Many class action proceedings end in settlement. The settlement agreement is designed, inter alia, to facilitate an efficient and fair resolution to the proceeding, in a manner that also provides certainty to the parties. Essentially, it “takes on the risk” for all parties involved—the class action plaintiffs and their legal representation, the class, and the defendants. According to the law, a settlement agreement in a class action suit is subject to certification by the court. Often, the court grants this certification only after the relevant regulatory bodies have reviewed the settlement and after the class members have had the opportunity to comment on, or even object to, the settlement. Settlement certification by the court constitutes res judicata, and ensures the preclusion of repeated claims regarding the subject of the settlement.
In one recent case, a plaintiff tried to be clever and filed a new class action suit against the defendant, following a prior class action proceeding that ended in settlement. The class action was against Azrieli E-Commerce Ltd., which operates the online shopping website owned by the Azrieli Group. In the original class action proceeding, the company was permitted the opportunity to remedy the flaws on its website within a period of several months, a time frame set by the court that certified the settlement. The new class action plaintiff sought to exploit the time window between the settlement’s certification and the deadline for finalizing revisions to the website and hurried to a different court. The new plaintiff claimed there were violations on the company’s website and that the original settlement agreement did not apply to him because he filed his suit only after the first proceeding ended in settlement (and before the revisions were completed).
Eyal Nachshon and Omer Keydar of our firm represented Azrieli E-Commerce in the class action proceedings. They filed a motion to dismiss the second motion for class action certification, along with a motion to impose significant costs on the class action plaintiff.
In its declaratory judgment, the court (Hon. Judge Amit Yariv presiding) dismissed the “new” motion for certification. The court held this was a frivolous lawsuit and strongly criticized the plaintiff. The court also imposed significant costs upon him.
The court ruled that granting certification for such a frivolous proceeding would encourage the submission of “piggyback” lawsuits that seek to ride on the backs of proceedings already resolved. Moreover, encouraging such lawsuits has no justification, since they carry no real risk to the plaintiff (as decisions on the merits have already been made), no real use to the class members (as the general corrections have already been made), nor any creativity (as someone else already identified the claim, drafted the motions, and presented the data). The court added, “Frivolous lawsuits, such as the one filed here, cause harm: They impose a great financial burden on business corporations, a burden that may be rolled back onto consumers by way of raising prices. They impose a burden on courts, a burden that can delay the hearing of other cases. Worst of all, they harm the important consumer tool of class action suits, as they give the impression that such suits are designed only to enrich their plaintiffs.“
