– How mass litigation follows other mass-produced goods –
A litigation industry is a „division-of-labour, systematically organised wailing and gnashing of teeth.“ (Karin Martussek)
The evolution of mass litigation: how lawyers and technology are transforming the legal market.
A remarkable development has taken place in the world of law: mass claims are increasingly being processed on an industrial scale, enabling a more efficient and standardised handling even of smaller amounts in dispute. This transformation is being driven by the advancing specialisation of law firms and the support of IT providers who supply the necessary technology.
The industrial processing of mass claims is a phenomenon that has emerged in recent years and is now accelerating sharply. Lawyers who specialise in mass litigation use advanced software and algorithms to handle a multitude of cases quickly and efficiently. This allows them to win more clients while shortening processing times. It is also encouraged by legislation. One example of this development is the reform of the Kapitalanleger-Musterverfahrensgesetz (KapMuG, the German Capital Markets Model Case Act), which aims to increase the efficiency of mass claims under capital markets law and to shorten the duration of proceedings. The same applies to electronic files, court mailboxes and service of documents, electronic signatures and the use of video conferencing for court hearings – and not only since the new Justice Digitalisation Regulation in force from May 2025.
The role of legal-expenses insurers should not be underestimated in this context, as they often bear the costs of such proceedings. This makes it easier for clients to assert their rights without having to worry about the financial aspects. In the ideal case the client merely signs a power of attorney for the proceedings and can then simply let themselves be surprised when the money flows, without needing to be informed any further about the proceedings. In addition, legal-tech service providers have become established, offering technical solutions for specific cases such as flight delays. Here, publicly accessible databases are used to process claims automatically, with the client only having to supply their flight ticket. Obtaining the insurer’s coverage confirmation and generating clients is likewise technology-supported – advertising banners on the internet are not unusual. Through pure „dark processing“ at the legal-expenses insurer by means of AI, no review by a caseworker is required there.
The collaboration between lawyers and IT providers has also led to the founding of specialised firms that concentrate on defending against mass claims. One example is the firm Classreaction, a joint venture between Deloitte Legal and Frommer Legal, which specialises in the technology-supported handling of consumer claims. The same technology providers usually supply all sides with suitable products.
These developments show that the legal market is in the process of fundamental change. The industrial processing of mass claims and the accompanying specialisation in standardised offerings are a clear sign that the legal sector is increasingly being shaped by technological innovation. This presents both opportunities and challenges: on the one hand, clients can benefit from faster and cheaper proceedings; on the other, traditional firms must adapt to the new circumstances in order to remain competitive – and, as a consequence, so must those on the defendant side.
The future of the legal market will undoubtedly depend on the further integration of technology and on the adaptability of legal-service providers, the judiciary and any court-appointed experts who may be required. There is barely time to wait and see how these trends develop further and what effects they will have on legal practice and on society as a whole.
The evolution of mass litigation and model declaratory actions in Germany
In recent years, the German legal system has increasingly adapted to handling mass claims. This is a response to the rising number of cases in which a large number of claimants assert identical claims – for instance because mass-produced goods exhibited the same defects on a mass scale, or because regulating laws and provisions were misunderstood in the same way. The courts have begun to adjust to this development by forming specialised chambers, reinforcing staff and, where appropriate, creating networks. A key aspect of this adjustment is the standardisation of the procedural process, extending from the drafting of texts through evidentiary orders to the judgments themselves. The inclusion of initial „model“ judgments in statements of claim and statements of defence reinforces this effect. Added to this is the attempt by some courts to uphold claims through judgment reasoning that is as simple as possible and without extensive taking of evidence, for as long as the BGH (Federal Court of Justice) does not see it differently.
Standardisation in mass proceedings is, however, not without challenges. It must satisfy the requirements of the Zivilprozessordnung (ZPO, the German Code of Civil Procedure), which governs the form and content of pleadings, regardless of whether they are prepared for an individual case or for a multitude of cases. The ZPO requires that, in addition to a specific application, a statement of claim must also contain particulars of the subject matter and the grounds of the claim asserted. This requirement of specificity stands in tension with the standardisation needed in mass litigation, since although the facts are similar, they may differ in detail. Yet it turns out that even far-reaching ignorance of the facts does not prevent mass claims, because claims for information can also be asserted, which are then largely satisfied voluntarily in the statements of defence – possibly also in order to bring the proceedings back onto the further standardised track.
Another route the legislator has taken to cope with mass claims is the model proceedings, introduced in 2018 with the model declaratory action (Musterfeststellungsklage). This type of action allows qualified consumer-protection associations to sue companies on behalf of consumers. The model declaratory action aims to balance the power relationship between consumers and companies and to enforce consumers’ claims more effectively.
Despite this progress, there are still challenges in implementing such model proceedings. For example, not all relevant questions can be clarified in a model proceeding, and there are cases in which a referral to the Bundesgerichtshof (BGH, Federal Court of Justice) and a stay of the proceedings are not possible. This can mean that individual claimants must continue to sue individually in order to assert their claims.
The development of mass claims and model declaratory actions in Germany shows that the legal system is, for now, still flexible enough to respond to new challenges. At the same time, it becomes clear that the balance between efficiency and individual justice is an ongoing process requiring constant adjustment and improvement. Not infrequently, the BGH ultimately blocks the attempt at an „efficient“ solution – and so some courts already have the efficiently (but unsuitably) resolved cases back on their desks en masse.
The subject matter of mass claims is standardised
The „industries“ affected are those producing relatively uniform products subject to particular regulations or – not only technical – standards. This is the case with motor vehicles, pharmaceuticals, chemicals (for example the wood-preservative cases), medical devices (such as silicone implants), the unwinding of life insurance policies and also private health insurance (PKV, German private health insurance) – here particularly premium adjustments. The client need only supply, say, their insurance policies regarding premium adjustments, or merely sign the power of attorney under which the lawyer can then obtain the corresponding information. The factual assertions are limited, for instance because, absent known documents (trade secrets!), a secondary burden of presentation and in part also of proof lies with the defendant insurer in any event. Owing to regular confidentiality obligations carrying criminal sanctions, the claimant’s representative does not know the documents even when they are stored on their computer from other cases.
In the PKV there are statutorily prescribed (albeit through indeterminate legal concepts) uniform methods of calculation and procedure for premium adjustments. There are also prescribed uniform formulae, extending to the very designations, model conditions, standardised technical business plans down to identical section, annex and appendix numbering, the contents themselves, and the requirements placed on them. There is also a statutory requirement that everything must be documented in a comprehensible manner. The Deutsche Aktuarvereinigung (DAV, German Actuarial Association) sets standards here, the training is uniform, and the trustees are also networked among themselves, with meetings held with the responsible actuaries of the sector. The relatively few trustees each serve several insurers, take on new ones through changes of trustee, and for this reason too strive for the strongest possible standardisation of contents and processes.
Mass litigation and the standardisation of subject matter
The world of mass litigation is complex and multi-layered, yet one aspect remains constant: the need for standardisation. This applies in particular to industries that manufacture uniform products and must comply with specific regulations. The automotive industry, the pharmaceutical sector, chemical companies and the PKV are just a few examples in which standardised subject matter comes into play.
Standardisation makes it possible that, in mass litigation, not every single case has to be considered individually; instead, common denominators can be identified and used as the basis for the claim. This simplifies the process for the claimants, who in the PKV, for instance, merely have to submit their premium-adjustment notifications or – if they cannot find them – also grant the lawyer a power of attorney to obtain the information.
One area in which this standardisation becomes especially clear is private health insurance (PKV). Here there are statutorily fixed, uniform methods of calculation and procedure for premium adjustments. These comprise standardised formulae, model conditions and technical business plans that are often regulated down to the smallest detail. The prescribed equal treatment of the insured requires that there be no deviation – if something is wrong, it is wrong in equal measure every time. The Deutsche Aktuarvereinigung (DAV, German Actuarial Association) plays a central role in setting these standards, and the training of actuaries, including examinations and professional-disciplinary proceedings in the event of deviations, is uniformly regulated.
The trustees required to approve premium adjustments likewise strive for the strongest possible standardisation of contents and processes in order to ensure efficiency and transparency. The BGH, however, rejected the view that the trustee must be economically independent – rather, premium adjustments are in any event to be reviewed fully by the courts with the help of experts. Attempts by many courts to decide the claim in the claimant’s favour efficiently and simply via the „unlawfully dependent“ trustee have thus proved unsuitable. The same applies to the view that a premium adjustment would be ineffective merely because no complete cross-tariff capping concept with all tariff-portfolio details was available, or that the adjustment clause itself was already ineffective.
Standardisation in the PKV and other industries shows how important clear and comprehensible processes are in order to protect consumers’ rights while at the same time increasing efficiency within the legal system. It ensures that mass claims do not become an unmanageable burden on the justice system, but can instead serve as an effective means of enforcing consumer rights, or of the constitutionally required effective legal protection. This is a decisive step towards a fairer and more accessible legal system for all. Even where claims are ultimately dismissed in many cases, legal peace is at least established. The fees and court costs are then also borne by the legal-expenses insurer. The reproach by some that they are „defencelessly at the mercy“ of premium adjustments can thus be countered – anyone who wishes to can have them reviewed by the courts, including a court-appointed expert opinion, as the Constitutional Court already held at the end of 1999.
Admittedly there is a bottleneck, for example among experts in insurance mathematics in the PKV, with workloads often booked out well beyond 2028 – yet in view of out-of-court hourly rates of well over EUR 300, just as with the trustees, more actuaries can also be won for this work well into retirement age. For the hourly rate of up to a maximum of EUR 155 under the Justizvergütungs- und Entschädigungsgesetz (JVEG, German Judicial Remuneration and Compensation Act) can, with the consent of just one party and (as is then regularly granted) the court, even be doubled.
That more experts would further fuel a „litigation industry“ can hardly be assumed. Its financial basis does not depend on whether and when enough experts are available – not a single claim will be foregone merely because there are too few experts.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by kind permission of
www.guetsel.de (published on 25 June 2024)
and
www.hm-infinity.de (published in Infinity Magazin, July 2024, pages 14 and 15, under the heading: A litigation industry is a „division-of-labour, systematically organised wailing and gnashing of teeth“)
and
www.pt-magazin.de (published on 12 July 2024 under the heading: The evolution of mass litigation: how lawyers and technology are transforming the legal market)
