An extract from The Class Actions Law Review, 4th Edition
Section 35-1(2) of the Civil Procedure Act defines class action as an 'action that is brought by or directed against a class on an identical or substantially similar factual and legal basis, and which is approved by the court as a class action'. The characteristic feature of a class action, as opposed to an ordinary action with several plaintiffs, is that it is the class (group) as such that is party to the litigation.i Types of action available
The Civil Procedure Act recognises two different forms of class action:
- opt-in class action: anyone who falls within the scope of the class as defined by the court in its approval of the class action is entitled to be registered as a member within the time limit set by the court; and
- opt-out class action: anyone who falls within the scope of the class as defined by the court in its approval of the class action is automatically a member of the group (and will be bound by a subsequent ruling) unless he or she withdraws from the class.
For a class action to be approved under the opt-out alternative, the claims or obligations must be of such a minor value individually that they would not justify a separate legal action and it must be assumed that the claims or obligations will not raise issues that need to be heard individually.
The class action rules have been prepared based on a class comprising claimants. However, pursuant to Section 35-15 the class action rules in Chapter 35 also apply mutatis mutandis to class actions in which the class is the defendant, except that class membership without registration is excluded (i.e., in opt-out actions, for obvious reasons). Applying the class action rules in a case where the class is the defendant will give rise to a series of questions and it is 'questionable whether such actions will be of any practical use since defendant members are entirely free not to register as members and will then not be bound by a judgment'. So far, there have been no class actions where the class is the defendant.
In addition to class actions the Civil Procedure Act also allows for joinder of parties in ordinary proceedings. An action may be brought by several plaintiffs (or against several defendants); for instance, when the factual and legal basis for the claims is the same or substantially similar, provided that all claims fall under Norwegian jurisdiction and the court is the correct venue for one of the claims, and the claims can be heard by a court with the same composition and pursuant to the same procedural rules. There are no formal limits as to how many parties may participate in such a lawsuit, and there are many examples in case law with several hundred parties. Several parties on the same side in a legal action shall be regarded as independent parties in relation to the opposite party.
Another option under the Civil Procedure Act is consolidation of actions (cases), which means that two or more actions raising similar issues are joined to be heard in one hearing or to be adjudicated jointly.ii Commencing proceedings
A class action may be instituted by anyone who fulfils the conditions for class membership if approval to bring the action is granted. For example, in a case against a bank concerning the legitimacy of an increase in borrowing rates, action may be brought by any bank customer affected by the increase. Furthermore, a class action may also be brought by an association, trust or public body if the action falls within the scope of the organisation's purpose and field of activity. As this alternative indicates, there is no requirement for the organisation itself to have a claim similar to that of potential class members in order to initiate a class action lawsuit. This alternative will, inter alia, allow the Consumer Council to bring class actions on behalf of consumers.
The class action shall be brought by submission of a writ of summons to the court. The writ of summons shall contain information necessary for the court to assess whether the conditions for a class action are fulfilled. In the writ of summons, it shall also be stated whether the class action is sought to be brought as an opt-in or opt-out action.
Pursuant to Section 35-4 of the Civil Procedure Act, the court must approve the action being brought as a class action. For a class action to be approved, the following conditions, set out in Section 35-2, must be met:
- several persons have claims or obligations whose factual or legal basis is identical or substantially similar;
- the claims can all be heard by the same court, in terms of its composition, and in the main pursuant to the same procedural rules;
- class procedure is the most appropriate way of dealing with the claims; and
- it is possible to nominate a class representative.
There is no formal lower limit with respect to the number of members; the statutory requirement merely refers to 'several persons' (see point (a) above). In practice, there have been some cases where the number of group members has been on the very low side. If the number of group members is low, this will have an impact on the court's assessment of whether class procedure is the most appropriate way of handling the case (see point (c)). A low number of (potential) group members will weigh against handling the case as a class action. However, it must also be kept in mind that a feature of the class action institution is to ensure that the action is made public – so that potential group members are informed of the lawsuit. In some cases, there may be significant uncertainty as to how many group members exist. In such cases, it may be an argument in favour of a class action that such an action is the only way to get in touch with potential members or claimants. This appears to have been the situation in a case from 2009, which concerned state liability for wrongful implementation of EU directives; the case was approved as a class action because it was suspected that there were many potential claimants (members). The case was, however, nevertheless heard as a class action.
For an action to be approved as a class action, the members of the group must have 'claims or obligations whose factual or legal basis is identical or substantially similar' (see also (a) above). This is often a matter of debate in actions being pursued as class actions and it is quite common for the defendant to argue that the requirement has not been met. When assessing whether this requirement has been met, the court cannot apply only the claimants' perspective but must also take into account possible objections from the defendant. The claimants may rightfully argue that the basis for their claims is very similar (e.g., they were all customers in the same bank, acquired shares in the same fund, got the same standard information, etc.). However, when looking at the defendant's objections, it may be considered that the requirement has not been met after all; for example, it may be found that some customers have lost their rights owing to statutory limitations, or some customers were given specific information prior to entering into the agreement, or because of other particular circumstances on the customers' side.
In general, however, the class action rules have been designed in a manner to cater for certain possible individual differences and to ensure that such differences will not be an obstacle to a class action. Pursuant to Section 35-10, the court may decide that the provisions on class actions shall not apply to the hearing of issues in the dispute that only relate to a limited number of class members, but that the class members themselves shall have control over the issues. The court may also decide to establish two or more subgroups if the class consists of a large number of class members and the same or substantially similar legal or factual issues apply to several of them but differ from the issues that apply to the class as a whole.
Pursuant to Section 35-2, there is also a requirement that 'the claims can be heard by a court with the same composition and in the main pursuant to the same procedural rules' (see point (b) above). This requirement will typically be fulfilled as long as the case concerns ordinary civil claims.
A class action may only be approved if the procedure is the most appropriate (i.e., the 'best' way of dealing with the claims (see point (c) above)). This is a vague criterion and leaves room for discretion on the part of the court faced with a petition for a class action. Based on the preparatory works, the following elements should, however, be taken into account:
- the number of parties involved or potentially involved;
- whether the involvement of a number of parties will hamper coordination of the lawsuit;
- the degree of individual factual or legal circumstances;
- whether the (potential) members of the class action are easily identifiable; and
- whether it is necessary to apply the mechanism for notifying the (potential) class members.
In reality, the criterion that a class action has to be the 'best' way of dealing with the claims, seems in practice not to have been important for the courts' decision as to whether an action should be approved or not. It is perhaps illustrative that the Borgarting Court of Appeal, in a ruling of 12 April 2018, simply stated that although there were alternatives to a class action, there were at the same time no particular arguments against a class action. While this is of course true in many cases, this approach, taken by the Borgarting Court of Appeal in its ruling in this case, is somewhat difficult to reconcile with the requirement that a class action should be the better choice for the case at issue than the available alternatives.
Finally, a class action may only be approved if it is 'possible to nominate a class representative', as in point (d) above; any person who fulfils the requirements to initiate a class action and who is willing may serve as class representative. However, it is left to the court to appoint the class representative. Pursuant to Section 35-9(3), the representative must be able to safeguard the interests of the class in a satisfactory manner and also be able to cover the class's potential liability for costs towards the other party.
Provided that the court approves the class action, the court shall also define the scope of claims to be covered by the action and thereby also the range of class membership. There is no limitation as to who may be a member of the group; in other words, both private individuals and corporations, nationals and foreigners may be members, depending on how the court has described the scope. However, only persons who could have brought or joined an ordinary legal action before the Norwegian courts may be class members. This may to a certain extent limit the possibility of foreigners joining a Norwegian class action. An example taken from the preparatory works will illustrate this: a Norwegian resident consumer having purchased tangible goods from a professional party in Germany will be able to instigate ordinary legal proceedings in Norway against the German trader. The Norwegian consumer will thus also be able to join a class action against the German trader. However, a consumer who is resident in Denmark and enters into an agreement with the same German trader will have to instigate litigation against the trader either in Denmark or in Germany; the Danish consumer will not be able to take legal action in Norway. Consequently, the Danish consumer will not be able to join a class action against the German trader in Norway.
If the class action is disallowed by the court as a class action, interested parties may bring individual actions that may be brought as a joint action if the conditions for joinder are fulfilled.iii Procedural rules
Once a class action has been approved, the court shall ensure that those who may qualify for class membership are informed of the action by notification, public announcement or otherwise. The notice or announcement shall state what the class action and the class procedure implies, including the consequences of registering or withdrawing as a class member, the potential liability for costs that may be incurred and the authority of the class representative to settle the action. The notice shall further state the time limit for registering. The court shall decide the content of the notice and how notice shall be given, including whether the class representative shall take charge of issuing the notice or announcement and paying the expenses thereof.
The court's approval of the class action may later be amended or withdrawn if it becomes evident that it clearly is not suitable to continue the case as a class action or that the scope of claims covered by the class action ought to be adjusted. Parties who are then no longer included in the class action may, within one month of the ruling for reversal or amendment becoming final and enforceable, require the court to continue to hear their claims as individual actions.
Apart from being governed by the specific rules in Chapter 35 of the Civil Procedure Act, class actions are handled by the courts in the same manner as ordinary individual cases. Courts are, among other things, obliged to maintain an active dialogue with the parties during the preparatory stage of the proceedings.
As a general rule, the main hearing in a civil case shall take place within six months of the date of submission of the writ of summons to the court, unless there are special circumstances. This also applies for class actions. However, in class action cases it is common for the defendant to contest whether the criteria for bringing the action as a class action have been met. This may lead to an exchange of pleadings and also, in some cases, a separate hearing with respect to the approval issue. If the class action is approved, the approval may also be appealed to the Court of Appeal. Thus, in many class actions it will not be possible to schedule the main hearing until later.
The class shall be represented in court by a class representative nominated by the court when giving approval to hear the action. The representative shall keep the class members informed of the handling of the action. The representative is liable for costs awarded to the opposite party but can claim reimbursement from the class members individually if this was made a condition for registration as a class member. As a general rule, in addition to the class representative, the class is required to be legally represented by counsel, who shall be an advocate.iv Damages and costs
When the class action rules were adopted, it was emphasised that it was not the intention to make any changes to the substantive law (tort, contractual liability, etc.). This means that the same rules with respect to burden of proof, documentation for economic loss, etc., will apply in a class action, and damages will be awarded based on each member's individual loss. However, in a class action involving a significant number of members, a certain standardisation may take place in practice. Norwegian law does, to a very limited extent, recognise the concept of punitive damages.
With respect to costs for legal fees, etc., Norwegian law is based on the loser-pays principle (i.e., the successful party in a class action will be entitled to recover its cost from the losing party, provided that the court finds that the costs incurred have been necessary and proportional to the importance of the case). These rules also apply to class actions. For class actions, Section 35-13(1) also provides that the court shall determine the class representative's and the legal counsel's fees and coverage of expenses.
Class members in opt-in actions will be liable towards the class representative for costs imposed on the representative for remuneration and refund of disbursements insofar and to the extent that such liability is a condition for registration. On application from the person who has brought the class action or the class representative, the court may decide that registration shall be subject to the class members accepting liability for a specified maximum amount of costs. This is typically done in cases where the class action is brought by a private individual or the class representative is a private individual. In cases where the class representative is an organisation or similar, the organisation sometimes decides that it will cover all the costs itself.
Class members in opt-out actions will not have any liability towards the class representative (or towards the other party in the action for that matter) for costs.
Pursuant to the ethical guidelines from the Norwegian Bar Association, it is prohibited for a lawyer to agree a fee arrangement whereby the client's claim in whole or in part is acquired by the lawyer so that the lawyer's fee is dependent on the outcome of the case.
In the case of a class action, there is neither any direct public funding, nor any generally available private funding. In principle, each member of the group must cover his or her share of the costs, unless he or she is eligible for legal aid. So far there have been no examples of third-party financing or similar arrangements in class actions. However, there is an increasing interest in such arrangements in Norway.v Settlement
Pursuant to Section 35-11(3), settlement in a class action pursuant to Section 35-7 (opt-out) requires the approval of the court. This requirement is a consequence of the claims or obligations having such a low individual value that the group members cannot be expected to have any active role in the proceedings or as part of a settlement discussion. The requirement is also a consequence of the fact that the members of the class action may be completely unaware of the action. The court's approval has thus been seen as important in safeguarding the members' interests.
The court's approval has two aspects. First, the court must ensure that the process leading up to the settlement has been satisfactory (i.e., that the group members, to the extent possible and taking into account that it as an opt-out action, have been informed of the settlement). Second, the court must also ensure that the content of the settlement is satisfactory. With respect to the latter, very little guidance is provided in the preparatory works as to how the court should exercise control of the settlement. With reference to interpretations of similar provisions in Denmark and Sweden, it is probably correct to assume that the court should approve the settlement unless it is clearly unreasonable or discriminatory towards some group members. In general, the parties should have a wide margin of appreciation when it comes to agreeing an amicable solution.
Court approval is not necessary for an opt-in action, but it is emphasised in the preparatory works that it is important for the group representative to consult with the group members prior to any settlement.
In the case of a settlement, in both opt-in and opt-out actions, the settlement will be binding for all those who are class members at the time the settlement is made.