Mexico introduces first class action law

Law could increase litigation for companies doing business in the country

A rather historic change will come to Mexican courts in the coming months. For the first time, consumers will be able to bring class action lawsuits.

In April 2010, the Mexican Congress amended Mexico’s constitution to allow class actions in the country. President Felipe Calderón signed a class action bill into law a year later. The law was published in the Federal Official Gazette on Aug. 30, and takes effect on March 1, 2012.

This modification to the legal system is significant. Experts say the Mexican government’s motivation to enact the class action law, which serves as a remedy for aggrieved consumers, was a combination of the vox populi over the past decade and recent action from Mexican state legislatures.

Since the mid-1990s, Mexico’s Consumer Protection Law has allowed the Federal Consumer Protection Agency (referred to as Profeco) to bring limited collective actions on behalf of consumers. Dissatisfied with the minimal representation, consumer interest groups pushed for a class action law that would let consumers file their own claims.

“There was a lot of pressure by consumer groups and society in general to have legislation that would enable consumers to make their rights effective in more aggressive manners,” says Luis Enrique Graham, a partner in Chadbourne & Parke’s Mexico City office and former president of the Mexican Bar Association.

In the past few years, local legislatures have considered their own versions of allowing class actions. In April 2009, the Mexico City legislature held hearings about adopting a class action law that would allow claimants to bring class actions as long as at least one class member was from Mexico City.

But when it came to crafting a national class action law, the Mexican Congress faced challenges.

“There was a great deal of divisiveness and back-and-forth between consumer groups and the business community,” Dechert Partner Sean Wajert explains. “Everybody was putting forward their own version of what they thought was a fair and balanced class action model.”

The final version of Mexico’s class action law accomplishes its main goal: to increase consumer access to justice. And although the law affords some protection to businesses, companies that operate in Mexico should understand the law’s structure and the possibility of increased litigation.

Nuts & Bolts

Mexico, which is a civil law jurisdiction, created a class action system with some major differences from the system used in the U.S., which is a common law jurisdiction (see “Avoiding Abuse”).

Under the Mexican law, groups of at least 30 people can bring consumer products and services claims, environmental claims, and some financial services and antitrust claims. Claimants can obtain restitution or compensation of damages, and injunctive relief. Claims are split into three categories defined by the types of rights a group wants to enforce.

The first type of class action—diffuse actions—protects the rights of society in general rather than specific individuals. Most environmental litigation will fall under this category.

The second type of class action is collective actions, which protect the rights of a group of people linked by an informal, noncontractual relationship. Product liability cases would fall under this category.

The final class action type is homogeneous individual rights class actions, which protect the rights of individuals connected by a formal contractual relationship.

The diffuse actions are opt-out class actions, meaning individuals included in a class can remove themselves from the class and not be affected by the outcome of the lawsuit.

However, the collective and homogeneous individual rights actions are opt-in class actions, meaning people can join the class up until a specific date. Mexico’s law gives plaintiffs a surprising 18 month safter a case’s final judgment or settlement to join the class.

Wajert says some U.S. lawyers are speculating that this element of the law could create a “piling-on effect” in which droves of eligible class members join a class successfully certified by a court. To say the least, the 18-month opt-in period makes it difficult for companies to estimate class sizes, damages and litigation costs.

Further Complexities

Other components of Mexico’s class action law also trouble litigation experts.

“The time frame that defendants face in submitting their evidence and their arguments is extremely reduced—much more reduced than the one you would find in a U.S. court when dealing with class actions,” Graham says.

Defendants have five days after an action to take a position as to whether a class should be admissible. “That gives the defendant very limited options in terms of timing as to produce a solid defense,” Graham notes. Judges have between 10 and 20 days to rule on a class’s certification.

Mexico’s abbreviated certification period is drastically different from proceedings in the U.S. In 2003, the U.S. Supreme Court approved changes to the Federal Rules of Civil Procedure so that the deadline to decide certification was much more vaguely defined—“at an early practicable time.”

“When deciding on certification issues, some U.S. courts realized they needed more time to appreciate what sort of evidence parties would be submitting at a trial in order to better determine if all of the requirements of class certification are met,” says Chadbourne & Parke Partner Allison Alcasabas.

Mexico’s law also features a catchall provision that, loosely translated, permits judges to refuse class action treatment if it would be improper under the circumstances. “What does that mean?” Wajert asks. “Are the courts going to be open and amenable to arguments there, or not?”

According to the law, if a class action case does go to trial, the trial can’t exceed 40 days. Parties have a 60- to 80-day discovery period for their cases.

Mexico’s rules for class actions seeking monetary damages feature a two-stage procedure in which courts determine defendants’ liability before proof of causation of damages and that defendants’ conduct caused damage. If liability is determined, individual class members can then come forward for their individual trials. The notion of determining fault before causation or damages is troubling to many U.S. lawyers.

“In the U.S. and elsewhere, causation and damages are integral parts of the liability finding, and oftentimes focusing on those very key aspects is how a court may find that there is no liability,” Alcasabas says.

Moreover, Wajert says that keeping individual class members’ evidence separate from the initial classwide trial is easier said than done. “Time will tell whether Mexico feels that’s an issue,” he says.

Prep Time

Experts admit it is difficult for U.S. companies to anticipate how Mexico’s new class action law will affect business and how Mexican courts will interpret the law. One preparation strategy is to keep an eye on some of the country’s federal and private agencies, which have standing to bring class actions under the law.

The law gives standing to Mexico’s consumer protection agency, environmental agency, financial services regulatory agency and various non-profit associations. “Companies should watch the reaction of these agencies in terms of how aggressive they are, how they’re interpreting the law, how they want to use it and how quick they are to try to test it,” Wajert says.

Another key way to prepare for the spring 2012 enactment of the law is to partner with Mexican outside counsel.

“Companies should identify Mexican counsel who are on the ground monitoring these developments more closely than perhaps companies would be able to from the U.S.,” Alcasabas says. “Still, I don’t know that anyone is able to predict how the courts will be interpreting and applying what sometimes is very broad language in this statute.”

Join the Conversation

Advertisement. Closing in 15 seconds.