Adequate representation of group members in collective redress litigation and the role of courts

• Applicant: Professorin Dr. Astrid Stadler
• Subject Area: Private Law
• Term: from 2013 to 2019
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 239162599

The project undertakes to analyse how legislatures and courts in Europe and Germany can guarantee an adequate representation of victims of mass damages in collective redress litigation (for example securities cases, product liability cases, mass damages of consumers arising from unfair compeition and price-fixing agreements, unfair contract terms in mass contracts). The Member States of the European Union have developed - to some extent following the example of the US class action - different models of collective redress (group litigation, representative actions, mass settlement proceedings). They all have in common that a large group of tort victims or consumers is represented by an individual claimant (the "lead plaintiff"), a representative association, or a public institution. Despite the fact that the outcome of the itigation or the settlement is binding for all represented persons, these "absent group members" normally do not have the right to participate actively in the proceedings. Considering their right to be heard and their right to due process, collective redress proceedings must therefore guarantee an adequate representation of "absent group members". This requires an active role of courts and judges, probably going beyond the traditional neutral role of courts. The project will analyse in particular three issues: 1) Identification of a adequate representative of the group. Should the representative of the group be appointed by the court, or identified by principles of priority? To what extent should the representative be elected or controlled by the group members? What criteria must be met by representative organisations in order to obtain legal standing? 2) To what extent, and how should civil courts supervise the conduct of the litigation by the representative? 3) From a comparative view, it becomes clear that collective redress litigation very often result in a settlement of the whole dispute. In the Netherlands, there is even a particular "mass settlement proceeding" which allows courts declaring a settlement contract negotiated by represenative organisations to become binding for all tort victims or consumers. Class action regulations in the US and other common law countries, and existiing group action provisions in Europe require court approval for these settlements. What standards should courts apply when scutinizing settlements, what instruments must be available to detect possible collusion between the group represenative and the defendant? Must courts look at the merits of the case before approving settlements? The project will - on a comparative analysis - develop criteria with respect to these issues and questions which might be taken into consideration by European/German legislatures when implementing new instruments of collective redress or by courts in applying these instruments.

• DFG Programme: Research Grants