Going Dutch: The Effects of Domestic Restriction and Foreign Acceptance of Class Litigation on American Securities Fraud Plaintiffs

IntroductionClass actions in the United States began with a noble goal: to open the courthouse doors to groups of similarly injured plaintiffs who would otherwise be unable to bring claims individually.1 Using class actions, victims of securities fraud, employment discrimination, and consumer fraud could easily join together to file mass claims.2 In practice, however, class actions have been expanded beyond their original bounds and have been abused routinely by plaintiffs' lawyers.3 As a result, during the last decade class action critics have succeeded in dramatically limiting class certification.4 Unfortunately, this legislative and judicial tightening has left many truly aggrieved plaintiffs without relief.5Across the Atlantic, European countries have historically rejected American-style class actions because such claims cede the state's regulatory authority to private actors.6 Nevertheless, the European Union has recendy studied and proposed a trans-European system for aggregate litigation.7 Moreover, many EU Member States have independently adopted legal mechanisms that permit private individuals to seek collective redress.8 In 2005, for instance, the Netherlands enacted the Dutch Settlement Act, by which Dutch courts can certify out-of-court settlements of mass claims.9 As a result of its extensive jurisdictional reach, the Dutch Settlement Act holds potential for both European and American plaintiffs.10This Note traces the trends of aggregate litigation in both the United States and Europe, and examines the potential benefits of the European market to American plaintiffs.* 11 Part I examines the state of the class action in the United States and the legislative and judicial tightening of Rule 23 of the Federal Rules of Civil Procedure that has left many plaintiffs without recourse.12 Part II discusses Europe's historical rejection and recent embrace of aggregate litigation mechanisms, and analyzes the state of the law in individual Member States and the European Union itself.13 Part III argues that, as a result of the trends identified in Parts I and II, American class plaintiffs with securities fraud claims who have been shut out of domestic courts should seek relief in Europe under the Dutch Settlement Act.14 Part III then considers the res judicata effect that American courts might give to foreign aggregate litigation judgments, and concludes that courts are most likely to give such effect in securities fraud cases.15 Finally, Part III analyzes the potential impact of a trans-European aggregate litigation regime on American plaintiffs' recourse in the Netherlands.16I. The Evolving Standard for Class Action Certification in the United StatesCourts have long accepted the class action as an integral element of American jurisprudence, but the standard used to evaluate class certification has not been consistent over time.17 This Part identifies three significant developments in the recent history of the American class action.18 Section A provides an overview of Rule 23, which governs class actions, and examines the policy considerations underpinning its creation.19 Section B notes several real and perceived abuses of the class action structure.20 Section C then details the judicial and legislative response to these abuses.21A. The Rule 23 Class Certification StandardRule 23, which governs the procedure for class certification, was significantly reformulated in 1966 in response to widespread criticism.22 Prior to this revision, class actions were relatively rare, due in large part to the rule's ill-defined certification requirements.23 The 1966 revision provided clarity, and remains the standard today.24 The revised rule permits federal courts to certify class actions if: (1) the proposed class is so large that joinder is impracticable; (2) the class is united by common questions of law or fact; (3) the representative parties' claims or defenses are typical of those of the class as a whole; and (4) the representatives will adequately protect the class's interests. …