All questions

Procedure

i Types of action available

The Law is the exclusive procedural framework for any group action in Israel. No action may be brought on behalf of a group of individuals without their express power of attorney, unless the claim falls within the ambit of the Law. A class action will only be recognised if it falls within a statutory list of enumerated causes; it should be noted, however, that as a rule, these causes are broadly worded. Some of the causes that may be of interest to international corporations include: claims against manufacturers, distributors and service providers, including product liability claims and various claims against internet platform providers; claims against insurance providers and agents; antitrust claims, including 'follow-ons'; claims related to corporate securities or trading platforms; claims related to environmental damages or nuisances; and claims related to the 'anti-spam' amendment to the Communications Law (Telecommunications and Broadcasts) 1982.

A class action suit requires prior approval of the court, in a preliminary proceeding known as a 'motion for approval of a class action'. A court may, at its discretion, approve a class action if it falls within the ambit of the enumerated causes, and all of the following elements are present:

  1. the claim presents questions of law or fact common to the class members;
  2. there is a 'reasonable chance' that those questions will be decided in the group's favour;
  3. a class action would be the just and efficient method for resolving the dispute;
  4. there are reasonable grounds to believe that the class members' cause will be adequately represented and managed; and
  5. there are reasonable grounds to believe that the class members' cause will be represented and managed in good faith.

Class actions do not have a special statute of limitations. In nearly all circumstances relevant to this note, the period provided by Israel's general statute of limitations applies, which is seven years from the time when the grounds for the claim arose, or would have become known to a reasonably diligent injured party. The Law includes a saving clause such that claims whose statute of limitations would otherwise have run in the course of a class action proceeding will survive for an additional year from the date that a motion for approval was denied or dismissed, or from the date that the claimant was removed from the class.

ii Commencing proceedings

A motion for approval of a class action may be commenced by either a person possessing a cause of action that raises the question in law or fact common to the group, one of the government commissions listed in the Law's appendix, or a qualified non-profit organisation whose purposes include the public cause advanced by the class action. In practice, approximately 99 per cent of motions for approval of class action are commenced by a private member of the group. At least one Supreme Court Justice has expressed the sentiment that standing in a class action should be granted liberally and with heightened flexibility, in order to better promote the public cause. In practice, 'entrepreneurial' lawyers may take an active role in the formation of the claim, and the Supreme Court has said, in obiter, that in light of the public interest of promoting 'civil enforcement', the mere fact that a lawyer may take a leading role and even recruit a representative plaintiff to advance the claim does not, in and of itself, disqualify the lawyer or the representative plaintiff. Furthermore, the Law mandates that a court that would otherwise have allowed a motion for approval of a class action must 'cure' any defect in locus standi by ordering that the class action be maintained and continued by an additional plaintiff.

The default mechanism for a class action is 'opt out', meaning that upon approval of a motion for a class action, all individuals meeting the definition of the group as approved will be judged as members of the group and bound by the outcome of the proceedings, unless they file an objection within the required time period (the default period is 45 days from publication of the decision to approve the motion). In special circumstances, the court may, at its discretion, rule that the action be conducted on an 'opt-in' basis, which means that the proceeding will relate only to those class members who request to be included. In either case, the procedural and substantive provisions of the Law will apply.

The class must be defined, initially, by the party bringing the motion for approval. In the course of hearing the motion, however, the court has substantial discretion to alter or redefine the class, or create sub-classes and appoint representative plaintiffs and attorneys for each sub-class. Ultimately, the final definition of the class will be set forth in the court's ruling to approve the class action. There is nothing in the Law to exclude foreign claimants from being included in a class; however, several cross-border jurisdiction questions may arise in cases with foreign elements, as explained in Section IV.

The Class Actions Law established a seven-year pilot period for a dedicated government fund to provide financial assistance for representative plaintiffs whose causes of action are of public or social importance, and the lifetime of that fund has been continually renewed each year since 2013 by subsequent orders of the Minister of Justice.

Indeed, during 2018 the Ministry of Justice submitted a memorandum for a proposed amendment to the Law (proposed amendment number 11), according to which the fund's activity will become permanent. This is a reflection of the success of the fund in facilitating class actions with merit and of public and social importance.

The fund's nine-member management committee includes representatives from the Attorney General's office and several government commissions concerned with matters related to class actions (such as the Commission for Consumer Protection, the Antitrust Commission, the Environment Ministry, and so forth). The management committee holds quarterly meetings in which it examines, approves and follows up on funding requests, based on each claim's degree of public importance and its potential to promote the public interest, and the committee may also take into account any particularly onerous financial obstacles that a claim may face. Assistance may be offered at any stage of the motion for approval, in the course of the claim itself or any process of appeal and, in specially warranted circumstances, even before the initial motion is filed. To the degree that the sponsored motion or action is successful (whether upon judgment or settlement), proceeds from the award corresponding to the monies received are recycled into the fund. In its annual report for 2018, the fund reported that 1,582,126 Israeli new shekels had been approved for 64 funding requests, for an average of approximately US$6,800 per request.

iii Procedural rules

One defining aspect of the Law is the requirement that a motion for the approval of a class action may be granted only once the court is satisfied that there is a 'reasonable chance' of the common question of fact or law being decided in favour of the class. The 'reasonable chance' criterion for approving a class action in Israel essentially forces the court to have some initial regard for the merits, even as it considers what is otherwise (and ostensibly remains) a procedural motion. The representative plaintiff must provide a preliminary evidentiary basis that sufficiently demonstrates a reasonable chance of success on the merits. Although phrased in terms of a procedural question, this essentially substantive requirement has created, de facto, a bifurcated process, in which a preliminary approval often serves as an indication of the court's leaning as it progresses to the merits. Experience has shown that the parties to litigation invest considerable resources in the 'preliminary motion' stage, which may include discovery, testimony and cross-examination, and may last several years in complex cases.

The Supreme Court directly responded to the bifurcation dilemma in The Phoenix v. Amosi, in which three insurance companies (as defendants joined into a single class action) contended that their alleged underpayment of personal accident insurance benefits was justified by the rules of contractual construction applicable to similarly phrased policy wordings. The court held that the very fact that the defendants had placed reliance upon an inferred reference not mentioned in the plain language of the policy wordings was sufficient, in and of itself, to determine that the plaintiffs' interpretation of the policy had a 'reasonable chance' of success in the claim. The court established that the guiding rationale of the 'reasonable chance' requirement was to strike a balance between protection of class action defendants from the collateral damage caused by spurious claims on the one hand, and the public interest of encouraging worthy class actions on the other hand.

The court in The Phoenix did not expressly retreat from the previous case law that had clearly established the need for a plaintiff to provide preliminary evidence to support the claim's 'reasonable chance' of success, and acknowledged that certain complex cases might even require preliminary legal or factual findings on the merits. On the other hand, the court warned against a bifurcation that would require 'duplicate proceedings' that place undue obstacles before plaintiffs, and potentially increase the collateral cost for defendants. In light of the above, the lead opinion held, inter alia (and in obiter), that where plaintiffs sought an identical remedy on several alternative grounds, it was sufficient to find that just one of the grounds had a 'reasonable chance' for success to allow the entire claim to proceed as a class action.

Upon the court approving a certification motion, the representative plaintiff's proposed statement of claim takes effect as the claim of the plaintiff class, and the main proceeding continues in accordance with the normal rules of civil procedure. All claims available in a normal proceeding remain available to both sides at this stage, unless and to the extent that the court, in its discretion, orders amendments to the statement of claims.

Experience has shown that nearly all class actions in Israel are resolved either by a withdrawal of the motion for approval or by settlement, most often during the motion's preliminary approval stage. While recent years have seen a measured increase in the number of class actions that gain approval (approximately 8 per cent on average in the past three years versus 5 per cent or less in previous years), the lion's share consistently result in a negotiated withdrawal or settlement, and typically only about 1 per cent, are finally resolved through a judgment. Of the tens of cases that have reached judgment since the Law's enactment, the vast majority have been decided for the claimants, an indication that the court's finding of a 'reasonable chance' of success in the approval stage may in fact include some preliminary review of the merits.

The Law does not entirely entrust the public interest to the self-appointed 'class agents'. It gives special procedural standing to the Attorney General's office, government commissions, non-profit organisations, and others. In every motion for approval of a class action, the representative plaintiff must send a notice, including the full motion and proposed statement of claims, to the government commission associated with that particular type of class action. The Attorney General, as well as the relevant government commission, must also receive every public notice related to the class action, including interim court decisions as well as any joint motion for the approval of a settlement. Qualified non-profit organisations and government commissions (as well as any individual class member) may, with the court's permission, participate in hearings to the extent the court deems such participation required for the sake of fairness, efficiency, or the defence of any of the class members' interests, and the court may, in its discretion, award a fee to a non-profit organisation in light of its contribution to the hearings. In addition to the Attorney General and all of the aforementioned persons, 'any person acting for the benefit of the class members' interests' may submit a reasoned objection to the proposed settlement of a class action proceeding, including an objection to the costs and fees proposed for the 'class agents' thereby, which objection may not be withdrawn without court approval, and in light of which the court may award a fee, commensurate to the extent to which the objection served to promote the public interest.

The Israel Consumer Council has special standing under the law, in that it may commence a class action proceeding without needing to demonstrate any particular difficulty or burden in the action being commenced by a private individual. The Israel Consumer Council has played a role both in commencing class actions and filing objections to proposed settlements that resulted in arrangements more favourable for consumers.

Motions for class actions are most commonly submitted to the district courts, since they generally involve aggregate claims in excess of 2.5 million Israeli new shekels. They generally require more judicial hours than an average case judged by the standard rules of civil procedure, but are still resolved, on average, with fewer judicial hours than cases involving standard form contracts, antitrust law or serious crimes. Of those certification motions in respect of which a decision was rendered, the average time lapse between the date of filing and the date of the decision (of the certification motion) has been approximately 1.5 years, although of those motions for which approval was granted, the average time lapse is slightly higher, and it is not uncommon for particularly complex certification motions to require several years to be adjudicated.

iv Damages and costs

There are no jury trials in the Israeli legal system. Class actions are typically heard before a single judge, who will determine all questions of fact and law regarding the certification motion, the action, and the extent and nature of damages and other remedies.

Israeli law takes a particularly flexible approach to damages and causality in class actions, an approach anchored in statute by the express purposes of the Law, which include '[civil] enforcement of the law and deterrence of its breach' and 'the grant of fitting remedy to those injured by a breach of the law'. Even prior to the Law's enactment, the Israeli courts had viewed flexibility in damages as essential to certain class actions. A prevalent jurisprudential sentiment is that while the damages awarded in classic tort actions are meant to provide 'corrective justice', a strict adherence to the traditional rules of damages would undermine the basic rationale and primary purpose of the law of class actions: to achieve efficient and effective deterrence against breaches of the law.

In the landmark Tenuva (I) case, Tenuva, a major Israeli dairy manufacturer, had misled consumers regarding the use of a clear, non-toxic, silicone-based polymer as an additive to prevent frothing in low-fat milk. The plaintiff class consisted of those who had consumed the milk on the false understanding that the silicone had not been added, yet plaintiffs had failed to demonstrate any physical damage. The Supreme Court upheld the district court's approval of the certification motion for a class action, based on breach of consumers' autonomy, with non-monetary damages awardable based on plaintiffs' negative feelings of disgust upon learning of the additive. Flexibility would also be required in awarding the damages to benefit a public cause, since it would be impossible for those who had actually consumed the milk to prove their identity, or the extent of the injury they suffered.

Subsequently, the Law anchored and built upon the case law that had preceded it. Punitive damages are rarely granted by Israeli courts, and, with the exception of certain class actions regarding the rights of people with disabilities, the Law specifically disallows punitive or exemplary damages in a class action, rather requiring the class members to prove that they suffered actual 'injury'. As in the previous case law, however, flexibility lies in the causation, scope and proof of injury, as well as the variety of remedies available.

The Law itself provides statutory mechanisms for overcoming the problem of class members whose individual identity may be difficult or impossible to ascertain or prove. A court rendering judgment in favour of the class members may grant damages or any other remedy (including any injunction or declaratory relief), which may include the quantum of damages for each member as well as the standard of proof required of a class member to demonstrate his or her right to damages (or other remedy). The court may also determine a global quantum of damages that the defendant must remit in any event, and in the event that the proved claims of individuals do not reach that amount, may provide instructions for the distribution of any remainder to class members with a proved right, up to the full satisfaction of their loss. If there is still a remainder from the global quantum, it will be paid to a statutory fund charged with distributing the proceeds to the public benefit in a manner most closely resembling the matter of the class action.

The Law further recognises, as did the Supreme Court in Tenuva (I), that the award of traditional 'damages' to atomised class members is not always a feasible remedy (especially, as in the Tenuva case, where the injured members were consumers of household items, who are not readily identifiable and who do not generally maintain proofs of their purchase or consumption). If a court is of the opinion that class members cannot be individually identified and compensated without unreasonable cost or difficulty, the Law authorises the court to grant damages, or any other remedy, for the benefit of either the group as a whole or the general public.

The Law reflects the jurisprudential sentiment that the damage in a class action is more than just the sum of the parts; the claimant is not just an individual representing other individuals, but rather a 'super-plaintiff' who gives expression to the collective and aggregate interest of the class. This sentiment found authoritative expression in Tenuva (II), the sequel to the first Tenuva case, in which Tenuva was ordered to donate approximately US$11 million to public causes. The court in Tenuva (II) further allowed for group causality to satisfy the causality requirement of a class action in tort, under which generalised and statistical evidence of consumer preferences and behaviour as a whole would be sufficient to demonstrate the causal link between non-monetary damages and the violation of consumer autonomy.

The remedy of enforced donations as damages payable to the public raised an ancillary issue in the Israeli courts: the concern that either or both of the parties to a class action would leverage the outcome to promote their own public image or sponsor their own preferred channels, exploiting court-mandated donations to serve their own goodwill and advertising interests. The Law's amendment of 2016 has provided a statutory solution: from now on, damages awarded to a public cause will be transferred to a statutory fund charged with distributing the proceeds to causes that match or approximate the public interest that each particular class action is meant to promote.

v Settlement

Any settlement of a class action proceeding requires court approval. A report of the claim and the proposed settlement, including certain key parameters, must be publicised and sent to the Attorney General as well as to the public commission charged with the claim's designated subject area, and any other person whom the court deems appropriate. A proposed settlement must include, inter alia, a definition of the class, a summary of the claim and the proposed settlement, the gap between the amount of the claim and the amount of the settlement, the stage of the proceedings and an evaluation of the benefits and risks of their continuation, and the issues and remedies regarding which the proposed settlement would comprise an estoppel. Class members who wish to exit from the proposed settlement may request leave from the court to do so.

The Law mandates that a court may approve a proposed settlement only after it is satisfied that the settlement is fair, adequate and reasonable, and that concluding the proceedings by way of settlement is the most equitable and efficient manner for resolving the issue under the circumstances. In the case of a settlement in the 'motion for approval' phase, the court must also be satisfied that the claim would have met all of the procedural requirements for a class action, including the quasi-substantive requirement of a 'reasonable chance of success'. Furthermore, the court may not ordinarily approve a settlement until it has first received the expert opinion of an 'examiner' appointed as an officer of the court, who is authorised to summon the parties for a hearing or suggest variations to the proposed settlement. The court may provide specific instructions for supervision of the settlement's execution, and may also predicate the payment of fees and costs to the representative plaintiff and counsel on the settlement's actual execution (in full or in part).

The Attorney General and any government authority relevant to the claim, as well as any class member, qualified non-profit organisation, or person who acts in general for the benefit of the class members, have legal standing to file an objection to a proposed settlement within 45 days of its publication notice; any such objection may not be subsequently withdrawn without court approval. Under a recent amendment to the Law, if the court accepts the objection in full or in part, it may order that a 'reward' commensurate with the public interest achieved to be paid to the objector.

It is common for the Attorney General to express a position ('objection' or 'no objection') regarding the proposed settlement, and there seems to be a recent trend of the Attorney General responding with comments to the proposed settlement even when filing a 'no objection' response. The Attorney General has typically filed objections to around 15 per cent of proposed settlements, and among such cases, the court's tendency to reject the settlement or approve the settlement with substantial changes is correspondingly greater. If approval of a settlement is withheld or cancelled, nothing said or determined in the course of the settlement approval proceeding may serve as evidence in any civil proceeding.