Mass actions: dealing with mass individual lawsuits

The diesel scandal, data leaks and air passenger rights - these are just a few examples that have triggered a wave of individual (consumer) lawsuits against companies. Such lawsuits pose major challenges for companies - they should prepare themselves for the risk and, if the worst comes to the worst, develop a defence strategy at an early stage.

Mass individual lawsuits

In recent years, companies of various types and sizes have repeatedly been confronted with mass individual lawsuits from consumers. Prominent examples such as the diesel emissions affair, in which numerous customers filed lawsuits against car manufacturers, lawsuits brought against banks due to incorrect cancellation policies for consumer loans or compensation claims by air passengers asserted against airlines show how quickly and comprehensively such waves of lawsuits can arise.

The initiators are often specialised consumer law firms or litigation funders. They specifically target consumers for whom they assert similar claims in court - usually using templates and model pleadings. It is not uncommon for legal expenses insurance companies to be involved, which cushion the financial risk for the claimant and lower the inhibition threshold for going to court or lodging an appeal.

Risks and challenges for companies

The claimants’ home courts usually have jurisdiction for the consumer actions, which is why the proceedings are pending before various courts within Germany or even internationally. This increases the expense and risk because, despite the similarity of the cases, the courts treat the cases very differently in terms of both procedural and substantive law. As a result, the outcome of the proceedings is difficult to predict and it is difficult for the company concerned to develop and implement a uniform and efficient defence strategy. This is particularly true when different law firms with different strategies act on the claimants’ side. Although judgements from parallel proceedings can provide guidance, they do not provide legal certainty due to their lack of precedential effect.

Due to the sheer number of cases and the undesirable signalling effect for parallel proceedings, settlement is often not advisable, or at least not in the initial stages. This often conflicts with the need to remove the cases from the public eye as quickly as possible. A wave of lawsuits often has a high public profile and can lead to negative reporting about the defendant company: Consumer law firms usually engage in intensive advertising to attract claimants. This attracts the attention of the media and can have a negative impact on the public perception of the company - even if the claims are ultimately dismissed.

Risk minimisation measures

Companies need to counter the flood of similar claims as strategically as possible. If there are signs of mass claims arising, a strategy for their pre-litigation handling should be developed at an early stage. A standardised communication to all consumers, for example, prevents claimants from being able to take advantage of objections during the proceedings. Furthermore, model pleadings or text modules have proven to be a cost and time-efficient measure. However, extreme care must be taken when adapting them to individual cases.

As soon as several lawsuits are pending, effective deadline management is essential in order to avoid default judgements or the risk of delays. Artificial intelligence can help with this as well as with the management of text modules or the analysis of large amounts of data in order to analyse patterns and deviations in the claimants’ model pleadings.

Overall, we advise companies to take the following (preventive) measures:

• Compliance measures: Compliance with legal obligations is the most effective means of preventing violations that could trigger a wave of lawsuits. Regular employee training as well as internal company guidelines and audits can minimise the risk of breaches that could lead to legal action and, in case of doubt, rule out the company's culpability for the incident. For evidence purposes, companies should ensure that their measures are adequately documented.
• React quickly: The wave of lawsuits is often heralded by pre-litigation demand letters. A quick and strategically careful response to such letters can dissuade consumers from taking legal action or prevent their legal expenses insurer from granting cover. This requires a well-founded legal analysis and a strategic approach in order to identify weak points in the claimant's claim early and decisively.
• Litigation PR: Targeted public relations can be an effective tool to manage the public perception of the company before and during legal proceedings. Proactive communication can maintain the trust of customers, business partners and the general public in the company.
• Holistic defence concept: If there are signs of a large number of individual claims arising, it is important to set the right course from the outset. In order to avoid contradictions in the legal argumentation and the factual presentation, a holistic defence concept should already be established with the first written submission.

On the whole, despite the fact that mass individual lawsuits present companies with considerable challenges, in our experience these can be successfully countered with a carefully prepared legal defence and strategic planning.

The Litigation & Arbitration team at Oppenhoff helps to avoid conflicts by carefully drafting contracts and clearly defining rights and obligations.

Where disputes are unavoidable, the team represents your interests before the state courts and arbitration tribunals - with convincing arguments and customised litigation tactics. The team has already successfully defended several companies against mass individual claims.

Further information on the Litigation and Arbitration team can be found here.

 Read more regarding this topic here:

• Mass litigation as opposed to individual lawsuits: opportunities and risks of collectively enforcing claims
• Class actions: cross-industry risk for companies
• Managing litigation risks: Assignment models and litigation funding make it possible
• The reform of the KapMuG: phoenix from the ashes?

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