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Online Lawsuits Fuel Debate in France

Posted by inet - 2005-10-05

PARIS - Attorney Jean-Marc Goldnadel knew he was going to make waves when he launched classaction.fr — a French Web site that lets users sign up to lawsuits online for as little as 12 euros ($14.50).

Sure enough, the site has ruffled France's traditionalist establishment and raised the temperature of a debate on government plans to let plaintiffs file U.S.-style class actions in French courts.

But Maitre Goldnadel underestimated the backlash, and even several consumer groups are trying to shut him down. A verdict is due next month on their court challenge, the second against the site, and the Paris Bar Council is scouring its pages for ethics breaches.

Opponents of the government's plans have also seized on classaction.fr as evidence that a class action law would encourage the kind of "excesses" that the United States is now trying to curb: ambulance-chasing lawyers, ruinous damages awards and spurious lawsuits used to blackmail companies into settlements.

"This is grist for our mill," said Joelle Simon, head of legal affairs at France's main employers' organization, Medef. "This is exactly what we don't want — we have no desire to see this kind of practice become widespread."

    President Jacques Chirac announced the introduction of class actions earlier this year, but Simon, who represents Medef on a government advisory panel, cautions that France would do well to avoid the U.S. model.

"It's an incitement to blackmail," she said. "We know what the American system costs their economy, and that is one import we can really do without."

Just as class action lawsuits arrive in Europe — Britain and Sweden have recently opened their courts to limited forms of class actions and Italy is considering them — Washington has been taking steps to rein them in.

U.S.     President George W. Bush signed a law in February making it harder to file "junk lawsuits" that stand little chance of winning in court, but sometimes scare companies into settling anyway. Such suits drove overall U.S. legal costs to $240 billion last year, Bush said.

But French consumer groups say class actions are the only way to obtain justice when, for instance, a company overbills thousands of customers by a few hundred euros (dollars) each — hardly worth suing for individually.

Whereas a single U.S. consumer can file a class action covering all those who have suffered the same prejudice, French attorneys need a signed mandate from each litigant. Rules barring them from advertising or approaching prospective clients make it almost impossible to gather plaintiffs.

Goldnadel and his associates work around the restrictions by getting the clients to come to them. Close to 1,000 plaintiffs have signed up online for two pending lawsuits.

The first accuses movie distributors of breaching consumer rights by copy-protecting DVDs; the second seeks damages for misleading financial information allegedly given to Vivendi Universal SA shareholders.

But French consumer organization UFC-Que Choisir and four smaller groups are accusing classaction.fr of unlawfully recruiting clients and requiring plaintiffs to cede control of settlement decisions.

The site tells visitors who have bought DVDs that "you have suffered the following prejudices, for which we are demanding damages in court." It goes on to outline the case, inviting users to click on a flashing red button to sign up and enter credit card details. Fees start at 12 euros up front, plus 40 percent of any damages won.

Goldnadel is confident that he is operating within the law. "There is nothing outrageous about telling people they've suffered a prejudice in a certain way," he said in an interview.

"It is an attorney's job to do that — it's not ambulance-chasing."

Despite its case against the site, UFC-Que Choisir is pushing for a U.S.-style class action procedure in France that automatically covers all potential victims unless they opt out.

French employers would rather see a more limited "opt-in" system obliging attorneys to collect mandates from every plaintiff — as classaction.fr currently does. "If a company's involved in a court case, it should know who it is up against," said Medef's Simon.

Others argue that the more powerful class action procedure would actually help corporations contain litigation risk.

"It is in companies' interests to have an opt-out system," said Paris-based attorney Ron Soffer, who is also qualified at the New York bar.

An opt-out suit usually covers the "vast majority" of possible plaintiffs, Soffer said. "Once it settles with the class, the company has basically settled the entire case and will probably never hear of it again."

But such a major step could require changes to existing French laws as well as to the constitution. While the government is keeping quiet before the working group makes its recommendations, expected this month, comments by ministers suggest their approach will be gentler.

Finance Minister Thierry Breton has said the government is keen to avoid the "abuse" of class actions seen in the United States. Their introduction will go ahead "in a French context and in a more controlled way," he told reporters recently.

"It is a wonderful business for the lawyers, but not always for the consumer."

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