Mexico's New Class Action Law Opens a Litigation Frontier

At a recent conference in Mexico's capital city, attorney Diego Gandolfo fielded questions during a presentation before hundreds of judges who will be charged with presiding over one of the latest legal developments in the country: Mexico's first class action law, which goes into effect March 1, 2012.

Which means legal professionals on both sides of the border are busy preparing for how the law will play out among potential litigants. Gandolfo's presentation on comparative class action law was part of a series of educational offerings from Mexico's federal judiciary institute on the law's implementation.

On the corporate side of the equation, the March start date gives companies some time to prepare for the strategies and defenses available to them, says Gandolfo, who specializes in product liability cases in Latin America at Shook, Hardy & Bacon's Kansas City, Missouri, office.  

Mexico's new law, signed by President Felipe Calderón in August, gives standing to classes that number at least 30 people. Complaints are limited to consumer and environmental claims. The law identifies three different categories of class action: (i) diffuse actions that protect rights held by society at large; (ii) collective actions that protect rights held by groups of people who have a non-contractual relationship; and (iii) homogeneous individual rights class action that protect groups whose members are linked by a contractual relationship.

Mexico joins a growing list of countries in Latin America that recognize class, collective, or group claims—including Argentina, Brazil, Chile, Colombia, and Peru.

While Brazil's legislation has been influential on similar laws in the region, says Gandolfo, Mexico's new law incorporates a crucial departure from the Brazilian model: it requires U.S.-style certification, a step in which the court determines if a class has standing to sue in the first place.

Certification can make a "big, big difference" to defendants facing a suit, says Gandolfo:  "You can challenge [certification], which, from a corporate point of view, is a big defense that you have," he says. "You can stop the case right there with a good certification strategy, which is what happens in the United States."

In Mexico, defendants will generally have a five-day window to challenge certification (the law includes a provision to request an extension). That means they will be able to employ the kinds of arguments typically made in U.S. courts: whether individual issues of fact and law predominate over commonly held issues; whether the class has adequate representation; and whether a class action is the most effective means of resolving the complaint at hand.

There are some important points on which Mexico's class action law differs from that of its northern neighbor. In the U.S., for example, members of a class opt out if they do not want to be subject to the terms of a class action settlement. In Mexico, however, potential members of a collective or homogeneous class will have to affirmatively opt in—and they can do so up to 18 months after a settlement or judgment is reached.

That opt-in approach could have the effect of limiting class sizes, says Gandolfo. But the open-ended timing could also give rise to uncertainties for defendants. 

"Let's say you settle the case—and then you never know how many people are going to come up," says Gandolfo, who is not aware of a similar opt-in mechanism anywhere else in the world. "It will not grant certainty as to the size of the class and to the real size of the award [defendants] would have to pay."

Gandolfo has worked on these types of suits primarily in Brazil, Colombia, Argentina, and Peru. A 2008 article that he co-authored for the International Bar Association's Latin American Forum newsletter [PDF] identified Mexican legislative reform, under consideration at that time, of a piece with "a clear international trend for the introduction of class action and collective action procedures and for their greater use in courts around the world."