Friday, February 27, 2009

Consumer Protection through Class action

Exsiting legal framework
All legal regimes across the globe provide for legal actions by redressal of grievances addressing commonality of rights affecting a large body of persons. The homogeneity of the class may consist of the nature of injuries similarly suffered or exposed to risks in the same accident or the wrong perpetrated by the same tort-feasor. The collective actions, also called class actions, have immense value in consumer actions claiming damages against a manufacturer and/or a retailer selling goods or against an individual or organization or corporate entity providing some service. In the case of a purchaser of goods, the damage may have resulted by defect in goods placed for consumption; in the case of a person availing of service, the complaint may be of deficiency of the service provided. The Consumer Protection Act defines the term “consumer” as a person that buys goods or a hirer of service for consideration and a “complainant”to include any registered voluntary consumer association. The “complaint”could relate to unfair or restrictive trade practice or defective goods supplied or deficient service.

Public law remedy unavailable against private manufacturer or service provider
The provision that enables a voluntary consumer association to espouse the cause of an individual consumer or the body of consumers cuts short, as if by sleight of hand, the not too easy resort to joinder of causes of action by plaintiffs, contemplated under the provisions of Order 8 Rule 1 of the Code of Civil Procedure. Just as infrequent as this provision of the Code has been resorted to in India for ordinary civil actions through suits in Courts, which are perceived to be time consuming and expensive, so are the voluntary organizations making complaints on behalf of consumers infrequent before consumer forums, although perceived to assure faster reliefs, less expensively. If there is one area where class- actions have become popular in India, it is in the area of public interest litigations (PILs) resorted through writ petitions before High Courts and Supreme Court. By the very nature of a writ being possible only against State and its functionaries (subject to extracting exceptions) and not against individuals or companies, the use of PILs are not efficacious to address consumer related problems of defective products and deficient services.

Res ipsa loquitur, best instances for class action
It is not as if there have never been adequate instances that offer scope for resort to class actions under the Consumer Protection Act. This is so, even if we must resort to this genre of litigations only for cases which could be disposed of in a summary procedure, without having to go through tortuous procedures of examination of witnesses which could involve considerable time, discovery and inspection which could again mean exchange of documents and expensive forensic skills to track the wrong-doing. There are countless occasions, where a large body of persons is affected. Consider res ipsa loquitur instances, where as the saying goes, the act of negligence speaks for itself. Cases of medical camps, where due to poor medical care and facilities, cataract operations result in blindness to patients undergoing the medical procedures; Of harmful drugs that maim or kill which are dispensed recklessly without proper medical trials; vaccinations due to contaminations in large batches of bottles and vials that result in deaths of babies; hooch tragedies, where consumers of illicit arrack, mostly poor people die tragic deaths at the hands of illicit bootleggers; corporate frauds admitted by the CEOs as such, resulting in prodigious financial loss to investors in shares in companies; noxious fumes emanating from factories that flout brazenly pollution control laws or industrial effluents that pollute water table and affect health to persons living around the area of the factory. All are cases just waiting to be easily identified and pursued through complaints before consumer forums.

Lessons for the Indian milieu from global regimes
Class litigation has enormous advantages in the Indian situation. Several suits or claims in various courts could be encapsulated in a single collective action, saving court’s collective time spent through several litigations in several courts. It helps to cut costs by engaging services of less number of lawyers. Even a poor litigant could have the benefit of engaging the services of the most competent and even expensive legal counsel. A homogenous decision is not merely more efficacious but most just that similar claims are addressed across the board to obtain the same result. The likelihood of misuse could be effectively controlled by the experience gained through some of the practices in other countries.

In U.S, in the context of Private Securities Litigation Act, 1995 codified into Title of United States Code, the Court would appoint a lead plaintiff ( usually a large institutional investor with greater sophistication to devote to the action than an individual plaintiff) to oversee the conduct of every securities fraud class action. The appointment is designed to ensure that the action is adequately monitored and that any settlement is in the interest of the investors rather than the lawyers. The practice of contingency fee in US that gives rise to fantastic claims could be controlled by strictly enforcing the law against such practice.

In Australia, in a recent case alleging corporate fraud against the Centro Group, for indulging in inadequate and misleading information about its financial condition of the company, Justice Finkelstein, the judge dealing with the case constituted a litigation committee to decide which lawyers and litigation funders should take over the conduct of the class actions. Interestingly, here the court retained the power to decide who the attorneys shall be to conduct the litigation. In India, the respective Bar Councils operating in the States could be given the responsibility of creating an approved panel of attorneys or advocates that would hold the license to institute class actions.

In Spain, the 1/2000 Civil Procedure Act sets forth a class action regime, by virtue of which Consumers Associations are entitled to file a lawsuit on behalf of an undetermined number of consumers for those damages allegedly caused to them. Any favorable decision issued by the court will benefit all the undetermined consumers that are represented by the Consumers Association, regardless of whether or not those consumers are affiliated to the plaintiff Association. The undetermined consumers will afterwards be entitled to execute the decision on their own behalf. Such like provision is not new to India. The Land Acquisition Act provides under section 28A the right to a landholder who has lost the property in land acquisition to claim the benefits of enhancement of compensation on a fast track, by applying to the Collector, even if he had missed the bus initially by not filing a claim for enhancement and seeking for reference to civil court, subject only to proof that his acquired land was comprised in the same notification.

It is possible that the tort feasor may force a litigant not to resort to class actions by introducing arbitral clauses in the contract. In 2003 Dell Computer Corporation posted incorrect prices on its web order pages for two products. Dell corrected the error three days later, but not before hundreds of consumers had placed online orders at the posted prices. Dell declined to process the orders. This resulted in an attempt by the Union des Consommateurs (a non-profit organization) to initiate a class action against Dell in the Superior Court of Québec. Dell resisted the proposed class action by invoking the arbitration agreement contained in the terms and conditions page hyperlinked to its website order pages. Dell applied to have the claim referred to arbitration and to have the application to institute a class action dismissed. The individual arbitral referrals are expensive and a disincentive to litigate. Dell failed at first instance and again on appeal, but prevailed on further appeal to the Supreme Court of Canada in Union des consommateurs v. Dell Computer Corp. ("Dell")(2007), when the court ruled that the arbitration clause for each individual offeree ousted the scope for collective action. After the events that gave rise to this dispute took place, Ontario and Québec enacted legislation prohibiting consumer agreements from requiring that disputes arising out of them be submitted to arbitration (s. 7(2) of Ontario’s Consumer Protection Act, 2002, and s. 11.1 of Québec’s Consumer Protection Act). In India we could make do with specific provisions in the Arbitration and Conciliation Act and the Consumer Protection Act that would not bar prosecution of class litigations through arbitral clauses.

U.K. & Italy
In England and Wales, under Part 19 of the Civil Procedure Rules, the court has the power to make a Group Litigation Order (GLO) to manage cases on an “opt in” basis, where there are a number of claims giving rise to common or related issues of fact or law. On December 21, 2007, the Italian Parliament passed the Budget Law 2008, which finally introduced into the Consumer Code a specific statutory provision (Article 140-bis) giving certain associations the capacity to sue collectively for tort liability, unfair trade practice, and anti-competitive behavior. The new law became effective on July 1, 2008.Under the new class-action law, bodies acting on behalf of consumers or investors will be able to obtain a declaratory judgment of the right to obtain compensation and the refund of sums due.

Any consumer movement obtains impetus only through collective actions. It is the unity of purpose secured through funneling of independent initiatives that could sharpen the edge of attack against errant manufacturers and retailers of consumer products and negligent service providers and make them responsive to consumer needs. Welcome class actions in consumer forums; enter an era of quicker and cheaper remedies for larger sections of people.


balaji said...


The first class action suit in India, on "Bhopal gas tragedy" was a sham and the people were thoroughly cheated and have not had Justice.

At present the credit card companies are the biggest manipulators with sky high penalties and interest rates squeezed out from the hapless customers. There have been several indictments of credit card companies by High Courts and also the Supreme Court, but still the legal fraternity has not evolved a class action against the credit card company frauds.

A precedent may be set with regard to particular malpractices indulged by these companies and they can be followed in a class action. But at present these companies misuse the legal aid authorities in all States to choke the defaulters and make them pay up, while their misdeeds are clearly brushed under the carpet.

Action against these credit card companies may be one of the biggest class action suits to come in our country.

Action against pharma companies may take a long time as the awareness amongst consumers is very low and doctor dependent. The doctors may not like to kill the golden geese ( the pharma companies) that nowadays takes care of their ego needs like foreign trips, vacations etc.

India is one of the biggest exporter of finished leather and products, by polluting itself and thereby keeping the Developed nations clean. There ought to be a class action against these developed countries that imported leather from India, for the damage done to the ecology here, while they live in leather industry pollutant free environments. The polluter pays principal evolved by the Supreme Court has to reach overseas too !

Aravind said...

Dear Judge,
It is a great show. I am happy to see that you are up by 5:00 a.m to fill your blog. You can spend some time away from law and think of your friends.
---- Raghu

Aravind said...

Dear Judge,
It is a great show. I am happy to see that you are up by 5:00 a.m to fill your blog. You can spend some time away from law and think of your friends.

Ashish said...

It is submitted with reference to the post as well as the first comment that it shall not be enough to only extend the class action suits only to Consumer Organisations but also in matter or environmental torts.
The principle of Polluter Pays has till date only been applied by the Courts, specifically the Supreme Court in matters dealing with Writs under article 32. A legislation of this sort will not only ensure justice, but also lessen the burden of the courts so that they don't have to deal with environmental matters in general course.
Ashish Virmani
Student, National Law University, Jodhpur