I INTRODUCTION TO CLASS ACTIONS FRAMEWORK
The first form of class action was introduced into the Italian legal system in 2007 by Law No. 244/2007 (the Finance Law 2008). In particular, this law added Article 140 bis to the Consumer Code, which expressly provides for and regulates the 'compensatory collective lawsuit'. In principle, such provision should have entered into force 180 days after the coming into force of Law No. 244/2007. However, owing to several fundamental and procedural issues, its coming into force has been continuously postponed. By Law No. 99 of 23 July 2009, the Italian legislator substantially modified the original Article 140 bis of the Consumer Code (Legislative Decree No. 206 of 6 September 2005), adopting a new text that entered into force on 1 January 2010 (the Class Action Law), regarding events and infringements occurring after 15 August 2009 (the date of coming into force of Law No. 299/2009).
Lastly, in 2012 the Class Action Law was amended so as to expand its scope and to protect the contractual rights of a number of consumers and users that find themselves in 'homogeneous' situations, while the previous language of the law required the situations to be 'identical', still according to an opt-in scheme.2
More in detail, the current version of Article 140 bis provides that consumers with homogeneous interests are entitled to file a class action against a private corporation in three different cases: breach of contract, unfair or anticompetitive commercial practices and product or service liability (see below).
For the sake of completeness, it has to be noted, that, by the Legislative Decree No. 198 of 2009 on the efficiency of public administration, the Italian legislator enacted a different type of class action, granting consumers the right to protect their interests in case of misconduct performed by public bodies or private companies providing public services. The commentators usually refer to this as 'public class actions', as opposed to the above-mentioned 'private class action'.
Further significant change could result from the reform of the Class Action Law now pending before the Senate of the Republic, after having been approved by the House of Representatives. The most significant changes could be:
- the inclusion of the rules of the class action in the Italian Code of Civil Procedure, consolidating the private class action and the public class action;
- the expansion of the subjective and objective scope of the class action with the opportunity for the consumers to join the latter even after the court's decision; and
- the provision of financial incentives to the attorneys who represent the class.
In this chapter, we will deal with the private class action only, in light of the different scope supporting the public class action.
II THE YEAR IN REVIEW
In recent years, the railway company Trenord has been involved in different class action proceedings.
In particular, the most important was incepted on 25 August 2017 before the Court of Appeal of Milan, which issued a historical decision ordering Trenord to pay compensation of €300,000 as a result of the class action brought by Altroconsumo.
The claim arose from the inefficiencies suffered by the consumers for more than 15 days in December 2012, when Trenord was responsible for cancellation of trains, delays and lack of information, which caused damage to approximately 700,000 commuters.
In 2014, after four days of mobilisation, Altroconsumo had filed before the Court of Milan a class action that had been admitted on 3 March 2014.
In the first instance proceeding, the Court of Milan dismissed the class action. In particular, the Court recognised commuters' right to be compensated as a result of the delays occurred, however it considered that the automatic compensation offered by Trenord - equal to the 25 per cent of the monthly subscription's cost – was sufficient.
Altroconsumo appealed this decision. At the first stage, the Court of Appeal of Milan stated that the failures in Trenord's software management had to be assessed and compensated in a single proceeding. Consequently, the class actions promoted by the consumers' associations Codici and Codacons were to be consolidated with that one of Altroconsumo. Second, on 25 August 2017 the Court of Appeal of Milan overturned the decision of the Court of Milan ruling for a compensation of €100 for each member of the class action in addition to the automatic compensation already paid.
For sake of completeness, it is worth noting that in 2018 Trenord was again subject to a class action in relation to the difficulties faced by the consumers after a railway accident occurred in Pioltello in January 2018.
On that occasion, the Court of Milan upheld consumers' claims and the damages suffered; however, it considered the class action inadmissible as each of the commuters should have proved that he or she was actually on the train that was late and suffered damages. In addition, the Court of Milan ordered the commuters to pay €7,000 for legal costs. As a result of this surprising decision, the parties accepted Trenord's proposal, according to which they will waive the appeal upon a waiver by Trenord of the legal costs.
i Types of action available
Pursuant to Article 140 bis of the Italian Consumer Code, (private) class actions can be brought to seek legal relief in case of breach of the following rights, which are now required to be simply 'homogeneous' and no longer 'identical':
- contractual rights of a class of consumers towards the same professional defendant, these rights deriving also from standard terms and conditions, and mass contracts;
- rights arising from product liability, even in the absence of a direct contractual relationship with the manufacturer. In particular, reference must be made to the damage arising from defective or dangerous products as regulated by Articles 114 and following of the Consumer Code. It is worth mentioning that, in the case of defective goods, the manufacturer's liability is widely considered by Italian case law as a 'strict and objective liability' and, therefore, the consumer merely has to prove the existence of the damage, the causal nexus between the damage, and the use of the product and the fact that the product resulted as defective during its use, while the producer has the burden to prove that the defect of its product did not exist when the product was put into circulation or that there was no fault or negligence from its side; and
- rights to compensation for the damage suffered owing to unfair commercial practices and anticompetitive behaviour.
Although, so far, most of the cases relate to unfair trade practices and financial contracts, most commentators consider that environmental law should be covered by the Class Action Law, despite the subject not being expressly indicated in Article 140 bis of the Consumer Code.
Limitation periods are the same as ordinary civil actions (i.e., five years for torts and 10 years for contractual liability).
ii Commencing proceedings
Pursuant to new Article 140 bis of the Consumer Code, consumers and users that have suffered damage are entitled to bring a class action lawsuit. Such a lawsuit may be brought individually by the consumer, as a party of the relevant damaged class, or through associations to which the consumers have granted proper delegation of power or through a committee in which the consumers participate. Any association may be delegated, provided that it is registered in a special register held by the Ministry of Industry or, lacking such registration, is deemed by the court to be sufficiently representative of a class of consumers in a given market.
Consumer associations are not entitled to bring class actions on their own.
Other consumers or users that intend to join a class action that have already been initiated can do so without the need of a counsel for the defence. Such joining involves the waiver to start any individual lawsuit grounded on the same claim as that of the joined class action.
Both the defendant and the public prosecutor have to be notified of the complaint. The public prosecutor will then be able to take part in the first stage of the proceedings and recommend that the court admit or dismiss the class action for reasons of public interest.
According to Article 140 bis, if a consumer is willing to benefit from the court's decision, he or she is required to join the class and file the relevant documentation supporting his or her position (e.g., the invoices or tickets proving he or she bought a certain item), listing the factual elements and legal grounds on which his or her claim is based. Nonetheless, joining the class does not imply that the party will directly participate in the proceedings, and, for this reason, he or she is not required to be assisted by a lawyer.
A consumer may also decide not to opt in. In this case, he or she will be allowed to file a separate individual action. Furthermore, if he or she joins the class and then the lead plaintiff decides to bargain a settlement with the defendant, he or she can refuse to be bound by it and regain his or her individual power to sue.
As to overseas claimants, nothing in Italian law prevents them from joining the action, pursuant to the same provisions applicable to Italian and EU consumers.
iii Procedural rules
Class action lawsuits fall under the jurisdiction of the court located in the main city of the region where the company is based (with some exceptions) and are handled by a panel of three judges of the tribunal, no matter what the value of any single (or aggregated) claim.
At the end of the first hearing, the court rules on the admissibility of the lawsuit. In particular, the lawsuit shall be declared inadmissible if:
- it is prima facie clearly groundless;
- there is a conflict of interest;
- the judge believes that the individual rights indicated in the class action are not homogeneous; or
- the proponent does not appear to be capable of properly protecting the interests of the relevant class.
In the past, this has proved to be a crucial stage of the class action and most actions were rejected at that moment, particularly on the point of homogeneity, as opposed to the identity of positions of the consumer plaintiffs. The purpose of the first reform of 2012 was just to make it easier for the class actions to be admitted, but this is still a serious hurdle to overcome.
In that respect, two main positions have been taken by the Italian courts. The first, stricter one, maintained by the Court of Milan by the decision issued on 8 November 2013, stated that only the breaches caused by a single event may be considered 'homogeneous' for the purposes of the Class Action Law. In contrast, the Court of Venice (decision issued on 12 January 2016) interpreted the concept of homogeneity as a mere similarity; this means that the class can be considered as homogeneous on condition that the damages are caused by the same behaviour, even if this is not (necessarily) the same event that actually caused all the breaches.3 Clearly, the interpretation of the Court of Milan implies a substantial limitation of the applicability of the class action. That said, even in the lack of precedents of the Court of Cassation (see below), it seems that the interpretation of the Court of Venice may prevail, as the recent decision of the Court of Milan in the Samsung case declared the admissibility of the class on the assumption of the homogeneity of the behaviours.
At the end of this first stage of the proceedings, if the action is considered inadmissible, the court will rule on the legal costs of the lawsuit that the losing party will have to bear. It is worth noting that, while the decision stating the inadmissibility can be challenged before the court of appeal, the decision issued by the latter cannot in turn be challenged before the Court of Cassation.
According to the recent decision issued by the Joint Chambers of the Court of Cassation Court on 1 February 2017, the class action is just one of the possible ways for the consumers to enforce their rights, so the decision of the court of appeal does not prevent the consumers from seeking compensation for the damage suffered following the ordinary procedural rules. According to the Supreme Court, while the inadmissibility declared by the court of appeal prevents the consumer plaintiffs from restating another class action under the same structure, other consumers are still entitled to put forward a class action based on the same grounds.4 The Supreme Court also highlighted that the consumers who initially promoted the (inadmissible) class action would be able to join the said new class action, once it is finally admitted. This decision has been criticised by many commentators, in light of the crucial role played by the preliminary stage for scrutiny of admissibility, where most of the class actions started as of 2010 have been stopped over past years. Owing to the features of the Italian legal system, in the absence of judgments issued by the Court of Cassation, there will be no chance to have a clear and final interpretation of the Class Action Law and namely of the criteria set forth to identify the homogeneity of the consumers' positions, a concept still subject to divergent interpretations of the courts of merits. In fact, even though in the Italian legal system the precedents of the Court of Cassation are not automatically binding (stare decisis) on the lower courts, it is without doubt that they have great influence on all territorial courts.
Coming back to the class action proceedings, if the action is admitted, the court will specify the requirements that every consumer should fulfil to join the class.5 Most importantly, it will order the publication of the decision at the expenses of the plaintiff, and will establish a term within which any consumer may opt-in.
Parties will be able to challenge the court's decision within 30 days of notification. The appellate body (the competent court of appeal) will then re-evaluate the claim and issue a judgment within the following 40 days. If the court of appeal does not overturn the decision of the first instance court, the merits phase will begin.
iv Damages and costs
During the merits stage, the court goes through and analyses the merits of the case. Hence, if the judges find the defendant to be liable, they will rule on the amount of damages that each consumer deserves or indicate general uniform criteria. According to Law No. 27 of 2012, the parties are granted 90 days to reach an agreement on the above; failing this, the court will quantify the amounts due. Consistently with the opt-in mechanism, consumers who did not join the class are not bound by any agreement.
Punitive damages are not allowed under Italian law.
At the end of this stage, the court will also rule on the legal costs that the losing party should bear. The decision can be challenged before the court of appeal and, subsequently, in the Court of Cassation.
Any possible settlement reached during the proceedings is binding only on the consumers who have joined the action and expressly accepted the settlement.
IV CROSS-BORDER ISSUES
The Class Action Law does not expressly address the possibility for overseas consumers to join the class or that a class action can be brought before foreign companies. Ordinary jurisdiction and applicable law provisions apply.
As to follow-up actions relating to competition law infringements, where an infringement has been identified by a decision of the European Commission, Italian courts will consider themselves bound by the findings made in that decision, according to Article 16 of EU Regulation No. 1/2003. An Italian court may, therefore, opt to stay proceedings brought in reliance on a European Commission decision where that decision is subject to appeal before the European courts, so as not to reach a judgment that is irreconcilable with the outcome of that appeal or appeals.
It is worth noting that under a recent judgment, the joint divisions of the Italian Supreme Court ruled on 5 July 2017 (judgment No. 16601) that in Italy it will be possible to enforce judgments issued by foreign courts, granting the payment of punitive damages. This will apply also to judgments following class actions, whereas for domestic class actions it will still be impossible to get punitive damages, as the general principle emerging from the Italian framework on civil liability is based on compensatory damages, which are granted only as a compensation for the actual losses, injuries or harm suffered as a result of the behaviour of the wrongdoer.
V OUTLOOK AND CONCLUSIONS
Even after the amendment of 2012, the class action has not proved over the years to be an effective instrument to secure and enforce consumers' rights. Even if official data are not available, it is well known that since 2010 fewer than 10 cases reached a positive outcome for the consumers. Throughout 2016 and 2017, consumers associations scored some important points, but most commentators state that the law needs sweeping amendments, otherwise the entire system is doomed to fail.
As mentioned above, the most common problem with class actions still lies with the requisite that consumers have to be in a homogeneous situation. Based on that, most class actions have been dismissed at the preliminary stage as they were found to be inadmissible under the Class Action Law. This was the case, for example, with some class actions with a potentially huge impact, as those started versus the state-owned broadcasting company (RAI TV), the navigation companies Moby and Snav, and the railway company active in Lombardia, Trenord.
A further problem with the Class Action Law over the past years has been the availability of the action to consumers only, and the rather restricted definition of 'consumer' adopted by the courts.
As highlighted above, two different trends were maintained by courts, and so far no consistent trend has been established, also owing to the fact that the Supreme Court is not allowed to reconsider the decisions issued by the courts of appeal.
As regards the subject of the cases, the majority of the class actions concerned unfair commercial practice allegedly committed by Italian banks against consumers.
Below is a short outline of some of the most significant class action cases bought before Italian courts over the past years.
i Some significant cases
Samsung Electronics Italia
In March 2017, the Court of Milan admitted a class action brought against Samsung Electronics Italia by Altroconsumo. The claim arose from a breach of the rule concerning the unfair trade practices and it was based on the fact that for some devices Samsung declared a memory substantially higher than that actually available. Samsung objected that the positions of the consumers were not homogeneous as required by law. The Court of Milan, firstly, ruled that the above mentioned positions were sufficiently identified, the action proceeded on the merits but, ultimately, the Court of Milan decided not to proceed any further with the class action because of the unsuitability of the methods Altroconsumo had adopted for its communication.
This case was started in 2011 before the Turin Court by the consumer association Altroconsumo. The Court finally ascertained that some overdraft charges applied by the bank were unlawful and sentenced the latter to give them back to the account holders. However, owing to some formal issues as regards the joining deeds, only six consumers were finally compensated.6
The action started by some consumers seeking compensation for damage suffered a result of the cancellation of a holiday package. The Naples Court sentenced the tour operator Wecantur to pay €3,600 for each consumer, but in the end nobody got their money, as Wecantur went bankrupt.7
Volkswagen and FCA – class actions versus the automotive industry
Late in 2015, the Turin Court of Appeal admitted a class action started by the Italian consumer associations Altroconsumo against Fiat, regarding the falsification of the pollution tests of the vehicle Panda third series 1.2.8 More recently, Altroconsumo scored a good point for a class action brought against Volkswagen about the well-known case concerning the falsification of pollution tests of diesel vehicles. On 16 June 2016,9 the Venice Appeal Court, by reversing a previous decision of the Venice First Degree Court, admitted the class action concerning the Volkswagen vehicle model Golf 1.6 HDI and opened the possibility for further consumers to join the action. In November 2017, the Court rejected an appeal, and the case is now pending on the merits The next hearing will be in May 2019; by that time the Court will have to analyse all the 76,000 filed claims.
British American Tobacco Italia
This is the first and only case of a tobacco class action in Italy. The lawsuit was filed by Codacons, on behalf of several consumers who claimed that the high level of nicotine contained in the cigarettes sold by British American Tobacco Italia caused addiction. Consequently, the plaintiffs sought compensation both for the costs of the cigarettes purchased under this dependence and the health damages caused by the same.
From a procedural point of view, the defendant objected that the alleged facts occurred before Article 140 bis came into force, thus no class action could be filed, and that in any case the rights at issue were not homogeneous.
The Court of Rome partially upheld the arguments of British American Tobacco and ruled that the class action proceedings was applicable only for the misconduct that occurred after Article 140 bis became enforceable (i.e., after 15 August 2009). Then, as regards the merits of the case, the Court considered the action to be groundless on the statement that every smoker was in fact fully aware of the risks arising from the consumption of cigarettes, and the damage was, therefore, a consequence of a free and aware choice of theirs.
The Court also declared that a collective protection could be granted only upon condition that the judge's assessment can focus on the same legal and factual issues (i.e., on homogeneous rights). On the contrary, in the specific case, as every consumer had his or her own smoking 'history' and has been differently affected by the nicotine, the Court of Rome ruled that the class was not homogeneous for the purposes of the Class Action Law. Accordingly, the action was dismissed as being inadmissible.10
The Italian class action system clearly needs further legislative interventions to gain popularity.
As reported above, only a few class actions have been declared admissible. Indeed, there are several issues among the provisions of Article 140 bis that need to be addressed.
The courts tend to allocate the litigation expenses between the parties or to apply the general principle whereby the losing party bears the costs and attorney fees of the winning party. However, one of the most significant financial burdens of a class action litigation is the publication expense of the ordinance admitting it. Even Article 140 bis does not contain provisions as to how to allocate such expenses; so far the courts have uniformly imposed on the plaintiff to anticipate those expenses (which, only at the end of the proceedings, may possibly be charged to the defendant, if the action is upheld). Accordingly, in order to comply with the adequacy requirement, a consumer is required to prove that he or she has enough economic and organisational resources to provide the publication of the court orders as well as the legal costs of a possible merits stage.
The economic factor has often been proved to be decisive for the courts to dismiss many lawsuits, and has inevitably affected the practice of class actions in Italy, where most cases are in fact promoted by associations granted with an ad hoc mandate. These associations, in fact, have organisational and financial resources greater than single individuals or small groups of consumers.
On the other hand, the costs for proceedings and the high standard of representativeness required by the courts might discourage the consumer associations when the number of class members is presumed not to be significant.
Through Article 140 bis a consumer may only seek compensation for damages and restitutions, but not 'punitive damages', which are not allowed by Italian law (whereas, as indicated in Section IV, foreign decisions granting punitive damages may be enforced in Italy).
However, contingency fee arrangements are not allowed by law, and this has made big legal firms reluctant to take cases where the amount of damages awarded may be eventually modest and the attorney fees liquidated by the court not sufficiently rewarding.
For the above reasons, in light of the relevant financial resources needed to have court orders published with national newspapers, the consumers' associations could likely find it too onerous to promote a class action. Moreover, even assuming that the class is dimensionally significant, there is no certainty that after that the action has been admitted, it will end with a positive judgment in the merits. Consumers and associations are forced to run the risk that the high publication expenses are paid for no benefit. Nonetheless, the publicity is necessary to inform people and put them in a position to opt in. Also, the above mechanism has an important impact on the outcome of class actions proceedings. In fact, consumers other than the plaintiffs can join the class only after the action has been admitted. Hence, in theory, a class potentially involving thousands of consumers could stop at the preliminary admissibility stage, if filed by a promoter without the appropriate financial resources.
One may, therefore, wonder whether it makes sense to switch to an opt-out system, which would presumably entail lower publicity costs. Apart from the issues that such a choice may raise, such a mechanism would hardly be successful in the Italian system unless appropriate procedural powers are granted to the consumers that would be involved, by operation of law, into the class action.
Another possible change could involve a better definition of the element of homogeneity to ensure its uniform interpretation.
Also for these reasons, the Italian parliament considered enacting the above-mentioned reform of the class action law, which is now pending before the Senate of the Republic
1 Gianfranco Di Garbo is a partner and Gaetano Iorio Fiorelli is a counsel at Baker McKenzie.
2 See Law No. 27 of 2012, which also introduced other amendments to the Class Action Law, for example, regarding the deadline for the consumers to join the class, which is now set forth by the court not later than 120 days after the decision to admit the action. Under the previous version of the law, consumers were allowed to join the class at any time after the admission of the class, even during the appeal proceedings.
3 For example, while one cannot deny that, for an action concerning unfair commercial practices committed by a bank, based on the (same) standard contractual forms, the misconduct is homogeneous (see the cases against the banks); in other cases – such as the unfair information provided to consumers in relation to several models of tablets and smartphones – the situations may be actually different both for the scope of the information and the persons who actually received it under different circumstances.
4 See below a brief description of the Samsung case footnote 6.
5 For example, in the recent Samsung case, the Court of Milan made reference to some smartphone and tablet models, bought within a certain period of time, also relying on the decision of the Italian Competition Authority that had dealt with the case from a public enforcement point of view.
6 See the decision of the Court of Turin of 28 March 2014 (Turin Court Case No. 32770 of 2011).
7 See the judgment of the Court of Naples of 18 February 2013 (Naples Court Case No. 2195 of 2013).
8 See the decision of the Court of Appeal of Turin of November 17 June 2015 (Turin Court of Appeal case No. 1775 of 2015).
9 See the decision of the Court of Appeal of Venice of the 17 June 2016 (Venice Court of Appeal Case No. 298 of 2016).
10 See the decision of Rome Court of 1 April 2011, confirmed by the decision of the Rome Court of Appeal of 27 January 2012.