Australian ruling shows practical application of ‘opt-in’ class actions
Federal courts in the U.S. favor an “opt-out” system for class action suits—meaning that, if certain requirements are met, individuals with a common complaint are automatically considered members of a class unless they choose to be excluded. While this system allows consumers with small individual claims to hold defendants accountable, it does have detractors. Critics of the “opt-out” system often claim that it leads to excessively large, unwieldy groups of plaintiffs, who may not be interested in participating, or even be aware that they are involved.
Class actions around the world
In other parts of the world, however, courts often require class members to opt in, not out. For example, in the Canadian provinces of British Columbia, New Brunswick, and Newfoundland and Labrador, residents are not automatically opted in when class actions are initiated in other provinces; they have to register themselves within a certain timeframe. (This, by the way, may be a concern for residents of those provinces who wish to join nationwide class action lawsuits against Equifax, in response to the company’s recent data breach.)
An Australian class action example
A recent Australian case, Jones v. Treasury Wine Estates Limited (No. 2), offers insight into how a court can apply a limited “opt-in” requirement when it comes to class actions. The Australian judicial system is widely seen as being favorable to plaintiffs in class action suits, but Australian courts are nonetheless willing, in some circumstances, to shut out potential plaintiffs in class action suits by “closing” a class within a certain time period.
The Jones case involves allegations that Treasury Wine Estates (TWE) failed to disclose necessary information related to the price of its shares. A plaintiff named Brian Jones argued that he and other shareholders, as a class, were entitled to damages. Both Jones and TWE agreed that it was appropriate for the court to close the class for the purposes of settlement. (This would mean that any shareholders who failed to register by a deadline would not be able to collect any proceeds in the event that a settlement was reached.)
The parties disagreed, however, on whether the class closure order should prevent unregistered group members from collecting if the case was settled at trial. Jones argued that they should be barred only from receiving settlement damages, while TWE argued that the unregistered group members should be barred from receiving damages altogether, even if the matter went to trial.
A caution from the class action courts
An Australian federal court sided with Jones, and held that the class should only be closed for settlement purposes. The judge who wrote the decision was open to the possibility of barring unregistered group members from collecting proceeds from a trial, as TWE had suggested. However, the judge concluded that it would be more appropriate to do so at a later point in time (such as after a judgment has been rendered in the initial trial).
This ruling was appealed, and the Federal Court of Australia upheld the decision on class closure. The ruling states that courts should be cautious about barring class members from their entitlements in cases without settlements. The Court held that “an order to shut out class members who do not respond to an arbitrary deadline” is not appropriate when no settlement has been reached.