The year in review
Recent developments in Israel's case law on class actions include an increased tendency of courts to rule in favour of motions for approval of a class action, alongside increased judicial review of the class 'agents' (i.e., representative plaintiff and counsel seeking fees and costs alongside the collective claims that they promote).
Despite this, most of the certification motions in 2018 ended with arrangements for withdrawal.
In addition, 2018 saw a decrease of approximately 13 per cent in the number of certification motions that were submitted in comparison with 2017. The reason for this probably stems from a 2018 amendment to the Court Regulations (Fees) 2007, which introduced a fee related to the bringing and disposal of a certification motion for a class action. The regulations now provide that in order to bring an application for the certification of a class action, the representative plaintiff is required to pay part one of the fee in the amount of 6,000 Israeli new shekels when filing a class action motion in the district court, 3,000 Israeli new shekels when filing a class action motion in the magistrates' court and there are no fees payable when filing a class action motion against governmental and local authorities. Where the certification motion is dismissed or withdrawn, the representative plaintiff is required to pay part two of the fee in the amount of 10,000 Israeli new shekels in the district court, 5,000 Israeli new shekels in the magistrates' court or 1,800 Israeli new shekels for certification motions against governmental or local authorities (irrespective of whether the representative plaintiff filed the motion in a district or magistrates' court – if the respondent is a governmental or local authority the court fee is always 1,800 Israeli new shekels). On the other hand, should the certification motion be successful, the respondent will be required to pay part two of the fee and reimburse the representative plaintiff for part one of the fee. The court still retains a discretion in this regard. In a worst-case scenario, the representative plaintiff is at risk for the full fee (i.e., part one and part two of the fee) as well as the respondent's legal costs.
Certain types of plaintiffs are exempt from paying these court fees namely: (1) an organisation registered with the Registrar of Non-Profit Organisations or the Registrar of Charitable Trusts, which operates to promote public goals and the filing of class actions motions is not its main activity, (2) the Israel Consumer Council, and (3) a person who hires a public apartment and conducts a suit against a company for public housing.
The two main objectives of the amendment are:
- a reduction in groundless class actions and their proportion in relation to all the class actions that are submitted. While it is anticipated that the proposed fee may deter claims with a low chance of success, the 'chilling effect' on reasonably worthy claims may be moderate, since the class actions public assistance fund is likely to provide increased assistance to reasonably worthy claims in light of the new fees (money that is likely to be returned to the fund should the action result in a favourable settlement); and
- to cover a portion of the court expenses and judicial resources that are required by a class action due to it being a complicated and long, legal proceeding.
In our estimation, during 2019 an additional decline may be expected in the number of class actions to be filed, in light of the fact that the amendments to the regulations regarding the payment of a fee for the filing of an application for approval of a class action entered into force during May of 2018, which could affect the data for 2019.
With regards to withdrawals of class action proceedings, a representative plaintiff and their lawyers were previously permitted by the court to receive a reward and legal fees, respectively, despite the withdrawal of proceedings. However, during August 2018 in Markit v Sonol the Supreme Court held that in a case of a withdrawal of proceedings, a representative plaintiff and its lawyers were not permitted to receive a reward or legal fees unless the case was exceptional. Although the Supreme Court refrained from providing a closed list of factors that a court had to consider when deciding whether a case was exceptional, it did mention the following considerations:
- the benefit to any injured persons represented by the plaintiff and their lawyers;
- the efforts that the representative plaintiff and their lawyers invested during the class action;
- the risk taken and expenses incurred by the representative plaintiff and their lawyers in bringing the class action;
- the degree of public importance of the class action;
- the manner in which the representative plaintiff conducted the class action proceedings; and
- the gap between the remedies that were requested in the application (for approval of the class action) and the remedies that are to be received by the representative plaintiff as part of the withdrawal. A withdrawal, including the terms of the withdrawal, requires the approval of the court.
Subsequent to this case, it appears that the courts are willing to intervene and reduce the rewards and the legal fees, and even deny it completely in some cases of withdrawal.