Contributed By Bach, Lederman & Co.
The Israeli Class Action Law was enacted in 2006.
Before its passing, various specific laws allowed the filing of class actions mainly in the fields of securities, antitrust, consumer protection and banking.
The Class Action Law of 2006 has dramatically broadened the legal fields in which class actions may be filed and created a comprehensive and detailed mechanism and procedure for filing and conducting such claims.
The Israeli Class Action Law was influenced by the US regime, and they are very similar, but there are also some notable nuances.
Major similarities include that:
Notable nuances in the Israeli model or departures from the US one include the following.
This regime is not applicable in Israel.
Class actions in Israel are regulated by the Class Actions Law of 2006 and by the Class Actions Regulations of 2010.
The second appendix of the Class Actions Law portrays a list of matters and legal fields in which class actions may be filed:
A class action is a procedural vehicle which allows a person or an organisation to file a claim on behalf of a large number of people who suffered similar damages as a result of an unlawful act or misconduct by businesses or government authorities.
Section 1 of the Class Action Law, defines the targets and goals of the class action as the following:
A class action in which the cumulative damage is lower than ILS2.5 million (approximately USD700,000) is filed with the Magistrates’ Court, and any class action exceeding this sum is filed with the District Court. Therefore, most class actions are filed with the District Court.
An appeal on any decision of the Magistrates’ Court is filed with the District Court and an appeal on any decision of the District Court is filed with the Supreme Court.
Class actions which deal with corporate and/or securities issues should be filed with the Financial Department of the District Court, and class actions in the field of labour law should be filed with a special Labour Court.
The court fees for filing a motion of certification of a class action in the Magistrates’ Court is ILS8,000 (out of which ILS3,000 is paid on the date of the filing of the claim and an additional ILS5,000 after the decision on that motion) and in the District Court is approximately ILS16,000 (out of which ILS5,500 is paid on the date of the filing of the claim and additional ILS10,500 after the decision on that motion).
The Israeli legal system is adversarial and does not have juries. Israeli judges are professional judges who are appointed by an independent judicial appointments committee consisting of Supreme Court judges, government ministers, members of the Israeli Parliament, and Bar association representatives.
The overall procedure for bringing a class action in Israel is set out below.
The Filing of the Certification Motion
The sending of a warning letter is not mandatory. However, in cases in which the plaintiff has a doubt with regard to their claims, it is sometimes advisable.
Prior to the filing of the certification motion, the plaintiff has to check the Class Action Registry to see whether a previous similar claim has already been filed, and in such cases, they must state that within the framework of the certification motion. In such cases the court will decide whether to dismiss one of the claims or to unite them.
The factual basis of the certification motion should be supported by an affidavit and in certain cases, in which professional or scientific questions are involved, an expert opinion may be required. The plaintiff has to specify the alleged causes of action and show that the motion meets all conditions for approving the claim as a class action.
The Parties’ Responses
The defendant is entitled to respond to the certification motion within 90 days. The defendant may also file a motion to dismiss the class action outright without a hearing, but as mentioned above, the court will give such an order only in very rare cases in which it is clear that there is no basis for the claim or that the claim is not suitable for the class action procedure.
The plaintiff then has the right to respond to the response of the defendant to the certification motion within 30 days.
Proceedings and Hearings
Preliminary proceedings – if the certification motion showed an “initial evidentiary basis” supporting the claim, the plaintiff is entitled to discovery and questionnaires with regard to the questions that should be decided within the framework of the certification motion.
Preliminary hearing – the court will hear and decide on the preliminary proceeding motions, and in most cases share its initial opinion on the case and advise the parties accordingly.
Cross-examinations hearing – the court will usually conduct a hearing in which the witnesses and experts are cross-examined. In cases which do not involve factual questions, the court might decide to skip the cross-examination stage.
Summaries – both parties file summaries.
The Ruling on the Certification Motion
The court decides whether to certify the lawsuit as a class action, or to dismiss it. At the certification stage, the plaintiff has to meet a prima facie burden of proof.
If the court certifies the motion, the class action will be heard on its merits on behalf of the class as defined in the ruling. In such cases, the defendant has a right to file a motion to appeal to a higher court (they do not have an absolute right to appeal, but need to receive permission to appeal).
If the court dismisses the certification motion, the plaintiff has the right to appeal to a higher court.
In the case of an approval of the motion, the plaintiff is entitled to demand further discovery with regard to the damages or unjust enrichment of the defendant. Subsequently, further cross-examination sessions will be conducted, the parties will file summaries and the court will give its final ruling. Both parties have the right to appeal the final judgment to a higher court.
If the parties reach a settlement prior to the ruling on the certification motion or afterwards, the settlement agreement should be filed with the court for its approval. Class members are entitled to opt out and/or to file objections to the motion to approve the settlement. The Attorney General of Israel is also entitled to file their opinion with regard to the settlement. If the court approves the settlement, it creates a res judicata on all class members who did not opt out.
Any person who has a personal cause of action, public authority or a non-governmental organisation (NGO) may file a class action. However, in cases in which the claim is filed by a public authority or an NGO, it should show that the issue of the claim meets its objectives and activities and that it would be difficult for the claim to be filed by an individual member of the class.
In cases in which the court decides that there is a ground for the claim, but where the plaintiff does not have a cause of action or is not suitable to represent the class members, the court might decide to certify the claim and to nominate another lead plaintiff, instead of the plaintiff who initiated the claim.
The class member and sub-class members are defined by the plaintiff in the certification motion. The court has a discretion to change the definition of the class within its judgment and also within the framework of the approval of a settlement agreement.
The Class Actions Law does not limit the size of the class. However, the class action instrument is mainly designated to cases in which the plaintiff cannot identify and find in advance all of the class members and to cases in which the class is comprised of a sufficient number of members to justify this unique procedure.
The court has the discretion to include in the class even individuals who suffered damage after the filing of the class action, until the date of the final judgment of the class action on its merits.
As mentioned in 1.2 Basis for the Legislative Regime, Including Analogous International Laws, in Israel the default is for an opt-out mechanism, unless the court explicitly determines that an opt-in mechanism should be implemented in the specific circumstances.
As stated in 1.2 Basis for the Legislative Regime, Including Analogous International Laws, in cases in which two or more certification motions are pending, the court might decide to dismiss one of them, or to unite them or to hear all of them together.
In cases in which the defendant claims that a third party should be held responsible, they might file a motion to add that third party as a side to the claim.
The law gives the court the discretion to handle the procedures as it sees fit and the higher court will usually refrain from intervening in such decisions. Within that framework, the court is entitled to:
The length of the proceedings changes and varies from case to case. However, the average estimated lifetime of a regular class action is between three and five years. In mega class actions, which involve extremely large amounts, the proceedings may be longer, and there are cases which are heard over a period of ten years and more.
The average period needed in order to approve a settlement agreement is about one year.
As mentioned in 1.2 Basis for the Legislative Regime, Including Analogous International Laws, in Israel there is no summary judgment procedure and only in very rare cases will the court dismiss a class action outright without a hearing. That is due to the importance the court places on the public interest in hearing claims that might be fruitful for a large group of people and due to the fact that the certification motion is itself an interim procedure.
In certain suitable cases in which the question brought by the plaintiff is legal and does not involve factual questions, the court may shorten the procedure by giving its ruling based on the certification motion or summaries without conducting preliminary proceedings and/or without conducting cross-examinations.
As mentioned in 4.1 Mechanisms for Bringing Collective Redress/Class Actions, the court fees which the plaintiff has to pay in Israel range from ILS8,000 to ILS16,000. There are a few areas that are exempted from court fees (such as: environmental and accessibility claims).
The main out-of-pocket expense of the plaintiff is the commissioning of an expert opinion and its cost varies from case to case in accordance with the complexity of the subject matter. However, in general, in comparison with the average costs in the USA and Europe, experts’ fees in Israel are substantially lower and are in the range of a few dozens of thousands up to a few hundreds of thousands of Israeli shekels.
If a claim is dismissed (or interim motions within the proceedings are) the court might impose expenses on the plaintiff. If the court is of the opinion that the claim was serious and it was not a misuse of the instrument of the class action, it sometimes waves the expenses or imposes minimal sums.
According to the Class Action Law, there is also a government fund that financially supports adequate class actions.
As mentioned in 4.2 Overview of Procedure, there are two stages of discovery. The first one during the certification process, and the second during the hearing of the class action on its merits after the certification.
At the first stage, the disclosure focuses on matters that are relevant for the certification stage and generally does not include information with regard to the damages. At the second stage, the disclosure is broadened to include the damages and unjust enrichment of the defendant.
Due to the built-in gap of information between the plaintiff and defendants in the field of class actions, discovery procedures are extremely important and, in some cases, crucial.
As to privilege, the court may protect trade secrets of the defendants or third parties’ information, by exposing the information to the plaintiff under a confidentiality order, and in some cases the information is exposed only to the court or to an expert nominated by the court who acts as an officer of the court.
The general remedies given in class actions are monetary relief for pecuniary and non-pecuniary damages and for the unjustified enrichment of the defendant, declaratory orders, injunctions and future regularisation. In cases in which it is not practical to locate the class members and compensate them directly, the court might impose compensation for the benefit of the public in accordance with its discretion.
As specified in 4.2 Overview of Procedure, at any time during the legal process the parties may reach a settlement agreement which should be filed with the court for its approval. Even in cases in which the plaintiff wishes to withdraw from the class action, such withdrawal should be approved by the court, which has the discretion to dismiss the withdrawal motion and to seek an alternative plaintiff in cases in which it is of the opinion that this is to the benefit of the public.
There are cases in which the court appoints an expert to examine the settlement.
The legal fees and the remuneration for the plaintiff are also subject to court approval and the court may decide to reduce the proposed amounts or to stipulate it on certain conditions. The average legal fees are calculated between 15% and 25% of the benefit to the public and the average remuneration for the plaintiff amounts 1% to 3% of this benefit.
Mediation procedures are very popular in the class action field and in cases in which the mediator is a former judge, the court tends to take these procedures into consideration.
As stated in 4.2 Overview of Procedure, the judgment creates res judicata with regard to all class members who did not opt out.
In general, at the completion of the execution of the settlement, the defendant is asked to file an affidavit with the court to show and declare how it fulfilled its duties under the agreement and the counsel of the plaintiff is generally asked to check the declaration and inform the court if the agreement was executed in a satisfactory manner.
The judgment is enforceable against the defendant and in case of a breach of the judgment by the defendant, it can be enforced via the execution bureau or through semi-criminal contempt of court orders.
The Class Action Law of 2006 created a very strong and efficient legal instrument to fight against unlawful abuse of power by large corporations. As a result, those corporations are investing significant efforts in limiting and decreasing the power of this vehicle, by using lobbyists to influence legislators to amend the law.
In some cases, the regulators are also intimidated by this instrument, since they fear that the success of a class action might be interpreted as their failure to prevent misconduct by the large corporations which are subject to their supervision.
Therefore, every once in a while, there are legislative initiatives trying to limit class actions in Israel.
See 5.1 Policy Development.
Brexit did not have an impact on class actions in Israel.
Numerous class actions were filed with regard to damages that occurred as a result of thwarting of contracts due to the pandemic. In general, the courts have tended to feel sympathy for the defendants, since they were also a victim of those circumstances. However, in cases in which the court was of the opinion that the defendant abused the pandemic in order to shirk its responsibility, rulings against such corporation were given.
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