing, on a dedicated page of the Ministry of Justice's online platform. Class actions commenced within 60 days from publishing the application are joined to form a single suit. On the other hand, proceedings initiated more than 60 days after the initial application are discontinued.
Within 30 days from the hearing, the court – acting through a panel of three judges – must issue a preliminary ruling on the admissibility. Pursuant to article 840-ter of the CCP, an action is declared inadmissible if:
- it is manifestly unfounded;
- the individual rights are not homogenous;
- there is a conflict of interests between the initial plaintiff and the defendant; or
- the plaintiff does not appear fit to represent the homogenous rights on which the action is based.
If the action is dismissed as unfounded, the plaintiff is barred from lodging it again unless the factual background changes or new facts or causes of action are alleged.
On the other hand, if the court deems the suit admissible, its decision is published on the online platform run by the Ministry of Justice within 15 days to allow participation to the class on an opt-in basis within a court-fixed deadline (which cannot exceed 150 days).
Second phase: assessment of liability
Other class members may join the class at the outset of the second phase, which is centred on the merits of the case, specifically on liability. From a practical standpoint, the prospective plaintiffs may electronically file their brief of adherence to the class action (based on a standardised form issued by the Ministry of Justice) together with any supporting documents. To ensure that the proceedings are conducted efficiently, the judge is granted significant leeway in shaping this stage, which focuses on document production. The court may order on its own motion that the defendant disclose documents that may be material to the outcome of the case.(12) Notably, this does not seem to encompass documents such as customer lists, which, if disclosed, could be used by the plaintiffs to encourage more individuals to participate in the action.
At the outcome of the second phase, the court renders a decision on liability, which, if favourable to the plaintiffs, identifies the defining traits of the individual rights harmed by the defendant and appoints the judge and the class representative who will oversee the following phase.
Third phase: quantum of liability
The third phase is devoted to quantifying the damages and follows, albeit with minor tweaks, the same rules as those governing insolvency proceedings. At its outset, potential class members have an additional and final opportunity to join the proceedings once the defendant's liability has been ascertained. After the class has been formed by the judicial decree ruling on any defendant's objections (which must be presented within 120 days), the court proceeds with the quantification of the damages suffered by each member and the approval of the redress plan drafted by the class representative (akin to a bankruptcy trustee and subject to the same requirements). Failing the defendant's voluntary compliance, the plaintiffs are barred from pursuing individual enforcement and may resort only to the collective procedure set out in article 840-terdecies of the CCP.
Pursuant to article 7(2) of Law 31/2019, the revised class action applies exclusively to conducts carried out after 19 May 2021.(13) This may create a relevant disparity of treatment between individuals and entities that have suffered an impingement of the same rights as a result of repeated or continued conducts since, depending on the date when said harmful action took place, some may avail themselves to the revised class actions, while others may have no option but to pursue their claims individually. As this runs counter to the principle according to which proceedings are subject to the procedural rules in force at the time of their commencement, it has been suggested that this deviation may be at odds with the principle of equality as enshrined in article 3 of the Constitution, as it creates an unreasonable disparity ratione temporis.
Overall, notwithstanding the aforementioned flaws and criticisms, the new class action appears to be a viable instrument which, through a system of economic incentives, could overcome the rational apathy of small-claims holders and ensure redress in situations such as environmental damages, where individual initiative, even if viable, constitutes a suboptimal solution. However, whether this new mechanism will be successful (in terms of recourse) and efficient (by achieving redress within a reasonable timeframe), ultimately also depends on less obvious but still important factors, such as:
- the ease of access and reliability of the online platform developed and run by the Ministry of Justice;
- the visibility given to the actions (which may encourage broad participation); and
- the courts' ability to keep up with the tight timeframe set by articles 840 bis et seq of the CCP.
For further information on this topic please contact Marco Torsello or Gregorio Baldoli at ARBLIT Radicati di Brozolo Sabatini Benedettelli Torsello by telephone (+39 02 8425 4810) or email ([email protected] or [email protected]). The ARBLIT Radicati di Brozolo Sabatini Benedettelli Torsello website can be accessed at www.arblit.com.
Endnotes
(1) Legislative Decree 206 of 6 September 2005.
(2) Legislative Decree 198 of 20 December 2009.
(3) While Law 31/2019 expressly supersedes the consumer class action set out in article 140-bis of the Consumer Code, no reference is made to the "public class action" which, although seldom used, should still be considered in force.
(4) The Commission Recommendation of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the member states, concerning violations of rights granted under EU law.
(5) Id at article 2. See also I Speziale "La nuova azione di classe: riflessioni critiche sulla riforma", in Il Corriere Giuridico, 7/20202.
(6) C Consolo, "La terza edizione della class-action è legge ed entra nel c.p.c. Uno sguardo d'insieme ad una amplissima disciplina", in Il Corriere Giuridico, 6/2019, p738.
(7) In fact, similar concerns were also expressly voiced in article 21 of the Commission Recommendation of 11 June 2013, in which the following is stated:
The claimant party should be formed on the basis of express consent of the natural or legal persons claiming to have been harmed ('opt-in' principle). Any exception to this principle, by law or by court order, should be duly justified by reasons of sound administration of justice.
(8) Article 840-septies(6) of the CCP.
(9) As contingency fees (ie, compensation dependent on the outcome of the case) are not allowed under Italian law, article 840-novies of the CCP frames the sums awarded to the attorney representing the class as an additional reward.
(10) Article 840-novies of the CCP.
(11) The sums awarded to the class representative and the attorney assisting the class do not constitute punitive damages, but are merely an incentive and a reward for the initiative and risk undertaken by these figures. See, C Consolo, supra at 6, p742.
(12) M Franzoni, "Azioni di classe, profili sostanziali, in Danno e Responsabilità" 3/2019, p309.
(13) F Tediolo, "Tra nuove regole e vecchi problemi la class action trova collocazione nel codice di procedura civile" in Studium Iuris 12/2019, p1413.