Class actions in Italy are a recent introduction. Traditionally,
according to the Italian system, a group of individuals whose
rights were allegedly violated by the behavior of a business entity
did not have the power to jointly sue such entity. In order to
obtain relief, each of them had to bring separate actions, which
caused disadvantages such as the risk of conflicting judgments and
an undue burden on the overloaded Italian judiciary.
After years of debate, the 2007 Italian Budget Law1
introduced a specific provision (Article 140 bis) in the
Italian Consumer Code,2 regulating the so-called
"collective actions." These were intended as an avenue
for consumer associations and committees to obtain - for the
benefit of their members whose "collective interests"
were violated - restitution and damages for certain contractual or
tort claims, or in respect of unfair commercial or anticompetitive
conducts.
Before becoming effective, Article 140 bis was subject to
a number of amendments, such as those contained in Article 49 of
Law no. 99 dated July 23, 2009. Collective actions were then
renamed "class actions" and were directed to protect each
of the plaintiffs' "individual rights," rather than
their collective interests. Accordingly, the relevant locus
standi was shifted from national consumer associations or
committees to single users and consumers, either individually or
represented by one of the mentioned organizations, which, lacking
autonomous standing, must be duly empowered by class members
themselves.
On January 1, 2010, after several postponements, Article 140
bis entered into force in respect of harmful events
occurred after August 16, 2009.
Subsequently, Article 6 of Law Decree no. 1 dated January 24,
2012, ratified by Law no. 27 dated March 24, 2012 under the heading
"Rules to make class actions effective," added a further
set of amendments. The recent changes, effective as of March 25,
2012, lowered one of the admissibility thresholds: formerly, class
actions were inadmissible if class members' rights for which
protection was sought were not "identical," whereas these
rights now need to be "homogeneous," which is a wider
concept.
Class actions are not a widespread phenomenon in Italy. Only a
handful of lawsuits have been brought before Italian
Courts,3 and most of them were unsuccessful. The
majority was dismissed at the admissibility bar, and one was
rejected on the merits. However, on February 18, 2013, the first
class action was upheld on the merits by the Court of Naples
(Judgment no. 2195 dated February 18, 2013).
This judgment concerned the claims brought by a group of tourists
against a tour operator in respect of a purchased all-inclusive
holiday package, according to which the plaintiffs were to spend a
week in Zanzibar in a specific four-star resort. However, once on
the island, the tourists were initially sent to a different hotel
because the agreed hotel had not been fully restored. The new hotel
was significantly less luxurious. Moreover, when the tourists were
eventually transferred to the agreed hotel, they experienced
further unexpected disadvantages, given that the pool and spa
structures were not fit for use and the tourists could only use the
hotel beach, which had not been decontaminated. The court upheld
the claims of the lead plaintiffs and part of the group but
rejected the claims of the remaining class members on the grounds
that their rights were not perfectly "identical" to those
of the others.4 In this regard, the court had to apply
the restrictive interpretation imposed by the 2009 version of the
law; however, the same court declared in an obiter dictum
that the new "homogeneous rights" concept introduced by
the 2012 reform would improve the effectiveness of the class action
tool applicable to future cases.
Despite the above, court interpretation of the new class action
regime still needs to find its stability, and it will be crucial to
observe how future cases unfold. Nevertheless, the main features of
the recent legislative fine tuning on the subject - read in light
of the very first judicial victory for the consumers - will here be
described for the benefit of all entities with an interest in the
Italian market.
Scope of Application
Ratione Personae.
Pursuant to Article 140 bis, not all individuals, but
only "consumers" or "users" whose
"homogeneous rights" appear violated, may file a class
action, either directly or through one of the mentioned
associations or committees. "Consumers" or
"users" are defined by Article 3 of the Italian Consumer
Code as: "any individual who is acting outside trade, business
or profession purposes." Hence, class actions are not an
option either for those who act within the scope of their trade,
business, or profession, including their employment contract, or
for parties who are not individuals.
Article 140 bis does not specify the minimum number of
users or consumers requested to form the "class." In the
recent case decided by the Court of Naples, there were
approximately 30 class members.
As for defendants, class actions may be filed only against
business entities, such as individuals, corporations, or other
legal entities acting within the scope of their business. Article
140 bis does not clarify whether plaintiffs are allowed to
file a class action against foreign companies that do not have
registered offices in Italy; however, the relevant EU and
international provisions on jurisdiction shall
apply.5
According to Article 140 bis,the final judgment is
binding upon the company/defendant, the lead plaintiff(s), and all
individuals who subsequently enter into the proceedings according
to the "opt in" mechanism. Nonetheless, consumers and
users who do not opt into the class action retain the power to
bring their own individual actions against the company, although
they may not jointly start another class action against the same
entity on identical grounds.
Ratione Materiae.Under Article 140
bis, paragraph 2, class actions in Italy may be grounded
on alleged violations of the following rights:
- Rights arising out of standard contractual terms and conditions binding the plaintiffs and the business entity (letter (a));
- Rights in respect of defects of products or services, regardless of any contractual relationship between the plaintiffs and the manufacturer (letter (b)); and
- Rights to compensation accorded to consumers or users for unfair commercial practices or anticompetitive conducts (letter (c)).
The relief sought consists in a declaratory judgment on the
company's liability, compensation of damages, and restitution
of any undue payment.
Unlike the U.S. legal system, Italian law encompasses only
compensatory and not punitive damages. Therefore, any sum that the
defendant company might be required to pay would merely be directed
to compensate an actual prejudice suffered by the plaintiffs.
Obviously, without punitive damages as an available remedy, Italian
consumers - compared to their U.S. counterparts - are less
incentivized to use the class action tool, also because they would
have less individual leverage in any related settlement
negotiation.
Procedural Issues
Service and Competence.Class actions begin with the lead plaintiff filing a writ of
summons in accordance with Italian Civil Procedure, pursuant to
which a claim must be served on the defendant at least 90 days
before the first hearing. The writ must also be served on the
public prosecutor, who has a part in the admissibility bar phase.
Within 10 days of service, the writ and the relevant documents must
then be filed with the competent court.
Pursuant to Article 140 bis, paragraph 4, in respect of
class actions, the competent court is the one located in the
regional capital of the territory where the defendant has its
registered offices.
Opting In. As mentioned, unlike the U.S., Italy
has adopted an "opt in" model, according to which
affected consumers or users may join the lead plaintiff by filing a
written declaration and evidence supporting their claim. The most
recent amendments to Article 140 bis introduced the
possibility to file such declarations by certified mail, email, or
fax and, regardless of the method, this may be done without the
assistance of a lawyer. Prospective class members have the right to
opt in until the term set by the judge during the first hearing
(120 days maximum).
Opting in, for class members, amounts to a waiver of their right
to start any different legal proceedings on the same grounds for
which they are seeking protection through the class action.
Moreover, those who opt in will be bound by the final
judgment.
The Admissibility Bar. At the first hearing, the
court must determine whether the claim is admissible through a
procedural order similar to U.S. certification. At the same
hearing, the court may stay a proceeding if a claim regarding the
same facts is pending before an administrative court, or if an
independent administrative agency or authority is investigating the
same issue.
On the one hand, as set forth in paragraph 6 of Article 140
bis, the claim will be declared inadmissible if: (i) prima
facieappears "clearly ungrounded"; (ii) a "conflict
of interest" exists (particularly with regard to any
relationship between the associations representing the consumers
and the defendant); (iii) the plaintiffs' rights are not
"homogeneous"; and (iv) the lead plaintiff is incapable
of handling the interests of the class (i.e., it lacks the
necessary administrative, secretarial, and arguably financial
means).
As noted, one of the most significant changes introduced by the
2012 reform was the substitution of the term "identical
rights" with "homogeneous rights," which lowered the
admissibility bar. In the above-mentioned decision, the Court of
Naples confirmed the restrictive interpretation of identical rights
as rights that must coincide as to all elements, except the right
holder. Moreover, the court essentially welcomed the 2012
introduction of the "homogeneous rights" concept
applicable to future cases, which is also praised by the first
commentators on the judgment.6
On the other hand, as set forth in paragraphs 9-11 of Article 140
bis, an admissibility order shall set out: (i) the
characteristics of the rights that may obtain protection through
the class action; (ii) the form of the advertisement directed to
inform other class members of the possibility to opt into the class
action; (iii) the term for opting in within 120 days; and (iv)
procedural rules relating to the following phase of the
proceedings, including taking of evidence.
Pursuant to paragraph 7 of Article 140 bis, any order on
admissibility may be challenged before the competent court of
appeal within 30 days, but any such appeal - which must be decided
in 40 days - does not stay the assessment on the merits of the
class action that was declared admissible.
The Final Judgment. If the lawsuit is successful,
the court issues a judgment finding the defendant company liable,
either ordering it to pay damages to the plaintiffs in a given sum
or specifying thecriteria for determining the quantum thereof. With
regard to the latter case, the most recent amendments to Article
140 bis set a 90-day deadline for the parties to find an
agreement on quantum, which would be directly enforceable. In
abeyance of such agreement, one of the parties may request the
court to liquidate damages. In this respect, the Court of Naples
did not avail itself of the simplified method of setting the
criteriaand expressly quantified the amount of damages in
€1,300, directed to compensate the "ruined holiday"
of each successful class member.
The final judgment becomes enforceable only after 180 days from
issuance, but the losing party is encouraged to pay within such
period, as its payment would be free from interest and additional
taxes.
As noted, the judgment binds the original plaintiffs and those who
timely opted into the class action. All other individuals who
failed to opt in, but whose rights were hindered by the same
behavior of the company, do not directly benefit from the decision.
As noted, they may still independently sue the same company, but
only individually and not through another class action (Article 140
bis, paragraph 14). Conversely, any inadmissibility order,
being of procedural nature, would not prevent losing parties to
bring a new class action against the same company.
The final judgment may be appealed before the competent court of
appeal, which, if so requested, may even suspend its
enforceability, taking into account the total amount due by the
defendant, the number of creditors, and any prospective difficulty
in recovering the amounts paid should the appeal be successful. In
any case, the court of appeal may order to put the sum into
escrow.
On a different note, should the class action be concluded without
a final judgment, there are options for those whose claims remain
unsatisfied. Pursuant to the newly introduced paragraph 15 of
Article 140 bis, if the original plaintiff settles its
claim (individually or with other class members)or if the class
action is otherwise cancelled, the rights of class members who
failed to agree on such measures "are not prejudiced."
Therefore, in the former case, the class action would continue with
the remaining adherents, and, in the latter case, class members
would be entitled to bring new proceedings (and arguably a class
action) against the company.
Conclusion
After the third round of amendments and only one victory for the
consumers, Italian class actions appear to have a long way to go
before reaching full maturation. Indeed, the system still shows
structural shortcomings that need more than court interpretation in
order to be resolved.
First of all, the "opt in" system makes it difficult for
Italian class actions to collect a large number of participants. In
this regard, Italy is still far from the U.S., where, thanks to the
opposite "opt out" system, class actions are
automatically participated in by a large number of right holders
(i.e., a whole class, except those who opt out), which serves as a
deterrent vis-Ã -visthe business entities. These entities,
in any case, would not risk being condemned to punitive damages in
Italy, which also renders Italian class actions less
appealing.
Moreover, there are no financial incentives in Italy for
prospective class action plaintiffs or their lawyers. Indeed, the
Italian system does not even provide for a "lead counsel"
or "class counsel," (i.e., the law firm or lawyer) that
prosecutes a class action on behalf of the class members in the
U.S. Therefore, it appears unlikely that the use of class actions
will be promoted through the action of individuals - who may not
have the necessary means to handle the lawsuit and may for this
reason risk an order of inadmissibility - or lawyers, who are not
incentivized to invest in this sector. Finally, there are also
difficulties for consumer associations or committees, which do not
have direct standing and would therefore be subject to the
procedural conduct of the single plaintiffs, who may autonomously
decide to accept settlement offers made by the companies.
Hence, even if the decision rendered of the Court of Naples may be
Italian class actions' first step forward, several weakness
need to be overcome before these actions become an effective tool
for consumers or a tangible disincentive for business
entities.
Footnotes
1. Article 2, Law no. 244 dated December 24, 2007, i.e., "Legge Finanziaria."
2. Legislative Decree no. 206 dated September 6, 2005.
3. Ten, according to a very recent review, of which six were dismissed (five at the admissibility bar, one on the merits); three were merely declared admissible and are still pending, and only one was recently upheld on the merits by the Court of Naples (see G. Finocchiaro, Con la prima vittoria di una class action italiana il fronte dei consumatori "allerta" le imprese, in Guida al diritto, n. 12, March 16, 2013, p. 12 ff.).
4. For example, the Court rejected the claims of those plaintiffs who had been transferred to a different alternative resort whose poorer quality had not been proved. Moreover, it rejected the claims of those tourists who spent the whole week in the agreed hotel, despite the disadvantages. In any case, the Court stated that these claims had wrongly been declared admissible, given that they did not concern rights "identical" to those of the lead plaintiffs.
5. Namely, EU Regulation 44/2001 in the case of companies registered within an EU member state, or the 1968 Brussels Convention in the case of companies registered outside the EU.
6. G. Finocchiaro, L'azione collettiva deve poter essere proposta anche per tutelare diritti di consistenze diverse, in Guida al diritto, no. 12, March 16, 2013, p. 22.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.