Three judgments have recently been published on the admissibility of interest groups under the Mass Mass Action Settlement Act (WAMCA). These are judgments in the class actions against Airbus (1), TikTok (2) and Vattenfall (3). We summarize the main lessons.
Since the effective date of the WAMCA on January 1, 2020, it is possible for interest organizations to claim damages in a collective action - in addition to a declaratory judgment. However, interest groups must meet strict (admissibility) requirements under the WAMCA before the case can be handled substantively.
In assessing the admissibility of an interest group under the WAMCA, at least the following requirements come into play:
The interests for which the interest organization is defending must be similar . This is the case if they can be decided in a single procedure, without looking at the special circumstances of the individual interested parties;
The interest organization must also represent these interests according to its bylaws (bylaws requirement);
Moreover, the interest organization must also actually represent the interests. This means that the interest organization must be able to demonstrate that it performs actual work for the constituency it represents in the proceedings. Think, for example, of education around the topic or lobbying;
The interests of the constituency must be adequately safeguarded, which includes the question of whether the interest organization is sufficiently representative This requirement means, among other things, that the interest organization must represent a sufficiently large proportion of the total constituency (qualitatively and/or quantitatively) in the proceedings. Also relevant in the context of this requirement is, for example, the expertise and experience of the organization. Several considerations may play a role in assessing this requirement. Ultimately, under this requirement, the interest group must demonstrate that it is well able to conduct the proceedings on behalf of its constituency.
Jurisprudence has further colored the above admissibility requirements, including the three rulings we will discuss below.
In a class action against Airbus over investor losses due to corruption and bribery, Airbus has been sued by two interest groups. They are Investor Loss Compensation Foundation ("SILC") and Airbus Investors Recovery Foundation ("AIRS").
In these proceedings, the court first of all cut a knot on the question at what moment the admissibility test should take place: ex tunc at the moment of summons or ex nunc at the moment judgment is requested. According to the interest groups, that test should take place ex tunc. The District Court decided otherwise and considered that in principle the situation as it is at the moment when judgment is sought(ex nunc) should be assumed. The court then conducts this review with respect to both organizations. Ultimately, it concludes that both SILC and AIRS should be declared inadmissible.
In the case of SILC, this includes the statute and guarantee requirement. The court concludes that SILC does not or hardly perform any activities of its own besides taking action against Airbus. For example, it has not been stated or shown that SILC has its own organization that stands up for the interests of its supporters. Moreover, essential activities have been outsourced by SILC, the court considered. For this reason, it has not been sufficiently established that SILC itself has sufficient experience and expertise to initiate and conduct the collective action against Airbus.
Next, the court goes on to address governance at SILC. The court considers it problematic that the Supervisory Board has a far-reaching degree of control within SILC, while the independence of this body from the process financier is insufficiently guaranteed. For example, the court notes that one of the members of the Supervisory Board is also managing director of the process financier.
In addition, the foundation is also not sufficiently dependent on the law firm (DRRT) that funded its incorporation costs. That law firm is a party to the funding agreement and continues to work with SILC, according to the court. One of the members of the Supervisory Board performs various work for DRRT which, according to the court, makes there a real risk of influence (of decision-making within SILC) by DRRT's interests. According to the court, the financing agreement also allows for such influence by DRRT and the financier. This is the case in part because SILC is required to consult both parties prior to entering into a settlement. This is diametrically opposed to the intention of the legislator, who wanted to ensure that such decisions cannot be influenced to any real extent by third parties (in particular process financiers).
With respect to AIRS, the court considers that it does not meet the representativeness requirement: AIRS represents too small a constituency, according to the court. The court explained that the legislative history of the WAMCA shows that the term "constituency" can first be related to the number of victims who have registered with an interest group. Also - in the case of a collective compensation claim - the relationship between the size of the damage of the notified aggrieved person and the total damage as suffered by all injured parties can be considered. According to the court, AIRS did not state anything about the number of shares as held during the relevant period by the investors notified to AIRS. Nor did AIRS state the extent of the claims of the investors represented by AIRS. It is known to the court only that AIRS represents over 420 retail investors, and less than ten institutional investors.
The court considered that third-party reports shed more light on the size of the total outstanding share capital and the ratio of private to professional investors. Those reports show that on average 73% of the shares were held by shareholders who held at least 2,000 shares. These, according to the court, are almost exclusively professional investors. In view of the above, the court considered the number of investors represented by AIRS to be too small, so AIRS cannot be considered representative. In that context, AIRS also points out that it has previously litigated against Airbus on the same set of facts in "ordinary" proceedings. It did so in cooperation with another organization (AIRL). In those proceedings, more than 200 institutional investors assigned (assigned) their claims to obtain damages from Airbus to AIRL. Therefore, according to AIRS, those investors can also be counted among its supporters. That argument cannot prevent AIRS from being declared inadmissible as the court concluded that the claims of those investors were assigned to AIRL and not AIRS.
In a case revolving around large-scale privacy violations - primarily against children - three advocacy organizations have sued TikTok. Demanding parties are Market Intelligence Research Foundation ("SOMI"), Take Back Your Privacy Foundation ("STBYP") and Mass Tort & Consumer Foundation ("SMC").
The court first addresses the bundling of the claims. The claims for compensation for material damage the court considers sufficiently similar, in contrast to the claims seeking compensation for immaterial damage. The court considers that such a claim depends so much on the individual situation of a user that there is no sufficiently similar claim. Those claims are therefore inadmissible, according to the court. The claims for compensation for material damage are, which is why the court acceded to the other admissibility requirements.
Next, the court addresses the representativeness requirement. In that context, the court considers the nature of the claim against TikTok. The case primarily concerns a privacy claim aimed primarily at minors, regarding a digital product that can be used without payment. The court considered that the initiative to raise a constituency for this action had to come from the foundations themselves, which have limited resources to do so. Although the foundations represent a limited percentage of the total number of interested parties (the alleged number of TikTok users), in absolute terms the three foundations have a substantial constituency. Therefore, in light of the nature of the claim, the court finds the three foundations sufficiently representative.
However, in the context of the guarantee requirement, the court identifies problems with respect to the funding agreement that STBYP and SMC entered into with their funders. Some provisions therein do not adequately guarantee the foundations' independence from their funders. Such independence is precisely of great importance, as the court's ruling in the case against Airbus mentioned above also showed. The court considers that the defects in the agreements should in principle lead to STBYP and SMC being declared inadmissible. However, the court gives the foundations the opportunity to amend the financing agreement, as this is one of the first times it has been reviewed by the court.
The other admissibility requirements are met by the foundations. In its ruling, the court declared SOMI - which does not have a third-party funder - admissible. The admissibility of STBYP and SMC depends on adjustments to the funding agreements entered into by these foundations.
The third case concerns a collective claim against Vattenfall brought by Stichting Nuon-claim. According to the foundation, the energy company has wrongfully overcharged energy costs to SMEs and non-profit organizations for twenty years.
Also in this case, the court wanted to see the financing agreement between the foundation and its funder. There were still several ambiguities before the court regarding the financial agreements made between Nuon Claim Foundation and the funder. In particular, it was unclear what percentage of any compensation to be obtained from Vattenfall would go to the funder, what percentage would be paid out to the supporters, and what percentage could remain with the foundation (e.g., for future litigation).
Stichting Nuon-claim submitted the financing agreement to the court and in its ruling the court considered that the ambiguities had been removed after reading the agreement. The court further considers that the fact that the final amount of the financier's fee is still uncertain does not make the foundation insufficiently clear about the financial arrangements to its supporters. Uncertainty about the total costs is a given, in part because the duration of the proceedings is unknown in advance.
The court further found it relevant that the total costs were capped in the financing agreement. Although the financing agreement did contain a possibility of (uncapped) additional financing, this does not mean that the requirement of transparency is no longer met. After all, in the normal course of proceedings, the agreed budget will be sufficient and additional funding will probably not be needed. The court emphasized in its ruling that it is especially important that the constituents know in advance what portion of the recovered amount will ultimately go to the funder and what portion can be paid out to them.
Having previously determined (4) that Stichting Nuon-claim met the other requirements, the court declared the foundation admissible in its claim against Vattenfall.
Closing
As evidenced by these rulings, the admissibility requirements applicable to interest groups under the WAMCA continue to be fleshed out. This will continue to be the case for the foreseeable future: the Class Action Register (5) - in which all filed class actions are recorded - continues to expand rapidly with new cases.
(1) https://uitspraken.rechtspraak.nl/details?id=ECLI:NL:RBDHA:2023:14036&showbutton=true&keyword=ECLI%253aNL%253aRBDHA%253a2023%253a14036&idx=1
(2) https://uitspraken.rechtspraak.nl/details?id=ECLI:NL:RBAMS:2023:6694
(3) https://www.rechtspraak.nl/SiteCollectionDocuments/Vonnis-St.-NuonClaim_Vattenfall.pdf
(4) https://www.rechtspraak.nl/SiteCollectionDocuments/RBAMS-vonnis-stichting-nuon-vattenfall.pdf
(5) https://www.rechtspraak.nl/Registers/centraal-register-voor-collectieve-vorderingen
