Class action lawsuits have arrived in Thailand

by DLA Piper

DLA Piper

[co-author: Soham Panchamiya]

At the end of last year, the civil procedure rules in Thailand were amended to allow class action litigation to be brought in Thailand for the first time. The first class action lawsuit in Thailand has since been brought against the operator of a goldmine in central Thailand on behalf of local residents, alleging various breaches of environmental legislation, and claiming damages for the losses caused by the escape of heavy metals and other toxins.

The level of damages claimed by each plaintiff is relatively low, approximately USD 40,000, but with a class of 300 or more plaintiffs, the total value of the claim rises to approximately USD 13 million with a further potential 30% in costs. The case is being supported by the Lawyers Council of Thailand and is being viewed as something of a test case.

These developments may be of particular concern as numerous companies have had to defend against significant class action lawsuits brought by consumers in the US and other jurisdictions.

What is a class action?

In simple terms, a typical class action is a court proceeding where there is a group or class of plaintiffs who have been harmed or damaged by the acts (or omissions) of a common defendant. One significant difference between class actions and litigation with multiple plaintiffs is that in a class action, all members of a class are effectively automatically represented in the relevant litigation case unless a member exercises his/her option to exit the class.

A 'class action' is defined in the Act as a civil court proceeding where a plaintiff is allowed to sue a defendant both to pursue his interests, as well as the interests of others who constitute a 'class' of people like him. The Act defines 'class' as a group of persons having identical rights arising from common issues of fact and law, as well as possessing certain unique characteristics specific to the class, even if their claimed damages may be different.

What to expect?

The types of claims against businesses which are made possible include torts, breaches of contract, and cases brought under environmental, consumer protection, labor, securities and stock exchange and trade competition laws.

The Thai class action proceeding has much in common with class actions in the US, where there is an established right of recourse for plaintiffs. Possible claims may be:

  • patients prescribed a prescriptive drug with health damaging effects;
  • consumers who have purchased the same defective product or were deceived by false advertising;
  • consumers or small business owners who have suffered as a result of price fixing;
  • employment claims brought by employees who otherwise would find it difficult to bring claims independently against their employers;
  • home or business owners affected by environmental disasters (e.g., large scale oil spills or chemical contamination); and/or
  • investors who have lost savings due to securities fraud.

Class actions, then, pose potentially significant risks to businesses in all industries by opening up opportunities to claimants who would otherwise not find it cost-effective to litigate. High profile cases in the US have seen companies lose millions of dollars. For example, in the Fen-phen anti-obesity drug class action lawsuit, a Texan manicurist was awarded USD 23.3 million by American Home Products as compensation for causing her heart damage. 3,100 lawsuits were filed following the outcome of this case and the class action was ultimately settled for an estimated USD 70 million.

Environmental claims pose a similar risk. For example, following the Exxon Valdez oil spill in the US, a class action was brought by thousands of local workers, land owners, Alaskan natives and others who were harmed by the spill. Exxon Valdez were initially ordered to pay punitive damages of USD 5 billion, which were later reduced to USD 500 million (plus interest).

Class actions permeate sectors and affect companies beyond the scope of their products' liability or consumer actions. An example is the highly-publicised Sony hacking scandal of 2014, where a hacker group leaked confidential data from Sony Pictures Entertainment including details about employees, their families, email correspondence, and salary information, among other things. Soon after, Sony employees launched a class action lawsuit and an undisclosed settlement was eventually reached. As seen in this case, in an increasingly technological world, data breaches and cybersecurity have become key concerns for any modern business that stores confidential information electronically.

Thai Class Actions v US Class Actions

The recent legislation is intended to emulate the system currently in place in the US, with a few key differences.

  • In the US, as with other common law jurisdictions, there exists a process of pre-trial discovery whereby the courts, as well as the parties, gather all of the evidence necessary to establish a 'class certification' so that the claim may proceed. Thai law, however, places the onus on the parties to assume this process, with judicial officers collecting and reviewing the evidence to determine if class certification is warranted.
  • In the US, an attorney is highly incentivised to establish a 'class' as, once established, the stakes are typically too high to go to court. With settlements reaching the millions, or even tens of millions, in US dollars, attorneys may look forward to incredibly compelling fees if they apply significant resources to uncover often expensive evidence on contingent fee arrangements. However, under Thai law, 'success fees' or contingent fee arrangements have been held to be against public morals and prohibited by the courts. Therefore, we cannot envision the same incentive existing for a Thai lawyer or judicial officer to gather evidence to justify a class certification. The class certification stage is, by far, the most important stage in a class action proceeding.
  • Under the Thai regime, defendants may be held liable for plaintiffs' legal fees for up to 30% of the judgment amount (and there is no corresponding award for defendants). However, given the culture of typically low legal fee awards made by the Thai courts, it is difficult to envision a lawyer determined to make a living on, or even apply sufficient resources to, a class action practice.
  • It would also be difficult for a lawyer in Thailand to make an educated risk assessment on whether or not to accept a class action case in a legal system without binding case law. Compare this with the US, in which there is a significant body of precedential class action cases that bind subsequent cases involving similar issues.
  • Unlike in the US, there is no jury system in Thailand. Juries in the US are sometimes swayed by emotion and might overly sympathise with a class action plaintiff challenging a large corporation. In Thailand, however, it is the judge who will decide the case.
  • Further, unlike in the US, the class of plaintiffs may be subdivided only on the grounds of differing damages. This may have interesting implications in terms of judicial process. Rather than being divided on points of law or points of fact, plaintiffs may only submit separate charges based on the nature of their injuries. This may cause problems for plaintiffs looking to establish 'class status'.

What may be done?

There is certainly much to consider. Those in high risk industries may start evaluating their Thai operations in light of the risk of class actions - it pays to be prepared. There are a few places one might look:

  • Insurance coverages - conduct a risk assessment in light of the Thai class action regime and re-evaluate your policies to ensure adequate coverage levels.
  • The Thai minimum requirements to which companies must adhere so as to avoid the risk of class action lawsuits by employees - it is worth noting that Thailand has firmly established labour unions and employee groups that will welcome the change.
  • The types of procedures and criteria that US entities already have in place to mitigate the risks of class actions. Extra precautions might be considered such as changing warning labels or providing additional disclosure in advertisements.

Moreover, special attention should be paid to relevant class actions brought in other jurisdictions since now a similar case may also be brought in Thailand using the same evidence.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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