Did you read this in the Tagesschau (News) app? A group of lawyers, it says, wants to bring a U.S. class action on behalf of German citizens to assert claims for damages against German virologist Christian Drosten of the Charité (Berlin hospital) and the director of the Robert Koch Institute, Lothar Wieler, because of the Corona measures imposed in Germany. Mind you, a class actionin the United States.
Question: Can this work? Should we join such a class action? Might there even be millions in damages? – You sometimes hear that in the USA you can get a 6-digit sum if you burn your thighs on a hot cup of McDonald’s coffee. So how about following this lawyer from Lower Saxony, who supposedly organizes this class action, so that you also get a piece of the big cake?
For those of you who don’t like to read much, but are only interested in the outcome, here is the result of my assessment in advance:
1. US courts have no personal jurisdiction
In a purely German case (German tortfeasor, German injured party, damages limited to Germany), you will have a hard time finding a U.S. court to take up the matter. True, it is well known that the American courts interpret questions of personal jurisdiction very broadly, so that even minimum contacts with the USA are often sufficient for them to declare themselves competent. But if the case has no relation to the U.S. at all, then the U.S. courts will not have jurisdiction.
2. Proximate cause and fault rather doubtful
And what about proximate cause? Let’s assume that the Corona tests are indeed unsuitable (“idiot tests”), as apparently claimed by the plaintiff side. However, this alone does not cause any damage and thus no claim for damages. Instead, there must be a few intermediate steps. Namely, the imposition of Corona measures by German government authorities, resulting in lost sales, lost profits, etc. But to blame all this as proximate cause on the virologists, seems very far-fetched. Even if German politics undoubtedly listens more to science than Trump does (or did) to Dr. Fauci.
3. Result (my opinion)
I think that this project has no great chances of success. To invest 800 € in fees (as an advance downpayment), as the organizer apparently demands, seems to me more like a waste of money. But everybody should decide that for themselves.
So, now that I have probably satisfied your biggest curiosity, let´s take a closer look. This case, or rather this report, does indeed raise a few interesting legal questions.
4. What is a class action after all?
A class action is an instrument of U.S. procedural law. As the name implies, a group (class) of injured parties sues a tortfeasor.
a) The whole thing started about 50 years ago. The idea was this: If an individual consumer is harmed by a large company, it is very difficult for him or her to effectively enforce their rights, especially in the USA. Lawsuits in the USA are very expensive.
This is also due to the fact that the courts in the USA play a much more passive role than German courts, for example. The taking of evidence (pretrial discovery and discovery) is almost entirely in the hands of the lawyers. They have to take care of the witness statements, find suitable experts and pre-finance their expert opinions. The court largely stays out of this process. Whereas in Germany witnesses and experts are summoned by the court at the request of one of the parties and then questioned primarily by the judge during the trial, in the U.S. this is all a matter for the lawyers.
Court proceedings are therefore costly, and American lawyers are expensive. Hourly rates of $500 are not uncommon.
How is an individual consumer supposed to take on a tobacco company or an asbestos manufacturer, for example? These large corporations have all the money in the world to defend themselves against such a lawsuit with expensive large law firms. The individual consumer has virtually no chance.
b) This is where the class action comes into play. If many injured parties, hundreds or thousands, join forces and pool their resources, they can stand up to a large company as an equal partner. The class action thus creates equal opportunities for justified concerns. Take a look at the movie Erin Brockovich with Julia Roberts, and you’ll know what I mean.
c) Another aspect is the following: In America, contingency fees have been common practice for a long time. Here’s how it works: The party to the lawsuit first pays the lawyer nothing. If the case is lost, it stays that way. If, on the other hand, the lawyer wins the case, then he receives a considerable portion of the sum of money won as remuneration. The usual amount is 30-40%.
d) And now another aspect comes into play, namely the so-called jury procedure. In America, the question of whether a company is guilty, i.e. whether it has manufactured a defective product, for example, is decided not by a judge but often by a group of jurors (jury). This jury also decides on the amount of compensation. And you can imagine that 12 “ordinary people” (peers) are more willing to award a plaintiff a few million in damages than, for example, a German professional judge is.
e) This also has to do with the fact that American tort law is structured differently than German tort law. Here in Germany, the damage actually incurred is compensated. No more and no less. In the USA, on the other hand, the court can also award so-called punitive damages. The idea behind these punitive damages is to deter the damaging party or similar companies from bringing dangerous products onto the market again or in a different way in the future.
And this is where the jurors will ask themselves: How high must these punitive damages be in order for a company with 1,000,000,000 in sales to stop putting dangerous products on the market in the future? Is 5,000,000 enough if the company makes 500,000,000 in profits with the dangerous products? Certainly not. That’s why the jury is often very generous with punitive damages.
f) It all comes together: The plaintiffs’ lawyers seek high damages. They get 30-40% of that as part of the contingency fee. With a group of a few hundred plaintiffs, this leads to a really lucrative lawsuit, with a fairly low risk for the individual plaintiff.
That’s how it works in the USA.
5. Are class actions uncontroversial in the USA?
No, not at all. What was originally a good idea has turned into a major threat to the economy.
In fact, given the mechanisms described above, not only are legitimate lawsuits being filed, but a veritable avalanche of lawsuits has developed. Law firms use newspaper ads to search for injured parties – or those who may have been injured – and then assert their claims against a company. The company is then faced with a choice: either defend itself against the lawsuit, which is very expensive, involves damage to its reputation, and may end up being ordered to pay a three-digit million sum by a jury after all. Or agree to a settlement with the plaintiffs.
Because that is what such class actions often aim at: To reach a settlement as quickly as possible and without much effort, which secures a high contingency fee for the plaintiff lawyers, if the group of plaintiffs is large enough, while the individual plaintiff is often left with only a fairly small amount of damages. Very nicely illustrated by John Grisham in his novel The King of Torts.
Class actions are thus a major threat to the economy. At least where the instrument of class action is misused and where the legal framework allows such misuse. In my opinion, this is the case in America, especially in view of the jury system. That’s why there are also efforts there to restrict the instrument of the class action again somewhat and to push it back. However, this will probably not succeed.
6. Are there also class actions in Germany?
No, there are no real class actions in Germany. The Code of Civil Procedure does not provide for this.
a) What we have had for a few years is the model declaratory action (Musterfeststellungsklage) and – in stock corporation law – the model proceedings for capital investors (Musterverfahren für Kapitalanleger). Within the framework of such a model declaratory action, consumer associations can have disputed issues clarified in principle in a model lawsuit. This instrument was used in the emissions scandal (Dieselmusterklage).
However, a model declaratory action initially only leads to certain legal issues being clarified for a large number of cases. What does not happen at the end of a model declaratory action is that a certain company has to pay a certain amount of money to a certain plaintiff. These further steps, i.e. suing for individual damages, must then be taken by each plaintiff himself in Germany.
If you want to look at it positively, you could say that the model declaratory action takes up the positive aspects of the U.S. class action and avoids its excesses. If you want to look at it negatively, you could say: The model declaratory action is a relatively blunt sword. Or why do you think a German automaker pays plaintiffs in the U.S. more than those in Germany? …
b) Another aspect to consider: In Germany, contingency fees like in the U.S. are only permissible in very exceptional cases and have not been customary up to now. Until a few years ago, contingency fees were completely forbidden in Germany. This has now been liberalized somewhat. But we do not have conditions like those in the U.S. here.
c) Another factor is that Germany does not have the high damages that the U.S. does. We do not have punitive damages. Punishing a tortfeasor is not the task of the civil courts; it is the responsibility of the public prosecutor’s office and the criminal courts. The individual injured party therefore receives nothing from the punishment that an injuring company has to pay. In our case, as I said, the injured party is only compensated for the damage it actually suffered.
d) And these damages are adjudicated by a professional judge, not an emotionalized lay jury.
So, that were some, I would say, quite interesting aspects of class actions in the USA and model declaratory actions in Germany.
Let’s see what will become of the plan for a class action in the U.S. against our German virologists, as described in the introduction. My guess is that the lawsuit, if the case ever gets to court at all, will lead to nothing, since the claims are unfounded and the American courts do not have personal jurisdiction over the defendants.