What are the standing requirements for a class action?
Class actions are only available for damages arising out of certain securities-related transactions, and the Securities-Related Class Action Act specifies those certain securities-related transactions and the eligible plaintiffs.
For claims based on false representation in a registration statement or a prospectus, the plaintiffs should be purchasers of the securities and must have suffered damage by such false representation. For claims based on false representation in annual, biannual or quarterly reports, the plaintiffs should be purchasers or sellers of the securities issued by the defendant corporation whose annual, biannual or quarterly reports were falsely represented. For claims based on unfair securities practices, including insider trading or market manipulation, the plaintiffs should be the persons who trade, or make any other transaction of, the relevant specific securities and must have suffered damage. For claims based on false representation in an audit report, the plaintiffs should be the persons who sustained damage by relying on the falsely represented audit report.
One or more victims who meet the standing requirement above can file a class action. The person who filed the action can be the lead plaintiff; however, the court may appoint another victim as the lead plaintiff. In principle, a lead plaintiff or plaintiff attorney cannot serve as lead plaintiff or lead counsel if they had previously been lead plaintiff or lead counsel in three or more class actions within the last three years.
On the other hand, injunction actions provided under the consumer protection law can be filed only by certain qualified consumer organisations.Participation
Do members of a class have to opt in or opt out of the action? Are class members notified that an action has been commenced on their behalf and, if so, how?
The class action system in Korea employs an opt-out model. This means that all potential claimants who fall within the definition of a class become members of the class on the filing of the complaint, whether they are aware of it or not. They will all be bound by the final judgment of the court or any approved settlement unless they opt out of the proceedings individually.
If the certification of a class action becomes final and conclusive, the court is supposed to notify the relevant class of this fact, and the notice should be made both through regular mail and newspaper. A class member may give a written opt-out notice to a court within a certain period of time. Class members who have not opted out shall be bound by the final judgment or any approved settlement.Certification requirements
What are the requirements for a case to be filed as a class action?
To be certified as a class action:
- there should be a minimum of 50 victims whose aggregate interest in the securities concerned is 0.01 per cent or more;
- relevant legal or factual issues must be ‘common’ to all members of the class;
- the class action must be an ‘adequate and efficient’ means of fulfilling the rights of, and protecting the interests of, the class members; and
- the matters stated in the application for certification and its accompanying documents should be free of defects.
The matters that should be stated in the application for certification are as follows:
- the person (or persons) who files the class action and his or her legal representative;
- the attorney for the plaintiff;
- the defendant;
- the scope of the class;
- the careers of the person (or persons) who files the class action and the plaintiff’s attorneys;
- relief requested and the cause of action; and
- agreement of attorneys’ fees.
The person (or persons) who files the class action should submit a document detailing the following:
- the fact that the person has not acquired securities with respect to the class action to file the class action, or in accordance with the instructions given by the attorney; and
- details of the securities-related class actions that the person has been involved in as a lead plaintiff during the preceding three years.
The plaintiff’s attorney should submit a document with the following:
- details of the securities-related class actions in which the person has been involved as an attorney during the preceding three years; and
- the fact that the person has no conflict of interest with the class in such a manner as to be deemed inappropriate to serve as a legal representative in the action for owning, or having any direct monetary interest in, the securities at issue.
How does a court determine whether the case qualifies for a class action?
Based on the requirements for a case to be filed as a class action, the court determines whether the action qualifies as a class action by issuing a written opinion. Because this decision is appealable, the certification stage alone can take three to five years to be finally and conclusively certified by the Supreme Court. Similar to the merits stage, the certification stage also has trials and hearings. The plaintiffs bear the burden of proof that the case is qualified as a class action.Consolidation
Is there a process for consolidating multiple class action filings?
Where multiple class actions are filed over the same cause of action with the same court, the court is required by law to consolidate them. Similarly, in cases where such multiple class actions are filed with the different district courts, the higher court with common jurisdiction over the district courts determines which court should preside over the case, and the designated court must consolidate the case. When class actions are filed, information about the filing is posted on the website of the Supreme Court, and thus anyone is able to find out which class actions have been filed.