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The Dutch parliament is set to change the way class action lawsuits are litigated. The first such step in Europe, it will move the Netherlands toward the American system by expanding the scope of class actions. Businesses operating in the Netherlands have pushed for the legislation, saying it would ease the cumbersome settlement process currently in place. This is in sharp contrast to their U.S. counterparts, which have lobbied to narrow the scope of class actions. Experts say the legal change in the Netherlands is part of a broader European shift toward a litigation model resembling that of the United States. These changes include a growing plaintiffs’ bar and increased desire by Europeans who think they have been injured by businesses to partake in class actions. SCOPE OF SETTLEMENTS The biggest change under the new Dutch law will be a broadened scope of settlements. “We don’t have a lead plaintiff and class certification,” said Daan Lunsingh Scheurleer, a lawyer in the Amsterdam office of NautaDutilh. His firm has 500 lawyers worldwide with offices across Europe and in New York. Instead of a lead plaintiff, an association or entity acts as a representative of the class, Scheurleer said by telephone from the Netherlands. The problem with the existing system is that the parties can only enter into a declaration whereby the defendant admits wrongdoing, he said. The settlement is not binding on class members, forcing the defendant to litigate or arrange for settlements with all the affected members of the class. This can be burdensome and costly. The new law, called the Act on the Collective Statement of Mass Claims, will correct this handicap. As in the American system, said Scheurleer, a settlement will bind all members of a class who do not opt out. “That is one of the advantages of class actions for defendants and plaintiffs” litigating under the American system, said Joseph McLaughlin of Simpson Thacher & Bartlett. A settlement will not only cover Dutch citizens but may apply to citizens across the European Union, Scheurleer said, with a population exceeding 380 million. One house of the Dutch Parliament passed the legislation on Oct. 14. The second chamber will vote on the matter within months. “We are a test case,” said Stijn Franken, also of NautaDutilh’s Amsterdam office. The Dutch are the first to pursue this type of legislation, but Spain, Portugal and Sweden have also updated laws controlling class actions. The Dutch have gone the furthest in copying the American model. “This is inspired by the American system,” said Franken. “There is real trend in Europe towards devices that more and more resemble the American class action,” said Marc Gottridge, a partner at the New York office of international law firm Lovells. In addition to the pending Dutch law, Gottridge pointed to one under consideration in Germany that also seeks to make it easier to process cases with large numbers of plaintiffs. BUSINESS SUPPORT The Dutch business community has supported the legislation. Under the old Dutch system, defendant corporations could not enter into mass settlements and were forced to defend myriad lawsuits one at a time, Scheurleer explained. The problem appeared acutely, he said, during the litigation over the estrogen drug diethylstilbestrol, known as DES, which apparently caused miscarriages. Defendants in that case, he said, wanted a global solution, not piecemeal litigation with all the individual plaintiffs. But that alternative was not available. This support contrasts with corporate America’s efforts to limit class actions through legislative efforts. In 1995, businesses won a major legislative victory when Congress passed the Private Securities Litigation Reform Act. It was intended to curb the plaintiffs’ bar and make it harder to bring a class action case in the securities fraud setting. ‘FAIRNESS ACT’ More recently, corporate interests have been pushing for a federal bill called the Class Action Fairness Act that would strengthen their position in the class action setting. The bill, which died in the Senate in July but will likely be introduced again, would push nearly all state actions to federal court, allow automatic appeals and allow for greater judicial scrutiny of settlements. Trial lawyers have lobbied against it and earlier variations, while the U.S. Chamber of Commerce and like-minded associations have pushed for the legislation for several years. There is a reason for the different viewpoint. The emerging Dutch law offers many of the advantages of class actions without the same downside for corporate defendants. Europe lacks a vibrant plaintiffs’ bar like that in the United States, said Dennis Orr, a partner at Mayer Brown Rowe & Maw’s New York office. European courts, moreover, do not allow contingency fee arrangements and punitive damages, said Scheurleer. Those differences have helped curtail the development of strong plaintiffs’ firms that initiate and manage massive lawsuits against companies with deep pockets, he said. Still, the changes do have some potential pitfalls for companies with operations in Europe. Under the old system, Gottridge said, a case was extremely time consuming because of the large number of individual plaintiffs. In a case pending in Germany involving Deutche Telekom, for instance, a judge said that it would take 15 years to adjudicate the thousands of claims. This type of delay places a heavy burden on plaintiffs and gives an advantage to defendants, he said. “On the other hand,” he said, “the ability to bind plaintiffs and lead to finality,” is advantageous for defendants. POSSIBLE EFFECTS The law may eventually shift the manner in which foreign plaintiffs participate in American-based class actions and may send some of the class action litigation to Europe. In June of last year, Melvyn Weiss of Milberg Weiss Bershad & Schulman toured Europe to describe to injured shareholders the advantages of suing in the United States, according to press reports. A recent decision in the Southern District of New York indicates that Europeans are listening. In that case, In re Vivendi Universal, S.A. Securities Litigation, 02 civ. 5571, Judge Richard Holwell allowed foreign plaintiffs to join a class action pending in the United States against French-based Vivendi Universal. He ruled that the court had subject matter jurisdiction because Vivendi’s lead executives, its former CEO and CFO, moved their operations to New York and committed some of the alleged fraud in the United States. Milberg Weiss played a key role in that litigation. More and more foreign investors are using U.S. courts in the securities fraud setting, said John Coffey, a partner at Bernstein Litowitz Berger & Grossmann, commenting on the Vivendi case. He said other nations lack the American system of organizing class actions, leading institutional investors to sue here. That began to change somewhat even before the introduction of the Dutch law. “I think the European system is catching up, certainly on the antitrust side,” said Mayer Brown’s Orr. Until now, he said, legal advisors have been primarily concerned about liability from private antitrust actions based in the United States. “Now you have to be concerned about non-U.S. private actions.” This has forced law firms that defend companies to take a global viewpoint, he said. They have done that through their offices abroad or through direct cooperation with lawyers licensed in Europe, at least in the antitrust setting. Gottridge does not foresee a sea change in the balance of class actions, despite the pending legislation in the Netherlands and elsewhere. “Even if foreign countries adopted the same procedures” used in American courts, “the U.S. would still be an attractive forum in many cases” for institutional investors based in Europe, he said. That is because of the U.S. system’s wide-reaching discovery, jury trials and the potential for immense punitive damage awards.

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