The Supreme Court of Justice Reiterated Requirements for the Admissibility of Collective Actions

Requirements for Collective Actions - Need of a Class Definition

On February 10, 2015 the Supreme Court of Justice accepted the extraordinary remedies submitted by the sued cement companies and the direct appeals filed by two of them and dismissed the claim submitted by the plaintiff association considering that the requirements necessary for the admissibility of a collective action according to the Supreme Court of Justice’s case law, are not present in the case.

The aforementioned was decided by the Supreme Court of Justice – by unanimous vote- in the “Asociación Protección Consumidores del Mercado Común del Sur c/ Loma Negra Cía Industrial Argentina S.A. y Otros S/ Ordinario” (File 566/2012) case.

The association (hereinafter, the “plaintiff”) alleged that in 1999 the National Commission of Competition Defense started investigating the sued cement companies (Cementos Avellaneda S.A., Petroquímica Comodoro Rivadavia S.A., Asociación de Fabricantes de Cemento Portland, Cemento San Martín S.A., Loma Negra C.I.A.S.A. and Juan Minetti S.A., hereinafter the “defendants”) to determine if they had violated Sections 1, 41, subsection b), e), k) of the Defense of Competition Law in force at that time, through alleged price-fixing and market-sharing agreements.

The plaintiff affirmed that after the aforementioned investigation the Secretary of Technical Coordination imposed fines on the defendants for an amount over three hundred million pesos (Resolution SCT 124/2005) and on the basis that the legal violation had been proved. The plaintiff filed the collective action and claimed that the defendants be ordered to reimburse the alleged overpricing that they may have collected between 1981 and 1999.

In its claim the plaintiff alleged to represent the following:

1. “Affected consumers”, defined as natural and legal persons who acquired –directly or indirectly- Portland cement of any quality, through any form of commercialization, whether in return for payment or free of charge, as final consumers, for their own benefit, of their families or social group;
2. “Indirect consumers”, defined as natural and legal persons who acquired as final consumers Portland cement of any quality, through any form of commercialization, whether in return for payment or free of charge, for their own benefit, of their families or social group, from vendors different from the defendants;
3. “First purchasers of properties built or refurbished”, defined as natural and legal persons who during the period involved in the lawsuit have: (a) acquired properties built or refurbished and/or (b) commended to a third party the building of a property or structure, whether in return for payment or free of charge, as final consumers, for their own benefit, of their families or social group;

The Judge in charge of First Instance National Commercial Court No. 24, Secretary No. 47, accepted the defense of lack of standing filed by the defendants.

The plaintiff appealed the aforementioned decision and Tribunal F of the National Commercial Court of Appeals (“Tribunal F”) –supporting the prosecutors’ opinion- revoked the first instance’s court decision and decided that the plaintiff has standing to represent consumers whose rights were allegedly violated.

The defendants filed federal extraordinary remedies against the judgment rendered by Tribunal F which were formally granted since the scope and sense of federal rules (Sections 17, 42 and 43 of the Federal Constitution) were disputed. Loma Negra C.I.A.S.A and Cemento San Martín, for their part, also submitted partial direct appeals since Tribunal F tacitly rejected the arbitrariness motion included in their extraordinary appeals.

 The substitute Attorney General stated that the appealed judgement should be upheld. The Attorney General referred to case law that had important differences with this one, regarding the rights involved (“Consumidores Financieros Asoc. Civil para su Defensa c/ Citibank s/ Ordinario”).

In its judgement of February 10, 2015 the Supreme Court of Justice began by recalling the following case law:“Padec”, “Union de Usuarios” and “Consumidores Financieros Asociación Civil p/ su defensa”. In these cases the Supreme Court recognized the standing of consumers’ associations to bring collective actions provided they prove: the existence of a single fact that could harm a group of persons; that the claim be focused on the “collective effects” on the whole class; y that the failure to recognize legal standing could jeopardize access to Justice of the members of the class involved.

The court also referred to each of the categories presented by the plaintiff and stated:

• That the universe of situations that the plaintiff tries to cover is vast, diverse and has unique features that prevents the issue from being decided in a single proceeding.

• That the claim involves an asset (Portland cement) that in many cases is not commercialized by the defendants directly with consumers. When the relationship between vendors and consumers is mediated, it is not possible to state that the conducts of which the defendants are accused, may have affected equally all members of the class since it would be necessary to analyze the characteristics of the aforementioned intermediation in each case. This circumstance prevented from confirming the existence of the common effects needed to enable the intended proceeding (acc. doctrine of “Fallos” 332:111).

• For the same reasons stated in the previous section, it is not possible to deal jointly with the situation of the “first purchasers of properties built or refurbished”, because the features of the agreements entered into by such purchasers individually, do not allow a conclusion that the conduct of which the defendants are accused have equally affected the group involved;

• As for the group that the plaintiff presented as “direct consumers”, the court stated that the definition of such consumers was so generic that it prevented the court from concluding that there is a significant group of consumers (purchasers of Portland cement directly from defendants) whose rights to obtain a compensation may be jeopardized if the collective action was not accepted.

In recital 11 of the judgment rendered, the Supreme Court of Justice exhorted those who wish to initiate collective actions to make "a certain, objective and easily verifiable definition of the class, which requires to sufficiently characterize its members, so that it is possible for courts to verify at the initial stage of the proceedings, both the existence of a relevant group and who its members are... ".

Lastly, the court concluded that the requirements to make a collective action feasible in the terms of the case law set by the Supreme Court were not satisfied and accepted the extraordinary remedies and the direct appeals submitted by the defendants, revoked the judgement appealed and rejected the claim, without legal costs (Section 55 of Law No. 24.240)

Thus the Supreme Court of Justice reiterated once again the requirements for the admissibility of collective actions. In particular the Supreme Court emphasized the need for an accurate identification of the class allegedly affected an issue over which it is essential to set clear guidelines.

This requirement of the Supreme Court of Justice regarding the definition of the class is in line with its decision to put the Public Registry of Collective Proceedings (Agreement 32/2014 of the Supreme Court) into operation. This Registry requires Judges to identify the “class involved in the collective case through a succinct, clear and accurate description” (Section 4, b, of the Public Registry of Collective Proceedings Regulation).