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Defense apprehensions that American plaintiffs’ lawyers are “exporting” abusive class action habits to Europe may be premature, but 2006 clearly has seen a growing European interest in handling large volumes of similar claims. In a parallel development, while American plaintiffs’ lawyers advise European policymakers on loosening laws that restrict class actions, they are trying to increase their recoveries in American securities litigation by adding new clients from among European institutional investors. While class actions were for the most part unknown in Europe as recently as five years ago, the European landscape has shifted so that forms of class litigation are increasingly available to consumers, and more private parties are bringing antitrust claims. The French government presented a draft bill this month that would for the first time allow consumers to take companies to court collectively, rather than force them to bring individual lawsuits. England, Sweden, Spain, Germany and the Netherlands already have some form of class litigation. The Irish, Italian and Finnish governments are considering legislation to implement procedures that could be brought by multiple parties. Norway’s Mediation and Civil Procedure Act, which established an opt-in class action procedure similar to Sweden’s, takes effect next year. And Denmark’s justice minister submitted legislation to the Danish parliament in October that would implement an opt-in class action procedure similar to Norway’s. But European Union judicial systems, with rules that limit the discovery available to plaintiffs, bar punitive damages and make losers pay lawyer fees of both sides, have not yet accommodated anything as broad and freewheeling as U.S.-style class action litigation. Elusive connection Meanwhile, American plaintiffs’ lawyers have been cultivating a client base of sophisticated European institutional investors-such as mutual funds, pension funds and insurance companies-as a potential new source of recovery in U.S. litigation. They also have been keeping an eye on wrongdoing by multinational corporations in Europe with a view to bringing actions on similar theories against those companies in the United States. Seth Aronson, head of O’Melveny & Myers’ securities litigation practice group from the firm’s Los Angeles office, said that jurisdictional bars generally prevent foreign investors who purchase shares on foreign exchanges from bringing actions in U.S. courts. “What the plaintiffs are trying to do is find a U.S. connection,” Aronson said, adding that they also are trying to find ways to sue foreign companies in U.S courts. “There’s definitely a movement afoot by plaintiffs’ lawyers to expand U.S. securities law to capture foreign issuers and sue them in the U.S.,” which means that “there’s a risk to European businesses that they will be hauled into court in the U.S.,” he said. Cohen, Milstein, Hausfeld & Toll, a plaintiffs’ class action firm based in Washington, announced recently that it is opening a London office to offer a full range of skills to a European client base. It also has advised the judicial systems of countries such as Ukraine how to improvise ways to fold into one case large numbers of similar single claims that are currently clogging their courts. Michael D. Hausfeld of Cohen Milstein said that in opening its London office, the firm is looking to establish a European practice base for class and other types of litigation, and a regulatory/advisory component, among other things, to help governments and courts find ways to implement class-type litigation. Hausfeld said that there appears to be a misapprehension among traditional American defense firms that American plaintiffs’ firms are attempting simply to export American-style class action litigation abroad. “Outside the United States, the legal world does not divide itself this way,” Hausfeld said, noting that European law firms think of themselves as transaction firms and they represent both companies and so-called claimant associations. Claimants in European-style collective actions commonly must form associations to bring collective actions in European courts. “Our vision is not to export class actions,” Hausfeld said. “It’s to provide a legal resource for claimants, litigation and advice that’s not being provided outside of the United States.” Lawrence G. Scarborough, managing partner in the Phoenix office of Bryan Cave, a firm that defends class actions, sees class actions on the rise in Europe and believes that companies must be prepared. Scarborough thinks that too many companies do not believe that class actions will emerge in the European Union or will not admit to the possibility. Ignoring the prospect will only result in helping the plaintiffs, he said. “Cohen Milstein announced the opening of a London office specifically to assist in this effort,” Scarborough said. “That’s a vote with Cohen Milstein’s dollars and with their feet.” Companies may have a rude awakening in Europe if countries in the European Union adopt less restrictive rules regarding what materials companies must divulge to plaintiffs’ counsel, Scarborough said, which is starting to happen in England. “Companies in the U.S. were vulnerable to class action litigation for some period of years because they had a tendency to think about cases in a compartmentalized way. The plaintiffs’ bar was quick to use documents discovered in one case in subsequent litigation,” he said. As a result, companies were blindsided by inconsistencies, such as when documents produced in one case inadvertently were not produced in others, leading plaintiffs to accuse companies of hiding or destroying documents, Scarborough said. “A development worthy of note in the United Kingdom is the increasing ability of nonlitigants to gain access to papers in litigated cases,” he said, making it more possible for people to use documents filed in one case in subsequent litigation. On the personal injury side, European defendants are starting to see what they are calling “claims factory operations,” and there has been a lot more thought about claims that could cut across multiple claimants, Scarborough said. “Certain aspects such as contingent fees may never appear, but there’s a trend line here that’s unmistakable. How far it will go and how quickly it will get there are open to legitimate question,” he said. Schiffrin & Barroway, a plaintiffs’ class action practice based in Radnor, Pa., that focuses primarily on litigation of securities fraud, Employee Retirement Income Security Act and 401(k) claims against public companies, recently announced a strategic alliance between itself and a German law firm, Winheller Attorneys at Law, based in Frankfurt. Darren J. Check, a Schiffrin & Barroway partner and the firm’s director of institutional relations, said that although the firm’s plans could change, it does not intend to bring litigation in European courts, but to represent European investors in U.S.-based securities litigation. Other American plaintiffs’ firms appear to have the same idea. “The biggest problem now is that there are too many lawyers trying to get in there too quickly,” Check said, adding that “some firms have rushed over there with fliers, [telling institutional investors] ‘These are the kinds of recoveries we can get for you. Sign this and we’ll get a lot of money for you. You don’t have to worry-we’ll take care of everything.’ “ A deliberate strategy For its own part, Schiffrin & Barroway is moving slowly, focusing on educating clients about the benefits and detriments of litigation and what this will mean to them in terms of the time and resources, he said. For instance, Schiffrin & Barroway represents Cominvest Asset Management GmbH, the mutual fund of Germany’s Commerzbank A.G.-and Cohen Milstein is overall local counsel-in U.S. securities litigation that also includes a long list of American institutional investors. In re Federal National Mortgage Association (Fannie Mae) Securities, Derivative and ERISA Litigation, No. MDL-1668 (D.D.C.). Rather than building relationships, “too many lawyers seem to see Europe as the new, most fertile territory to get new clients” for U.S. litigation, Check said. But he said he does not see “a lot of support for adopting the U.S. system over there.” Traditionally litigation-resistant European culture-and U.S. law-could make these ventures more of a challenge than they might seem at first glance. In general, European legal systems resist American-style litigation because they prohibit contingency-fee relationships and punitive damages, they limit what defendants have to give plaintiffs in discovery, and the losing side pays both sides’ fees and costs. Also in Europe, judges rather than juries decide cases and apportion damages awards. American courts generally have not been receptive to American firms’ efforts in trying to import European plaintiffs into U.S. lawsuits. Also, they have been resistant to a newer trend in which domestic plaintiffs try to base lawsuits on a theory that a multinational company’s bad behavior abroad reflects similar conduct in the United States. In 2004, the U.S. Supreme Court held that the Foreign Trade Antitrust Improvements Act bars claims relating to foreign conspiracies unless the conspiracy has a “direct, substantial and reasonably foreseeable effect” on trade in the United States. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155 (2004).

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