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Class actions

Class actions are fairly common in the technology and telecommunications industries. Some more notable class actions in these industries that have been noted by the media relatively recently include the Sony BMG rootkit class action lawsuit. In that case, Sony music CD’s that were played on personal computers allegedly installed, albeit unbeknowingly to end users, versions of copy-restriction software that could expose end users to security vulnerabilities. In another case last year, iPod Nano users filed suit against Apple Computer Inc as a result of the significant propensity for iPod Nano screens to be scratched; and in another case, a group of Verizon customers sued the company in relation to its email filtering policies. This edition of Legal View provides a brief overview of class actions in Australia

Class Actions, Representative Proceedings and Group Proceedings

Class actions are a form of litigation involving a large number of people known as members of the class whose cases involve common issues of law and fact. Class actions allow a group to formulate a combined claim as an alternative to bringing separate actions. In Australia, class actions are referred to as representative proceedings and group proceedings, depending on the jurisdiction in which the class action is launched. Class actions can be launched by and against resellers, distributors and wholesalers and any other channel member. The most publicised class actions are launched by end users or members of the public.
Before a class action can be launched, there are thereshold requirements that must be satisfied. The Federal Court of Australia class action litigation regime, which came into effect in 1992, stipulates that representative proceedings may be commenced by one or more persons representing a group of persons where:

  • 7 or more persons have claims against the same person; and
  • the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and
  • the claims of all those persons give rise to a substantial common issue of law or fact.

Class actions have been launched in Australia against a wide range of defendants, including banks, pharmaceutical drug manufacturers, governmental organisations and of course, IT organisations.

Litigation Funding

The general rule of litigation that the “losing” party pay the other party’s legal costs related to the case is followed in class action lawsuits. This means that if the class action is successful, the defendant may need to pay the costs of all members of the class; and due to the extensive and complex matters of law and fact that will often need to be determined by the courts in class actions, the costs that can accrue in these matters can be significant. However, if the class action fails, only the representative of the class will generally be liable for payment of the defendant’s costs. One way to deal with these costs is for parties to arrange litigation funding. This occurs where the class obtains the agreement of a third party company to fund the costs of the litigation in return for a percentage of the proceeds, if the litigation is successful.

Conclusion

In Australia, the level of litigation is second only to that in the United States so far as class actions are concerned. Where warranted, aggrieved technology and telecommunications providers with common causes of action that are able to understand the benefits of aggregating their interests with other providers can deal a decisive blow by bringing a successful class action in the appropriate circumstances.

Disclaimer: This column is for general informational purposes only. It is not legal advice nor is it a substitute for legal advice. Readers should seek legal advice on their own particular circumstances. Alan Arnott is a technology & telecommunications lawyer with qualifications in computer science and law with Arnotts Lawyers Jones Bay Wharf in Sydney. For more information, please visit www.arnotts.net.au.