The Implications Of The Expanded Scope Of The French Class Action System On Potential Liability And Insurance Coverage For Companies Domiciled And Doing Business In France

Author:Mr Kevin Dreher and Laura Ferry
Profession:Reed Smith

Although the French class action system has gotten off to a slow start with only 6 actions initiated to date, the recently and anticipated expanded scope of the French class action system will impact the potential liability and insurance coverage of corporations domiciled and doing business in France. For this reason, corporations domiciled and operating in France should continue to monitor the evolving scope of the class action model and consider the scope of insurance coverage available to provide a defense and indemnification in connection with any class actions initiated against them in France.

  1. Mixed Results of the French Class Action System After Two Years

    On October 1, 2014, a system of class action was introduced into French law to provide a procedure for consumers to seek and obtain relief on a group or class-wide basis. In the first phase under the French class action system, 15 associations representing consumers at a national level and nearly 500 associations in the health care system are authorized to initiate a class action in French court. These associations may be represented by a lawyer and they may participate in a mediation to obtain compensation for individual claimant damages suffered by consumers. In the second phase, the court rules on liability of the defendant(s) and sets the conditions under which individuals can step forward to be included in the group/class to obtain compensation for their damage (i.e., an opt-in system). The third phase involves implementation of the decision to compensate consumers, which would involve the association transferring funds to the group/class members and any related enforcement proceedings to recover compensation awarded by the court.

    Under the French class action model, unlike the U.S. model, the initiation of the action has been solely entrusted to authorized "associations" in an effort by the French legislature to avoid the perceived problems with the U.S. class action system, including the perception that U.S. plaintiffs' lawyers initiate too many class action lawsuits and without adequate legal basis for such claims.

    Having sought to limit the number of class actions and to narrowly define who can initiate such claims, the French class action model has not achieved any significant impact on protecting consumers since only six class actions have been filed. The class actions initiated have included claims involving rental real estate, financial services, electronic...

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