This article is the second in a series on litigation in Israel and outlines class action law, and its stages and procedures (for the first article in the series, see “Guide to litigation in Israel: Israeli legal system and service of process“).
Class action lawsuits have become a prevalent phenomenon in Israel in recent years, including against foreign international corporations. The legal framework for filing and adjudicating class actions in Israel is outlined in the Class Action Law 5766-2006 and the Class Action Regulations, 5770-2010.
The Class Action Law limits the causes of action that can be certified as a class action. In practice, class actions may be certified for a series of civil causes of action derived from contracts law (eg, breach of contract) or torts law (eg, breach of a statutory duty).
Another approved cause of action relates to claims based on the Consumer Protection Law, such as misleading consumers regarding material aspects of a transaction (eg, the nature of the asset or service) including:
- the date of delivery or provision of goods or services;
- the usual or customary price of the good or service; or
- transaction cancellation terms.
This cause of action includes claims against a dealer concerning matters between the dealer and the consumer, whether they have engaged in a transaction or not. A “dealer” is defined broadly in the Consumer Protection Law and includes any seller, supplier, manufacturer, importer or marketer that sells goods or provides a service in their regular course of business. While the definition of “consumer” in the Consumer Protection Law excludes a person (or entity) who acquired the goods or services mainly for commercial uses, the Supreme Court has recently ruled that, in some circumstances, certain commercial entities can be defined as “consumers” when examining the applicability of the Consumer Protection Law.
In recent years, there has been a significant increase in “private enforcement” of the Antitrust Law through the filing of class actions. Thus, increasing numbers of class actions that raise claims regarding the Antitrust Law, such as alleged damages caused in Israel by international price fixing conspiracies (cartels) and general cases regarding allegations of excessive pricing, are being heard before courts in Israel.
A declaration of a breach of the Antitrust Law by the Israeli Antitrust Commissioner serves as prima facie evidence in all legal proceedings, and thus facilitates the submission of class actions regarding the subject of the declaration.
Other prominent causes of action stem from the Law of Unjust Enrichment and the Standard Form Contracts Law.
An additional popular cause of action in recent years is unlawful invasion of privacy, especially in cases where information regarding customers is collected and stored.
Under Israeli law, a class action is adjudicated in two stages:
- the certification stage – where the court decides whether to allow the class plaintiff to lead a class action on behalf of the class they claim to represent; and
- the adjudication of the action itself, which is similar to the adjudication of any other civil claim in Israel.
Certification stage
The certification stage begins with the plaintiff filing a motion to certify the class action. The motion to certify must demonstrate that the claim meets the cumulative conditions required for the court to certify the motion.
- The plaintiff must have a personal cause of action concerning the subject of the motion, and their cause of action must have a reasonable chance of success.
- The class action raises material questions of law or fact that are common to all the members of the represented class.
- There is a reasonable chance that mutual questions will be decided in favour of the represented class in the adjudication of the claim.
- A class action is the fair and effective mechanism for resolving the dispute.
- There is a reasonable basis to assume that the class plaintiff will duly and properly represent the interests of the represented class.
- There is reasonable basis to assume that the interests of all class members will be represented and managed in good faith.
Adjudication stage
The respondents are entitled to respond to the motion to certify, and the class plaintiff is then entitled to reply to the respondents’ response.
Following the parties’ submissions, the court will usually set a preliminary hearing, for the purpose of simplifying and expediting the adjudication of the motion to certify, or to explore the option of amicably resolving dispute. At times, the court might propose that the parties turn to mediation.
Should mediations or the preliminary hearing fail to bear fruit, the court will usually schedule evidentiary hearings, wherein the affiants on behalf of both parties are subjected to cross-examination (unless the parties agree to forgo cross-examinations).
The evidentiary hearings are typically followed by written summations, following which the court decides whether to certify the class action.
If the motion to certify is granted, the court will include in its decision the legal questions that will be adjudicated and the definition of the class to be represented by the class plaintiff.
The decision to certify a class action can be challenged by leave of appeal filed to the relevant court of appeal. A decision to deny the motion to certify, on the other hand, can be appealed by right. However, the court’s decision in the claim itself (following the granting of the motion to certify) can be appealed by right to the relevant court of appeal.
The Class Action Law sets out a unique procedure for the approval of settlements, which are subject to the court’s approval. The parties must publicise a notice to the public with the terms of the proposed settlement. Further, a copy of the proposed settlement must be sent to the attorney general, the courts administrator and the relevant regulator (eg, the custodian of consumer protection). These officials, as well as any member of the represented class, and any entity or government body that operates to further public goals in fields relevant to the motion, may file objections to the proposed settlement.
Additionally, the court should receive an opinion from an expert in the fields relevant to the motion to certify, analysing the advantages and disadvantages of the settlement.
The court will only approve the settlement if it finds that the settlement is fair, reasonable and proper, considering the interests of the represented class. If the settlement is reached during the certification stage, the court must also find that the prerequisites for certifying the motion are fulfilled.
For further information on this topic please contact Sivan Wulkan at Arnon, Tadmor-Levy & Co by telephone (+972) 3 608 7999 or by email sivanb@arnontl.com.
