Luis Enrique Graham Tapia Salvador Fonseca July 12 2011 Green light for wide-ranging class action regulation Chadbourne & Parke LLP | Litigation - Mexico Luis Enrique Graham Tapia, Salvador Fonseca Litigation IntroductionClass action requirements and representativesAvailability of interim relief Class-wide rulings and individual damages claimsTiming of proceedingsOpt-in modelCosts and legal feesClass action fundComment IntroductionAfter a long legislative debate, Congress has passed Mexico's first regulation governing the use of class actions, which will take effect six months after its official publication. The new regulation is likely to prove particularly significant because of its potentially wide-ranging scope of application, which includes cases involving consumer products, financial services and environmental concerns. The regulation follows an amendment to the Constitution in 2010 to permit class actions, which granted exclusive jurisdiction over class claims to the federal judiciary (for further details please see "Constitutional amendment allows class actions").Class action requirements and representatives Class actions may be brought for claims involving: harm to consumers or users of public or private goods or services; damage to the environment; or harm to consumers due to monopolistic market concentrations or practices as decreed by the Federal Antitrust Commission. The remedies available to class action claimants include injunctive relief and damages.The requirements for bringing a class action are broadly defined. Prospective class members must share common factual or legal circumstances and there must be a clear relationship between the action and the damage to the class. Although the regulation imposes a minimum class size in some instances, a class consisting of 30 members will satisfy this requirement. The action may not be barred by res judicata (ie, a matter already judged) or a limitation period of three-and-a-half years, and must meet any other requirements of the legislation applicable to the case. The regulation lists various grounds for rejecting a class action, including a general exception for cases in which it would be inappropriate to dispose of the subject matter on a class-wide basis. Class actions may be filed by a common representative selected from members of the class; however, they may also be filed by non-profit associations whose corporate purpose includes protecting the rights that are under threat of violation, provided that such entities are at least one year old. The regulation also grants standing to bring class-wide claims to the federal attorney general and other government officials charged with protecting consumer rights, users of financial services, competitive markets and the environment. Availability of interim relief Unlike other Mexican procedural rules, the class action regulation permits the court to: issue injunctive relief at any stage of the proceedings; order the recall or seizure of goods and products that are directly related to any irreparable harm which threatens the class; and take "any other step that the judge may deem advisable" to protect the rights and interests of class members. In order to obtain interim relief, the requesting party must demonstrate an urgent need, based on the risk of damage that would be difficult or impossible to redress. The court must weigh the potential harm resulting from the requested measures against that which would be caused by the acts or omissions against which interim relief is sought. Where an interim injunction is granted, a defendant may post security to avoid enforcement, although this right is unavailable where issues of national security are involved or where there is an imminent threat of irreparable harm to the social interests, life or health of class members.Class-wide rulings and individual damages claimsClass action judgments may order restitution or compensation of damages. Where individual class members are entitled to recover their damages, the regulation establishes a two-stage procedure consisting of the class-wide trial followed by individualized proceedings, during which class members are to prove their own damages and a causal link to the defendant's conduct. The regulation imposes a term limit of one year from the final class judgment or settlement within which class members must commence these indemnification proceedings. Timing of proceedings In general, the time limits set by the regulation provide for expedited certification and trial stages. Class action defendants are given only five days from service of the complaint to submit arguments on whether the criteria for a class action have been satisfied, and the court's decision is to be issued within a further 10 to 20 days, depending on the complexity of the case. Where the court determines that the prerequisites for a class action have all been satisfied, defendants will have up to 30 days to answer the class complaint, including, inter alia, providing full arguments regarding the merits of the case and all supporting documentary evidence. Opt-in modelClass members who were not part of the original group that commenced proceedings may seek to join the action by providing express notice to the class representative at any time up to 18 months following the final judgment or settlement. Unless it is appealed, the class judgment becomes binding on all class members.Costs and legal fees Each party is responsible for its own costs and legal fees in class action suits. The regulation imposes certain limitations on the fee structure that is available to class representatives and their legal counsel, based on percentages of the amount in dispute.Class actions fundThe regulation requires the creation of a fund, to be managed by the Federal Judiciary Council, for the deposit of money judgments in certain cases where the remedy of restitution is unavailable. These resources will be used to promote class actions in Mexico, as well as collective rights research and awareness. The fund may also be used for the payment of expenses relating to class actions, including the class representative's fees, where this is justified in the public interest. CommentThe new regulation permits class action lawsuits in a number of broadly defined matters and across a potentially wide range of legal claims, creating the potential for class action claims in a wide variety of circumstances. The legislation will undoubtedly garner further attention as this novel area of law begins to take shape and the Mexican courts grapple with the many legal questions that will arise under the statute.For further information on this topic please contact Luis Enrique Graham or Salvador Fonseca at Chadbourne & Parke by telephone (+52 55 3000 0600), fax (+52 55 3000 0698) or email ([email protected] or [email protected]).