English 
Norsk 
Polski 
Lietuvių kalba 
By:
Attorney/Partner Benjamin Nordhaug, Advokatfirmaet Halvorsen & Co AS
Associate Kristiane Fasseland Fahret, Advokatfirmaet Halvorsen & Co AS
Nordhaug and Fahret are both affiliated with Halvorsen & Co AS’ dispute resolution and litigation department.
1. Introduction
Traditionally, legal processes before the courts have mainly been limited to disputes between two parties. However, the Disputes Act contains two sets of rules that allow a dispute before the courts to have multiple plaintiffs.
Firstly, the Dispute Act's rules on subjective cumulation may, subject to certain conditions, result in the plaintiff side consisting of more than one defendant. Among other things, the rules on subjective cumulation allow for a lawsuit to be brought by several plaintiffs if i) the plaintiffs' claims fall under Norwegian jurisdiction, ii) the court in question is the correct venue for one of the claims, and iii) the claims can be dealt with by the court with the same composition and mainly according to the same procedural rules. In addition, it is required that either none of the parties in the case have objections to joint processing, or that there is «such a close connection between the claims that they should be dealt with in the same case».
Secondly, Chapter 35 of the Dispute Act contains a special set of rules on class actions. The rules on class actions were an innovation when the Dispute Act was introduced. The preparatory works to the Dispute Act state that:
«Group process is a completely new form of process.»
The rules on class actions allow the plaintiff side to consist of an unlimited number of plaintiffs. This means that the cost risk for the individual plaintiff is lower than if a single plaintiff had filed a lawsuit alone, or together with a small number of plaintiffs under the rules on subjective cumulation. For the defendant, this entails a correspondingly increased cost risk for the outcome of the case.
This article seeks to shed light on certain key aspects of the rules on class actions, but in no way aims to be exhaustive.
2. Class actions - definition and justification
The rules on class actions are intended to adapt the procedural rules to a societal development where interventions or other circumstances often affect more actors than before. In the preparatory works, particular reference is made to consumer and environmental issues, but also to discrimination, dangerous products, major accidents and unfair business practices as examples of this social development. The legislator assumed that class actions would be more suitable in certain areas than others, but the law nevertheless does not contain any restrictions on which cases can be brought as class actions.
The introduction of class actions as a special form of litigation is also justified by the fact that the individual's claim in a class action may well be diffuse and fragmentary. This reasoning is particularly relevant if the individual's loss is relatively small, while the liability of the tortfeasor as a whole is large as a result of the large number of injured parties. In such a case, the individual's loss may not be sufficiently large for them to choose to pursue the claim legally. If the individual victim chooses not to pursue the claim, the tortfeasor will be left with a potentially large (but unjustified) gain. The rules on class actions will lower the threshold for the individual injured party to pursue such claims.
The rules on class actions are also based on social and procedural economics. The class action institute is intended to ensure good procedural economy by allowing the claims to be processed at lower costs than if the claims had been processed individually. Collective processing of the claims will result in lower litigation costs for the parties involved, as well as a desired socio-economic saving in that the courts are burdened to a lesser extent than if the claims had been processed individually.
A class action is defined as follows in the Dispute Act:
«Class actions are actions brought by or against a class on the same or substantially similar factual and legal grounds and which are recognised by the court as class actions.»
In other words, the law allows the «class» in the lawsuit to be either plaintiffs or defendants, provided that the conditions in section 35-2, cf. section 35-4 of the Dispute Act are met. The decisive factor is that the lawsuit concerns «the same or substantially similar factual and legal basis», and that the court authorises the case as a class action.
3. Enrolment or deregistration?
The Disputes Act contains two types of class actions, where the difference lies in what it takes to become a party to the class action.
The main rule is that the class action only includes those who «are registered as group members» - a so-called opt-in lawsuit. Under this option, legal entities must actively join the class if they want to be part of the class action and be covered by the decision on the merits of the case.
A well-known example of an opt-in lawsuit is the class action lawsuit filed by approximately 3,500 plaintiffs against the City of Oslo, which concerned the basis for calculating property tax.
The second option is a class action that covers several legal entities without them having registered - a so-called opt-out action. Deregistration actions require the court to decide that all «who has a claim within the scope of the class action» included in the class without registration. In other words, the court must define which legal entities will be parties to the class action.
The two types of class actions are intended to address different types of cases. Opt-out actions are reserved for cases where two cumulative conditions are met. Firstly, the individual claims must apply in) «such small values or interests that a significant majority of them cannot be expected to be promoted by individual lawsuits», and ii) the requirements must «not likely to raise issues that require individual consideration».
Although the main alternative under the law is an enrolment lawsuit, Norway's largest class action is being conducted as an opt-out lawsuit. This case concerns a claim from approximately 180,000 fund customers against DNB Asset Management AS. This case is discussed in more detail below.
In both types of class actions, the parties can withdraw as a class member and thereby no longer be a party to the class action. In the case of opt-out actions, class members must actively opt out in order not to be a party to the class action.
Both enrolment and withdrawal as a group member raise several legal issues, but these are not dealt with here.
4. When are factual and legal grounds the same or substantially similar?
The assessment of similarity must be made in relation to the claim or obligation asserted in the lawsuit. The condition means that the factual and legal basis of the claim must be the same or substantially similar.
The key question in this assessment is whether, and to what extent, individual circumstances within the «group» mean that the equality requirement is not considered to be met. In the preparatory works it is emphasised that;
«The fact that there are individual circumstances related to the individual party - e.g. circumstances of significant importance for the assessment of damages - will in principle not need to be an obstacle to class proceedings. However, the more prominent the individual circumstances are, the more likely it will be that the basic condition of «substantially similar factual and legal basis» is not met.»
Individual differences in the individual thus do not alone preclude a class action, but a specific assessment must be made of how prominent the individual circumstances are for the individual.
The issue of individual circumstances has been addressed by the courts on several occasions.
The ruling in Rt. 2010 p. 267 concerned an appeal against the Court of Appeal's decision to allow a lawsuit brought by 89 section owners in a housing association against a construction company as a result of bathroom defects. The appeal to the Supreme Court concerned, among other things, an argument that there was insufficient similarity between the plaintiffs. The argument was based on the fact that some of the plaintiffs had purchased their sections directly from the developer, while others had purchased the sections in the secondary market. The Court of Appeal concluded that such individual circumstances did not preclude the possibility of a class action. The appeal to the Supreme Court was unsuccessful, and the conditions for a class action were deemed to be met.
In the aforementioned case, for those of the plaintiffs who had purchased the section in the secondary market, it was emphasised that buyers in the secondary market, subject to certain conditions, can also bring claims against previous sales stages in accordance with the Sale of Goods Act. The Court of Appeal considered that this meant that the claims from first-hand and second-hand buyers were made on the same or substantially similar factual and legal basis.
In its ruling of 2 June 2017, Borgarting Court of Appeal considered the question of whether a class action brought by approximately 180,000 fund customers against DNB Asset Management («DNB») should be approved. The lawsuit concerned the management of three equity funds that were sold and marketed as actively managed. The defendants claimed that the funds were passively managed and that they had therefore paid excessive fees for the management of the funds. The total estimated claim in the lawsuit at the time was approximately NOK 690 million. One of the questions addressed was whether the condition «the same or substantially similar factual and legal basis» was fulfilled for the plaintiffs.
DNB argued several factors in favour of not allowing the class action to proceed, including that it concerned three different funds with different prospectuses and articles of association, differences in the management of the three funds, the extent of information provided to each of the plaintiffs, the individual's risk appetite and degree of consumer protection, as well as differences in allegations of limitation, complaints and passivity towards each of the plaintiffs.
The Court of Appeal states at the outset that «The assessment of the similarity of the claims must depend partly on the basis invoked and partly on DNB's objections to the basis». After referring to the preparatory works, the Court of Appeal formulates the assessment issue as follows;
«The Court of Appeal notes that individual circumstances relating to the individual party do not necessarily exclude group issues. The question is whether the case will be dominated by common issues.»
Having formulated the issue for assessment, the Court of Appeal goes into more detail on what the claim from the plaintiffs concerns. The Court of Appeal then looks at what the claim concerned and how the lawsuit was brought by the plaintiffs;
«The fact that the service provided - the management of the mutual fund - is carried out collectively, and that the investors only have an ideal share in the fund and that the fund itself owns the assets in question, are circumstances that strongly support that the claims are similar. The lawsuit attacks precisely the management of the portfolio. When the management does not take place on an individual basis, the lawsuit basically does not raise individual questions for the individual unitholder.
The Court of Appeal understands the lawsuit to mean that the Consumer Council will seek to justify its view of the content of the management obligation on the basis of the articles of association, prospectus and key information, and not on the basis of individual contact with the individual unit holders. The content of the obligation will thus in principle be independent of the individual unitholder's personal understanding.»
In its assessment of the similarity requirement, the Court of Appeal thus determined that the three funds were all to be managed collectively, and that each of the plaintiffs had only one share in their respective funds. The plaintiffs' lawsuit was not based on individual circumstances, but on how the funds had actually been managed compared to the articles of association, prospectus and key information.
After a more detailed review of the submissions from DNB Asset Management AS, the Court of Appeal found that the case could indeed have individual differences, but concluded that such differences did not violate the equality requirement. In this regard, the Court of Appeal states that;
«The aforementioned uncertainty means that it cannot simply be assumed that the unitholders« claims on this point are completely identical. The Court of Appeal nevertheless finds that the claims will have a basis that is »substantially the same», as it will be common issues that will dominate the case. Any legally relevant differences and nuances in the investor information will in any case be able to be handled within the framework of the class action, if necessary through the establishment of subgroups pursuant to Section 35-10 second paragraph of the Dispute Act."
The Court of Appeal concluded that the conditions for a class action were met. The appeal against the Court of Appeal's ruling was not allowed.
After the Supreme Court's appeals committee rejected the appeal, the case has been heard in two instances. In the district court DNB Asset Management AS acquitted, but in Borgarting Court of Appeal's judgement of 8 May 2019, the plaintiffs won. This judgment has been appealed and was heard by the Supreme Court on 21-28 January 2020. Judgment was handed down in the case on 27 February 2020.
After a specific assessment of the fund's articles of association and other investor information, the Supreme Court found that the funds had not been managed in accordance with the agreement entered into with the unitholders. This meant that the unitholders did not receive the financial risk exposure - and thus the opportunity for excess return beyond the funds' benchmark index - that they had paid for. The Supreme Court ruled that the conditions for a price reduction were met. DNB Asset Management was ordered to pay compensation. The amount of compensation was not finally determined in the judgement, but according to DNB Asset Management's own calculations, it amounts to NOK 348.8 million for 180,903 customers.
The above shows, in our judgement, that whether there is «same or substantially similar» factual and legal basis, has not only purely legal aspects, but also a practical significance. The practical significance is evident in the above-mentioned class action against DNB Asset Management, where the plaintiffs in their lawsuit focussed on matters that applied generally to fund management, and not on the individual circumstances of each of the plaintiffs. If you are facing a case with several potential plaintiffs, or defendants for that matter, and it is considered appropriate to bring a class action, you should already at the beginning of the case angle the case so that the collective issues are emphasised.
5. Class actions should be the best form of treatment
In addition to the similarity condition discussed in section 4 above, a class action requires that «group process is the best treatment method».
This condition requires an overall assessment of the case as such, and
«The court must make an overall assessment of the entire case complex and see whether group proceedings will provide the most appropriate treatment compared to other collective or individual treatment methods.»
Among other things, consideration must be given to whether there are suitable alternatives to class actions, including joinder of claims on the basis of the rules on subjective cumulation, or ordinary organisational actions under section 1-4 of the Dispute Act.
As mentioned in the introduction, the justification for class actions is, among other things, that this form of procedure will be more economical than alternative treatment in certain types of cases. In line with this, it follows from case law that the question of cost and time is of importance when assessing whether class action is the best form of treatment. In this connection, Gulating Court of Appeal stated the following in its ruling of 22 March 2011 (LG-2011-014894);
«The Court of Appeal can also essentially agree with the District Court's assessment and conclusion on this issue. In its assessment, the District Court has emphasised the considerations that will be particularly decisive - the number of individual lawsuits, if any, and the savings that can be made by bringing a class action. In the Court of Appeal's view, the latter must apply both to financial savings and also to the time savings in relation to the time a larger number of individual lawsuits would have entailed.»
In our opinion, the above cannot be understood to mean that the requirements for time and cost savings are cumulative. Such an assessment is also supported by the preparatory works to the Dispute Act, where the cost element is given great weight, while the time element is given less weight.
The scope of the overall assessment that must be made is well reproduced in Borgarting Court of Appeal's ruling of 1 December 2009 (RG-2009-1512), where the Court of Appeal concludes its assessment by stating;
«The Court of Appeal cannot see that it has been substantiated that a class action will in practice be the only way many of the claimants will be able to pursue their claims in this case. Furthermore, the Court of Appeal has doubts as to whether a class action will allow for proper processing of the claims. As mentioned, it is difficult to disregard the fact that individual circumstances will be important based on the legal grounds invoked. It is, of course, difficult to have a clear idea of the extent of individual features at the present time, but overall it is the Court of Appeal's assessment that the disadvantages of allowing a class action in this case could be greater than the advantages. It is by no means a given that class actions will be good procedural economics here. In this case, it seems most appropriate to clarify the factual circumstances in one or more individual cases first, in order to then assess whether there may be grounds for settling other cases.»
The above quotation shows that the possibility of proper handling of the claims will also form part of the assessment. This has a bearing on the assessment of whether the claims are sufficiently similar, as too great a difference between the claims could jeopardise the proper handling of the individual claims.
In the above, the Court of Appeal has also emphasised individual differences when assessing whether group proceedings are to be regarded as the best method of treatment. At first glance, this may seem somewhat odd, given that the assessment of individual differences basically falls under the assessment of whether the claims have the same or substantially similar factual and legal basis. The fact that the Court of Appeal also emphasised this when assessing whether group proceedings were the best method of treatment is nevertheless in line with the preparatory works to the Dispute Act, which state, among other things, that;
«In cases where individual circumstances are central, the condition under (c) of group process as the most appropriate form of treatment will often not be met.»
The above quote from the preparatory works shows that there is no clear distinction between the assessment of the similarity between the requirements and whether group process is the best form of treatment.
6. Summarising
Despite the fact that the number of class actions in Norway is considerably lower than ordinary legal processes, the rules should still be kept in mind on a daily basis. In principle, the rules on class actions can be applied regardless of legal area. The possibilities for class actions should be considered if you become involved in a case where an act or omission has caused many legal entities to have a claim with the same or substantially similar factual and legal basis.
If the conditions for a class action are met, a class action will in principle be a cheaper and more time-efficient process for safeguarding the client's interest, compared to running several individual cases with great similarities.
