Shift Happens: Pressure on Foreign Attorney-Fee Paradigms From Class Actions

You know what they say about paradigms--shift happens. (1) I. INTRODUCTION The class-action device, still unique in its degree of prevalence in American civil litigation, (2) has begun to spread--some would no doubt say metastasize (3)--beyond the United States. Five Canadian provinces now have some form of the device, (4) as do the Australian Federal Court and the state of Victoria. (5) For over a decade Brazil has authorized collective actions on behalf of private parties by designated government offices and by private associations with relevant institutional purposes. (6) The People's Republic of China has since 1991 provided for class-action-like representative lawsuits, (7) and the Indonesian Supreme Court recently adopted a regulation to authorize and govern class actions. (8) A Swedish law authorizing class actions was to take effect January 1, 2003, (9) and Finland, Norway, and Scotland have considered or are considering adoption of the device. (10) The South African Law Commission in 1998 recommended recognition there of class and public-interest actions. (11) This essay does not discuss these developments in depth; nor does it wade into whether, and if so how, other nations should implement class actions. Rather, it explores the tensions between the class-action device and norms governing attorney-fee liability and class-action financing practices in most of the world outside the United States, the pressures resulting from those tensions, and possible resolutions. Given differences among legal systems that have, or might adopt, class actions, the essay also largely avoids arguing for or against particular choices that might be made. I hope that this exploration can, by clarifying some of the issues that are likely to arise and the alternatives available, be useful where adoption or modification of the class action is being or may be considered-perhaps even including in the United States. II. THE UNVIABILITY OF CLASS ACTIONS WITHOUT CONTINGENT FEES AND UNDER LOSER-PAYS ATTORNEY-FEE SHIFTING As others have long recognized, class actions could find barren soil if they were transplanted to systems that, like much of the world, maintain bans on contingent fees for plaintiffs' lawyers and adhere to the near-universal loser-pays rule on liability for a winning side's attorney fees. (12) The American class action exists in a system under which losing plaintiffs are rarely, and losing defendants only sometimes, liable for the attorney fees of their victorious adversaries; (13) contingent percentage fees are allowed and are the dominant means for financing plaintiffs' non-class and class damage litigation; (14) and entrepreneurial plaintiffs' lawyering--with attorneys often being the main impetus behind, and principal persons financially interested in, a class action for damages--is at least tolerated. (15) In nearly all the rest of the world, prevailing practices and attitudes hew in varying degrees to an opposite paradigm in which losers in civil litigation are usually liable for a substantial portion of winners' reasonable attorney fees (loser-pays or the English as opposed to the American rule (16)); contingent fees--percentage or hourly (17)--have been frowned upon, with the client at least in principle obligated to pay the lawyer the same rate no matter whether success be great, small, or nil; (18) and lawyers' financing of and stakeholding in litigation have tended to be regarded as unacceptably commercial and unprofessional. (19) Moreover, financing of litigation by third parties aside from clients and their own lawyers could run afoul of the traditional common-law barrier to maintenance. (20) American practices are in several ways obviously hospitable to the flourishing of plaintiffs' class actions for damages. While small chance of a significant recovery may (or at least should) deter the pursuit of class claims, individual class representatives' or class members' fear of down-side liability for large defense fees will not. …

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