Served with a motion to certify a class action: the first days and the defense

There are two first filters. The first: a class action can be filed only in a claim listed in the Second Schedule to the Law, or in a matter set by an express provision of law (section 3(a)). For example, item 1: a claim against a dealer, as defined in the Consumer Protection Law, 5741-1981, in connection with a matter between it and a customer, whether or not they entered into a transaction. The second: when the motion is filed by a person, and not by a public authority or an organization, that person must have a personal cause of action that raises substantial questions of fact or law common to all the class members (section 4(a)(1)). Where damage is an element of the cause of action, it is enough for such an applicant to show that, on the face of it, they suffered damage (section 4(b)(1)).

Beyond that, the court may certify the class action if it finds that the four conditions in section 8(a) are met:

1. the action raises substantial questions of fact or law common to all the class members, and there is a reasonable possibility that they will be decided in favor of the class;
2. a class action is the efficient and fair way to decide the dispute in the circumstances of the case;
3. there are reasonable grounds to assume that the interests of all the class members will be represented and managed in an appropriate way;
4. there are reasonable grounds to assume that their interests will be represented and managed in good faith.

Three points that matter for the respondent. First, even when the condition of appropriate representation or of good faith is not met, the court may certify the class action if it finds that it can be ensured by adding or replacing the representative plaintiff or the representative counsel, or in another way (section 8(c)(1)); and the defendant may not appeal a decision on appropriate representation (section 8(a)(3)). Second, the court may certify the class action with any change it decides on in relation to the motion (section 13). Third, at the motion stage, an order for discovery of documents is given only if the documents concern the certification questions and the applicant has laid an initial evidentiary basis for the conditions in section 8(a) (regulation 4(b)).

The court may decide the motion on the basis of the material filed alone, or after cross-examining the affiants (regulation 2(e)), and may order a pretrial hearing (regulation 4(a)). A decision to certify a class action can be appealed only with leave (section 8(d)).

A “notice of cessation” (הודעת חדילה) is a mechanism under section 9 of the Law, and it applies only in a restitution claim against an authority: a claim for the return of amounts that an authority collected unlawfully (item 11 of the Second Schedule). In such a claim, the court will not hear the motion before 90 days have passed since it was filed, and will not certify it if the authority gave notice that it will stop the collection and it was proved that it stopped by the relevant date (section 9(a)–(b)).

Section 9 does not apply to a motion against a private business, for example under item 1. Whether to change the practice behind the motion is a separate decision, and it is wise to make it after getting advice.

An applicant, a representative plaintiff or representative counsel may not withdraw from a certification motion except with the court's approval, and may not receive, directly or indirectly, a benefit from the defendant or from another person in connection with the withdrawal, except with the court's approval. When deciding whether to approve such a benefit, the court considers the benefit the motion brought to the class members, and when the withdrawal is requested before the class action was certified, also whether the action showed a cause of action on the face of it (section 16(a)). An affidavit disclosing all the material details of the withdrawal is attached to the withdrawal request (section 16(b)), including details of any benefit received (regulation 11(a)). The court orders the publication of a notice of the withdrawal request and its delivery to the Attorney General (regulation 11(b)), and a withdrawal by one applicant does not affect the continued conduct of the motion by another applicant (section 16(c)).

A settlement agreement in a certification motion, or in a certified class action, is made only with the court's approval (section 18(a)). If the court did not dismiss the motion to approve the agreement outright, it orders the publication of a notice and its delivery to, among others, the Attorney General and the Director of Courts (section 18(c)), and in a motion under item 1, also to the Commissioner for Consumer Protection (regulation 12(d)). A class member, the Attorney General and other bodies listed in the section may file a reasoned objection in writing within 45 days of the publication of the notice, or within a later period the court set (section 18(d)). Within the same period, a class member may ask to opt out of the class to which the settlement will apply (section 18(f)).

The court will approve a settlement only if it finds that it is appropriate, fair and reasonable, taking into account the interests of the class members; and if the settlement was filed before the class action was certified, also that the action meets, on the face of it, the conditions in sections 3, 4 and 8(a), and that ending the proceedings by settlement is the efficient and fair way to decide the dispute (section 19(a)). Before that, it receives an opinion from an examiner it appointed, unless it considered, for special reasons that it records, that there is no need for one (section 19(b)(1)). The settlement cannot include causes of action, parties or class members that were not included in the certification motion or in the decision certifying the class action (section 18(g)(1)), and in its decision the court addresses the causes of action and remedies for which the decision is binding (res judicata) on the class members to whom the settlement applies (section 19(c)(2)(f)). And if the settlement was not approved, things said or decided in the proceedings to approve it will not be used as evidence in civil legal proceedings (section 19(g)).

In a class action, the court will not award exemplary damages, nor compensation without proof of damage, except in a claim under item 9 of the Second Schedule; compensation for non-monetary damage is not excluded (section 20(e)). When monetary compensation to the class members is not practical, the court may order another remedy in favor of the class or of the public (section 20(c)). When setting the amount of compensation and how it is paid, the court may also take into account the harm that may be caused by damage to the defendant's financial stability, compared with the benefit to the class and the public (section 20(d)(2)).

When the court decides in favor of the class, including by approving a settlement agreement, it generally orders the payment of an award to the representative plaintiff (section 22(a)) and sets the attorney's fees of the representative counsel (section 23(a)). Among the considerations the Law lists: the benefit the class action brought to the class members, the effort and the risk, the degree of public importance, and the gap between the remedies claimed in the motion and the remedies awarded (sections 22(b) and 23(b)). A settlement agreement cannot include a provision on the award or on attorney's fees; the parties may only file an agreed recommendation (section 18(g)(2)). These are amounts that the court sets under the Law.

The certification decision sets out the definition of the class, the representative plaintiff and the representative counsel, the causes of action, the common questions and the remedies (section 14(a)), and a notice about it is published to the class members (section 25(a)(1)). The text of the class action attached to the motion is treated as a statement of claim, and the defendant files a statement of defense within 45 days of the day the decision was served, or within another period the court set (regulation 5(a)). A person who belongs to the class and does not want to be included in it gives notice of this within 45 days of the publication of the decision, or within a later period the court set (section 11(a)). For limitation period purposes, the class members are treated as if they had filed a claim on the date the certification motion was filed (section 26(a)), and the judgment will be binding (res judicata) on all the class members on whose behalf the class action was conducted, unless the Law expressly provides otherwise (section 24).