The year in review
In the past year, Germany opened a new chapter with regard to collective redress. On 14 June 2018, the German legislator passed a law creating a collective redress action for consumers. The new law came into force on 1 November 2018. It allows for Model Case Proceedings. These Proceedings provide a model action for a declaratory judgment. Under the new law, certain consumer associations may file suit to have legal issues or disputed questions of fact bindingly determined by a court. Consumers can register their claims to the action in order to receive the binding effects for their individual proceedings. Registration also suspends their limitation period.
The aim of this legislation is to allow for redress for minute damages, for which a single party would not rationally bring action owing to the insufficient potential benefits. With a view to political realities, however, the introduction of the first global collective redress mechanism in Germany was heavily influenced by the events of 'Dieselgate' (i.e., the revelations on the alleged manipulation of diesel emissions tests by Volkswagen). This matter demonstrated to a larger audience the striking differences between the United States and Germany when it comes to collective redress. The fact that roughly 500,000 American plaintiffs were able to recover damages from VW in one single, comparably short court proceeding, whereas German plaintiffs had to enforce their alleged claims individually, has been perceived as unjust by parts of the German public. In fact, about 23,000 actions are currently pending, with the competent local courts scattered all over Germany. The courts have already handed down around 6,000 judgments on the matter. Contradicting court opinions are thus the norm, with courts of appeal still not showing a uniform approach to the matters before them. It is quite probable that claims of potential claimants will have become time-barred before legal certainty is obtained. A major deadline for this type of action was supposed to lapse at the end of 2018, which led to doubling or even tripling of filings in some courts. The Model Case Proceeding must therefore be seen in reaction to the limits of German car owners having to file suit individually in lieu of a class action.
Rather predictably, an action for a Model Case Proceeding was immediately brought on 1 November 2018 against Volkswagen in the matter of diesel manipulation allegations in front of the Higher Regional Court of Braunschweig. As at February 2019, 401,000 individual claims have been registered to the action equalling more than 10 times the previously brought claims. Because of this massive number, a schedule for the proceedings is not yet foreseeable. Meanwhile, the first proceedings on the basis of the new Model Case Proceedings have already been concluded on 20 March 2019 in front of the Higher Regional Court of Stuttgart. They concern the Mercedes-Benz Bank, which is alleged to have provided insufficient consumer credit information. More than 600 consumers are reported to have registered their claims to this action. Finally, on 21 February 2019, another action was brought in the Higher Regional Court of Frankfurt, pertaining to the liability of the company Bisnode for ratings of stock creditworthiness the company had provided.
As at April 2019, these are the three only proceedings under the new law. A similar action against VW Bank has not been accepted by the Higher Regional Court of Braunschweig, meaning the Federal Court of Justice will rule on issues of admissibility in the near future. Yet even these fledgling developments show how disparately proceedings under the new law may unfold. Whereas the VW action has not seen any real development at all, the Mercedes-Benz Bank case has already been concluded. After an oral hearing on 25 January 2019, the court rejected the action as inadmisssable on 20 March 2019. It ruled that the claimant consumer organisation did not fulfil the requirements for such an organisation provided by law. Thus, it did not rule on the merits. For the VW case on the other hand, neither timeline nor tendencies of the proceedings can be predicted at the current stage.
Also in the realm of Dieselgate, a US law firm led initiative continues to bring mass actions for payment against automobile manufacturers, which are sometimes named class actions in layman's terms. Having made headlines by commencing a lawsuit before the District Court of Braunschweig on behalf of more than 15,000 car owners in November 2017, the initiative is reported to have filed another action regarding 18,700 car owners in December 2018. For this purpose, the law firm is cooperating with a limited liability company called 'financialright GmbH', known under the brand name 'myRight'. The company is using the opportunity to bundle claims through fiduciary assignment. Car owners assign their potential claims to myRight, which then asserts these claims in court. In the event of success, myRight receives a payment, more precisely a fee of 35 per cent of the realised amount. Technically, every single claim transferred to myRight must be ruled on by the court individually. The combined sum in question for both actions now exceeds €1 billion. In total, myRight has stated to have accumulated the claims of 45,000 car owners.
Finally, the previously existing methods of collective redress are also being utilised in the case of Dieselgate. A separate group of plaintiffs commenced lawsuits against VW and Porsche, emulating the effects of a class action. Shareholders of the two corporations brought actions alleging that VW and Porsche did not inform them in due course about the ramifications of the emissions matter. They are making use of an instrument exclusively available to plaintiffs who sustained damages on account of false or misleading capital market information. The Capital Markets Model Case Act (KapMuG) allows courts to select a model case, decide common issues of fact and law, and thereby facilitate individual lawsuits brought by shareholders. Further actions to the same effect have been brought in front of the Higher Regional Court of Stuttgart.