Collective actions: an important decision by the Commercial Court of Appeals

On February 17, 2010, Division E of the National Court of Appeals on Commercial matters affirmed the Trial Court’s decision admitting the defense of lack of standing to sue filed by the financial entities being sued by a consumers’ association in the “Damnificados Financieros Asociación Civil para su Defensa v. Lehman Brothers et al., re summary proceeding” case. This ruling is not yet final.

Division E highlighted the importance of the guidelines set forth by the Argentine Federal Supreme Court in the “Mujeres por la Vida” and “Halabi” cases in order to make up for Argentina’s lack of regulation on collective actions.

Following those guidelines, Division E acknowledged the legal standing of consumers’ associations to file collective actions, even when such actions are aimed at protecting divisible individual economic rights, as long as there is an homogeneous common interest or denominator among such consumers.

However, when analyzing if such homogeneity requirement was fulfilled, the Court performed a detailed analysis of the plaintiff’s claim, concluding that the fact that the damage suffered by the consumers has come from the same factual event (in this case, public debt default) is not sufficient to admit a collective action, if, concurrently, the consumers do not share a common platform of facts.

In this case, the plaintiff grounded its complaint on an alleged malpractice in the advising of financial consumers and in a supposed concealment of information of investment risks by the financial entities, for which –according to the decision of the Court- it is essential to ponder the individual qualities of the different investors (their knowledge and experience on financial matters) and the other particular circumstances in which each operation of the purchase of the public securities was performed; which prevents the Court from deciding the collective claim in an abstract or general manner.

Division E also considered that the requirement stating that collective actions should be the only available remedy to protect the consumers’ access to justice was not fulfilled either, because the involved amounts, considered individually, would justify individual claims.

Finally, the Court imposed the legal costs of the proceedings on the plaintiff, on the understanding that the consumers’ association (a “specialist” in this matter) could not have been considered to have the right to file the collective action on behalf of the consumers, when the complaint was not intended to protect collective rights.