Compensation Even Without Joining the “Coupang Lawsuit”?... Class Action System Should Move Toward a “Hybrid” Model [Will Class Actions Be Introduced?] ③

American-Style Class Actions Covering All Victims Raise Concerns of ‘Excessive Litigation’ Among Businesses
Need to Combine European and Japanese Models That Compensate Only Consumers Who Express Intent to Participate
Significant Expansion Beyond Se

The current class action system in Korea applies only to securities-related cases, such as stock price manipulation and false disclosures. However, there is a consensus that the system is ineffective due to excessively strict procedures and requirements. As a result, there is growing agreement that the scope of class actions should be expanded and that the procedures and requirements should be relaxed. Nevertheless, many point out that it would be difficult to adopt the American-style class action system as it is, given that the United States operates the most robust class action regime among major countries and there are significant concerns about excessive litigation.

Experts say that Korea should develop a class action system tailored to its circumstances, such as adopting the American model only for cases where the damages are relatively uniform among a large number of victims, or allowing consumer organizations to file lawsuits on behalf of victims, as is done in Europe. In the latter approach, once a court decision establishes the company's liability, consumers can then participate in the lawsuit. They emphasize the need to design a Korean-style class action system that suits the country's needs.

The United States: The Most Active ‘Class Action Heaven’

In the United States, where class actions are most active, there are concerns that the side effects are as significant as the consumer protection benefits. According to The New York Times, some law firms encourage consumer class actions and use them as a “business tool.” A 2021 report from the New York Civil Justice Institute found that more than 700 consumer class actions related to false or deceptive advertising were filed in New York federal courts between 2015 and 2023 against major companies such as Pfizer and Iberia Foods.

In particular, the American law firm “Lee Litigation Group,” established in 2012, was responsible for about one-fifth of the consumer class actions filed in New York between 2015 and 2018. The entry of law firms like Lee Litigation Group into the class action market has led to a surge in lawsuits, raising concerns about court system overload and lawyers pocketing large settlements. There is also a growing trend among American companies to employ various tactics to avoid class actions. The New York Times reported that major companies are increasingly inserting clauses such as “disputes will be resolved by individual arbitration” into terms and conditions that are difficult for consumers to notice, in an attempt to preemptively block class action filings.

The American-style class action system, which is based on the opt-out principle (where only those who explicitly declare they do not wish to participate are excluded from the binding effect of a judgment), is considered a powerful tool for efficiently remedying victims’ rights. However, concerns remain about the burden on corporate management and potential abuse or misuse of the system due to excessive litigation. As a result, the Korean legal community suggests that rather than adopting the American-style opt-out class action system as is, Korea should design a “Korean-style class action system” that combines the strengths of various models being tested in Europe and other countries.

Rather Than Following the American Model, Korea Needs Its Own Class Action System

On December 26, Lee Eunwoo, an attorney at Law Firm Jihyang who is leading the joint class action over the Coupang personal information leak, stated, “Given the strong resistance from the business community to the American-style class action, we need to design a hybrid model suited to Korean realities and consider practical alternatives to enhance the system’s effectiveness.” He suggested that for cases where there are numerous victims and the damages are relatively uniform, the opt-out method should be used, while for cases with highly individualized damages, the opt-in method (where only those who explicitly express their intention to participate in the class action are bound by the judgment and can receive compensation) should be adopted.

He explained that introducing the opt-out class action system for all cases could heighten corporate concerns about excessive litigation, so it is necessary to vary the participation method depending on the type of case. He emphasized, “We should not simply adopt the American model, but rather combine the strengths of systems being tested in major countries like those in Europe.” In Europe and Japan, consumer organizations file lawsuits on behalf of victims, and after a court decision establishes the company’s liability, consumers can then participate in the lawsuit. The method for determining whether victims participate in the lawsuit (opt-out or opt-in) varies by country.

Attorney Lee also argued that, in the process of introducing a class action system, the entities allowed to file lawsuits on behalf of victims should be limited, but as many organizations as possible should be allowed to participate. He noted, “In Japan, only four consumer organizations nationwide are permitted to file class actions. If the qualification to file lawsuits is limited to a very small number of organizations, it is difficult for the system to function properly, as these organizations may be influenced by their relationships with companies and others.” He added, “Organizations with expertise in areas such as environment, energy, climate, and consumer protection should be relatively broadly permitted to act as representatives in lawsuits and should also be able to claim damages on behalf of consumers.”

The Scope of Class Actions Should Be Expanded Beyond Securities

There is a prevailing view that the scope of class actions should be significantly expanded. It should not be limited to securities or personal information infringement cases, but should also include areas where collective harm is repeated, such as antitrust violations under the Fair Trade Act or violations of the Consumer Protection Act. The problem is that even when large-scale damages occur due to illegal acts by global companies, Korean consumers have been excluded from compensation because class actions are limited to the securities sector.

There are also calls to carefully coordinate the introduction of class actions with existing regulatory and remedial measures. If class actions are introduced, the roles of existing systems such as punitive damages, administrative fines, and group litigation need to be redefined. Park Soyoung, a legislative researcher at the National Assembly Research Service, stated, “If class actions are added to a structure where various systems such as punitive damages and administrative fines already coexist, there is a risk that sanctions for the same illegal act may be duplicated. Each system is individually necessary, but if they operate in an overlapping manner, companies may face excessive economic and legal burdens.”

Researcher Park also noted that if class actions provide sufficient compensation for damages, the need for administrative fines as a public sanction may be reduced. Since class actions are premised on a significant expansion of compensation for damages, issues of fairness may arise if they are combined with punitive damages or high administrative fines. She also emphasized that if the opt-out class action system is introduced, notification procedures must be significantly strengthened to ensure that victims are fully aware of their right to exercise their rights. Like in the United States, a variety of means such as mail, electronic notifications, media, and online advertisements should be used to clearly inform people of the binding effect of judgments and the meaning of opting out, so that victims have the opportunity to be excluded from the binding effect of a final judgment.

Securing Evidence Is Key... Discovery System Should Be Considered

There are also calls to introduce a discovery system alongside class actions to enhance the effectiveness of consumer remedies. The discovery system is a procedure that obligates the parties in a lawsuit to exchange evidence and information before the actual trial. It is considered effective in reducing information asymmetry between parties by allowing them to secure documents, testimony, and physical evidence in advance. In Korean civil litigation, the discovery system has not been introduced, and the courts lead the evidence-gathering process, so the problem of information asymmetry has persisted. While systems such as court orders to submit documents or requests for document production exist, courts tend to be passive in recognizing plaintiffs’ rights to collect evidence. A legal expert noted, “Since most of the evidence is held by companies, there is a need to guarantee more means of securing evidence. If it is not possible to introduce the discovery system throughout all civil litigation, it should at least be introduced for class actions.”