The “one for all lawsuit”

by Dr Katarina Barley – former Federal Minister of Justice and Consumer Protection – Germany

A faster, better and cheaper way of enforcing consumer rights

Until recently, many consumers who had purchased a manipulated diesel car probably thought: “How is it possible that emissions levels have been manipulated and my expensive car has dropped in value, yet the people responsible don’t have to answer for their actions? All the same, I think I’d rather let the matter rest than take on a large car manufacturer and its legal department.”

And who can blame them for thinking that? Nobody really wants to be involved in a legal dispute: they’re complicated, the evidence is often ambiguous, and the risk of losing is extremely high as a result.

This is precisely why adding a new mechanism under civil procedure law was the right thing to do. The result is the “one for all lawsuit”, which has been in force since 1 November 2018.

How does the “one for all lawsuit” work?

In essence, the lawsuit works as follows: A consumer association files an action against a company in order to obtain a binding court ruling that clarifies key questions regarding the company’s liability. All consumers who are affected by these issues can join the action by registering their details in a claims register. The judgment delivered in that case then applies between these consumers and the company. A key advantage of this approach is that the consumers do not have to engage with the proceedings in any further detail. Furthermore, they do not bear the financial risk associated with a trial. Since the consumer association hires specialised attorneys at its own expense, it can pursue the lawsuit on an equal footing with the company in question. If the fundamental issues are clarified during this lawsuit, the consumers still have to assert their individual compensation claims themselves. However, this will be much more straightforward, with a far greater chance of success, if the company’s liability has already been established in principle.

This new mechanism of civil procedure is currently (at the beginning of 2019) being utilised in an action filed against Volkswagen AG by the Federation of German Consumer Organisations in cooperation with the German automobile association ADAC. Almost 400,000 consumers joined the lawsuit in the first few weeks alone. But this type of action is not specifically aimed at automobile manufacturers.

In principle, it is available for all civil-law claims. The specific circumstances in which it applies can be described as follows:

A large company has committed many similar legal violations affecting a large number of consumers. This scenario is not exactly uncommon.

Data protection law, for example, is one of the first areas that comes to mind. Indeed, without wishing to criticise specific social networks or corporations, data protection violations take place on a regular basis. And they all have one thing in common: they rarely affect just one individual. In the vast majority of cases, data leaks and irregular data use affect thousands or even millions of users.

Whether or not civil-law claims can then be enforced would always depend on the circumstances of the individual case. At any rate, the possibility has not been ruled out. Article 82 of the General Data Protection Regulation, for example, could be an option here. According to this provision, those responsible for a data protection violation must pay compensation to the person(s) affected. Such claims have rarely been asserted successfully thus far, mainly due to the sheer size and intangibility of the providers. Furthermore, the effort required to enforce a claim in a court of law is objectively high – even for legal professionals. The “one for all” principle can also be helpful in cases like this.

Specific details on the “one for all lawsuit”:

The official name for the “one for all lawsuit” is the model declaratory action (Musterfeststellungsklage). The model declaratory action provides officially recognised and highly competent consumer associations with the possibility of obtaining a binding court ruling that clarifies the main conditions of a company’s liability. This is done in a single set of proceedings on behalf of all similarly affected consumers, without the consumers first having to file a lawsuit themselves.

The strict requirements that must be fulfilled by the consumer associations ensure that model declaratory actions are used appropriately, in the interest of consumers, and that they cannot be misused in order to damage specific companies.

If at least ten consumers are affected by the same case, the consumer association can file an action. By order of the Higher Regional Court, the action is then publicly announced in a claims register, managed by the Federal Office of Justice.

Affected consumers can then register their claims (against a company, for example) in this claims register, without having to pay and with no obligation to be represented by a lawyer. The advantage here is twofold: First, the limitation period for the claims stops running and the clock is set back to the point when the action was filed; second, the declarations obtained in the judgment have a binding effect on the company and the registered consumers. If at least 50 consumers register within a period of two months, the lawsuit can proceed. A model declaratory action can be concluded either by way of a judgment or a settlement. Consumers are then able to enforce their individual claims on the basis of the model judgment.