By Dr. Eran Taussig, Adv.
Class actions are not a new phenomenon in Israel. They were recognized in subsidiary legislation decades ago. However, it is only since the late 1980s—with the enactment of subject-matter-specific laws (e.g. Securities Law (1988); Consumer Protection Law (1994); Banking Law (1996)), under which class actions could be instituted—that a significant increase in the number of petitions for class actions is evident. The current comprehensive Israeli Law concerning class actions was adopted in 2006. The Class Actions Law ("the Law"), which replaced all of the subject-matter-specific laws, allows the filing of class actions for causes of action enumerated in the second addition to the law, which—unlike prior legislation—provides a broad framework for most subject-matters in the law.
In general, class actions in Israel take after their American counterparts. Like in the United-States a class action in Israel is conducted in two phases: first, a motion to certify a class action is filed. Only if certification is granted, the second phase takes place, namely the hearing and the adjudication of the action on its merits.
There is one important difference between class actions in Israel and in the United-States: whereas according to Rule 23 of the Federal Rules of Civil Procedure, American courts are not entitled to examine a claim’s likelihood of success when deciding whether or not to certify a lawsuit as a class action, the Israeli Supreme Court has ruled that the court is obligated to conduct a preliminary inquiry into the merits of the claim. The purpose of this requirement to look further into the merits in the class action context is to protect potential defendants from frivolous suits, which can impose high costs on them.
Indeed, since the enactment of the Law motions to certify class actions are being filed in increasing quantities each year. Thus, the number of lawyers filing class actions grows accordingly. As we can see from the chart below, whereas in 2007 only 28 motions to certify were filed in Israel, in 2010 we had 433 motions, and in 2018 1,250 motions to certify were filed in Israel.
Due to allegations that growing numbers of frivolous class actions are filed in Israel, in 2018 the then Minister of Justice decided to impose court fees on representative plaintiffs, in amounts ranging from 2,300 to 4,600 USD. As can be seen from the chart, the led to a reduction in the number of class actions filed in 2018 and more so in 2019. Another result of the introduction of the new court fees was a significant shift in the areas of law in which the actions are filed. E.g., there is a significant increase in the filing of claims related to rights for people with disabilities, because these claims are exempt from the said court fees.
Having said that, we can see from the chart that the flood of motions to certify class actions was even strengthened in the Corona age, where many motions to certify claims as class actions were filed against companies from various sectors of the Israeli economy, despite their difficult financial situation. As can be seen from the chart above, in only five months in 2020 similar numbers of motions to certify were filed to the courts as the number of motions to certify filed throughout 2019.
A review of motions to certify submitted during the Corona crisis indicates that the filing of the many motions during this period is not only due to the unique legal situations created in light of the crisis, but may also be connected to the fact that the courts were closed and lawyers were available and had time to prepare the new claims.
This conclusion stems, inter alia, from the huge volume of motions submitted to the courts during this period in connection with access to websites that have no relation to the Corona crisis. Some of these Motions were filed against our clients, such as Ortal Human Resources Ltd., Alrov Group Ltd. and others.
Motions relating to the outbreak of the Corona Virus are filed against various defendants: One batch of motions was filed against banks, who retracted approvals for a mortgage and guaranteed interest rates, following a rise in interest rates with the outbreak of the Corona crisis.
An additional batch of motions to certify was filed against gyms, which continued to charge their customers for the subscription fee even though their customers were unable to use the subscription due to the coronavirus outbreak (the Israeli government has ordered gyms to close). In the same vein, motions to certify was filed against the Transport Cooperative Association and against Israel Railways, which did not operate its buses due to the Corona crisis but did not compensate passengers with periodical subscriptions for the period in which they could not use the subscription.
Many motions were filed against international airline corporations arguing that the airlines do not return the proceeds for canceled flights and do not inform customers about their right to a refund of airline tickets canceled due to the Corona crisis. No such motions have been filed at this time against the major airlines in Israel, among which Arkia International Airlines, which I represent.
Motions to certify were filed against cable and satellite TV companies arguing that due to the outbreak of the Coronavirus sports channels were no longer broadcasting live sports event s and therefore must not charge subscribers the full subscription fee.
Other motions to certify were filed by students against universities and colleges arguing that they paid full tuition and “ancillary payments” but did not attend the campus due to the Corona outbreak and therefore did not receive ancillary services (e.g., security Fees, Welfare, Cleaning, Electricity, Water, Maintenance, Parking Fees and Other Similar Payments). These students demanded restitution of funds paid for the period when they could not attend campus. Similar lawsuits were filed in the US where college students suddenly stuck in Zoom classes demanded some of their tuition fees back because, they say, this kind of academic experience isn’t what they bargained for.
Other typical recent motions to certify were lodged against insurance companies, which continue to charge full payments and/or do not return funds to insured persons for car insurance, despite the fact that due to the Corona crisis many insured persons are unable to use their vehicles.
Another wave of motions to certify class actions was filed recently due to the cancelation of student delegations to Poland during the Corona crisis. [1] The petitioners sued travel agencies that refused to refund the money paid by the students' parents.
As an anecdote, one might note that a couple of motions to certify were filed against the People's Republic of China arguing that the Chinese government developed the Corona virus as a biological weapon, in contrast to international law and as a result of an accident the virus escaped from the laboratory into the air and reached Israel. Alternatively, it was claimed that the source of the virus is in the meat market in Wuhan City and that the Chinese government has been negligent in overseeing the market, thus spreading the virus worldwide.
I believe that after the end of the worldwide crisis, the number of motions to certify class actions filed to courts in Israel will be similar to what we saw in 2019. Given that many of the recent flood of motions relate to issues of accessibility for the disabled, which are sometimes filed without cause in order to evade the court fees levied in Israel on class plaintiffs, it would seem inevitable to consider eliminating the exemption from these court fees or at least change the current rule in a way that may alleviate the heavy burden placed on the courts in Israel.
Notes
[1] These delegations of high school students visit the concentration camps, where Jews were starved, tortured, and killed during the Holocaust.
About the Author
Dr. Eran Taussig, Adv. S.J.D, the University of Pennsylvania Law School. Leading the Class Actions Department at Balter, Guth. Aloni & Co. (Israel); senior lecturer at the University of Haifa Law School.
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