Mass Litigation

Mass litigation and class action lawsuits represent a new challenge for companies with constantly growing risks. The mass assertion of similar claims by now established consumer law firms and litigation-financing online portals has become increasingly important in recent years. All sectors that have a large customer base or are listed on the capital markets are affected.

Thanks to the use of software, processing a large number of similar cases requires significantly fewer human resources on the part of consumer law firms and therefore represents an attractive business model for them. As a result, the companies concerned are facing increasing attacks from a commercial litigation industry that is rapidly driving the German and European mass litigation market.

Class action lawsuits

The EU Directive on representative actions has simultaneously triggered significant changes in the area of collective redress in many European countries. In Germany, a new type of action was intro-duced when the Consumer Rights Enforcement Act (VDuG) came into force on October 13, 2023. The redress action is a new instrument with which consumer associations can jointly assert con-sumers' claims for performance against companies. It expands the existing options for mass dam-age proceedings against companies. The model declaratory action already makes it possible to clarify common preliminary questions for many individual proceedings, the claims for which must then be enforced in separate individual proceedings. The redress action offers an alternative to the model declaratory action and can concern all civil law disputes between consumers and companies in which at least 50 consumers have essentially similar claims. Consumers cannot actively partici-pate in the proceedings but have the option of registering their claims in the class action register up to three weeks after the hearing. The court proceedings consist of three stages: First, the Higher Regional Court at the defendant company's registered office decides on the validity and calculation of the claims (basic remedial judgment). In the second stage, a settlement phase is sought in which the parties attempt to reach an agreement on the fulfillment of the claims. If this fails, the third stage follows: the court determines a collective total amount in a further judgment (final remedial judgment). At the end of the court proceedings, a trustee appointed by the court takes over the examination and payment of the consumers' individual claims in the implementation procedure. Both consumers and companies have the right to have the administrator's decisions reviewed by the courts. 

The redress action poses a number of risks and challenges for companies: They have to reckon with a large number of potential claimants who are motivated to assert their claims due to the low hurd-les involved in settlements. They must be prepared for a lengthy legal dispute and accept that a trustee will monitor their payment obligations and, if necessary, enforce them. They also bear the costs of the proceedings if they are unsuccessful.