Musterfeststellungskilage and how does this affect the future of Class action lawsuits in the E.U.?
I had the privilege of participating and speaking in Berlin at the 50th Congress of RIAD (now known as Legal Protection Insurance LPI). The Congress addressed the (European Union) E.U.’s proposal for the new directive repealing Directive 2009/22/EC. The E.U. parliament is considering replacing this directive with a new directive to aid and encourage Collective redress/ class action where the current directive has failed. There are currently 8 member countries in the E.U. that have no form of class action in their law.
So, what is Musterfeststellungskilage besides an impossible word to pronounce for this Texan? This is a case ruled by the high court in Germany that establishes the fixed cap of attorney fees at 8000 euro for the liability declaratory portion of the case. This case doesn’t affect the quantum proceeding of the lawsuit itself. Most E.U. countries do not have allow for contingency fee arrangement to compensate attorneys for their work on class action cases. The quantum portion would have to be prosecuted and funded by private funders. This is not the case in the U.S. where class action cases seem to be on the rise.
My personal experience with the U.S. model is that it’s predatorial and provides little justice for the litigants in general. The U.S. model appears to be profit motivated for lawyers. For example, cases like those against Subway and KFC that provided most of the proceeds to the prosecuting law firms. Law firms that specialize in prosecuting these class actions often target situations for profit. The current (round-up Monsanto case) is a good example of targeting by law firms. At the same time, Class actions in the U.S. may be the only means of providing any compensation for these victims.
I participated on a panel in Berlin. The German panel members seem to be the most opposed to any use of a contingency fee for prosecuting these cases. This current scheme in Europe is to prosecute the liability declaratory action first, then prosecute the quantum relief as a separate action afterwards with private funding to prosecute the quantum portion of the case. This may prove burdensome with an additional delay to seek compensation for the litigant. My biggest concern is the lack of incentive for attorneys to prosecute these collective redress cases in the E.U. The U.S. model incentive may provide too much incentive without providing the relief for the litigants. On other hand, this E.U. two-step model, with limited attorneys fee will provide little or no incentive for these lawsuits to be prosecuted.
Let me illustrate my point with the history of two statutes in Texas. I’ll prove changing or altering the Attorney fees incentive alone has affected the outcome of litigation. Texas adopted the common law legal system when the state entered the Union in 1845. Most counties in Europe use the Civil Code System instead of the Common law system as developed in the U.K. Ireland, Australia, South Africa and the U.S. Therefore, many causes of action for negligence fail at providing any real solution for litigants in Texas. Common law causes of action do not provide attorney’s fees, nor provide incentives for prosecuting deceptive trade practice cases in Texas.
So, Texas passed the Texas Deceptive Trade Practice Act DTP years ago to provide access to justice for these violations. This statute was drafted very much like many E.U. directives. The Statute provides for specific notice to all parties for attorney fees. The act is specific an provides 25 different types of deceptive trade practices to be prosecuted in Texas State courts. This act further provides for treble damages for litigants in cases where abuse is found. Attorney fees are provided along with possible mental anguish and other compensatory claims for litigants for egregious acts. These built in incentives have allowed for specialty law firms to develop in Texas to prosecute these cases. As a result, consumers are protected where no such protection existed in Common law.
Let’s examine history of another statute that was created and amended that had a different result. The workers compensation Act was passed in Texas to provide protection for Workers and companies for industrial accidents. These industrial accident cases cannot be effectively prosecuted or settled in a Common law system. So, the Industrial accident board was created in Texas many years ago. This statue, like the DTPA was created very much like an E.U. directive. The rights of the parties and procedure are spelled out in the statute. A special administrative court was created to prosecute these claims. Until 1989, attorneys could charge a contingency fee up to 25% of the claim. Texas is an oil driven business State. And Houston is the 3rd largest port in the U.S. moving most of the oil for refining in this county. Therefore, Texas has a history of a high number of industrial accidents.
Since Texas has had a history of industrial accidents, in 1989, the Insurance lobby took on the task to see how they could reduce the scheduled payouts for these claims. Insurance lobby passed an amendment to the Workers Compensation statute removing the 25% contingency fee. The new statute replaced the contingency fee provision with a requirement that law firms be paid on an hourly rate for fees proved in court. The net result drastically reduced the compensation for law firms for Workers comp cases. Cases that may have netted attorney fees of $ 25, 000.00 were now reduced to maybe earning $ 1500.00 for a few hours of work proved in court on the same type of case. Worker’s comp cases occurring after 1989 saw a mass exodus of attorneys. Most personal injury lawyers no longer accept these cases because of the low yield for the cost of prosecuting. Since 1989, there became a need for attorneys to prosecute these cases. But the lack of incentive has almost eliminated the practice leaving litigants without representation on these matters.
I believe the new directive may suffer because of the low yield for lawyers. The attorneys attending the Congress seem to come to a consensus that the E.U. directive will not attract attorneys to prosecute this litigation. This new E.U. directive will pass, but may not get off the ground. It’s too restrictive. Europe has a built-in mechanism to avoid abuse with the rule of “Loser pays”. The U.S. does not have a “Loser pays” rule. I don’t believe the E.U. directive needs to be so restrictive in how attorneys are compensated. I believe the two-step procedure of prosecuting a declaratory action first, then prosecute the quantum afterwards will create too much delay to affect a positive outcome for the claimants. Justice delayed is justice denied. On the other hand, I do understand something is better than nothing. When the E.U. passes the directive, then 8 EU counties with no collective redress will have some means to start an access to justice program for litigants that previously had no means of support. It’s a start. Only time will tell.
Data safety is an important concept for law firms, and for good reason. Most jurisdictions have rules for lawyers that explain the bare minimum of what they are required to do to protect client data. Then, throw in legal technology options, cloud drives, document sharing, social media use, servers, the ability to accept online payments…data safety entails a lot of considerations. While those are certainly important, it seems that the conversation has dropped away from technology we use every day: email. Email security is an important concept because it is still used to gain information (including login credentials) for critical systems. If you and your law firm employees don’t know and use email security best practices, your data remains at risk regardless of the other data protection safeguards implemented.
Remember You’re Dealing with Sensitive Information
While we’d all love to believe that the disclaimer placed at the bottom of law firm emails that state the email is intended for a specific recipient and should be destroyed if it is received by a non-authorized party is something that we all follow. Mistakes happen when we’re adding email recipients. We don’t always double check. We also don’t always double check that we’re adding the appropriate document. That’s why our first email security best practices tip is to always remember you are dealing with sensitive information.
Ensure that you’re sending the right document to the right recipient. You may even consider encrypting your email in certain situations. Gmail and Outlook (the two most common email programs) both make email encryption simple.
Use a Secure Password Generator
We know this won’t be the most popular email safety best practices tip we give, but it is an important one. A secure password generator creates a random, secure password that you can use for your email (or any other website). Using the same password for every login is a dangerous practice. If someone can guess your password or gains access to it somehow, you could face a lot of problems.
We know that the main concern with using a randomly generated secure password is whether you’ll be able to remember it. Using a program such as LastPass allows you to set one master password and then generate secure passwords that LastPass will remember for you. However, programs like LastPass aren’t without their flaws. If you can’t remember your master password, you can try to reset it, but if your data becomes corrupted, you will likely lose all of your password. (I learned from personal experience several years back. Despite contacting LastPass, my account could never be recovered because, according to them, all of the data was corrupted.)
Don’t Play “Getting to Know You” Facebook Games
This may not seem like an email security best practices tip, but it is. They look harmless: first pet, first car, first job, favorite teacher, elementary school. All of those inquiries (and several others made in those “games”) are potential password reset questions. Do not play those games. The answers could be used to reset your email password or even the password to your online bank account.
If you participated in a similar “getting to know you” post on social media, go change your security questions and answers as well as your passwords. And promise us that you’ll never respond to those things again!
Use Two Factor Authorization
Gmail, other email programs, and many other technologies allow you to use two factor authorization. It is an added layer of security for your data. Even if your password is compromised, there is extra security. Examples of two factor authorization include the program sending a text message to your cell phone with a code to enter to finish logging in, a PIN number only you know, or even unlocking your cell phone to finish logging into your email (thanks, Android!). Two factor authorization is one of the more recent email safety best practices that you can use. It’s simple to set up!
Learn How to Find and Understand Email Headers
Phishing still happens. For those that don’t know, phishing is when you receive an official looking email that wants you to “log in and verify your account.” In addition to email, this also happens over the phone. Do not ever provide your account number to anyone calling and stating they are with a certain organization. If they were really with them, they would see the number (or at least the last four) on their screen. They also wouldn’t ask you for your password.
When you open the email (if you open it), you’ll see a little arrow near the “From” email. You can click that and it will give you more information about the email. From here, it’s generally fairly simple to figure out if you’re receiving a legitimate email. And when in doubt, call the company listed in the email and ask if they emailed you for any reason. Don’t call any phone number in the email. Call the official number for the company.
Report phishing emails to your ISP, block the sender, and make sure your entire law firm knows and understands how to spot these dangerous emails.
Use Antivirus Software That Scans Emails and Attachments
Our final email safety best practices tip is to make sure that your law firm uses an antivirus software that scans emails and attachments for dangers. Your IT department or the company with whom you partner for IT services should be able to make an appropriate recommendation for your law firm.
Email Safety Best Practices Are the Backbone of Data Safety
In an ever changing world full of technology, data safety will remain a priority. Regardless of how technology changes, email security best practices will always be needed.
To watch Pat Monks’ video interview on Class Actions and Collective Redress, taken in November 2019 at the Legal Protection International Congress in Berlin, press play below.
Lawyers are known as Advocates and Counselors. The advocate is a familiar figure due to popular culture or a visit to the court house. The advocate is the one zealously representing their client’s position in a courtroom. Advocates research the law and develop facts to support their client’s point of view, then apply those facts to the law, with the goal of helping their client solve a problem.
The lawyer as counselor is less obvious. The counselors work takes place over the phone or in an office and rarely in the public eye. In fact, those clients who know their lawyer as a counselor often give them that name because the counselor’s thought out well reasoned legal advice has helped the client avoid a difficult situation.
Most of a lawyer’s job is as a counselor and not an advocate. Like a sport’s team, most of the hard work is at practice and not on the field of play in front of the fans. Counseling is the ounce of prevention to the advocate’s pound of cure. The slightest course correction early can help the ship miss the iceberg. To do so, however, requires the client, as the captain, to recognize his peril early and ask his navigator about a sight course correction.
As a navigator the lawyer as counselor can see things more clearly. First, we are detached from the situation so we can see things more objectively. Second, we have likely seen the same situation before. Situations that seem mysterious to our clients often appear clear to us. This is not because lawyers are smarter or have better insight. It’s simply because the experienced lawyer has been down this path before and the pitfalls are familiar. We are legal sherpas and have been to the summit a thousand times. Sure we can take you to the top of the mountain, we even know the easiest path. If you want to go it alone we can tell you where the Yeti is, where an avalanche may get you and when the snows will be deepest.
Regrettably, it is rare for a client to call and say “everything is going great just wanted to tell you I’m having a great day.” Unfortunately, the call usually starts with, “Can my employer/the cops/my ex-wife/husband/neighbor do that?” The short answer is usually “Well yes, since they did it, but I think what you really want to know is was it legal? Why don’t you tell me what happened.”
We can’t always give the client the answer they want but we can always give them the answer they need. Sometimes just knowing how something works or why the bank requires so many documents or what an easement or usufruct is can be very helpful. We are in the business of providing options. A good counselor will be able to discuss the pros and cons of different approaches to a problem. There is always more than on way to climb a tree.
At other times the explanation of how the law will apply to a situation can lead to the preparation of a document or raft of documents. Finally, the conversation can lead to a discussion of legal rights and the enforcement of same. In short, trial. Most of a lawyers day-to-day work is not in trial, despite what popular culture would have you think. While it is the most dramatic and compelling part of what a lawyer does it is a very small percentage of a lawyer’s time.
Sometimes, however, there is no alternative to solving a client’s problem other than through litigation. A good lawyer will make sure to discuss and explain the pros and cons of litigation and give the client all of the information they need to be make an informed decision and then do their best to make sure the client’s wishes are carried out to the best of their ability. A good lawyer will counsel his client on the reality of trial. Trial can be kabuki theater and/or a roller coaster with ups, downs and nerve wracking unexpected twists and turns. A good lawyer will do their best to anticipate same but there’s no sure thing in a trial.
There are so many reasons people may be stressed out when facing a legal challenge. It’s a mysterious process and not typical experience for most. Sometimes, it’s just as simple as being heard – if not in court, then at least by someone who can empathize with you, make you feel better and give you unvarnished advice.
I had the pleasure of being invited to serve on a panel at this year’s RIAD Congress in Berlin, Germany. RIAD is known as the International Legal Expense Insurers and recently celebrated its 50 anniversary. Founded in Italy, it serves as the association of 50 legal expense insurance companies from 18 different European countries including South Africa, Canada, and Australia.
This congress was special in that RIAD changed its name and now is simply known as the Legal Protection Insurance (LPI). This year’s conference was held the same time as the celebration of the 30th anniversary of fall of the Berlin Wall. The congress was considering how LPI will deal with the E.U. proposal of the Class Action redress or Class Action lawsuits. I had the pleasure of co-chairing a breakout session with Christoph Arnet (Switzerland) to discuss attorney’s views of the EU directive. Finally, I sat on a panel with Sabine Eichner (Germany), Sven Bode (Germany), John Byrne (UK), Dr. Domenik Wendt (Germany) and Thomas Kohlmeier (Germany) wrapping up the varies positions on the Collective redress issue.
I have attended RIAD congresses in Brussels, Montreal, Dublin and finally in Berlin. And it wasn’t until this Congress that I realized the main difference between European Legal Expense Insurance and Legal Plans in the United States. It can be summed up in two words “Loser pays”.
Loser pays is the number one difference in U.S. and European law that has charted the progression of legal expense in Europe and Legal Plans in the U.S. Legal Expense Insurance was founded first in 1917 in France for the drivers of the Les Mans motor car race. European law did not allow contingency fees for attorney fee reimbursement. In order to pursue a legal course of action, a litigant had to provide funding for his own attorney up front. This situation alone, was the foundation of the creation of legal expense insurance companies in Europe.
Over the years, some counties developed some contingency fee or incentive fee arrangements. It wasn’t until this century that England, Ireland, Holland, and Spain allowed some sort of contingency fee arrangement to compensate attorneys. You would think the development of contingency fees would equate European law with U.S. Law. But it hasn’t. The rule that loser automatically pays the other party’s expenses is the reason and the difference in the two bodies of law. All European countries whether Common law, or Civil code law have had a long rule that the losing party will automatically be accessed and required to pay the winner’s cost and legal expenses. This rule has prevented many litigants from filing lawsuits out of fear of losing and paying loses. The U.S. counterpart doesn’t have this automatic rule. For the most part, a counter claim or cross action is required to initiate the loser of a suit to compensate the winner.
The U.S. tort law was allowed to develop along a free enterprise system with contingency fees. In the U.S. , lawyers assess accident injury cases as business propositions. This business contingency relationship is a new thing for some European attorneys. However, the Loser pay rules still applies in Europe, and has a very limited application in the U.S. on the most outrageous cases. Therefore, litigants’ have a free reign to sue companies and individuals with legitimate causes of action without fear of paying costs and fees if they lose.
Because of this long-established rule, litigants have been terrified to drive on European roadways without insurance that covers for damages and injury. The same goes for legal expense insurance that will cover the injured’ s legal expenses for his attorney prosecuting a case, and any costs for depositions or discovery. This legal expense insurance also covers the cost of any potential loss of a case for the opponent’s attorney fees and costs. These situations do not currently occur in the United States. Here in the U.S., the litigant has very little risk involved with a contingency fee agreement. The costs and the attorney’s fees are deducted upon payment of the claim. In the event, no counter claim or malfeasance is found on the litigant’s part, the losing party will not be required to pay any losses out of pocket.
The loser pays rule developed the need for Legal expense insurance throughout Europe. As legal expense Insurance developed over the last 100 years, most of these products started covering other legal services for traffic ticket defense, wills, divorce, and civil actions.
The U.S. legal plan history started 50 years later. None of the U.S. jurisdictions were saddled with this oppressive “Loser Pays” rule. Legal plans developed more as Auto club plans developed in this country. Legal Plans do not pay out of pocket legal expenses. Nor is there the ongoing threat of paying the winner of any suit legal fees and costs. The U.S. model developed more as an employee benefit model to cover traffic tickets, wills, divorce and other routine civil actions. These U.S. plans become a source of access to legal lines for members. The group plan model allowed large members of a company, or Union to pay discounted monthly fees to a plan that would provide a lawyer for these services.
The loser pays rule caused the European business model to develop independent of the U.S. legal plan model. The European counties have very high numbers of participation with Legal protection. In these counties, the consumer attitudes are more equivalent to consumers need to own health insurance in the U.S. The fear of losing and paying outrageous attorney fees and costs to an opposing litigant is a real concern for EU. Consumers and has been for a century.
On the other hand, American consumers view the relaxed American rule in a different manner. Legal plans are viewed more like a company’s additional benefit. But they aren’t viewed in the same light as health insurance. But this view is changing. Legal plans are growing in the U.S. And in the areas of commercial drivers’ legal plans and gun owner plans, they are viewed as a necessity to protect the consumer from real legal exposure. Commercial drivers need plans to provide attorneys to protect their Commercial driver’s license and employment. And Gun owners need protection to protect their 2nd Amendment rights to bear arms. These ongoing daily fears and concerns cause U.S. consumers to view the need for these legal plans more like they view Health insurance.
I doubt that any of the U.S. jurisdictions will ever adopt and pass automatic rules for loser pays. In the event, the insurance lobby or corporations succumb to liberal legislation that adopt loser pays, then European Legal Expense Insurance model would develop in the U.S. because of this new need. In the meantime, legal plans in the U.S. will develop based on the unique needs of the individuals that have these specific legal problems.
Thanksgiving is my favorite Holiday of the entire year. So, imagine my horror last Wednesday afternoon, when instead of starting to prepare a feast for 20, I was left wondering, what am I going to do if the power does not come back on?!?!?! It was about this time I received an email on my phone reminding me that I had promised the GLSA an article by the end of Thanksgiving Weekend. As I was calmly explaining to my wife that I could cook everything on the gas stove top, or the grill, or the propane flame used to heat the oil to deep fry a turkey (or heat water to make mashed potatoes – at least that was my theory), it was occurring to me that I had the perfect GLSA article developing right before me.
Why yes, in fact, trying to prepare a holiday meal, or any meal for that matter, without modern conveniences like electricity and indoor refrigeration, is a lot like trying to run a law practice without the benefit of having legal plan members as clients. Certainly, you can do it, but if there is a more effective way, why would you want to?
Legal plan clients are the perfect complement to any legal plan practice that represents mostly individuals. Legal Plans provide a steady stream of new clients for whom the attorney or firm did not need to advertise for or market to. Payment is guaranteed by the plan for covered services and for non-covered services most plans permit the attorney to charge their normal rates or close to it. Why wouldn’t a firm want a handful of additional clients per month? In fact, there are some practices where legal plan clients represent a substantial part of the practice, to the point that if the flow of legal plan clients slowed down, it would have a significant negative impact on the firm’s bottom line.
Doubters of the model, particularly from the law firm perspective, will say, that legal plans pay too little. Yes, it is true, legal plans generally pay less for covered services than the attorney can command on the open market for similar services. What is missing from that analysis, however, is what those fees are being compared to. These are clients that the firm literally paid nothing for in terms of lead generation. If the lead is free, why does the firm need to command the same fees in order to make the work profitable?
The other part of the equation that is often missed is one of volume. In most cases, your clients do not have more than one or two legal matters that need to be attended to at any particular time, and certainly, do not have a steady flow of new legal matters to send to the firm on a monthly or even annual basis. What if your client said to you, I am going to need “X” hours of legal work every month, or “X” number of standard documents every month and in exchange for the volume would your firm be willing to provide services at a discounted hourly or project rate? I dare say many firms would not be able to give a discount fast enough in exchange for guaranteed volume. Now clearly there are no guarantees about volume when working with the plans, but the concept remains the same.
I submit that legal plans are just starting to take hold in the United States. In fact, they are quite common in other parts of the world. As legal plans continue to grow, so does the need for quality attorneys to provide the representation contracted for by the plans. So, as you start to project and plan for the year ahead, I have two questions: If you are not taking legal plan clients, why not? And if you are limiting yourself to business from just a plan or two, why stop there?
Lastly, just in case any of you are wondering, I was thankful that the power eventually came back on and I was able to pull off a feast for 20 without a hitch!
In an environment where we have more connectivity, more computers, and more technology, we assume that everyone working in a law office should automatically pick up on how to use legal technology. If they can use Word and save a document or even make and use a template, shouldn’t they instinctively know how to use legal practice management tools? Shouldn’t they know how to use online contract repositories that allow them to write or edit or even sign contracts just by opening it? Shouldn’t they know how to navigate a CRM and send out emails? Technology is technology is technology…right?
No, and, unfortunately, it is that overly broad idea that often means law firms as a whole and employees at their individual level do not get everything they want and need out of legal tech. If legal tech isn’t being used properly or isn’t being used at all, a disconnect is created at the individual level, the attorney-client level, and at the management level. It can be very difficult to determine which document for a certain client is the right one if you have people who don’t save it within the central server or document management system. There could be multiple people with different versions of it. Which one should be used? Sure, they could be using Track Changes and emailing the file back and forth, but there’s no way to know with certainty unless you do a lot of digging.
I’ll say it again: legal tech only works when people know how to use it and actually use it. What we must consider as lawyers as what we can do to create the right environment for employees to be more open to learning to properly use legal tech and also be open to asking for help. The good news is that we can structure, implement, and encourage the right environment. And it doesn’t have to be difficult, either.
Explain How Legal Tech Makes Employee Work Easier and It’s Not Meant to Replace Them
Legal technology is designed to make providing both and excellent experience and excellent service to each client. From a historical standpoint, it’s certainly easy to see how word processing programs that allowed us to edit documents and correct mistakes was an improvement from the use of typewriters and correction tape. We can see how the wider adoption of email and secured attachments (and the ability to create and provide secured document delivery online) has far better protected us all when compared to faxes (and, yes, I know that there are many online faxing options available that are still used; most of them have secured databases which makes them significantly more secure than the giant paper rocks of yore).
The entertainment industry hasn’t really given the general population much hope in regard to AI. Terminator, Beyond Blade Runner 2049, Bicentennial Man, Resident Evil, Westworld, RoboCop, I, Robot…the list goes on and on. The idea of AI in the workplace sparks a lot of fear. First AI comes to monitor and obliterate us if it thinks we’re misbehaving and now it wants our jobs. Thanks a lot, Hollywood.
Place your focus as the supervising lawyer on how the tech will help improve the daily work experience for each employee. Explain how legal tech should make them enjoy what they’re doing more and that they are still a necessary part of the law firm. Technology is nice, and sure it can do a lot of neat things, but it isn’t a substitution for a person. Someone still must check the quality of whatever it is that legal tech does for the firm. And although legal tech makes certain things more convenient for clients, such as receiving updates and paying their invoices, they still want to talk to a person when they have questions or concerns.
You may have to explain this concept multiple times. Just keep in mind that it’s about reassuring your team you’re looking to make the office function more smoothly and not looking to automate them into the unemployment line.
Create an Environment That Welcomes Questions, Concerns, and Feedback
No one likes to feel stupid or inept. Not all technology works the same; some legal tech applications are definitely more intuitive than others. Some are really easy to learn because they resemble common software used every day. Others have a steep learning curve. If you want to ensure that your employees give technology solutions a fair shake, create an environment that welcomes questions, concerns, and feedback.
It may not be possible for you to constantly have an open door policy for questions and help with software. You have meetings. You need deep work time. Sometimes you’re in court. You also have the option of setting up once a day (or once a week as time goes on) check-ins to ensure that no one is stuck. In addition to proactively addressing questions and concerns that could be hindering proper tech adoption, it also lets you get a look at what’s happening from the front lines in terms of quality in both the product created and whether the employee believes the technology is useful or if it really does nothing more than slow them down.
It’s vital to really listen to your employees. You can create help documents to answer common questions. You can create walk-throughs for training manuals. While those items are great, what you can really get is insider information on whether all those bells and whistles are helpful or a hindrance. Be open to this information. Don’t necessarily label every question, concern, or piece of feedback that doesn’t align with your opinion as a complaint or resistance. Use it as an opportunity to learn.
Get Input from Employees Before You Buy
Talk with key employees about their workflow. Give them some information about the legal tech they’re considering. Ask them to review the information and to let you know how they think each possibility would impact their work. Remember that while you are the one who holds the ultimate responsibility for their work as the supervising attorney, you’re likely not the one down in the trenches every day. Their input can help you make a better decision. It will also improve the likelihood that the employees will actually put in the effort to learn to use the one you decide to purchase.