Like the Loch Ness Monster, sightings of a French-law based class action have been reported from time to time, only to disappear on closer scrutiny. But at long last, the “Loi Harmon” (Law n° 2014-344 of 17 March 2014) has added a new chapter to the French Consumer Code creating a class action à la française known as the action de groupe.
The concept of a class action has given rise to considerable debate in France. For its supporters, it is a necessary tool for providing access to legal redress for everyone, particularly to individuals who have suffered harm at the hands of professionals, while for its detractors it is a dangerous weapon capable of destroying companies by creating an unacceptable level of risk, as shown by the example of American excesses caused by overly aggressive “plaintiffs’ lawyers” and resulting in awards of damages grossly out of proportion to the damage actually suffered.
The new law certainly creates a French-law class action, but it is restricted both in terms of scope and in the damages awardable, and is more in the nature of a “trial run” than a definitive statute, since Article 2 VI specifically states that “not later than thirty months following promulgation of the present law, the government shall submit to Parliament a report evaluating the implementation of the class action and examining possible extension to the areas of health and environment”. Thus, although it is possible that the procedure will be extended to new areas, this will depend on the satisfactory implementation of the procedure in its current form.
Although a decree still to be adopted will specify certain details of the new procedure, it may be useful to outline its principal features here.
The limited scope of the class action
New article L. 421-1 of the French Consumer Code provides as follows:
“An association for the defence of consumers that is representative at the national level and approved in accordance with article L. 211-1 may bring an action before a civil jurisdiction in order to obtain redress for individual damage suffered by consumers placed in an identical or similar situation and having as its cause a failure by one or the same professionals to comply with their legal and contractual obligations:
- With respect to the sale of gods or the supply of services;
- Or when such damages result from anticompetitive practices as defined in Title II of Book IV of the Commercial Code or articles 101 and 102 of the Treaty on the Functioning of the European Union.
The class action may only relate to damages for damage to proprietary interests resulting from material damage suffered by consumers.”
The law therefore considerably limits the scope of application of the class action, which is confined to consumer disputes and to certain damages incurred by consumers resulting from anticompetitive practices such as cartels or abuse of dominant positions.
In order to dispel any possible ambiguity over the concept of “consumer”, the law defines such term in the following manner in what will now become the initial article of the Consumer Code:
“For purposes of this Code, a consumer is any physical person who is acting for purposes which do not enter into the framework of his or her commercial, industrial, artisanal or professional activity”.
Thus, only physical persons who have concluded an agreement for sale of goods or supply of services forpersonal use are entitled to be indemnified under a class action A doctor who purchases a computer for use in his consulting practice would not, for example, be eligible to join a class action, while if he or she purchases the same computer from the same supplier and at the same price but for home use, any damages that (s)he suffers could be claimed in a class action. Legal entities are entirely excluded from the benefit of class actions.
In order for a class action to be constituted it is also necessary that the consumers – as defined above – have suffered damages resulting from the same legal or contractual breach by the professional, under article L. 432-1 of the Consumer Code.
Not only does the law limit the scope of consumers who may bring an action; it also drastically limits the type of damages for which redress may be sought, since class actions may only be brought to obtain redress for “damage to proprietary interests resulting from material damage suffered by consumers”. This not only means that the breach must relate to material damages but that the amount awarded is limited to the monetary consequences of such breach.
For example, if a defective coffee machine catches fire and seriously burns a consumer, (s)he can certainly join a class action in order to obtain indemnification for material prejudice by reimbursement or replacement of the coffee machine, but not for the injury caused by the burns – an indication of the limited, even dissuasive, benefits of class actions, since corporeal injuries, “moral” damages and loss of amenities are all excluded from the scope of a class action and redress must be sought on an individual basis in a personal action.
Procedure for class actions
The French la class action may only be brought by associations for the defence of consumers that are representative on a national scale and approved to do so; only 16 associations are so recognised at the present time. Lawyers may not, under the current statute, bring class actions on behalf of consumers.
Once an action is brought before the Tribunal de Grande Instance by a consumder defence association, it goes through three distinct phases.
Phase 1 – the judgement
The judgement must first acknowledge that the action meets the requirements set forth in article L. 423-1. The judge must then decide whether the professional is liable on the basis of the individual cases submitted by the association. The judge then defines the scope of the relevant consumers (e.g., “all consumers having purchased coffee makers model n° XX manufactured by YY Company between 1 January 2014 and 30 June 2014”), and the judge then determines the damages susceptible of being indemnified for each of the consumers, the amount thereof or the means of evaluating them. Damages in kind are possible.
At any time, the judge may order such procedures as are necessary for the preservation of evidence and the production of documents, including documents, computerised information and email held by the professional. If the judge holds the professional liable, the judge may order such publicity, at the expense of the professional, as is necessary in order to inform consumers who are affected by the procedure and who thus may belong to the class; however, such publicity may only be ordered once all appeals, including before the French Supreme Court, have been exhausted.
Phase 2 : Adhesion to the group
Affected consumers have a period of from 2 to 6 months from the last publication to join the group. The law provides for an “opt-in” procedure, requiring a positive act on the part of the consumer in order to join the group. The consumer may therefore either choose to join the group or to remain outside of the group and, should (s)he so wish, to bring an individual action for indemnification of all of the damages suffered, which will be greatly facilitated by the precedent of the judgement obtained by the association in the class action.
If the consumer decides to join the group, such adhesion constitutes a mandate to the association to recover the damages. The association may, with the authorisation of the judge, obtain the assistance of a person belonging to a regulated judicial profession in order to receive requests to join the class, verify such requests and take any action required against the relevant professional.
Phase 3 – Indemnification
The judge fixes the period in which indemnification must occur in the judgement. In the event of difficulties in execution of the judgement, the judge who ruled on the merits remains competent and rules on any requests for indemnification which the professional has not honoured. During such procedure, the consumers are once again represented by the consumer defence association and it is also the association who obtains any required measures of forced execution. Amounts received by the association as indemnification for the victims are deposited with the French Caisse des Dépôts et Consignations (a French bank which has a statutory mandate to receive amounts on consignment to hold pending payment to final beneficiaries) in order to be allocated to the victims.
Simplified class action
A simplified procedure has also been instituted in the event that the identity and the number of consumers harmed is known and where such consumers have suffered damages in the same amount, in an identical amount by service rendered or in an identical amount by reference to a period of time. In such case the judge, after having determined that the professional is liable, may order the professional to pay the identified consumers directly within a time limit fixed by the judge. The publication measures of phase 2 of the ordinary procedure are replaced by individually informing each of the consumers, at the expense of the professional. The consumer then has the choice of accepting or not accepting to be indemnified pursuant to the terms of the decision.
If the professional refuses to perform its obligations under the decision, the association once again assumes its role and consumers who have accepted the decision are deemed to have given a mandate to the association for the purposes of indemnification.
Specific provisions relating to class actions in competition proceedings
It should be noted that class actions for indemnification of damage suffered by consumers as a result of anticompetitive practices may only be implemented following a non-appealable decision (as the term is not defined, “non-appealable” probably covers any form of appeal, whether or not the appeal suspends execution of the judgement appealed from) holding that the professional is indeed guilty of violation of competition rules. Such decision can be issued either by national competition authorities or jurisdictions or by the European Union. The class action must be instituted within five years from the date on which the decision holding that a violation has occurred becomes non-appealable.
Such decision serves as the basis for the class action and prohibits the professional from contesting the existence of the violation on the merits, since the law specifies that “in such cases the violation by the professional is deemed to have been demonstrated on an irrebutable basis.” Provisional execution may be ordered, including publicity in order to encourage consumers to join the class.
The consumer associations having brought the class action are the only entities entitled to participate in mediation in order to obtain an agreement on the indemnification of individual damage to consumers. In the event of agreement, the agreement is submitted to approval by the judge, who verifies whether the agreement conforms to the interests of the group to which it is to be applied and if so, the agreement is given enforceable effect. The agreement must provide for publicity which is appropriate to inform the consumers concerned of the possibility of joining the class as well as the time period and the manner in which they can join the group.