As reported by “Rynek Prawniczy”, the Kubas Kos Gałkowski law firm represented injured parties in a class action concerning the government and local government administration bodies’ liability for damages suffered during the flooding in the spring of 2010. After proceedings lasting for seven years, in October 2017 the Regional Court in Krakow ruled that the State Treasury, represented by the Director of the Regional Water Management Board in Krakow and the local government of the Świętokrzyskie Province, are jointly and severally liable for the damage suffered by flood victims due to the Vistula River having broken the flood banks near Sandomierz.
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Below we present answers of the lawyers from the Kubas Kos Gałkowski law firm to the questions of “Rynek Prawniczy” concerning group court proceedings in Poland. The answers are given by the law firm’s partners, Agnieszka Trzaska, attorney-at-law, who acted as counsel for the claimants – flood victims, and Rafał Kos, attorney-at-law.
“Rynek Prawniczy”: the prolixity of group proceedings is even more shocking than that of ordinary proceedings. And yet, the idea was to shorten the processing of the claims by merging them into one case. What is the reason for the failure? The extremely formalistic procedure or the conservative cunctatorship of distrustful judges who several years ago did not understand the new institution in the Polish civil procedure?
Agnieszka Trzaska, Rafał Kos: The first years of the Act on Pursuing Claims in Group Proceedings being in force have shown that the newly introduced mechanism has not fulfilled the hopes for the faster and more effective resolution of many individual cases which were placed in it. This was due to several factors. Undoubtedly, the legislative novelty of the Act itself and of the mechanism for the collective pursuit of claims it introduced and which requires a slightly different view of the case than the traditional bilateral process [feature among them]. It also took time to develop the practice of applying the Act, to develop the interpretation of particular provisions, in particular including Article 1 or Article 2 of the Act on Pursuing Claims in Group Proceedings that determine the prerequisites for the admissibility of group proceedings.
Sometimes the excessively formalistic approach of the courts in the course of interpreting these provisions of the Act excluded the way to group proceedings even in those cases which were the main motive for the legislator to take legislative action and introduce group proceedings (e.g. the widely commented case of persons injured in the International Katowice Fair Hall construction catastrophe). A key role for correcting such a rigorous interpretation of the admissibility of group proceedings was played by the first broader statement of the Supreme Court on the understanding of these prerequisites, including the essence of the action for the determination of liability (primarily the decision of the Supreme Court of 25 January 2015, I CSK 533/14). This decision of the Supreme Court and another one from 2015 changed the rigorous approach of the courts which in the last two years have started to rule increasingly more favourably and to a greater degree in favour of the admissibility of group proceedings in individual cases pending before them.
“Rynek Prawniczy”: According to the statistics of the Ministry of Justice, in the years 2010-2015, approx. 38% of cases in group proceedings were examined on the merits. Judgments after eight or so years of the Act’s being in force are an outstanding rarity. So do the statistics confirm that group proceedings in Polish conditions did not at all pass the effectiveness test?
Agnieszka Trzaska, Rafał Kos: As regards the Ministry of Justice statistics – firstly, one should remember that according to the so-called sectoral approach adopted in the Act, not every civil case may be subject of group proceedings; hence, the fact that less than half of the cases were subject to the content-related examination may have resulted from the reason that in some of these cases group proceedings could not be conducted at all. Without detailed data on the category of claims these cases concerned, it is impossible to draw far-reaching conclusions from these statistics.
Group proceedings in the first years of the Act’s being in force did not turn out to be as effective as one might expect, but in our opinion, it is unfounded to say that these proceedings did not pass the effectiveness test at all.
Undoubtedly, proceedings in the first cases initiated in 2010 and in the following years, during which, one can say, courts and attorneys-in-fact learned the law, can be considered particularly lengthy. In these cases – the first phase of the proceedings (the certification phase) was particularly long, which resulted from ruling on admissibility by courts of two instances, sometimes many times, e.g. in the case of the flood victims, the court twice issued an order to hear the case in group proceedings, in the case of a group of insurance agents against Link4, the case in terms of admissibility was heard three or even four times. In group proceedings, a group of close relatives of people injured in the construction disaster of the International Katowice Fair Hall – the case went to the Supreme Court at the certification stage, similarly the case of a group of book publishers against the administrator of the Chomikuj.pl portal.
It is now clear that after 2015 these initial phases, and especially the certification phase, are moving faster, more efficiently, as can be seen from the cases against insurance companies or banks. And further improvement should be brought by this year’s amendment to the Act.
If you look at these first cases initiated still in 2010, it might seem prima facie that passing judgment in them after seven years is an unsatisfactory achievement in terms of the efficiency and speed of the proceedings. However, if you look at it more closely, it is not quite so if you look at how many individual claims/cases (often extremely complex) we have “dealt with” during this period. In the group proceedings conducted by us – there were fewer than thirty such individual cases, whereas in numerous groups there are from a few hundred to a thousand of them.
Speaking of the effectiveness of group proceedings, it is also impossible to ignore an important aspect related to them, resulting precisely from the accumulation of many claims. In many cases, individual members of the group would not decide to bring an individual action at all, especially in complex cases. Even if each member of the group decided to bring an action individually, there is no doubt that each of these individual cases would take at least 3-4 years.
“Rynek Prawniczy”: This year’s amendment to the Act should be considered rather as a cosmetic powdering of an inefficient model. However, let’s try to be a bit optimistic: which of the new solutions can bring even a modest improvement?
Agnieszka Trzaska, Rafał Kos: We do not agree with the opinion that the changes were cosmetic and perpetuate an inefficient model; we believe that proceedings will be more efficiently and quickly conducted and that the changes will significantly reduce the risk of the misinterpretation of regulations, especially at the certification stage.The amendment was, to a large extent, a response to these predicaments of the first years of the functioning of the Act on Pursuing Claims in Group Proceedings, and the main goal of these changes was to increase the effectiveness of the mechanism. As it results from the substantiation of the drafted amendments, at the legislative stage the legislator thoroughly diagnosed the pathologies present in the case-law and in proposing the amendments used the “precertification” decisions of the Supreme Court and the stance of the doctrine.
Firstly, the catalogue of cases in which group proceedings can be conductedhas been extended to all (not only consumer) cases with claims arising under the contractual regime or claims on the grounds of unjust enrichment.
Secondly, the key issue in terms of the certification stage, the prerequisite for standardising claims for constituting the condition for pursuing pecuniary claims in the proceedings has been made more precise, and the requirement to standardise the amounts of individual claims common circumstances taking into account has been repealed. It is precisely the previous wording of the provision and its excessively strict interpretation that sometimes constituted a reason for the courts to reject class actions in cases that were fit to be heard in this mode.
Thirdly, the essence of the action for establishing liability has also been made more precise, indicating that if the claim for establishing the defendant’s liability is upheld, the court, in its decision, determines the circumstances common to the members of the group which constitute the prerequisites of the claim they pursue. Fourthly, which is particularly important from the point of view of preventing lengthiness – the obligatory settlement on the admissibility of hearing a case in group proceedings during a hearing has been abolished.
Subsequently, the prerequisites to be taken into account by the court when deciding on the imposition of a security deposit on the claimant to secure the costs of the proceedings have been specified, as well as the moment when the court should rule on the deposit.
The provisions related to the issue of announcements notifying about the initiation of group proceedings have been liberalised. Further, more minor changes are also intended to increase the efficiency and speed of the proceedings.
The introduced changes do not, of course, change the opt-in model itself as the main assumption of the Act, but for the reasons indicated above, it is difficult to call them cosmetic.
“Rynek Prawniczy”: What fundamental changes would it take to achieve, at least in part, the same status as in America where, for example, scientific research shows that judgments issued in collective disputes have a deterrent effect on corporations from engaging in practices harmful to consumers? Or perhaps a change from an opt-in to an opt-out model of group formation? Or, for example, establishing a separate court dealing exclusively with group proceedings with specialised judges after internships and training in America? Something else?
Agnieszka Trzaska, Rafał Kos: As far as the first issue is concerned – that of realisation of the regulatory function forcing trading participants to act in compliance with the law by collective redress mechanisms – the current Act, as it is in force, can and does perform this function.
However, it takes time for market/transactions participants to become aware of this mechanism. We must not forget that in the United States, the institution of a class action has already had over a hundred and fifty years of tradition, and the legal culture itself, or more broadly the society’s legal awareness, are more developed than in Poland. It is worth remembering that this “deterrent” effect of judgments rendered in the United States results not so much from the very model of proceedings (opt-out), but from the fact that American courts may award so-called punitive damages to defendants, i.e. many times exceeding the amount of damage (precisely in order to “deter” potential perpetrators, and not only to compensate for the damage); such an institution is not known to our civil law.
Yet, there is no doubt that the introduction of an opt-out model, at least to a certain extent, would contribute to a faster formation or strengthening of this function. In particular, in the case of so-called small mass claims, related to consumer protection or competition law infringements. In any case, the Ministry of Development and the Ministry of Justice are working together on a project of introducing an opt-out model in certain categories of cases and to a certain extent into the Polish law.
Moreover, due to the entry into force of the provisions on private law pursuit of claims for the redress for damage caused by a breach of competition law (the so-called private enforcement), it will be possible to use a number of presumptions and evidentiary facilitations in those group proceedings with private enforcement claims as the subject. The accumulation of these two legal instruments is also likely to have a “deterrent” effect.
The idea of establishing a specialised court is an interesting solution from the point of view of ensuring greater efficiency, the specialisation of the court usually goes hand in hand with high-quality case-law. However, it may be worth waiting for the first effects of legislative changes in the practice of case law in the scope of group proceedings certification.
“Rynek Prawniczy”: A group of law firms has emerged which handle Polish class action cases on the claimant’s side, however, for some of them it is rather mere image marketing. On the other side, they usually have large foreign law firms representing e.g. banks in Swiss franc loan cases. From this perspective, what is important to successfully develop such a specialisation in a law firm? And is it worthwhile at all from the point of view of a law firm as a business?
Agnieszka Trzaska, Rafał Kos: Specialisation in class action is a “premier league” litigation in general; the starting point must be good practice in dispute resolution and settlement, i.e. a team of litigators with a good background in terms of expertise.
Observing current trends as well as the general interest in group redress mechanisms, not only in Poland but in the whole of Europe or globally in general, one can expect that this area will develop. Therefore, it is undoubtedly worthwhile to build your own specialisation in this area.
Interviewer: Ireneusz Walencik
The text originally published in: Rynek Prawniczy, 8 November 2017
