Case Number

CA 10085/08

Date Decided

12-4-2011

Decision Type

Appellate

Document Type

Full Opinion

Abstract

[This abstract is not part of the Court's opinion and is provided for the reader's convenience. It has been translated from a Hebrew version prepared by Nevo Press Ltd. and is used with its kind permission.]

An appeal and cross appeal challenging the decision of the Tel Aviv District Court (Partial Judgment and Supplementary Judgment,) where the court partially granted a consumer class action suit, which was granted leave to be submitted in CC 10085/080 (hereinafter: Tnuva). The class action suit revolved around the misleading of the consumer public and the production of a milk product in violation of binding official standards that were in effect in the relevant period of time. The product was long life low fat (1%) milk to which silicone was added and which Tnuva manufactured and marketed from January 25, 1995 until September 6, 1995, without listing the silicone component on the product. (The silicone was added to the mild – in a total amount of approximately 13 million liters of milk – in order to remedy a problem of over whipping.) The court helf that the number of members of the class were about 220,000 people, and that members of this group were entitled to compensation for the autonomy infringement and that half (110,000 people) were also entitled to additional compensation for negative emotions experienced after learning that the milk they had been drinking contained silicone. Under the circumstances, the court found it fit to award compensation according to the mechanism set in section 20(c) of the Act, where ultimately it was ruled that Tnuva must pay a total compensation amount of NIS 55 million, which reflects an estimated personal damage of NIS 250 to each of the members of the group for the general damages, without distinction between group members who experienced negative emotions and those in whose regard a consumer report has proven that they did not experience such emotions. It was held that the only actual remedy would be a remedy to the benefit of the group, which ought be divided to three purposes: reducing the cost of the product; a fund for research and grants in the field of food and nutrition; and distributing free milk to needy populations. Additionally, a NIS 4 million partial attorneys’ fees were awarded (the heirs of the class action plaintiff were awarded NIS 500,000, the Israeli Council for Consumerism was awarded NIS 1 million, and the representatives of the class action plaintiffs were awarded NIS 2.5 million.)

At this stage of the appeal, Tnuva no longer disputes that it mislead its consumers. However, according to its approach, the lower court’s decision must be reversed, or alternatively the amount of compensation it was obligated to pay must be drastically reduced. The essence on Tnuva’s arguments is that its misleading caused no real and compensable harm to any of the group members, and sadly this is a negligible matter that does not justify compensation. Even had any damage been caused, no causal connection was proven between the claimed harmed and the misleading it did. In the cross appeal, the class action plaintiffs claim that a higher compensation should have been awarded.

The Supreme Court (in an opinion written by Justice E. Hayut, with Justice I. Amit and U. Vogelman concurring) granted the appeal by Tnuva in part and rejected the cross appeal, for the following reasons:

Misleading consumers as a class action tort: The legal field where the outcome of Tnuva’s actions must be examined in this case is tort law, to which section 31(a) of the Consumer Protection Act refers. In other words, in order for a plaintiff according to this consumer tort would be awarded financial compensation they must show damages as well as a casual connection between the tortuous conduct and the alleged harm. However, when a class action claim is concerned, the court must integrated the general tort law and principles and rules taken from class action law, among others, by softening the requirements necessary for showing the harm caused to group members. Therefore, the court must not limit itself to examining the remedy under general tort law which apply to individual suits and it must rather fold into its decision principles and rules taken from class action law.

Negligibility: Indeed, not every case where there was a flaw in the listing of a food product’s ingredients this would justify compensation for autonomy infringement or negative emotions and there may certainly be cases where despite the existence of a particular flaw in the listing of the product’s components this would not justify compensation when the harm constitutes de minimis… in the words of Justice Naor. However, this does not benefit Tnuva, because in this case the lower court’s finding that under the circumstances the consumer’s autonomy to decide whether he wishes to put into his body milk that contains silicone or not was well founded. And as the lower court correctly held, this is not an infringement that constitutes de minimis, from the group-class action perspective.

The court noted that the rule regarding de minimis does not apply in its plain meaning on the damage element of a typical class action suit because “a central characteristic of it is the accumulation of small damages that independently would not have led to legal proceedings.” This in approach that has precedent in the jurisprudence of this Court. Still, it is important to note that the fact that a large group of plaintiffs argue in a class action suit for the accumulation of small damages, does not necessarily in itself negate the possibility of de minimis in the group context as well. Even in a procedure of a class action the answer to the question when is there a negligible harm that does not justify compensation depends on the circumstances of the case and it may change considering the entirety of circumstances involved.

Autonomy infringement: in CA 2781/93, the Dakka case, Israeli law first recognized that general damages involving autonomy infringements is a “damage” as understood by the Torts Ordinance and that as such it warrants compensation. The fundamental right to autonomy, as the Court held in Dakka is the right that every person has “to decide about his actions and his desired according to his choices, and to act according to such choices.” This right, it was held, encompasses all the central aspects of one’s live, and it results, among others, in “each person having liberty from intervention in his body without his consent.” It was additionally held that that liberty is one of the expressions of the constitutional right to dignity granted to each person and enshrined in Basic Law: Human Dignity and Liberty. In contrast to Tnuva’s argument, recognizing this cause of action of autonomy infringement is not limited and should not be limited to cases of medical malpractice or bodily autonomy violations alone. The principles at the basis of recognizing this cause of action and the constitutional right this recognition is designed to protect justify in the appropriate cases awarding compensation for autonomy infringement even when other torts, such as the consumer tort in our case, exist.

The causal connection requirement: Indeed in the Barzani further hearing, the Court ruled that the requirement of a causal connection established in section 64 of the tort ordinance applies to consumer torts in terms of misleading advertising as well as cases where such tort constitutes cause for a class action suit. Still the Court also ruled there that to the extent that consumer torts are concerned the reliance requirement that derives from the causal connection requirement must be interpreted “in a broad context, to include more than mere direct reliance” but rather “an indirect causal connection through a proper chain or causation from the advertisement to the consumer.” It was also held in Barnzani that a process for a class action suit based on the instructions of chapter F1 of the Consumer Protection Act and the regulations made by it in this matter (instructions that have since been repealed by the Class Actions Suit Act) may require a softening of the means of proof considering the unique nature of this procedure and that “the court may establish proper means, as it sees fit, for the ways in which the element of causal connection between the misleading advertisement and the damage caused to each group member including the harm caused to each and every one of them, may be proven.” However, Tnuva’s attempt to rely on the Barzani rule and argue that in this case, too, no causal connection between Tuva’s conduct and the general damage for which it is sued was not proven, must be rejected and this for several reasons.

First, Tnuva raised the claim at the stage after the class action was approved, and to the extent it addressed the class as such it must be remembered that about the three years after the decision in the Barzani further hearing the Class Action Suit Act was enacted to aggregate the principles and rules that must be applied to class actions in their various forms. Among others, the Act permits granting remedies to the benefit of the public in appropriate cases where it is impractical to prove the harm caused to each and every group member and therefore also the causal connection between that harm and the conduct of the damaging party (section 20(c) of the Act.) This is the guideline adopted by the lower court and under the circumstances the requirement to prove, for each and every individual member of the group, the causal connection between Tnuva’s conduct and the harm is an overly burdensome requirement. Second, to the extent that the consumer tort upon which the class action suit is based is a misleading through failure to act (in the form of failure to disclose, as in the case at hand, as opposed to active misleading as was the case in Barzani) this may justify softening and flexibility in terms of proving the causal connection between the tortuous conduct and the claimed harm. Third, as opposed to the Barzani case, where monetary damages were sought (differences in rate), the damage sought in our case goes to general damage of autonomy infringement. For this type of damage, it was ruled there is no need to prove causal connection between the failure to disclose and the harmed party’s choice.

However, even had it been decided that under the circumstances here proof that members of the group would not have purchased the milk had they known it contained silicone was required, it is possible that the requirement for a causal connection would have been satisfied in the class action suit here by finding there was a “class causal connection.” Such class causal connection maybe be based on the assumption that the class members, and sadly most of them, would have responded in the negative had they been asked in advance whether they would consider consuming milk to which Tnuva added, in violation of a binding standard, an artificial additive of which they are unaware in order to fix a problem of over whipping.

However, the Court rejects the objective approach for evaluating compensation for autonomy infringement. The Court’s approach is that the compensation for autonomy infringement is granted for a subjective outcome damage that is expressed through emotions of anger, frustration and similar additional negative emotions caused by the damaging party’s conduct. This conclusion leads to another conclusion which is that there is no place to divide the compensation for autonomy infringement and the compensation for suffering and negative emotions caused to the harmed party due to that infringement (as opposed to general damage that relies on other harms in the same claim.) therefore, where it was proved that some members of the class remained indifferent to the autonomy infringement, there is no place to award compensation for this type of damage.

In this case, the court’s finding that the class includes 220,000 members is a careful and conservative finding in which we must not intervene. However, the data presented by the class action plaintiffs themselves (statistical data and expert opinion) there is foundation for the conclusion that 30% of the group members remained indifferent to the silicone addition in the milk. Therefore, they did not experience any negative emotions even once they learned that the milk they consumed contained silicone and that Tnuva failed to detail this ingredient on the packaging. Therefore, the extent of the class entitled to compensation for autonomy infringement that caused them negative emotions includes only 154,000 people.

This is a group that consists of more than 100,000 people, who cannot be identified or located. Even had it been possible to locate them there is doubt as to whether it is appropriate to order that each and every one of them – or even some of them – would submit affidavits to detail the depth of the negative emotions they experienced, in order to make it possible to award them compensation according to one of the mechanisms established in section 20(a) of the Class Action Suit Act. Once it is impossible to determine the harm based on individual evidence or an accurate calculation, and once it is impossible to identify the members of the group entitled to compensation, we are left with the compensation mechanism established by section 20(c) of the Class Action Suit Act, which permits setting a total compensation through estimates to the benefit of the entire class or to the benefit of the public.

The compensation amount: In light of the diversity in class members in terms of their consumer habits of the long life milk that contained the silicone and in light of the additional characteristics of autonomy infringement in this case, including the severity of the harm (when one can imagine worse harms) and the limited period of time in which group members experienced negative emotions, the Court believed the sum of NIS 250 is acceptable as a suitable amount for setting the standard individual compensation. This sum, multiplied for the number of class members who suffered the outcome damage of autonomy infringement brings us to a total compensation amount of NIS 38,500,000 (250 X 154,000). Therefore, the total compensation the Tnuva must be obligated to pay in this case according to the formula adopted in the decision is a sum of NIS 38.5 million, valued for the day the lower court’s decision was handed down (October 7, 2008).

The manner of dividing the compensation: Under the schedule set in section 20 of the Class Action Suit Act, priority must be given as much as possible to the mechanisms of compensations that fit this order as such, and even when coming to award compensation under section 20(c) in the absence of possibility to award it under sub section (a) and (b), it must be attempted as much as possible to design the mechanism for allocating the collective compensation in a manner that allows some link between the group of compensated parties and the group of harmed parties.

Under the circumstances, the Court has concluded it is best to do without allocating part of the compensation to the discount arrangement and instead to focus on the two other goals set by the lower court, which serve worthy purposes to benefit the public. The part missing from the discount arrangement (22%) would be divided equally between the two goals in the following manner: the research and grants foundation 44.33% and provision of milk products to the needy 55.66%.

As a result of the reduction in the compensation amount, the award Tnuva must pay the class action plaintiffs and the attorney’s fees it must pay their representative were also reduced. The award to Reevi’s heirs stands at NIS 300,000. The award for the Israel Consumer Council stands at NIS 550,000 and the rate of the attorney’s fees to the plaintiffs’ representatives stands at NIS 1,500,000.

Keywords

Constitutional Law -- Right to autonomy, Torts -- Class action, Torts -- Compensation, Torts -- Fault, Torts -- Consumer fraud

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