Class action

In the Supreme Court

CFH 5712/01

 

 

Before:                                                            The Hon. Chief Justice A. Barak

                                                            The Hon. Deputy Chief Justice T. Orr

                                                            The Hon. Justice E. Mazza

                                                            The Hon. Justice M. Cheshin

                                                            The Hon. Justice T. Strasberg-Cohen

                                                            The Hon. Justice D. Dorner

                                                            The Hon. Justice D. Beinisch

 

The Petitioner:                                     Yosef Barazani

 

                                                                        v.

 

The Respondents:                               1. Bezeq – Israeli Telecommunications Company Ltd.

                                                            2. Israel Consumer Council    

 

A Further Hearing on the judgment of the Supreme Court of July 2, 2001 in CA 1977/97 by the Hon. Chief Justice A. Barak and Justices T. Strasberg-Cohen and I. Englard

 

Date of submission of briefs: 17 Shevat 5763 (Jan. 20, 2003)

Attorney for the Petitioner:                Avigdor Feldman, Adv.

 

Attorneys for Respondent 1:              Avner Gabbai, Adv.

                                                            Gil Lotan, Adv.

                                                            Shiri Kasher-Hitin, Adv.

Attorney for Respondent 2:                Prof. Sinai Deutch, Adv.

Facts:  Respondent 1 (hereinafter: Bezeq) advertised an international dialing service (hereinafter: the Service), and represented that a customer would be charged only for the exact amount of time that he used Service. In practice, it turned out that the method that Bezeq used for its calculations resulted in overcharging the users of the Service relative to what was expected according to the advertisement.

            The Petitioner, who used the Service supplied by Bezeq, but who had not seen the said advertisement, initiated a suit in the District Court for pecuniary damages against Bezeq. He claimed that the advertisement was one “liable to mislead a consumer” under sec. 2 (a) o the Consumer Protection Law, 5741-1981 (hereinafter: the Law), in regard to the actual cost of international calls. He also requested that the suit be certified as a class action.

            The District Court certified the suit as a class action. However, on appeal, the Supreme Court reversed that decision, based upon the provisions of sec. 31 (a) of the Law, according to which an act or omission in contravention of sec. 2 of the Law “shall be treated as a tort under the Civil Wrongs Ordinance [New Version]”. Therefore, and despite the finding that the advertisement was one that was “liable to mislead a consumer”, the Court applied the causal-link test established by the Civil Wrongs Ordinance [New Version] (hereinafter: the Ordinance), and found that since the Petitioner had not been exposed to Bezeq’s misleading advertisement, a causal link was not established between the advertisement and the damage putatively caused him. That being so, the Court held that the Petitioner did not have a personal cause of action against Bezeq under sec. 2 (a) of the Law, and in any case, was not a proper plaintiff in a class action.

            The Further Hearing focused upon the question whether or not the prohibition of misleading under sec. 2 (a) of the Law constitutes a “regular tort” like every tort in the Ordinance, subject to the doctrines established under the Ordinance, among them the causal-link doctrine.

            Held:  

The Supreme Court held:

1. (1)        The provisions of sec. 2 (a) of the Law, prohibiting deceit, create a prohibition upon conduct. A “dealer” contravenes that prohibition even if the thing that he does by act or omission is “liable to mislead”, that is, whether or not a person was actually misled by that thing that he did. The standard of conduct required by the provisions of this section is one that is higher than that required by many statutes, which require a direct causal link between an act and a result – the harm caused the victim – whereas sec. 2 (a) prohibits conduct, as such, even if it does not lead to harm. That requirement is intended to protect consumers and ensure that they receive reliable information about the goods or services being offered, so that they can make informed choices about whether or not to make the transaction.

 

(2)        Under sec. 31 (a) of the Law, an act or omission proscribed by sec. 2(a) shall be treated as a tort under the Ordinance. Nothing in the language of sec. 31(a) of the Law would show that the tort under sec. 2 (a) removes it from the fundamental principles or the doctrines of the Ordinance, and nothing therein might show that a consumer is entitled to compensation merely because a dealer contravened a provision of the Law. On the contrary, the Law unconditionally refers to the provisions of the Ordinance.

 

(3)        In addition to the clear language of the Law, expediency also argues that the sec. 2 (a) of the Law establishes a tort like any other tort under the Ordinance, for if those same acts and omissions external to the Ordinance are tortious in nature, it is but natural that we should employ the same traditional, familiar doctrines that tort law created and developed over so many years such that they have become foundational to the legal system, subject, of course, to special, exceptional cases

 

(4)        Nevertheless, there is a difference between the native torts of the Ordinance and those external to it that are treated as torts under the Ordinance. A tort external to the Ordinance should be scrutinized carefully in order to determine whether or not a particular doctrine of the Ordinance is compatible with the elements, nature and construction of the external tort.

B.        (1)        In accordance with the causal-link doctrine in sec. 64 of the Ordinance, there must be a causal connection between a person’s act or omission – an act or omission that constitutes a tort – and the harm caused to the victim, for which he demands compensation. In the instant case, there was no causal connection between the advertisement and the “harm” caused to the Appellant, inasmuch as the Appellant did not read that advertisement, and in any case, was not influenced by it and did not rely upon it. While Bezeq perpetrated a tort by publishing that advertisement to the public, the existence of a tort is insufficient to entitle a person to compensation. Rather, that person must show that he was harmed as a result of that tort, and that precondition was not met in regard to the Appellant.

            (2)        Similarly, the compensation doctrine, enunciated in sec. 76 of the Ordinance, states that a person is not entitled to compensation except in regard to damage that arose from a tort. In regard to compensatory relief, the Law requires that the plaintiff prove the damage arising from the misrepresentation, that is, the existence of actual deceit, and an act arising from that deceit. In the circumstances of this case, the publication of something that might tend to mislead – the advertisement itself – is not sufficient to for a consumer to acquire a right to compensation if he suffered no actual damage. The rule is that damages will not be awarded unless harm was caused, and damages will be awarded only to the extent of the harm caused. In the absence of an express, unequivocal provision granting a person damages for virtual harm without the proof of actual harm, it is difficult to imagine that a court will award damages. Such significant creativity is intended for the legislature, and not the courts.

            (3)        The causal connection (both factual and legal) required under sec 2 (a) of the Law does not require a consumer’s explicit reliance upon the representation presented by the dealer. Unlike other legal provisions, which explicitly require a causal connection of reliance, it is possible that a consumer will not directly rely upon the dealer’s representation, and the required causal connection will, nevertheless, exist, that is, that the dealer’s representation “was the cause or one of the causes of the damage”, as stated in sec. 64 of the Ordinance. That would be the case, for example, where it can be shown that an advertisement – capable of misleading the consumer – that was published by a dealer, initiated a factual chain of events that ultimately caused damage to the consumer. In such a case, it would be appropriate to interpret the concept of reliance broadly, such that it would not be restricted exclusively to direct reliance.

            (4)        However, there must be an appropriate causal connection between the misleading publication and the injury that a consumer incurs. The fact that the purchase of the goods or services occurred after the publication is not, in and of itself, sufficient to show a causal connection between the potentially misleading publication and the consumer’s acquisition of the advertised goods or services. There must be an appropriate causal connection between the two occurrences, and that link will be deduced from the circumstances of each and every case with the help of the relevant evidence.

C. A class action is, in effect, an extension of the personal right to sue, and in the absence of a personal right to bring suit, there can be no class action. The import and scope of the personal suit will only be influenced marginally, if at all, by the class action. A class action does not grant a consumer an independent cause of action. It is merely a procedural tool for joining individual suits in a single proceeding. Class actions were added to the Law some thirteen years after its enactment, and its addition to the Law merely expanded the personal suit – procedurally – into many personal suits, but the principles of the personal suit remained unchanged. Therefore, sec. 2 (a) of the Law should be construed as it was prior to the addition of class actions to the Law, that is, without reference to such a class action.

D. (Justice T. Strasberg-Cohen, dissenting):

     (1)   The phrase “shall be treated as a tort under the Civil Wrongs Ordinance” should be construed as establishing a new cause of action that is like a tort. This cause of action is not identical to a tort, but is equivalent to a tort in the sense that it applies the same doctrines of the Ordinance to the act or omission – in the present case, the compensation and causal link doctrines. However, it is a cause of action that is unique to this Law. It is substantively independent, and must be construed in its own context, in light of the objective it was intended to serve, while taking the said doctrines into account, and which must be given content that corresponds to the objectives of the Law and its enforcement in the framework of a class action.

     (2)   For the purpose of establishing a cause of action for compensation for damage caused by a publication liable to mislead, it must be shown, prima facie, that the publication was liable to mislead, that damage was incurred, and that there is a factual and legal causal connection between the publication and the damage. However, even in the absence of the consumer’s reliance upon the potentially misleading publication, there may be a causal link between the publication and the damage. This is so because, first, establishing a prohibition upon conduct that is liable to mislead without recognizing the remedy of compensation for its contravention without proof of actual deception, renders the Law’s primary prohibition lacking any real civil remedy. Second, there is little possibility that a consumer will devote significant effort and money solely for the purpose of obtaining a restraining order for the benefit of the general public. Third, over the years that the Law has been in force, the criminal sanction has been applied with measured restraint, and it would seem that the criminal sanction cannot provide significant deterrence for powerful dealers that expect to garner huge profits from misleading the public, and the same is true of administrative sanctions. Fourth, an approach that would require actual deception in order to obtain compensatory relief would limit the scope of a dealer’s liability only to those consumers who could actually prove that they were indeed misled by the dealer’s representations, and would make deception worthwhile from the perspective of the dealer. Fifth, a construction that would grant relief only to those consumers who were actually deceived would create an artificial distinction between the consumer public that used the goods or services that were the subject of the misleading advertising, but who were not exposed to it, and the consumer public who were exposed to the misleading information. Sixth, in other cases in the past, the Supreme Court did not hesitate to expand the available types of relief beyond those set out in a law, in order not to eviscerate the law. Seventh, the Law establishes other prohibitions that do not require proof of reliance, the violation of which grants the consumer a broad right to compensation. There is little reason to granting an independent remedy of compensation, which includes granting broad discretion to the court, for the violation of those prohibitions, while not doing so in regard to the Law’s central prohibition – the prohibition upon misrepresentation.

(3)   The tort perpetrated by publishing something liable to mislead does not require reliance in order for the consumer to be entitled to compensation for damage incurred due to the publication, and it is not tied to the demand of reliance. Had the legislature intended to limit the prohibition of deceit to one of the torts requiring reliance, one would expect that it would have done so explicitly. Reliance is not required by the language of the Law or by its objective for the purpose of the existence of a causal connection. Thus, there can be a causal connection without reliance.

(4)   Holding that there is no requirement that the consumer rely upon the misleading publication does not obviate the need for a causal connection, and in the instant case, the representation made by the dealer should be deemed a binding promise to the consumer public that requires that it act in accordance with the promise. That promise bestows a right upon the consumer, and places the dealer under an obligation in regard to the consumer public. If the dealer does not meet the obligation it undertook by means of the advertisement, and charges more than what was promised in the advertisement, it breaches its duty, and as a consequence of that breach, the consumer incurs damage. Therefore, even if the consumer was not exposed to the misleading publication, and did not change his behavior in regard the use of the product or service, he will still be deemed harmed, since the price he was charged for the product or the service was higher than the price at which he was entitled to purchase the product or service.

(5)   The consumer incurs injury in the form of a “price differential”, which is a real loss. Appropriate construction of the required causality would see this injury as connected to the breach of the proscribed misrepresentation, as due to the misleading advertisement and the difference between it and the manner in which the dealer actually acted, the consumer suffered injury. Such a construction would meet the requirement of a causal link, both factually and legally. Factually, the said injury caused to the consumer is a consequence of the fact that the dealer made a representation that it did not honor. Legally, the injury is causally related to the representation under the foreseeability test, in that when a dealer makes a false representation, it foresees that charging contrary to the representation will cause harm due to the “price differential”, under the risk test, since that harm falls within the scope of risk of the dealer’s act, and under the common-sense test, by which we examine the overall actions of the tortfeasor and their contribution to the harmful result.

E. (Justice E. Mazza, dissenting):

(1)   It is possible and proper to restrict the application of traditional tort law to consumer causes of action. Such restriction is clearly required by the significant, substantive difference between the purpose of consumer torts and the purpose of regular torts.

(2)   The consumer laws of deceit must contend with the requirements of reliance and causality differently than tort law. Instead of the personal reliance of each and every consumer – that of traditional tort law – we should adopt a doctrine that recognizes “constructive reliance” of the consumer public to which the advertiser directed its misleading advertisement, while instead of requiring proof of a factual causal connection between the deception and the injury caused to each of the complaining consumers, we should adopt a doctrine that recognizes a “consumer causal link” that would be inferred from the merger of the potentially misleading publication and the intention of the advertiser that the advertisement reach the consumers, mislead them, and thus influence their conduct.

(3)   Consumer deception would give rise to a (personal or class) cause of action for monetary relief upon the fulfillment of three elements: an offending publication, injury, and a “consumer causal link”. As opposed to this, we should also recognize a defense that would be available to the advertiser if he can show that the plaintiff was aware of the true facts, and that the offending advertisement could not, therefore, negatively influence his situation.

(4)   The reliance requirement undermines the objectives of consumer protection laws –leveling the playing field for the parties; increasing personal autonomy; the concept of consumer sovereignty; protection of the public welfare and of social rights; advancing commercial fairness; protecting the credibility of the local market and public confidence in the social regime – and it frustrates their realization. Once a potential to mislead is proved, and it is shown that the advertiser indeed intended that the misleading advertisement reach the public and influence its consumer conduct, we should properly hold that there is constructive consumer reliance upon the misleading advertisement. The question whether the dealer actually achieved its purpose, i.e., that the misleading publication actually reached its audience and actually influenced it, is of limited importance.

            F. (Justice D. Dorner, dissenting):

(1)   The Law, which intervenes in contracts between unequal parties, and subjects the stronger party – the supplier – to an increased duty of fairness towards the weaker party – the consumer – is firmly anchored in the established doctrines of contract law. Many consumer transactions are anchored in the accepted contractual doctrines under which if a supplier charges a higher price than the correct, advertised price, consumers are entitled to a refund of the difference. In the reality created by those doctrines, and in which consumers actually operate, consumers trust suppliers without verifying that each and every transaction conforms to the advertised price.

(2)   A supplier’s advertisement of a specific price creates a consumer right not to pay a higher price. If the supplier charges a higher price, that will, in any event, constitute a breach of contract that would give rise to monetary relief even for consumers who were not exposed to the advertisement.

(3)   That entitlement can be grounded at least three ways. The first deems the dealer’s publication about the price an irrevocable offer to the public, which can be accepted by the objective performance of its conditions, while the supplier is bound to the publicized price, and provides an opportunity for the public to purchase the product or service for a price that will not be higher. In accepting the offer, the parties agree to the published price, and the supplier must refund any additional amount charged. The second approach deems the contract to have an implied term under which the supplier undertakes not to charge the consumer more than the advertised price. Such a term reflects the expectations of the parties. Overcharging constitutes a breach of that term. The third approach would classify such overcharging – particularly if it targets only consumers who were not exposed to the publication – as a breach of contractual good faith.

 

Judgment

 

Justice M. Cheshin:

            A Further Hearing on the judgment of the Supreme Court in CA 1977/97 Yosef Barazani v. Bezeq – Israeli Telecommunications Company Ltd. (55 (4) IsrSC 584).

2.         The Consumer Protection Law, 5741-1981 (the Consumer Protection Law or the Law) – true to its name – places various obligations upon a “dealer” – one who sells goods or provides a service by way of dealer – to a “consumer” – one who purchases an commodity or obtains a service from a dealer in the course of his business for use that is primarily personal. One of those obligations is stated in sec. 2 (a) of the Law: “A dealer must not do anything…which is liable to mislead a consumer in regard to any material element of a transaction …”. Section 31 (a) further informs us that “Any act or omission in contravention of Chapters Two, Three or Four shall be treated as a tort under the Civil Wrongs Ordinance [New Version]”. And this is the heart of the matter before us: To what extent do the doctrines and principles of the Civil Wrongs Ordinance apply to the “tort” created under sec. 2 (a) of the Law? Shall we treat it as a “normal” tort – as if it were a tort comprised by the Civil Wrongs Ordinance – that integrates itself into the fundamental principles and doctrines of the Civil Wrongs Ordinance, or shall we say that the legislature created a special quasi-tort – a sui generis tort – that is not subject to the doctrines and fundamental principles of the Civil Wrongs Ordinance as they are usually construed?

             A company advertises one of its products in a way that is “liable to mislead a consumer” in regard to a material matter. Reuben buys the product without having seen the misleading advertisement, and thus, without having been misled. Reuben later discovers the misleading advertisement, and sues the company for monetary compensation for his claimed loss, solely because the company did not keep its advertised promise. Reuben does not make do with a personal suit, but requests that the court certify it as a class action: He asks to sue on behalf of the entire public that purchased that product, and obtain relief for that entire public. Can Reuben prevail in that suit?

3.         The Supreme Court ruled – by the majority opinion of Chief Justice Barak and Justice Englard – that Reuben cannot prevail in his personal suit. The reason is that in purchasing the product, Reuben did not rely upon the publication that was liable to mislead, and therefore no causal connection was shown between the publication and the injury allegedly caused to Reuben. As he could not prevail in his personal suit, he was not an appropriate plaintiff in a class action. Justice Strasberg-Cohen, dissenting, thought otherwise. In her opinion, considering the purpose of the Consumer Protection Law and the nature of a class action suit, such a person should be entitled to proceed with the suit, and there is, indeed, an appropriate causal link. Those, therefore, are the disagreements and the core of the issue that we will address in this Further Hearing. But first, the facts.

The Basic Facts

4.         I will begin with a brief, preliminary statement: Reading the briefs submitted to the Court surprisingly reveals that the parties do not only disagree on the legal questions – as is usual in a Furhter Hearing – but on no small number of factual issues. The appeal is even directed at findings of fact in the Supreme Court’s judgment. We will not address those disputes, and the factual foundation that we will address is the factual foundation that grounded the Supreme Court’s judgment.

5.         And now to the matter before us. Over the course of the years 1989 through 1996, the Respondent, Bezeq – Israeli Telecommunications Company Ltd. (Bezeq), conducted an advertising campaign to encourage the use of its international direct-dialing service, a service meant to replace the “188” service by which international calls were placed through an operator. The advertising campaign emphasized that “the call will be charged only for the exact time that you spoke, even if you only spoke for half a minute…”, and published the tariff that Bezeq was meant to charge for calls to various places around the world. The advertisement added that the quoted price was for a time unit of “one minute of conversation”. For example, a direct-dial call to the United States…NIS 3.53 per minute; a direct-dial call to France…NIS 3.14.

6.         In practice, it turned out that call time was not calculated on the basis of minutes, but rather on the basis of meter units. The length of each meter unit – whose length is set according to the country called – was several seconds, and Bezeq calculated the last meter unit of a call as if it had been entirely used, even if the customer spoke for only part of the unit. The customer did not, therefore, pay for the “exact time” that he spoke on the phone, as several seconds were added from the meter unit to every call – or to be precise – to almost every call. Due to that manner of calculation, the price of (nearly) every call was higher than the advertised price. For example, a “one-minute call” to the United States – 60 seconds – was calculated as comprising 14.23 meter units, the price of which was NIS 3.53, which was the advertised price. But in practice, Bezeq charged more for a (precisely) one-minute call. The reason for that was that Bezeq “rounded up” the 14.23 units to 15 units, and charged the customer for 15 units, whose price – needless to say – was higher than the advertised price. That, of course, was also the case for every call that was longer than a minute. The caller was charged for the last meter unit even if he did not completely use it.

7.         The Petitioner, Barazani (Barazani or the Petitioner) was a “consumer” as defined by the Consumer Protection Law, and Bezeq was a “dealer”. In 1996, Barazani initiated a monetary suit against Bezeq, along with a request that the suit be certified as a class action. Barazan claimed that Bezeq’s advertisements were “liable to mislead” consumers in regard to the true price of international phone calls, and that Bezeq had, therefore, contravened the prohibition of deceit under sec. 2 (a) of the Consumer Protection Law. Barazani claimed that the injury incurred by him was equal to the difference between the price that Bezeq advertised and the price that it actually charged him for international calls. Although Barazani incurred negligible injury, the total harm to Bezeq’s consumers – all those who had made international direct-dial calls in the relevant period – amounted to tens of millions of shekels. And, Barazani argued, Bezeq had pocketed those vast sums by misleading its customers. Barazani therefore asked that his suit be certified as a class action under the Consumer Protection Law, viz., that he be permitted to sue on his own behalf, and on behalf of all of Bezeq’s customers who made direct-dial international calls, and that he be awarded compensation for the injury incurred, i.e., compensation for the difference between the advertised price and the price actually paid by all of Bezeq’s customers.

8.         But Barazani himself was never exposed to the misleading advertisement. When he made his international calls, he had no knowledge of the misleading advertisement, and thus, in any case, did not rely upon it, was not influenced by it, and was not misled by it. The question, therefore, arose whether Barazani had a personal cause of action against Bezeq by reason of the misleading advertisement of which he was not aware. We would add – and this is the main point – that under the provisions of the Law, a person cannot present himself as a plaintiff in a class action unless he has a personal cause of action. Therefore, the absence of a personal cause of action by Barazani led to the collapse of the entire suit.

9.         The District Court decided that the conditions for a class action had been met, but further held that the class action could be submitted solely for declaratory relief and not as a suit for a monetary remedy. Both parties appealed that decision, and the Supreme Court decided (by a majority decision) to grant Bezeq’s appeal and deny Barazani’s appeal.

 

The Relevant Legal Provisions

10.       The three key legal provisions in this matter are as follows: first, sec. 2 (a) of the Consumer Protection Law, which establishes the prohibition upon deceit:

                        Prohibition of Deceit

2. (a)    A dealer must not do anything – by deed or by omission, in writing, by word of mouth or in any other manner … which is liable to mislead a consumer in regard to any material element of the transaction …

This provision limits itself to relations between a “consumer” and a “dealer” as defined under sec. 1 of the Law: A “dealer” is “a person who sells a commodity or performs a service by way of dealer and includes a producer”, and a “consumer” is “person who buys a commodity or receives a service from a dealer in the course of his business for mainly personal, domestic or family use”. The prohibition is one of conduct, and a dealer contravenes the prohibition even if he does something – by act or omission – that is only “liable to mislead” a consumer, i.e., even if no one was misled by it. Therefore, as stated in sec. 23 (a) (1) of the Law, a dealer commits an offense and is liable to punishment if “did anything liable to mislead a consumer in violation of the provisions of section 2”. The standard of conduct required under sec. 2 (a) is higher than the usual standard in other laws. Such is the case, for example, in regard to the torts of fraud and injurious falsity under secs. 56 and 58 of the Civil Wrongs Ordinance, and misrepresentation under sec. 15 of the Contracts (General Part) Law, 5733-1973. In those provisions – and in many others – a direct causal connection is required between an act and a result – injury to a victim – whereas sec. 2 (a) of the Consumer Protection Law prohibits the conduct per se, even in the absence of resultant injury. This requirement of the Consumer Protection Law is, of course, intended to protect the consumer – to ensure that the consumer will receive reliable information about a commodity or service offered to him, so that he may make a reasoned decision whether or not to make the transaction. See: Explanatory Notes to the Consumer Protection Law Bill, 5740-1980, 5740 H.H. 302; and compare: CA 1304/91 Tefahot Mortgage Bank for Israel Ltd v. Liepart, 47 (3) IsrSC 309, 326.

11.       The second legal provision is that found in sec. 31 (a) of the Consumer Protection Law, from which we learn that an act or omission under sec. 2 (a) – and many other provisions – is to be treated as a tort:

                        Compensation

31. (a) Any act or omission in violation of Chapters Two, Three, or Four shall be treated as a tort under the Civil Wrongs Ordinance [New Version].

It would appear, therefore, that contravening the prohibition of deceit – as specified in sec. 2 (a) of the Law – is to be treated as a tort under the Civil Wrongs Ordinance, and therefore, should be adjudged according to the principles and doctrines established by the Civil Wrongs Ordinance that apply to torts under Ordinance.

12.       The third relevant legal provision is sec 35A of the Law, which treats of class actions under the Law:

                        Class Action

35A. (a) A consumer… (hereinafter – the plaintiff), may bring suit subject to the provisions of this chapter, on behalf of a group of consumers for a cause of action under which, in accordance with this law, he could personally bring suit, and against every defendant that the consumer could personally sue (hereinafter – a class action).

(b) Where the cause of action is damage, it is sufficient that the plaintiff show that damage was caused to a consumer.

(c) …

The plain-meaning of this legal provision is that an individual victim can present himself as a representative plaintiff in a class action – subject to these and other provisions – if and only if he has a personal cause of action. In other words: there is no “public” class action. The possibility of an actio popularis in the field of class actions is ruled out by the Consumer Protection Law.

13.       Let us examine the opinion stated in the judgment before us in light of these provisions.

 

The Opinion in the Judgment under Appeal in the Further Hearing

14.       The starting point for this interpretive journey is that Bezeq’s advertisement was (purportedly) something that was “liable to mislead a consumer in regard to any material element of the transaction”, as stated in sec. 2 (a) of the Consumer Protection Law. Therefore, as all three justices agreed, Bezeq breached a prohibition established by under sec. 2 (a) of the Law. However they disagreed on the question whether Barazani was harmed as a result of the advertisement. Did Barazani incur damage even though he had not rely upon those advertisements, and even though there was no causal connection, in the accepted sense, between the advertisement that ex hypothesi did not mislead him, and the harm he claims that he incurred? Or, as Justice Strasberg-Cohen stated the matter (ibid., 594):

Section 2 (a) of the Law, titled “Prohibition of Deceit”, forbids a dealer from doing anything that “is liable to mislead” a consumer in regard to any material element of a transaction, and sec. 31 of the Law establishes that violating the prohibition upon deceit is to be treated like a tort, which entitles the victim to compensation. We learn from the two sections that in order for a consumer to have a cause of action against the dealer for a breach of the “prohibition of deceit”, the consumer must show that the dealer breached the duty imposed by the “prohibition of deceit”, that the consumer suffered harm as a result of the breach of that duty, and that there was a causal connection between the breach of the prohibition established under sec. 2 (a) of the Law and the harm suffered by the consumer.

15.       In her dissent, Justice Strasberg-Cohen argued that the purpose of the Consumer Protection Law – and the purpose of class actions, as well – both require that we interpret the provision of sec. 2 (a) of the Law as granting a consumer a cause of action even if he did not rely upon the misleading representation. After all, the Law speaks of something that is “liable to mislead”, and not about something that “misleads”. Therefore, once an advertisement that is “liable to mislead” is published, the dealer is under an obligation to fulfill what it promised in the advertisement, while opposite that duty stands the right of the consumer that the dealer will act in conformance with the advertisement. If the dealer breach that duty, the consumer incurs damage that entitles him to compensation. The dealer causes damage to the consumer by the very breach of the duty imposed upon him, even if the consumer was unaware of the advertisement. Indeed, the causal connection between the advertisement and the damage is not the accepted one that we know from tort law, but one that is not bound by the provisions of the Civil Wrongs Ordinance in this regard.

16.       That view was not acceptable to Chief Justice Barak. The Chief Justice agreed, as we noted, that Bezeq had breached the prohibition upon publishing an advertisement that was “liable to mislead a consumer”, but he did not share the opinion that that breach entitled Barazani to sue for compensation. The reason for that was that, as we know, Barazani did not rely upon the advertisement when he made international calls – inasmuch as he was unaware of it – and there was, therefore, no (factual or legal) causal connection between Bezeq’s breach and the alleged damage caused to Barazani. In the opinion of Chief Justice Barak, as stated in sec. 31 (a) of the Law, the normal doctrines of tort law – among them the causal-link doctrine, and the rule that compensation is granted only for damage that is causally connected to the tortfeasor’s wrongful act – apply to the breach of the duty established by sec. 2 (a) of the Consumer Protection Law. Thus, in light of that, in the matter before us there was no causal connection – a causa sine qua non connection – between the advertisement and Barazani’s alleged damage, and a necessary condition for compensation was not met. Since Barazani did not have a personal cause of action for a suit for damages, he could not, in any case, act as a representative plaintiff for compensatory relief.

17.       Justice Englard was of the opinion that Bezeq’s advertisements were not liable to mislead the consumer public, and that Bezeq had not, therefore, breached its duty under sec. 2 (a) of the Law. In regard to the disagreement between my colleagues Justice Strasberg-Cohen and the Chief Justice, Justice Englard concurred with the view of the Chief Justice, holding that compensation should not be awarded to a consumer who was not actually misled by the misleading advertisement. The reason for this was that “no obligation for compensation should be imposed in the absence of a causal connection between the wrong and the damage”.

 

The Question at Issue

18.       This, therefore, is the question at issue: Reuben, a dealer who sells commodities or supplies services, publishes an advertisement that is “liable to mislead a consumer” in regard to a material element. We all agree that by doing so, Reuben violates a prohibition established under sec. 2 (a) of the Consumer Protection Law. Simon, a consumer, purchases one of those commodities or services that Reuben offers for sale. Does Simon acquire a cause of action against Reuben for damages even if he never saw the advertisement, and thus was neither influenced nor misled by it? Is a consumer who purchased some commodity or service from a dealer entitled to damages from that dealer merely by virtue of the fact that the dealer violated sec. 2 (a) of the Law by publishing an advertisement liable to mislead the consumer public in regard to that commodity or service – which is the view of Justice Strasberg-Cohen – or, as Chief Justice Barak and Justice Englard argue, is the burden upon the consumer to show not merely that he purchased the commodity or service, but also that he did so in reliance upon the misleading advertisement?

 

A Methodological Note concerning the Core

19.       Before delving into the heart of the dispute, we would preface with a methodological observation that we deem of singular importance.

20.       When Barazani’s petition for a Further Hearing on the Supreme Court’s judgment was granted, the Israel Consumer Council (the Consumer Council or the Council) requested to join as a party to the proceedings. The Court granted that request, and in lengthy pleadings, brimming with arguments and supporting sources, the Council lent its support to Barazani’s position and arguments. Central to the Council’s arguments is the view that adopting the majority’s opinion would eviscerate class actions in the framework of the Consumer Protection Law, and would thus entirely frustrate the purpose of sec. 2 (a). Here is a typical example of the Council’s arguments:

It would be hard to overstate the importance of the rule established in the Barazani case. As will be explained below, in accordance with that rule, in every instance of a misleading advertisement it will be necessary to prove that each of the consumers saw the advertisement, read it, understood it and acted in reliance upon it. Where we are concerned with a consumer class action in which tens of thousands were harmed, it is not at all practical to examine which of them saw the advertisement, which of them relied upon it and to what extent the advertisement influenced their discretion in purchasing the commodity or service.

Inasmuch as consumer class actions generally represent a very large number of consumers, and are often the result of advertisements by the relevant companies, all such cases will be denied at the stage of requesting certification, based upon the argument that personal reliance of each and every member of the class cannot be proven. In other words, it will be possible to block almost every consumer class action. Moreover, as will be explained below, this construction will inflict substantial harm upon the Consumer Protection Law, at least in regard to the civil remedies that the Law provides.

If the construction under which personal reliance of each consumer is accepted as the relevant construction for the remedy of damages under the Consumer Protection Law, the result will be that it will be impossible to sue for damages by way of a class action in cases of false advertising. This rule is liable to result in abuse, and a situation in which advertisers will not worry about making imprecise statements, as the primary remedy of a class action will not be available to the consumer public.

The Council and Barazani (the Petitioners) further explain that the Consumer Protection Law – and sec. 2 (a) thereof, with which we are concerned – was intended to protect consumers from large companies, and to deter such companies from harming consumers. In the opinion of the Petitioners, class actions are vital to the realization of that objective, as without them, the Law will not be enforced, and the obligations it places upon dealer will come to nothing. The other enforcement measures in the Law are secondary measures and inadequate. The primary means for enforcing the Law is by class actions, which place enforcement in the hands of the individual consumer, and thus appropriately lead to a distribution of enforcement. The Petitioners argue that the majority opinion would sound the death knell for class actions and should, therefore, be rejected. The Petitioners find further support for their position in the American consumer protection laws, which, they argue, do away with the need for reliance, and that, they claim, is also the case in regard to Israeli securities law. They therefore pray that we interpret secs. 2 (a) and 31 (a) of the Law broadly and generously, as does Justice Strasberg-Cohen. I believe that I would not exaggerate in saying that the class action constitutes the central pillar of the Petitioners’ argument, as if class actions are the whole Torah on one foot, and all the rest of the Consumer Protection Law is but commentary.

            Bezeq replies to the Petitioners’ arguments at length and in detail, and we shall briefly refer to part of that reply.

21.       We have no intention of delving into the subject of class actions for the purpose of deciding the instant case. However, we will make some observations in regard to how class actions are integrated into the provisions of sec. 2 (a) of the Law, and primarily in regard to the consequences of such actions upon the interpretation of sec. 2 (a).

22.       In accordance with the provisions of sec. 35A (a) of the Law (see para. 12 above), a person cannot initiate a class action unless he has a personal right to bring suit. Compare (in regard to actions under the Securities Law, 5728-1968): CA 2967/95 Magen vaKeshet Ltd. v. Tempo Industries Ltd. IsrSC 51 (2) 312, 329, and in regard to an action on the basis of sec. 29 of the Civil Procedures Regulations, 5744-1984, see: LCA 3126/00 State of Israel v. A.S.T Project Management and Manpower Ltd., IsrSC 57 (3) 220, at para. 24 of the opinion of Strasberg-Cohen, J. A class action is a type of extension of the personal suit, and in the absence of a right to bring a personal suit, there can be no class action. A class action is like a chamber within a chamber. You cannot enter the inner chamber without first passing through the outer one. If that be the case – and I believe that to be so – then it would be difficult to conjecture from class actions to personal actions. If a person must first show that he has a personal right to sue, and if overcoming that hurdle is a precondition to a class action, then the interpretation and scope of personal actions can be influenced but little, if at all, by class actions. If that is the general case, then clearly class actions cannot be seen as independently granting causes of action. A class action is nothing but a procedural means for joining several personal actions into a single proceeding. That being the case, we cannot say that class actions might provide inspiration for interpreting sec. 2 (a) of the Law, let alone that the fundamental basis for its construction is to be found in class actions.

23.       Moreover, the provisions of sec. 2 (a) of the Law, along with sec. 31 (a) –  legal provisions that grant a consumer a personal right – were part of the original Law as enacted in 1981. At the time, class actions were not included in the Law. Class actions only boarded the moving train of consumer protection some thirteen years later in the Consumer Protection (Amendment No. 3) Law, 5754-1994. And see: the Explanatory Notes to the Consumer Protection Law (Amendment No. 3) Bill, 5754-1994, H.H. 5754, 396:

It is recommended that an additional chapter be added to the Consumer Protection Law, 5741-1981, that would make it possible to initiate a class action.

A class action, which saves the need for submitting a large number of individual consumer suits, is the efficient, and sometimes the only way by which consumers can contend with powerful economic bodies for which an independent suit of a single consumer, or even of several consumers together, is meaningless.

Knowing this to be the case, we can return to the question of how class actions influence the interpretation of personal suits, and say: until the institution of class actions, we had to interpret sec. 2 (a) on its own, from within and in the general context of the Law as it then was, and in the broad context of the existing legislation and the general principles for the interpretation of statutes, as normally applied. Class actions were not part of that interpretive process, as they had not yet been recognized, and therefore could not have influenced our interpretation. The interpretation of sec. 2 (a) of the Law was thus grounded before class actions were part of the Law. With the introduction of class actions in 1994, we find nothing among its provisions but the procedural expansion of the personal suit into very many personal suits.  The fundamentals of personal suits did not change. As Justice Strasberg-Cohen notes in LCA A.S.T. (above, at para. 26 of her opinion):

The arrangement for submitting a class action is essentially a procedural one. It facilitates joining the individual suits of many, mostly unknown, plaintiffs, into one suit. The fact that a class action has many ramifications for various areas does not change its basic procedural nature.

Indeed, “a situation in which a single plaintiff (or a number of plaintiffs) sue on behalf of a group of individuals for harm (of a similar kind), where each member of the group was harmed by an identical breach of duty, stands at the base of class actions” (LCA 4556/94 Tazat v. Zilbershatz, IsrSC 49 (5) 774, 783). A class action “represents a collection of personal suits” (the Magen vaKeshet case, above, 324), and it does not create causes of action for the representative plaintiff or for the members of the group. Class actions are an important tool – of great value and power – and in being what they are, they influence the material rights of the parties – the defendants, the representative plaintiff, and the members of the group. However, their influence is in providing an opportunity to realize rights, rather than in the creation of new causes of action. The power and importance of a class action are expressed in its size, and in making it possible to join a large number of existing actions in one procedure, where treating each action individually would lack significance. At the same time, the class action does not grant the representative plaintiff, or any member of the group, a cause of action that he would not have were it not for the class action. How, then, do class actions influence the interpretation of what preceded them in time, as alleged?

24.       We would emphasize that, of course, it is not our intention to say that a later law – that of 1994 – cannot influence the interpretation or scope of prior rights. However, in a case such as ours, we would expect that the new law would send us some sign or signal that would inform us – expressly or impliedly, directly or indirectly – that it is intended to change the mode or manner of the prior law, or, in the case before us, that it would entirely change the interpretation of sec. 2 (a). But in the 1994 law “there was no response, no one answered, no one paid attention”.[1] It is simply that sec. 2 (a) of the Law should be interpreted after 1994 as it was understood before that year, i.e., without reference to class actions as such (see and compare: HCJ 6194/97 Nakash v. National Labor Court, IsrSC 53 (5) 433, 455-456; and see: A. Barak, Interpretation in Law, v. 2 (Nevo, 1993) 51-54).

25.       We would add that we do not mean, and have not said, that the provisions regarding class actions cannot, by their very nature, affect the interpretation of the personal suit. It can be argued that had the class action been created in the original law – joined at birth to the personal suit – then it could retroactively, so to speak, influence the interpretation of the personal suit. “There is no early or late in the law”,[2] and all of its provisions are part of a unified whole. Thus, provisions that, in terms of the internal logic of the law, appear to “precede” other provisions of the same law, will not be interpreted independently, in isolation from the “later” provisions. The law is like a living creature, and each of its organs affects the others, and vice versa (see and compare: CrimA 4389/93 Mordechai v. State of Israel, IsrSC 50 (3) 239, 260 ff.). However, in this regard, we would expect that the later law would send us some message telling us that it is intended to shed new light on the preexisting law. But the 1994 amendment – that which introduced class actions – says absolutely nothing that might affect the interpretation of sec. 2 (a) as it stood prior to the amendment.

26.       Our conclusion is, therefore, that, as opposed to the argument of the Petitioners, class actions will not play a decisive role in the interpretation of the provisions of sec. 2 (a) or of sec. 31 (a) of the Law. That is not to say that we may not glance in the direction of class actions in the course of interpretation, since, after all, after the amendment of the Law, a class action is one of the organs of the Law (and that, bearing in mind, as we said, that had class actions been created with the Law, then it would be appropriate to interpret personal suits differently). However, the influence of class actions, to the extent that they may exert some influence – which is a separate question – will only be marginal.

27.       This matter of interpretation that we just addressed is of singular importance. As we all know – and as stated – class actions are an important, valuable tool. But first and foremost – and this is the main point – it is a powerful tool. However, the synergetic power of a class action makes it a non-conventional weapon, and not surprisingly, it strikes fear into the hearts of dealers. For that reason – and primarily for that reason – we must take special care in treating of the class action, as it is a hand-grenade with the pin pulled out.  We celebrated the birth of the class action, as in the “balance of terror” between dealers and consumers – particularly in a society such as our own, in which we are assured that “it will be alright” and “you can rely on me” – consumers require that power they would not otherwise have in confronting dealers. But that joy can be a mixed blessing, and we must take care that the class action not exert undue influence over the scope of personal suits.

            Let us now, first and foremost, turn to the question of Barazani’s right to bring a personal suit against Bezeq.

 

The Nature and Category of the Right established under Section 2 (a) of the Law

28.       Section 2 (a) of the Law does not inform us of the remedy that a consumer may seek from a dealer that did something “liable to mislead a consumer” in regard to a material element of the transaction. This gap – if it is a gap – is filled by the provisions of sec. 31 (a) of the Law, which informs us that an act or omission contrary to Chapters Two, Three or Four of the Law is to be treated as a tort under the Civil Wrongs Ordinance (see para. 11, above). Section 2 (a) is located in Chapter B of the Law – the chapter comprising secs. 2 through 7, titled “Deceit and Exploitation” – and we therefore know that an act or omission prohibited under sec. 2 (a) is to be treated as a tort under the Civil Wrongs Ordinance. It would appear as if the Consumer Protection Law planted sec. 2 (a) – like many other provisions – into the “Civil Wrongs” chapter of the Civil Wrongs Ordinance, and that sec. 2 (a) is the same as any of the other torts under the Ordinance. One of the necessary conclusions to be drawn from that would be that sec. 2 (a) is subject to the doctrines and principles set out in the Civil Wrongs Ordinance, which are applicable to all the torts in the Ordinance. And as Justice Strasberg-Cohen instructed us in LCA 6567/97 Bezeq – Israeli Telecommunications Company Ltd. v. Estate of Eliahu Gat, IsrSC 54 (2) 713, 717:

In practice, Bezeq cannot be directly attacked in regard to the applicable tariff, as its actions are under the aegis of the Regulations [Bezeq Regulations (Payments for Bezeq Services detailed in Schedule Two of the Law – Services in Israel), 5756-1996], and, therefore, enjoy apparent immunity by virtue of sec. 6 of the Civil Wrongs Ordinance [New Version], which grants a defense to an action under a statute, and according to sec. 31 (a) of the Law, an act or omission contrary to Chapters Two, Three or Four is to be treated as a tort under the Civil Wrongs Ordinance [New Version].

 

29.       My colleague now reads sec. 31 (a) of the Law differently, and sec. 31 (a) no longer directs us to the Civil Wrongs Ordinance as it stands, but rather to a general law that is similar but not identical to the Civil Wrongs Ordinance, or as she describes it (at p. 605):

 

In my opinion, we should bear in mind that an act or omission contrary to the prohibition upon deceit established by the [Consumer Protection] Law is not a “regular” tort but it is to be treated “as a tort”. Therefore, we are not limited to “traditional” tort law – upon which my colleague the Chief Justice bases his opinion – and we should also give appropriate weight to the purpose of the Law and the purpose of class actions … [emphasis original – M.C.].

 

I find it hard to accept such reasoning.

 

30.       In my opinion, sec. 31 (a) should be read and understood in accordance with its plain meaning, and the plain meaning is that the prohibition stated in sec. 2 (a) of the Consumer Protection Law is a tort for the purpose of the Law. Or, as stated in the Explanatory Notes of the bill (Consumer Protection Law Bill, 5740-1980, H.H. 5740, 302, 313), Explanatory Notes to secs. 30 through 33):

 

The granting of civil remedies to the harmed consumer allows him to compensate himself with relative ease for damage he incurred as the result of an act or omission contrary to Chapters B through D.

 

And further on (ibid., 314, in the Explanatory Notes to sec. 35):

 

The basic concept grounding the law is that deceiving a consumer, defrauding a consumer, and similar acts or omissions stated in the law are torts, and the consumer should be compensated for the damage caused him.

 

My colleague does not interpret the prepositional “kaf of comparison” prefix “as”[3] in forming the phrase “as a tort”[4] in the usual way. In my opinion, the interpretation of the prefix is “as this so this, the two are exactly identical” (Even Shoshan, The New Dictionary, 1991, s.v. “kaf”  (Hebrew)), or as Jehoshafat King of Judah said to Jehoram King of Israel: “ I am as thou art, my people as thy people, my horses as thy horses” (I Kings 22:4; II Kings 3:7) (and notwithstanding the statement of the Sages that “an egg is superior to anything as an egg…” (Babylonian Talmud, Tractate Berakhot 44b), which is clearly not applicable here, as is easily seen from the context[5]). Of course, the legislature could have worded the provision of sec. 31 (a) such that an act or omission etc. would constitute a tort under the Civil Wrongs Ordinance – it would be a tort rather than be treated as a tort – but I fear that the preposition is not strong enough to support the superstructure that my colleague wishes to build upon it. 

            I also do not find any merit in the arguments of the Consumer Council comparing the phrase “as a tort” in our case to similar but not identical wording in other statutes. Thus, for example, sec. 11 of the Commercial Torts Law, 5759-1999, states “The violation of the provisions of Chapters One and Two is a tort, and the Civil Wrongs Ordinance [New Version] … shall apply to it…”. At times we find this wording and at times other wording, and we will not hang mountains by a hair.[6] The same is true in regard to other statutes that employ various wordings. See, for example: sec. 28 of the Adoption of Children Law, 5741-1981; sec. 5 (a) of the Prohibition of Discrimination in Products, Services, and Entry into Public Places, 5761-2000; sec. 15 of the Banking (Customer Services) Law, 5741-1981, and others. In my opinion, the purpose of the Law in this case is crystal clear, and comparisons to other laws will not succeed.

31.       Indeed, nothing in the language of sec. 31 (a) of the Law would show that the tort under sec. 2 (a) removes it from the fundamental principles or doctrines of the Civil Wrongs Ordinance, and nothing therein might serve to show that a consumer is entitled to damages merely because a dealer contravened a provision of the Law. On the contrary, the Law refers us clearly and unreservedly to the Civil Wrongs Ordinance. Section 2 (a) situates itself as one of the native torts of the Civil Wrongs Ordinance, and it would therefore appear that the fundamental principles and doctrines of the Civil Wrongs Ordinance apply, in their entirety, with the same effect and force with which they apply to the native torts.

            Moreover, not only is the language of the Law crystal clear, but efficiency also points to the solution presented by the Law. Inasmuch as the acts and omissions external to the Ordinance are tortious in nature, it is but natural that we should employ the same traditional, familiar doctrines that tort law created and developed over so many years such that they have become foundational to the legal system, subject, of course, to special, exceptional cases.

 

Application of Fundamentals Principles and Doctrines of the Civil Wrongs  Ordinance to Torts external to the Ordinance

32.       We have stated that the doctrines of the Civil Wrongs Ordinance “appear” to apply to the prohibited acts under sec. 2 (a) of the Consumer Protection Law. Indeed, there are differences between the native torts of the Ordinance and those external to it that are treated as torts under the Ordinance. The native torts were created together with the Ordinance’s doctrines, and they reside in the same structure. Other than in exceptional cases, the doctrines of the Ordinance will apply with full force to every tort in the Ordinance. In regard to those exceptions, see Cheshin, Chattels in the Law of Torts (Magnes, Jerusalem, 1971), secs. 168-172 (pp. 167-170). As opposed to the native torts, the external torts, among them those under sec. 2 (a) of the Consumer Protection Law, are different. Indeed, the general doctrines of the Ordinance apply to them, however, here we must take special care. Since we are concerned here with transplanting a new organ into the body of the Civil Wrongs Ordinance, we must closely examine whether any particular doctrine of the Ordinance is compatible with the foundations, essence and structure of the new tort. This question was addressed in I. Englard, A. Barak & M. Cheshin, The Law of Civil Wrongs – General Principles of Tort Law, G. Tedeschi, ed. (2^nd ed., Jerusalem, 1977) pp. 74 ff. and especially p. 81, and we shall elaborate no further. And see: CA 3666/90, 4012/90 Zukim Hotel Ltd v. Netanya Municipality IsrSC 46(4) 45, 73 [1992]; CA 804/80 Sidaar Tanker Corporation v. Eilat-Ashkelon Pipeline Company Ltd., IsrSC 39(1) 393. And so we stated in CrimA 3417/99 Har Shefi v. State of Israel, IsrSC 55 (2) 735, 766-767 [English translation: http://versa.cardozo.yu.edu/opinions/har-shefi-v-state-israel]:

 

And indeed, this is – in general – the relationship between the general definitions and doctrines which cut across the law lengthwise and widthwise, and specific statutory provisions.  General definitions and doctrines will attach themselves to all statutory provisions and laws they wish to apply to. But where a certain specific statutory provision seeks to expel from within its bounds the general definition or doctrine—and this expulsion is derived by way of “interpretation”, in the broad sense of the concept of interpretation, including from the basic tenets of the system: logic, justice, first principles, social doctrines, etc. — the specific statutory provision prevails, while the general definition and doctrine will retreat. The general definition and doctrine will apply, as per the language of the Interpretation Law 5741-1981 in section 1, “… if there is no other provision as to the said matter, and if there is nothing in the said matter or its context which cannot be reconciled with…” the general definition or doctrine.

Elsewhere I raised the theory that the term “tort” in the Civil Wrongs Ordinance [New Version] is not limited only to those torts listed in the Ordinance.  I opined that the concept “tort” is a conceptual term, and from this I concluded that there are “torts” outside of the Civil Wrongs Ordinance [New Version].  Against this background I further asked myself, what is the relationship between the doctrines that were established in the Civil Wrongs Ordinance [New Version] and those unspecified torts.  I answered the question by saying that an unspecified tort will not “be controlled mechanically by the doctrines established by the Ordinance.”  And that the doctrines in the Ordinance will apply to unspecified torts only “… if the application of a certain doctrine from the Ordinance is consistent with the foundations, essence, and structure of the tort at issue, and with the framework in which it is found”.

 

Causal Connection and Awarding Damages

33.       Barazani claims damages from Bezeq by virtue of the advertisement that it published, and which – as stated in sec. 2 (a) of the Consumer Protection Law – was liable to mislead a consumer in regard to a material element. We are all in agreement that Barazani did not see the advertisement, that he was not influenced by it, and that he did not rely upon it when he made international calls. Nevertheless, and deeming himself wronged, he demands damages – and asks to sue for those damages in a class action on behalf of all those harmed – claiming that he incurred harm for which he is entitled to compensation. The damage, he argues, is the difference between the advertised price and the price he actually paid Bezeq. Here, Barazani confronts the doctrines of the Civil Wrongs Ordinance, and the question is whether those doctrines bar his path to compensation.

34.       Among those doctrines, two concern us here. My colleague Chief Justice Barak addresses those doctrines in his opinion, and inasmuch as I agree with his opinion, I will be brief rather than elaborate at length.

35.       One doctrine is that of causation, under which – in accordance with sec. 64 of the Civil Wrongs Ordinance – there must be a causal connection between a person’s act or omission – an act or omission that constitute a tort – and the harm incurred by the victim, for which he seeks redress. As stated in sec. 64 of the Civil Wrongs Ordinance: “… a person shall be deemed to be at fault for such damage when the fault was the cause or one of the causes of the damage”. In the matter before us, there was no causal connection between Bezeq’s advertisement and the “damage” caused to Barazani, if only by reason of the fact that Barazani never read that advertisement, and therefore, in any event, he is not entitled to sue on that basis. Indeed, Bezeq committed a tort by publishing the advertisement – that is the basic assumption in this case – but the mere existence of a tort is insufficient to entitle a person to redress. That person must show that due to that tort, he incurred harm, and that precondition was not met in regard to Barazani.

36.       This is also the case in regard to the compensation doctrine. In accordance with sec. 76 of the Civil Wrongs Ordinance, and as has always been the case: a person is entitled to compensation only for harm caused as a result of the tortious act. A person will be entitled to compensation only to the extent of the harm incurred, and as stated in sec 76: “only in respect of such damage which may naturally arise in the usual course of things and which directly arose from the defendant’s civil wrong”. A fundamental principle of tort law is that of restitutio ad integrum, and therefore, a person who did not suffer harm will not be entitled to compensation. See and compare: LCA 378/96 Sagi Weinblatt v. Moshe Burstein Ltd., IsrSC 54 (3) 347, 361; CA 5465/97 Kenny Housing Ltd. v. Netanya Local Planning and Building Board, IsrSC 53 (3) 433, 440-441.

            That is also the opinion of Prof. Sinai Deutch in his book Consumer Protection Law, vol. 1 (2001) 376 (Hebrew), who wrote the following about the causal link required under sec. 2 of the Law and the compensation to which a victim is entitled:

 

In a tort claim under the Consumer Protection Law (sec. 31 of the Law), there is no need to prove a causal connection between the mistake and the contractual agreement, but a causal connection must be shown between the deceit and the harm caused to the consumer. While sec. 2 of the Consumer Protection Law prohibits doing anything liable to mislead the consumer, and it would therefore appear that there is no requirement of actual misleading, the sanction attendant to such an act can only be administrative or penal. If, in fact, there was no misleading and no harm, damages cannot be awarded. Compensation owing to a tort can be awarded only for demonstrated harm.

 

Thus, publishing something that is liable to mislead, per se, does not grant a consumer a right to compensation if he was not actually harmed. That is also the view of Dr. Orna Deutch, who writes in her book The Legal Status of Consumers (Nevo, 2002) 414-415 (Hebrew):

 

As far as the remedy of damages is concerned, a suit under the Consumer Protection Law would require proof of the harm deriving from the deception, in other words, the existence of actual deception and action on the basis of that deception. There must be a causal connection between the deception and the harm, as is the normal rule in regard to damages. That was the majority opinion in Barazani v. Bezeq. Indeed, there is no justification for allowing a person to collect damages where he did not incur harm as a result of the deception. The purpose of damages is to require that the person responsible make restitutio ad integrum. There is no need for a causal connection in relation to any harm when a declaratory order is sought to stop the misrepresentations…

And see: Prof. Miguel Deutch, Commercial Torts and Trade Secrets (Nevo, 2002) (Hebrew) 48-50.

            And if that is not sufficient, we would note the opinion of Chief Justice Shamgar in the Liefert case (Note to editor: I assume the reference is to CA 1304/91 Tefahot Mortgage Bank v. Liefert, IsrSC 47 (3) 309). In that case, the Court addressed sec. 3 of the Banking (Service to Customers) Law, 5741-1981, that prohibits a banking corporation from doing anything “liable to mislead a customer as to anything material to the performance of a service to the customer”. In that regard, Chief Justice Shamgar wrote (at p. 326):

 

The prohibition in the Banking (Service to Customers) Law is broad, and prohibits any act or omission liable to mislead. In other words, it is not necessary that there be actual deception (although in the absence of such deception, it is doubtful that it would be possible to point to some harm that might support a cause of action for damages under the law) [emphasis original – M.C.].

 

Of course, the legislature is free to deviate from this principle, and decide – for various reasons – that a victim be granted compensation without showing harm. See, for example: sec. 7A of the Defamation Law, 5725-1965; sec. 11 of the Contracts (Remedies for Breach of Contract) Law, 5731-1970; sec. 10 (a) (1) of the Employment (Equal Opportunities) Law, 5748-1988; sec. 6 (b) of the Prevention of Sexual Harassment Law, 5758-1998; sec. 3A of the Copyright Law; sec. 13 (a) of the Commercial Torts Law, 5759-1999. However, these are but exceptions to the rule. The rule is that compensation will be granted only if harm was done, and compensation will be granted only to the extent of the harm done. In the matter before us, and inasmuch as Barazani was unaware of Bezeq’s advertisements and did not rely upon those advertisements, we cannot say that he is entitled to compensation. Indeed, depriving Barazani of the right to compensation primarily derives from the absence of a causal connection between the tort and the “harm” he allegedly incurred, and the compensation doctrine simply confirms the lack of a claim for compensation against Bezeq.

37.       The absence of Barazani’s right can also be demonstrated in another way. An action in tort that concerns an injury to a person, begins with that injury. When a person incurs injury as a result of the act or omission of another, we examine whether that injury was caused by a tort perpetrated by that person against the injured party, or whether that person breached some duty toward that injured party. See and compare: LCA 5768/94 A.S.I.R Import, Manufacture, and Distribution v. Forum Accessories, IsrSC 52(4) 289, 334. If that examination show that a tort was committed or that a duty was breached, and that the tort or breach of duty was the cause of the harm, then the tortfeasor will be liable for damages. However, if no connection be found between the act or omission of the tortfeasor and the harm, then damages will not be awarded, and the injury will be damnum sine injuria – a loss without a wrong.

38.       In the matter before us, things appear topsy-turvy. Unlike the situation of a normal tortious event, Barazani cannot show the actual “harm” that was caused him unless we first say that the provision if sec. 2(a) of the Consumer Protection Law entitles him to damages. In that case, we would say that Barazani incurred “harm” because he is entitled to damages by virtue of the Law. His “harm” is a sort of “statutory harm” – harm ex lege. However, unlike other statutory provisions that grant a consumer a monetary right – see, for example, the provisions of secs. 10 and 17B of the Consumer Protection Law – sec. 2 (a) of the Law does not establish a consumer’s right to damages in the absence of proof of injury, or a consumer’s right to pay a particular price advertised by a dealer. And see: LCA 8733/96 Robert Langbert v. Israel Lands Administration, IsrSC 54 (1) 168. Thus, while in a normal tort case, the injured party can easily point to the harm he incurred, in the matter before us, Barazani cannot show that he suffered any real “injury”, if only because he never saw Bezeq’a advertisement. The existence of an “injury” must be derived from sec. 2 (a), which does not address compensation. We thus find ourselves locked in a vicious circle. We assume the existence of “injury”, and then find that injury has been caused on the basis of that assumption. We therefore state that just as a person is not entitled to sue a person for negligence unless that negligence caused him harm, a person cannot sue a dealer for publishing something liable to mislead in regard to a material element of a transaction if that deceit did not cause him harm. We therefore declare that in the absence of an explicit, unambiguous provision granting damages for virtual harm, like that suffered by Barazani, we cannot imagine that a court will award damages. Such significant creativity is a matter for the legislature, not the courts. The legislature did not say what the petitioner wishes to put in its mouth, and we will not usurp the role of the legislature to say what it did not.

39.       Having said all that in regard to causation and damages, we would add that the (factual and legal) causal connection required by sec. 2 (a) of the Law does not unambiguously require a consumer’s explicit reliance upon a dealer’s representation, as opposed to sec. 56 of the Civil Wrongs Ordinance that explicitly requires a causal connection of reliance. It is possible for the necessary causal connection to exist even where a consumer does not directly rely upon a representation, as where the dealer’s representation (as stated in sec. 64 of the Civil Wrongs Ordinance) “was the cause or one of the causes of the damage”. That would be the case, for example, where it can be shown that a dealer’s representation that was liable to mislead a consumer in regard to a material element motivated a chain of events that resulted in injury to the consumer. For example: a certain advertisement misled a person, and it is possible to show a sufficiently proximate causal link between that person and the consumer who suffered the injury. In other words, in this context, we should broadly interpret the concept of reliance such that it comprises more than just direct reliance.

            However, there must be some (appropriate) causal connection between a misleading advertisement and the injury incurred by the consumer. Thus, the two successive events for our purposes are: first, a publication that is liable to mislead a consumer in regard to a material element of the transaction, and the second, that the consumer purchased the commodity or the service that was the subject of the advertisement. In this regard, the fact that the purchase of the commodity or the service followed the advertisement in time is not sufficient, in and of itself, in order to show a causal connection between the two events, or to put it in terms of the well-known Latin fallacy, post hoc, ergo propter hoc? – after this, therefore because of this? The mere fact that event B follows event A does not mean that event B was caused by event A. There must be an appropriate causal connection between the two events, and we learn of that connection from the circumstances of each case, by the usual procedure of examining the relevant evidence.

40.       A publication that is liable to mislead a consumer gives rise to a tort under sec. 2 (a) of the Law, and when there is an appropriate causal connection between that publication and the injury caused – whether a direct connection deriving from reliance, or an indirect connection deriving from an appropriate chain of causation from the publication to the consumer – the consumer will be entitled to compensation. In other words, the complaining consumer must show that the misleading publication initiated a chain of events that reached him and caused him injury.

            Let us look at the case of securities. In accordance with the Securities Law, 5728-1968, the tort resulting from deceptive conduct does not require a consumer’s reliance upon a misleading publication. A party signing a prospectus that comprises a misleading element “is liable to anyone who bought securities from the offeror … for damage caused to them by the inclusion of a misleading item in the prospectus” (sec. 31 of the Securities Law. And further see: secs. 32 and 52K of that law). And as held in LCA 8268/96 Dan Reichert v. Moshe Shemesh, IsrSC 55 (5) 276 (per Strasberg-Cohen, J.), there must be a causal connection between the misleading publication and the injury incurred by the consumer (reduction of value of the security), although it is not necessary that there be direct reliance upon the publication. And see, ibid., 311-312. What applies there can be instructive here, and I believe that it should be.

41.       In conclusion, what we set out above merely establishes general guidelines for the interpretation of sec. 2 (a) of the Consumer Protection Law. In the case before us, we would say that since Barazani was unaware of Bezeq’s misleading advertisement, and knowing that Barazani was neither directly nor indirectly influenced by that advertisement, we have no need to explore the issue of reliance or that of the appropriate causal connection between a misleading advertisement and the injury incurred by a consumer who purchased an commodity or service that was the subject of the advertisement. In the future, the courts will address those issues and corollary issues, and the law will develop from case to case. For our purposes, the main point is that we will always require the existence of an appropriate causal connection between a misleading publication and the injury incurred by a consumer, and in establishing that causal connection, we will find a place for including “constructive reliance” where appropriate. In other words, sec. 2 (a) will be interpreted as comprising not only direct reliance – as would be the case were we addressing the tort of fraud under sec. 56 of the Civil Wrongs Ordinance – but also indirect reliance, reliance whose practical import is an appropriate causal connection between the publication and the injury such that we might say that the plaintiff was misled in purchasing the commodity or service. The questions that present themselves are not simple at all, as the sharp disagreements testify. Indeed, American jurisprudence overflows with examples in both directions, upon which we will not elaborate for the purpose of the matter before us, but by way of example, see Mark Oliveira v. Amoco Oil Co., 776 N.E. 2d 151 (2002) and the cases cited there.

 

On the Uniqueness of the Consumer Protection Law

 

42.       “We cannot suffice with literal interpretation, and must continue to seek the purpose of the law in order to discern the appropriate interpretation”. Having said this (at p. 598 of the judgment), my colleague Justice Strasberg-Cohen turned to the purpose of the Consumer Protection Law. In doing so, she found that the provision under sec. 2 (a) of the Law – in terms of its substance – does not accord with the fundamental principles of injury and the causation doctrine established in the Civil Wrongs Ordinance. In my colleague’s opinion, we are have a duty to interpret the Consumer Protection Law in accordance with its purpose, and that purpose leads to the conclusion that sec. 2 (a) would award damages to a consumer even if he did not himself rely upon the dealer’s offending advertisement. As my colleague writes:

 

The Law is meant to impose modes of conduct upon the commercial sector, and establish fair rules-of-the-game in the relationship between consumers and dealers. The Law intends to ensure that a dealer will not exploit its greater economic power in order to profit unlawfully at the expense of the consumer. In order to protect the consumer, the Law established “… a line of obligations and prohibitions for dealers – producers, importers, dealers and service providers – with the overall purpose of preventing deception of consumers, providing the consumer with as much information as possible about the nature of the transaction he intends to make, and giving him the tools for realizing his rights …” … the tool of class actions was intended to ensure efficient enforcement of the norms established by the Law, and to deter those with an economic advantage from any attempt to abuse the consumer’s innocence, his weakness in the contest between the two, and the inherent lack of worthwhileness in bringing suit against dealers for the injuries caused by their conduct, which may be very small relative to each consumer, yet a source of unlawful wealth for the dealer. The prohibition of deceit under sec. 2 (a) of the Law should be interpreted against the background of these objectives. Therefore, in my view, the legislature did not choose its words by accident. The statement that the “prohibition of deceit” applies to any act or omission liable to mislead a consumer was intended to establish an objective-normative test for evaluating a dealer’s conduct, and to raise the normative bar that a dealer must pass in order to meet the requirement that the Law establishes to protect consumers. A construction that would grant relief only to those consumers who were actually deceived would create an artificial distinction between the consumer public that used the goods or services that were the subject of the misleading advertising, but who were not exposed to it, and the consumer public who were exposed to the misleading information. An approach that would require actual deceit would limit the liability of a dealer only to those consumers who could show that they were actually misled by the dealer’s representation. Such an approach would reduce the deterrence that is one of the purposes of the Law, if not its main purpose.         It would make deception worthwhile from the point of view of the dealer, and would undermine enforcement of the Law. Such an approach would undermine the achievement of the Law’s purpose, in general, and class actions in that framework, in particular.

And further on (ibid., 602):   

 

In my opinion, a consumer suing on the basis of the Law is not required to show that he was actually misled in order to for him to enjoy a cause of action for damages due to a breach of the “prohibition of deceit” established under sec. 2 (a) of the Law. It is sufficient that he show that the dealer committed an act “liable to mislead a consumer”.

 

43.       Needless to say, the Petitioners agree with the opinion of Justice Strasberg-Cohen, and add that another interpretation of sec. 2 (a) – one that would require reliance upon the misleading representations of a dealer in order for a consumer to demand compensation from the dealer – would eviscerate the Law. How? An interpretation like that of the majority would, in practice, prevent the submission of class actions for deceit, and seeing as an individual action (like that of Barazani) would not be initiated, if only due to the negligible injury to each individual consumer, the result would be that the Law would not be given effect. It would be a voice crying out in the wilderness. The benefit of the Law would be lost, and we would be left with an empty shell.

44.       We addressed the issue of class actions above (see paras. 19-26), and we will comment only briefly. We do not intend to minimize the distinguished place of class actions, nor in any way detract from their importance. We would, however, add that in the absence of a clear, explicit provision –which there is not – we will not permit class actions to rule the entire field of consumer protection, while allowing it to trample fundamental principles and doctrines that have been adopted over the course of time. In this regard. We would particularly note that, from its inception, the class action was not created as a substantive right or a cause of action. A class action, for all its importance – and it is of great importance – is nothing but a procedural tool for the joining of many actions under one roof. Being what it is, we find it hard to interpret it such that it would have the retroactive power, so to speak, to change substantive principles of tort law, and among them the rules concerning causation and the principles for awarding damages. While one can question the conception created by my colleague Justice Strasberg-Cohen, it cannot be entirely ruled out. But that conception deviates so drastically from what has long been accepted, that we would expect that the Law would explicitly instruct us in this regard, and it does not.

45.       When a new law is enacted, it becomes an integral organ of the legal corpus. That is true of every law, and it is true in regard to the Consumer Protection Law. A new law is not a Robinson Crusoe who comes to a place uninhabited by laws, fundamental principles, doctrines, classifications, modes of thought and legal culture. A new law must find its place and integrate itself into the thick forest and become part of the landscape. That is the background of sec. 31 (a) of the Law, which instructs us that a prohibited act under sec. 2 (a) of the Law is to be treated as a tort. Chief Justice Barak instructs us that even without sec. 31 (a), we would classify conduct contrary to sec. 2 (a) of the Law as a tort of breach of a statutory duty. But by enacting sec. 31 (a), the legislature made that unnecessary. But either way, the main point is that the Law recognized the need to weave the new law into the cloth of the general law, and found a place for it in the Civil Wrongs Ordinance. The Law thus informs us that a prohibited act in contravention of sec. 2 (a) of the Law – and contrary to other legal provisions as well – is a tort, and thereby saved us the trouble of classifying it in one way or another. As we stated elsewhere (Cheshin, Chattels in the Law of Torts, sec. 161 at p. 161, fn. 2 (Hebrew)):

 

Classification organized “Julian laws”, and is based upon fundamental principles established therein. Commonalities and distinctions among the rules to be classified is a fundamental principle of thought. The doctrines that apply to the rules that unify a category (capacity, consideration, proximity, etc.) are causes and effects of classification. At a given point in time, classification is made on the basis of the equivalence of doctrines that apply to various rules of law. After making the classification, and the creation of the doctrine that applies to a particular cluster of laws, the doctrine will govern all that is within that cluster because they are members of a single legal class. That will also hold, mutatis mutandis, with the creation of any specific legal rule that is a member of a particular legal class (whether explicitly or by its “explication”), which will then be governed by the doctrine pertaining to that class.

 

Classification in law (and in general), is intended to simplify the task of the researcher and the interpreter, but we must always bear in mind that what we are concerned with is “nothing more than a guideline, and while it would seem proper that we employ it, there is no a priori requirement that it apply, in practice, to a given legal issue” (ibid., 161). Indeed, functionality is the main thing, while “doctrines, classifications, and definitions, we have created these for our own use; they were intended to serve us; we will control them and not allow them to control us; the power is in our hands, and we will now allow our own creations to rise up against us” (the Har Shefi case, 767, and see: CrimA 4675, 4961, 4962/97 Yisrael Rozov v. State of Israel, IsrSC 53 (4) 337, 377). As for the matter before us, we find no good reason to distinguish the cause of action under sec. 2 (a) of the Consumer Protection Law, and treat it differently than any other tort.

 

The Consumer Protection Law – A Multidisciplinary Law

 

46.       The Petitioners place class actions at the center of Creation, and in reading their briefs, it is hard to rid oneself of the impression that the substantive provisions of the Consumer Protection Law were created solely, or at least primarily, to honor class actions. Thus they conclude that in denying Barazani a right granted under sec. 2 (a) of the Law, we render the Law an empty vessel. The claim is readily refuted by the fact that class actions were introduced into the Consumer Protection Law only in 1994, that is, some thirteen years after the Law was enacted. It seems to me that portraying class actions as the prime purpose of the Consumer Protection Law, around which all other provisions of the Law orbit and bow down, does injustice to the Law.

47.       We can all agree that the purpose of the Consumer Protection Law is to achieve an appropriate balance between the individual consumer and dealers – particularly large dealers – and the Law achieves this by placing greater burdens upon the dealers. See, e.g., the Consumer Protection Law Bill, 302; LCA 8733/96 Langbert v. State of Israel, IsrSC 55 (1) 168, 175; LCA 2701/97 State of Israel v. Chertok Daniel, IsrSC 56 (2) 876, 884. For a general survey, see especially, Dr. Orna Deutch, ibid., 27-37; Prof. Sinai Deutch, ibid., 118-128. However, the Consumer Protection Law is a multidisciplinary law. It simultaneously situates itself in private law and in public law, in public administrative law, and in criminal law. The Law integrates provisions form these various fields of law in order to serve the purpose of protecting the consumer.

48.       Indeed, we find three different enforcement mechanisms in the Consumer Protection Law: an administrative enforcement mechanism, a criminal enforcement mechanism, and a civil enforcement mechanism. These three mechanisms can be found in Chapter Five (The Consumer Protection and Fair Trade Commissioner), Chapter Six (Penalties and Remedies), and Chapter Six 1 (Class Actions).  These mechanisms are separate from the substantive provisions that impose specific obligations upon dealers.

49.       In regard to the Consumer Protection and Fair Trade Commissioner, an examination of the relevant provisions of the Law reveals that the Commissioner enjoys many potent powers for overseeing the execution of the Law, for addressing complaints, etc. As stated in the Bill (ibid., 301, 311):

 

For the purpose of enforcing the law, a Consumer Protection and Fair Trade Commissioner will be appointed, who will be granted many powers to enable him to ensure that the provisions of the law are indeed carried out, and to enforce them upon dealers that do not comply.

…

The powers granted by the law to the Commissioner will grant him the status of an independent authority that can act efficiently … to this end, the Commissioner is granted powers that are not generally granted to authorities, among them – the authority to obtain an undertaking by a dealer to abstain from repeating offenses, accompanied by a guarantee of up to NIS 10,000, and the authority to publish the findings of his examinations, and to obtain a restraining order from the court. In addition to those powers, the Commissioner will have the authority to investigate, to seize documents and chattels, and additional executionary powers.

 

The above receives full expression in the Law. Here are a few of the powers of the Commissioner, as set out in secs. 21-22 of the Law:

 

Powers of the Commissioner

21.       If the Commissioner or the person appointed by him for that purpose concludes that it is necessary to do so for the implementation of this Law, then he may –

(1)        Enter any place used for a business, and there check whether the provisions of this Law are observed, examine documents, samples and goods, and seize anything, if it is reasonable to presume that in its respect an offense against the provisions of this Law was committed or is planned;

(2)        Interrogate any person who is connected to the matter or has information about it, and demand that he appear before him, deliver to him documents, samples and information related to the investigation, on condition that the date of a person's appearance under this paragraph shall – as far as possible – be set in coordination with him and be at a reasonable time;

(3)        Carry out tests of goods or services and publish their results, but he shall not publish anything that is liable to injure any person, if he had not been given an opportunity to present his arguments;

(4)        Inform dealers of their obligation to stop or not to repeat practices that constitute prima facie violations of the provisions of this Law.

                        Auxiliary Powers

22. (a)              The Commissioner or a person appointed by him for that purpose shall have the powers of a police officer of the rank of inspector under the provisions of section 2 of the Criminal Procedure Ordinance (Testimony), and section 3 of the said Ordinance shall apply to information recorded by him.

 

In addition, the Commissioner also enjoys additional powers, such as the power to demand an undertaking that a dealer will abstain from violating the Law (sec. 28), the authority to apply for a court order that a dealer abstain from violating the Law (sec. 30), and more.

            In addition to the Commissioner, the Law backs up the obligations that it imposes upon dealers with criminal sanctions, upon which we need not dwell. However, we would especially note sec. 23 (a) (1) of the Law, under which a dealer is subject to a year imprisonment and a fine “if it did anything liable to mislead a consumer in violation of the provisions of section 2”.

50.       These consumer protection mechanisms do not impress the Petitioners. They argue that public enforcement by means of the provisions of the Law is not enough, and add that in practice, there is under-enforcement by the authorities. They further argue that class actions are the – with a capital “T” – primary tool for the enforcement of the provisions of the Law, and we must not let this valuable tool slip from our hands. And see and compare: the A.S.T. case, para. 7 of the opinion of Beinisch, J.; the Consumer Protection Law (Amendment No. 3) Bill, 5754-1994, H.H. 396; Bar-Niv (Bornowski), “The Limits of the Consumer Class Action,” 19 Iyunei Mishpat 251 (1994) (Hebrew); Bar-Niv, “Enforcement of the Consumer Protection Law by the Commercial Sector,” 17 Iyunei Mishpat 299 (1992) (Hebrew). And compare: M. Agmon & D. Lachman-Messer, “Theories of Enforcement in the New Companies Law Bill,” 26 Mishpatim 543, 577 (1996) (Hebrew).

51.       We would answer the Petitioners’ arguments as follows. First, we have not said – and will not say – that class actions are not an important means for the enforcement of the substantive provisions of the Consumer Protection Law. Second, and this is the main point, examining the Law from within shows that, in principle, the Law rests upon several foundations. Reviewing the powers of the Consumer Protection Commissioner and examining the penal section of the Law will show that the legislature is of the opinion that those powers and sanctions greatly strengthen the position of consumers. If the authorities have demonstrated laxity in enforcing the Law, that retrospective laxity cannot influence the interpretation of the law. We would recall how other authorities operated in the past and how they operate today. We would recall the Antitrust Commissioner and the Securities Authority – how those two operated in days gone by and how they stand today. We should remember, and hope that the Consumer Affairs Commissioner will similarly gain strength, and that the enforcement authorities of the Consumer Protection Law will follow suit in regard to penalties. But that is for the future. As for the present, the Petitioners’ arguments say nothing that would directly influence the interpretation of the Law.

52.       One last comment in this regard. We have stated elsewhere (see para. 12, above) that the Consumer Protection Law does not accept the actio popularis “in blank”. The proof is that a person does not acquire a right to bring a class action unless he also has an actionable personal right (see sec. 35A (a) of the Law). If we were to adopt the interpretation of sec. 2 (a) of the law advanced by the Petitioners, we would find ourselves indirectly introducing the actio popularis into the Law, if not in its fullest sense, at least in principle. By this interpretive process, we borrow a concept of public law – from constitutional law, administrative law, and primarily, from criminal law – and make it part of private law. It is as if we have returned to the days of old, when the enforcement of the law – civil and criminal – was in the hands of the individual. In those days, and in the absence of a central government that could impose its will upon the entire state, law enforcement was decentralized, and the powers and authority of the individual were of primary importance for the enforcement of the law. Granting Barazani a right to sue, as the Petitioners understand the Law, returns us to those early days, if by a sophisticated, modern apparatus. We would immediately add that we do not mean to criticize the need for decentralization of enforcement. We say this because we do not believe that the Law intended, as the Petitioners argue, to affect such a mini-revolution as that we have described without saying anything expressly to that effect. But we have not heard the Law say anything – neither loud nor clear.

 

Presumption

 

53.       Justice Strasberg-Cohen recommends that we establish a presumption that would assist consumers in their battle with dealers, or in her words (at p. 603):

 

Were I of the opinion that actual deception of the consumer, and reliance upon the dealer’s representation were required – and I do not – then, in light of the relative power in the relationship between the consumer and the dealer, and in order to deter the commercial sector, I would favor a presumption by which when a dealer makes a representation that is liable to mislead the consumer, and that representation is widely publicized in order that it reach the consumer public, the consumer who purchases the goods or services that were the subject of representation would be deemed to have been exposed to the representation and had relied upon it…

 

Chief Justice Barak preferred to leave that question in abeyance, inasmuch as there was no need to decide it (ibid., 621). Careful examination – even without delving deeply into it – shows that the subject of the presumption raises no small number of difficulties. Inasmuch as it is not necessary that we decide the issue, we will leave it for the future.

           

Does this spell the End of Collective Actions on the basis of the Consumer Protection Law?

 

54.       The Petitioners raise the fear, and even argue, that the conditions of reliance, or if you prefer, the conditions of causation – as established in the judgment under review – between the conduct of the dealer and the harm to the consumer will put an end to class actions under the Law, by which we will call down great harm upon ourselves. I cannot agree. Our opinion is centered upon the question of when, and under what circumstances, does a plaintiff under the Consumer Protection Law acquire a personal cause of action against a dealer. Indeed, each one of the plaintiffs in a class action must himself have a personal right to compensation – like the representative plaintiff – and have suffered harm causally connected to the conduct of the dealer. So much for the right itself. However, the legislature and secondary legislature took a significant step toward the members of the class insofar as proving the cause of action. Thus, if the consumer prove the existence of a personal cause of action, and if the complaint be certified as a class action, then the court may decide how the members of the class are to prove the injury they incurred. Or, as set forth in reg. 9 of the Consumer Protection (Procedures in regard to Class Actions) Regulations, 5755-1995:

 

                        Actions deriving from Judgments

                        9.  (a)   If a court decides that a cause of action has been proven, it may order that every member of the class prove his right to the requested remedy by means of an affidavit in which he details the harm he incurred.

                             (b)   …

                             (c)   Subsection (a) notwithstanding, the court may, at the request of the plaintiff, exempt the members of the class, or part of them, from submitting affidavits if it finds, under the circumstances of the case, that submitting them will unduly burden the members of the class, and it may order that the damage be proven in another manner as it shall see fit.

 

In terms of the matter before us, if Barazani had a personal cause of action, and the court had recognized his right to submit a class action, and if the court had accepted the class action as such, then the court would have been free to establish appropriate means for proving the causal connection between the misleading advertisement and the harm caused each of the members of the class, as well as the harm caused to each of them, as it saw fit. Or, as stated in reg. 9 (a) above: “that every member of the class prove his right to the requested remedy by means of an affidavit in which he details the damage he incurred”. So, by affidavit, or as stated in reg. 9 (c), even in any other way that the court shall see fit.

55.       Moreover, in CA 1337/97 Tnuva v. Rabi (recently delivered and as yet unpublished), Justice Naor (dissenting) stated that, in her opinion, the Consumer Protection Law should adopt an arrangement called “indemnification and special compensation” which is found in regard to class actions in several laws, among them sec. 46I of the Restrictive Trade Practices Law, 5748-1988, sec. 16I of the Banking (Service to Customer) Law, 5741-1981, and sec. 62I of the Insurance Business (Control) Law, 5741-1981. These provisions are identically worded, and we shall quote sec. 46I of the Restrictive Trade Practices law:

 

Indemnification and Special Compensation

46I.      (a) In the case that a ruling of pecuniary compensation is handed down by a Court in a Class Action, such Court may:

…

(b) In the case that the Court believes that pecuniary compensation of all or some of the members of the group is impractical under the circumstances, either because they cannot be identified and the payment cannot be made at a reasonable cost or for any other reason, it may provide for any other remedy as it deems fit under the circumstances, whether in favor of all or some of the group, or in the public interest.

 

A similar – though somewhat different – arrangement can be found in sec. 216 (b) of the Companies Law, 5799-1999, which addresses damages in class actions under that law. From these provisions, we learn that where awarding separate compensation to each member of the class is impractical, the court may impose special compensation arrangements or other remedies upon the defendant, as it may deem appropriate, as long as the defendant is not required to pay more than the damage it caused. And see: Daar v. Yellow Cab Company, 433 P. 2d 732 (1967).

 

Comparative Law

 

56.       The attorneys for the parties, each in its own cause, relied upon comparative legal precedents, primarily from American consumer protection law. An examination of the case law serves to show that support can be found for (virtually) every approach. American law is state based, and despite the reciprocal influences of the laws of the various states, each state follows its own path. While the language of the laws is similar – and even similar in certain ways to our own Consumer Protection Law – the interpretive policy of the courts differs from place to place. The primary differences center, not surprisingly, upon the subject of reliance and causation. Thus, for example, there are places where a precondition to the tort of consumer deception is that the consumer relied upon the misleading representation. In other places, no reliance is required at all. And still in others, the case law has created a presumption of reliance. And we need not point out that each is unlike the others.

            Moreover, reading the American case law reveals variations in the application of the various laws, both in regard to the conditions for reliance and in regard to causation. Thus, for example, in the case of Miller v. General Motors Corp., 2003 U.S. Dis., Lexis 1467 (a case decided in January 2003 by the United States District Court for the Northern District of Illinois, Eastern Division), the court addresses some of the differences between the laws of the various states – primarily in regard to issues of reliance – and we find the following marginal note by the court:

Some of the issues on which differences exist include: … differences in standards of reliance.

The court adds that the law of the state of Illinois is also insufficiently clear in regard to reliance. And also see, for example: the Oliveira case (above, para. 41), Connick v. Suzuki Motor Co., Ltd., 675 N.E.2d 584 (1996); Zekman v. Direct American Marketers, Inc., 695 N.E.2d 853 (1998).

            Precedents are thus brought to us from the four corners of the earth, and there is much confusion. Indeed, the legal provisions differ, as do the trends and social, economic and legal outlooks that characterize the different states and that guide the courts – each according to its own path – and we would be hard pressed to distinguish the universal from the particular. We may learn techniques and modes of thought from American law, but I fear, not much more.

57.       In reviewing the sea of citations imported from the United States and laid out before us, I cannot but be reminded of the words of Justice Haim Cohn in FH 12/63 Leon v. Ringer IsrSC 18(4) 701 [1964], where the Supreme Court was asked to decide upon the “eggshell skull” rule. This is how Justice Cohn began his opinion in that case (ibid., 706):

 

The rule established in CA 378/62 … it that the tortfeasor is responsible for the harm caused by his negligent act, even if – due to the “eggshell skull” of the victim – the extent of the injury exceeded anything that could be expected or foreseen. In the Further Hearing on this doctrine, the learned counsels called down upon us an abundant rain of precedent, sources, articles and comments, among them Israeli, American, South African, and Australian, to the point that the waters of the foreseeability doctrine flooded the banks. In fear of being swept away by such a torrent, and drowning in a sea of various decisions and statements, I cleared my desk of all the books – among them a compendium of nineteen articles published on the subject in various journals, which the attorney for the National Insurance Institute compiled and bound for us with discerning taste – and I commenced writing with only the Civil Wrongs Ordinance, 1944, and the said decision of this Court in CA 378/62; 390/62 set before me.

 

Indeed, in a moment of such distress – a distress of lémbarras du choix (de richesse) – we can but latch onto the fundamental principles of the law. That is what we have done, to the best of our ability, in this opinion. And see, for example: Gary L. Willson & Jason A. Gilmer, “Minnesota’s Tobacco Case: Recovering Damages without Individual Proof of Reliance under Minnesota’s Consumer Protection Statutes”, 25 Mitchell L. Rev. 567 (1999); Samuel Issacharoff, “Class Actions in The Gulf South Symposium: The Vexing Problem of Reliance in Consumer Class Actions”, 74 Tulane L. Rev. 1633 (2000).

 

Conclusion

 

58.       The Petitioner before us, Barazani, did not see the misleading advertisement, did not rely upon it – either directly or indirectly – and in any case, was not misled. There is no appropriate causal connection between the advertisement and the injury allegedly incurred by Barazani, and, therefore, his suit must be denied. I would, therefore, recommend to my colleagues that we dismiss the petition and affirm the judgment of the Supreme Court.

 

And it came to pass after these things[7]

 

59.       I have read the opinion of my colleague Justice Mazza. My colleague comments rather sharply upon my opinion. He primarily seeks to smash the wall I built around the judgment, and pulverize the foundations upon which I built my legal conclusions. Inasmuch as my colleague’s opinion was not before me when I wrote my opinion, I would ask that what I wrote be seen as an answer to my colleague’s remarks. And having thus replied to my colleague, I would add two observations in regard to the disagreements that have arisen between us.

60.       My colleague is of the opinion – and so he holds – that in interpreting and deciding upon the scope of the Consumer Protection Law, we must bear in mind that we are in a “consumer environment” as distinguished, for example, from a tort-law environment, and that we must give special force to the “uniqueness of the consumer cause of action”. Because we are acting in a consumer atmosphere, we must realize that the causal connection between a prohibited act and the injury in the Consumer Protection Law must be a “consumer causal connection”, that a prohibited act of deception is “consumer deception”, that the injury incurred by the consumer is “consumer injury”, etc. The borders and scope of each of these concepts – concepts whose core is the consumer as such – remain somewhat blurry. However, it is unambiguously clear that appending the term “consumer” to each of these long acknowledged concepts – the concepts of “causal connection”, “deception”, “injury”, etc. – shows that the interpretation of those concepts is not the usual one, and may contradict the usual interpretation. A “consumer causal connection” is not a regular “causal connection”, “consumer deception” is not the usual “deception”, “consumer injury” is not regular “injury”, etc. Thus, even though the Law clearly instructs us that acts and omissions prohibited under Chapters Two, Three and Four of the Consumer Protection Law are to be treated as torts under the Civil Wrongs Ordinance, my colleague intends to disengage himself – in practice – from the doctrines of tort law, while seeking to construct a new conceptual universe whose terms and expressions are the terms and expressions of concepts familiar to us from tort law, but whose content is a “consumer content” that is remote from tort law.

61.       In essence, my colleague’s words destroy the existing world – the old world – and create a new world in its place. Thus, the passes the old world and a new world comes into being, all on the basis of the purpose of the Consumer Protection Law. For my part, I would argue that I find such an interpretation problematic, and I fear “the disengagement from firmly-rooted, ancient legal traditions” (Prof. Sinai Deutch, “Consumer Class Actions: The Demand for Personal Reliance on Misrepresentations of the Deceiver,” (2 Moznei Mishpat 97, 126 (2001-2002) (Hebrew)). Not only do I not find any firm anchor in the Law for my colleague’s far-reaching interpretation, but the fears gnaw at me if only because the boundaries of the new world are not sufficiently clear, and the consequences that may result from the new conception are beyond me. My colleague seeks to disengage us from the gravitational center that we have become accustomed to orbit for so many years, but he does not provide us with a firm footing to tread upon. I would go so far as to say that in this new world that my colleague creates, we must begin from the beginning. The sensation is of floating in space, and the spirit of God hovers upon the waters.

            Thus we see that sec. 35A (b) of the Consumer Protection Law states: “Where the cause of action is injury, it is sufficient that the plaintiff show that the consumer suffered injury.” On this provision, my colleague states as follows:

 

I am of the opinion that we may learn from sec. 35A (b) that for the purpose of filing a class action, it is sufficient to show the existence of a consumer injury, and there is no need to show a factual causal connection between the breach and that injury. This construction accords with the special purposes of the consumer class action, which I addressed above, which are also not consistent with the requirement of personal reliance.

 

For my part, I would say that I tried but could not understand how we could award one person damages from another person for an injury that was not causally connected to that other person’s acts or omissions. What would that be like? It would be like saying that Reuben and Simon make a binding agreement between themselves solely on the basis of Reuben’s offer. Then, even if Levi breaches an obligation placed upon him, and even if Judah incurs the injury, Judah will not collect damages from Levi for that injury – so it appears to me – unless he can show some rational causal connection between Levi’s breach and the injury that he, Judah, incurred.

            My colleague’s construct may have been appropriate to the formative period of the Common Law, but today, with statutes from horizon to horizon, I find it difficult to free myself from the feeling that adopting my colleague’s approach – on its face – would tresspass the boundaries of the legislature by no small measure, and first and foremost, lead us into unknown territory. I would quickly add this: I did not say – and do not mean to say – that my colleague’s approach (at least in part) is not the lex ferenda. I did not say – and do not mean to say – that it is not proper that we interpret the Consumer Protection Law in a “consumer spirit” and more broadly than tort law. I agree that it would be appropriate to do so. But I fear that my colleague may have gone too far in his interpretation of the Law.

62.       A second comment: Over the course of his entire opinion, my colleague attacks the reliance doctrine, as well as my opinion allegedly based upon that doctrine. I am afraid that my colleague is mistaken. My opinion is expressly based upon the subject of the proper causal connection, and not upon the reliance doctrine in the narrow sense, and I believe that, in that regard, there are no deep disagreements between us. See, for example, paras. 39 through 41 of my opinion.

63.       Unlike my colleague Justice Mazza, whose approach is a torts approach – “torts” in the broad sense of the term – my colleague Justice Dorner chose to follow a different path, one beginning in contract law and ending in the Consumer Protection Law. My colleague is of the opinion that a consumer’s right against a dealer in circumstances like those before us “is firmly anchored in established doctrines of contract law,” and upon those doctrines, she grounds her conclusion that the Petitioner is entitled to the status of a class-action plaintiff. More precisely, my colleague is of the view that the Petitioner incurred compensation-worthy injury even though he was not exposed to the misleading advertisement, and that injury can serve as a springboard to the status of a representative plaintiff.

64.       I do not intend to argue with my colleague on the matter of the lex ferenda. The matter is too complex for me even to wish to express an opinion upon it, and we have heard no arguments grounded upon contract law. Our common assumption was, and is, that we are concerned with tort law. That was the field that was plowed by the plowers, and the one that we, too, plowed. For my part, I can say that to the best of my understanding, sec. 2 of the Consumer Protection Law – by its plain language and on its face – does not state what my colleague seeks to find there. The case law has always assumed that Section 2 of the Law addresses precontractual deceit, and in any case, it was the (alleged) existence of “deceptive advertising” that formed the basis of the Further Hearing with which we are concerned. That is the basis of the disagreement before us, and that – and only that – was addressed in our opinion above. See and compare: Prof. Sinai Deutch, Consumer Protection Law, ibid., 398-400, and the sources cited there.

            Contract law indeed adds causes of action and remedies to those causes of action and remedies provided by the Consumer Protection Law, but consumer protection as expressed in the Consumer Protection Law did not situate itself in the field of contract law. On the contrary, consumer protection law distanced itself from the field of contracts, seeking to reside in the field of tort law. That is, after all, what the Law says in stating that a deception such as that before us is to be treated “as a tort under the Civil Wrongs Ordinance [New Version]”. Consumer protection law lives its civil life in the field of tort law, the doctrines of that field serve as the basis for the rights that the Consumer Protection Law grants to consumers, and the general atmosphere is one of tort law. Knowing that, we further know that a class action under the Consumer Protection Law – as provided under sec. 35A of the Law – treats of that “tort” action that the Law created. Thus, when sec. 35A of the Law states that a consumer may bring a class action “on behalf of a group of consumers on a cause of action under which he can bring suit in his own name under this Law, and against any defendant that the consumer may sue in his own name”, it is speaking of nothing other than that cause of action in “tort” that the Law grants the consumer. Even if the consumer has a cause of action against a dealer in “contract law” – whether directly based upon contract law or more closely related to contract law – that suit will find its place – to the extent that it has one – in general contract law and not specifically in the Consumer Protection Law. In any case, the consumer will not be able to initiate a class action based upon the Consumer Protection Law for such a cause of action.

 

                                                                                                            Justice

 

Chief Justice A. Barak:

 

            I concur in the opinion of my colleague Justice Cheshin. I also concur with his comments in regard to the opinion of my colleague Justice Mazza. As for the opinion of my colleague Justice Dorner, I, too, am of the opinion that, inasmuch as arguments were not heard in regard to the application of contract law to this case in the District Court, or before the three-judge panel of the Supreme Court or in this Further Hearing, I would not wish to take a stand upon that issue in these proceedings.

 

                                                                                                            Justice

 

Deputy Chief Justice T. Orr:

 

            I concur in the opinion of my colleague Justice M. Cheshin.

 

                                                                                                                        Justice

 

Justice D. Beinisch:

 

            I concur in the opinion of my colleague Justice Cheshin, and thereby also add my voice to that of the majority in CA 1977/97.

            The approach of my colleagues, who seek – each in his own way – to construe the provisions of the Consumer Protection Law in a spirit of a consumer doctrine that would protect class actions, is very appealing. Protecting consumers against economically powerful dealers by levelling the playing field is not merely an appropriate purpose, but also expresses values that we seek to further as part of an overall economic vision. I also agree with the approach that sees class actions as an important tool for advancing consumer protection and for restraining economically dominant bodies from abusing their power.

            Nevertheless, I do not see how one can extricate oneself from the legal framework that the legislature established, under sec. 33(a) of the Consumer Protection Law, for damages for a “consumer tort”, which is a tort-law framework. For my part, I do not share my colleagues’ fear that a demand for a causal connection between the tort and the injury will eviscerate the remedy of damages that the Law provides. One must distinguish between the substance of applying tort-law doctrines and the nature of the causal connection and its proof. The nature of the causal connection, the strength of its proof and the means for its proof may be decided in accordance with the circumstances of each case, and the consumer background may result in more lenient rules. One must not, in principle, confuse that with the foundations upon which the legislature grounded the remedy of damages. The wording of sec. 31 (a) of the Consumer Protection Law bars the way to developing a theory of consumerism as a branch of compensation divorced from the foundational concepts of tort law.

            We may assume that a theory of consumerism will develop, and that consumer suits will find their path in regard to the remedy of compensation, as well, and case law and practical experience will lay the appropriate groundwork for proving the causal connection, without casting off the foundational principles of the theory of compensation for loss.

 

                                                                                                            Justice

 

Justice Tova Strasberg-Cohen:

 

1.         The suit before us was filed on the basis of the Consumer Protection Law, 5741-1981 (hereinafter: the Law). It is based upon a cause of action and a remedy established in the Law, and it was filed as a class action in accordance with it.

            The provisions of the Law that are relevant to these proceedings are sec. 2 (a), secs. 31 (a) and (a1), and sec. 35A of the Law. The central question that we must consider and decide is whether, under the prohibition upon deceit established in sec. 2 (a) of the Law, a plaintiff can be awarded pecuniary damages even if he was not exposed to the misleading representations and therefore, did not rely upon them. I addressed this question at length in my dissent in the Appeal that is the subject this petition (CA 1977/97 Barazani v. Bezeq – Israeli Telecommunications Company Ltd., IsrSC 55 (4) 584 (hereinafter: the Appeal). I have reviewed all of the relevant material in the Appeal, and especially the opinions of my colleagues Chief Justice Barak and Justice Englard, who formed the majority, as well as that of my colleague Justice Cheshin in these proceedings, and the conflicting opinions in the publications of the various scholars (Prof. Sinai Deutch, whose opinion coincides with mine, and Prof. M. Deutch and Dr. O. Deutch, whose opinions correspond with that of my colleagues, see: S. Deutch, “Consumer Class Actions: The Demand for Personal Reliance on Misrepresentations of the Deceiver,” 2 Moznei Mishpat 97, 121 (2001-2002) (Hebrew) (hereinafter: Deutch, “The Demand for Personal Reliance”); O. Deutch, The Legal Status of Consumers (Nevo, 2002) 414 (Hebrew); M. Deutch, Commercial Torts and Trade Secrets (Nevo, 2002) 49 (Hebrew). After reading all of the above, I have concluded that my opinion remains unchanged. I will, therefore, clarify my position and focus upon the questions under debate, and preface my opinion with a few words on the integration of a cause of action under the Consumer Protection Law in a class action under that law.

 

The Consumer Protection Law

 

2.         The Consumer Protection Law, which forms part of the consumer legislation, serves many purposes, but at their heart is the protection of consumers against economically advantaged dealers, and narrowing the power gap and lack of equality in the relative negotiating positions of the parties. Its purpose is to impose proper conduct upon the commercial sector, and to establish rules of fair play in the relationship between consumer and dealer. It was intended to reinforce the personal autonomy of the consumer and his right to dignity by ensuring his ability to make informed choices in regard to products and services on the basis of accurate, relevant information, and by preventing abuse of the consumer’s relatively weaker position. It was intended to deny a dealer the ill-gotten gains obtained from the consumer for a product or service, and thereby restore to the consumer what had been unlawfully taken, and to make such conduct not only improper but also unprofitable. Consumer protection also serves to encourage fair competition among dealers, which is an important factor in proper market and economic activity (for a survey of the purposes of consumer law, see: O. Deutch, supra, at pp. 27-37, and see the Explanatory Notes to the Consumer Protection Law Bill, 5740-1980, at p. 302).

3.         As for as consumer contracts, there are those who view them as a separate branch of general contract law. Each of those branches has its own point of reference. That of general contract law is the glorification of the autonomy of the parties. Its provisions are dispositive, and governmental intervention through criminal and administrative provisions is limited. As opposed to this, consumer protection law is obigatory, and in achieving its objectives, it comprises criminal and administrative sanctions. (For a survey of the characteristics of civil law as opposed to consumer law, see: S. Deutch, “Consumer Contracts Law versus Commercial Contracts Law,” 23 (1) Iyunei Mishpat 135, 150-152 (5760) (Hebrew); S. Deutch, Consumer Protection Law – Fundamentals and Principles, vol. 1 (5761) 294-289 (Hebrew)).

 

Class Actions

 

4.         The Consumer Protection Law provided consumers with efficient enforcement mechanisms for the protection of their rights, and primary among them is the class action. I have had the opportunity to address the purposes of class actions on more than one occasion, and I shall not repeat what I have already stated (see: CA 2967/95 Magen veKeshet Ltd. v. Tempo Beer Industries Ltd. [1997], IsrSC 51(2) 312, 322-323; LCA 4474/97 Tatzet v. Silberschatz, IsrSC 54 (2) 577, 586-587; LCA 8268/96 Reichert v. Shemesh, IsrSC 55 (5) 276, 288-289; LCA 3126/00 State of Israel v. A.S.T Project Management and Manpower Ltd., IsrSC 57 (3) 220). I will suffice in saying that in the broad sense, class actions are intended to prevent the unjust enrichment of powerful economic actors that concentrate production, industry and services for mass consumption at the expense of the man in the street who turns to such actors for the goods and services that he uses. They are also a means for enforcing the law at the civil level. The possibility afforded to the individual consumer of bringing suit, by class action, in the name of an anonymous group of consumers who were harmed by a violation of the law, achieves proper enforcement and prevents situations of under-enforcement that harm the individual consumer, the group of consumers and the general public. Under-enforcement leads to the undermining of public faith in the general social order and the rule of law. Class actions also serve the public interest in efficiency and economy of resources, and prevent a lack of uniformity in the decisions of the courts in similar individual cases (see: Nina Zaltzman, Res Judicata (Ramot, 1991) 427 (Hebrew).

 

Interpretation

 

5.         The suit before us is based upon a cause of action in the Consumer Protection Law, and the request that it be certified as a class action is based upon the same Law. This brings about an merger that has consequences for the proper interpretation of the provisions of the Law relevant to our examination. That interpretation begins with the language of the Law but does not end there. From among the possible interpretations that the language of the Law makes available, we must choose the possibility that is consistent with the objective and purpose of the Law. We can learn the purpose from the Law, the placement of the provision in the Law, the general structure of the Law, from the normative economic and social context of the Law’s provisions in relation to one another and in relation to other laws of similar character, and from extra-legal sources, such as the legislative and parliamentary history, all against the background of the accepted values of our legal system (CA 165/82 Kibbutz Hazor v. Rehovot Assessment Officer, IsrSC 39 (2) 70).

            From reading the relevant legal provisions, and especially secs. 2 (a) and 31 (a) and (a1) of the Law, we find that the words of the Law alone are insufficient to exhaust the substance of these provisions. It seems to me that the use of the procedural device of initiating a suit as a class action, and the nature of the Law as a consumer law, pave the way for an appropriate interpretation of the Law, and for providing the correct meaning to its provisions.

 

What is Agreed and What is Disputed

 

6.         At the outset, I would like to remove the stumbling blocks from the path that my colleagues and I are travelling, clarify what is and what is not in dispute, and focus upon what is in dispute.

            There is no dispute that a class action does not create new causes of action and that it is but a procedural device that allows for the joining of many actions into one, for procedural and substantive reasons. There must be a personal cause of action as a precondition to making a class action available to the plaintiff. This requirement is common to all the laws that regulate class actions (in this regard, see, for example, my opinion in CA 2967/95, above). My colleague Justice Cheshin addresses this matter at length, and I will not add to that. I will only state that, like him, I was and remain of the opinion that a class action does not create new causes of action and is nothing other than a procedural device available to a person who has a personal cause of action under the Law (sec. 35A (a) of the Law).

7.         From here I will now proceeed to the cause of action of “prohibition of deceit”, which is the cause of action in the matter before us, and I will begin by pointing out the questions that are not in dispute in regard to this cause of action established under sec. 2 (a) of the Law, which states as follows:

 

                        Prohibition of Deceit

2. (a) A dealer must not do anything – by deed or by omission, in writing, by word of mouth or in any other manner, also after the transaction has been contracted – which is liable to mislead a consumer in regard to any material element of the transaction … (emphasis supplied – T.S.C.).

 

There is no dispute that the prohibition of deceit established under sec. 2 (a) of the Law is not a prohibition of “result” that requires actual deceit, but rather a prohibition of “conduct” according to which one may not do anything “liable to mislead a consumer”. Therefore, in order for a cause of action to arise, there is no need to show actual deceit in practice. And so I stated in my opinion in the judgment under appeal:

 

…in my opinion, the consumer who files suit under the Law is not required to show that he was actually deceived…it is sufficient that he show that the dealer committed an act that was “liable to deceive a consumer” (p. 602).

 

Similarly, Chief Justice Barak states in the same judgment:

 

…sec. 2 (a) of the Law does not require deceit in actual practice. What is prohibited thereby is doing something “liable to deceive a consumer”. The purpose of the prohibition is to ensure that the consumer receive full and accurate information. The prohibition established by sec. 2 (a) of the Law is not a prohibition of “result”; it is a prohibition of “conduct”. The prohibition established in sec. 2 (a) of the Law… (p. 617).

 

And thus states Justice Cheshin in this Further Hearing:

 

The prohibition is one of conduct, and a dealer contravenes the prohibition even if he does something – by act or omission – that is only “liable to mislead” a consumer, i.e., even if no one was misled by it. …The standard of conduct required under sec. 2 (a) is higher than the usual standard in other laws. … whereas sec. 2 (a) of the Consumer Protection Law prohibits the conduct per se, even in the absence of resulting injury (para. 10, emphasis supplied – T.S.C.).

 

            (And see: Deutch, “The Demand for Personal Reliance”; O. Deutch, supra, p. 390; M. Deutch, supra, p. 49).

8.         There is no question that Bezeq’s advertisements appeared to be “liable to mislead a consumer” in regard to the manner of calculating charges for direct-dial international calls and their price (see: my opinion in the Appeal, at pp. 594-596); the opinion of the Chief Justice in the Appeal, at p. 617, opposite the marginal letter B). That being so, the consumer acquired a cause of action under sec. 2 (a) of the Law, and a restraining order and declaratory relief could be granted (the Chief Justice, ibid., at p. 617, opposite the marginal letter B). However, in the matter at hand, the class action that the court was asked to certify was not for declaratory relief, but rather for damages arising from injury incurred by consumers as a result of the advertisement that was liable to mislead. Here, too, my colleagues and I travel the same path, inasmuch as I agree that in order to acquire a cause of action for damages for injury caused by a publication that is liable to mislead, one must make a prima facie showing that the publication was liable to mislead, that injury was incurred, and that there was a factual and legal causal connection between the publication and the injury (see my opinion in the Appeal, at p. 602, opposite marginal letter A, and at p. 604, opposite marginal letter C).

9.         No one disputes that, in the case before us, the requirement of “liable to deceive” in sec. 2 (a) of the Law was met. My colleagues and I part ways in regard to the question of whether the Petitioner-consumer suffered harm, and whether there can be a causal connection between the publication and the injury in the absence of the consumer’s reliance upon the potentially misleading publication. My answer to both questions is in the affirmative for a number of reasons. First, establishing deceit as a prohibition of conduct but recognizing a remedy of damages for its violation only if actual deceit is proven, renders the primary prohibition of the Consumer Protection Law lacking of any real civil remedy. Although sec. 32 of the Law grants the remedy of cancelling the sale, the limitations of that remedy are so numerous that there is almost no reason to employ it, and indeed, not a single example of the application of this provision of the Law is to be found in the case law. Second, it is unlikely that a consumer will go to the effort and expense involved in obtaining a restraining order for the benefit of the general public. Third, over the years of the existence of the Consumer Protection Law, only limited recourse has been made to the criminal sanction, and it would appear that the criminal sanction does not significantly deter a powerful dealer from misleading the consumer public when he can pocket large profits (ibid., at p. 106). The same is true of administrative sanctions. Fourth, an approach that makes damages contingent upon actual deceit limits the dealer’s liability only to those consumers who can prove that they were actually misled by the dealer’s misrepresentations, and makes deception worthwhile from the dealer’s perspective. Fifth, an interpretation by which damages can be sought only by those consumers who were actually misled will create an artificial distinction between those consumers who actually used the misrepresented product or service but were not exposed to the misrepresentation, and those consumers who were aware of the misrepresentation. Sixth, in other cases in the past, this Court did not hesitate to broaden the choice of remedies beyond those delineated by a law, so as not to empty the law of content (thus, for example, in regard to sec. 12 (b) of the Contracts (General Part) Law, the case law established that even though the provision provides only the remedy of damages, the available remedies should not be limited only to those set out in the law when broader remedies, like enforcement, are justified (CA 829/80 Shikun Ovdim v. Zepnick, IsrSC 37 (1) 579; CA 579/83 Sonnenschein v. Gebso Bros., IsrSC 42 (2) 278; CA 986/93 Kalmar v. Guy, IsrSC 50 (1) 185)). Such an expansion is also appropriate in regard to the interpretation of secs. 31 (a) and 31 (a1) of the Law for the purpose of protecting consumers. Here I should note that such a partial expansion was made by my colleague the Chief Justice, who was of the opinion that even a consumer who was not misled and who did not suffer injury could be granted a restraining order against a dealer, although such a remedy does not appear in the Consumer Protection Law. Seventh, the Consumer Protection Law establishes other prohibitions that do not require proof of actual reliance, and their breach entitles the consumer to a broad right to damages (thus, for example, in regard to a failure to supply particulars in regard to a credit transaction (sec. 9), the court may – in addition to the provision for cancelling the transaction and refunding the consideration or part thereof to the consumer – “charge the dealer with the expenses caused to the consumer, and it may issue any other direction which it deems just” (sec. 11)). What reason is there to grant an independent remedy of damages that includes granting broad discretion to the court in regard to a violation of these prohibitions, while not for a violation of the Law’s central prohibition – the prohibition upon deception? (also see: Deutch, “The Demand for Personal Reliance,” at pp. 106, 121-127).

 

As a Tort

 

10.       All of the above reasons constitute a conceptual foundation for examining whether it is possible to interpret the relevant sections of the Law in a manner that would grant damages to a consumer in the circumstances of this case, while remaining faithful to the principles grounding the rules of interpretation. The provisions of the Law relevant to the remedy of damages are secs. 31 (a) and 31 (a1) which state as follows:

 

Compensation            

31. (a) Any act or omission in violation of Chapters Two, Three, or Four "A" shall be treated as a tort under the Civil Wrongs Ordinance [New Version].

(a1) Consumers injured by the wrong are entitled to remedies for the wrong and so are dealers, who in the course of their business are injured by deceit, as said in section 2 (emphasis added – T.S.C.).

 

The upshot of these sections is that the “prohibition of deceit” shall be treated “as a tort” under the Civil Wrongs Ordinance, and that the right to a remedy for the tort is granted to an injured consumer. The wording of these sections is problematic, and raises a question as to the meaning of the phrase “as a tort”. Much was written on the meaning of that phrase in the Appeal and in the opinion of my colleague Justice Cheshin in this Further Hearing. It might be noted that a review of the statutes reveals a number of laws comprising various statements in regard to the definition of “tort” in regard to the Civil Wrongs Ordinance. Conduct in violation of the law has been defined as “constituting a tort and the provisions of the Civil Wrongs Ordinance [New Version] shall apply thereto” and a wrongful act has been defined as being “as a tort under the Civil Wrongs Ordinance [New Version]” or “as an injury for which damages may be sought under the tort law” [for a list of the laws, see: Deutch, “The Demand for Personal Reliance,” at pp. 128-129). The differences in wording may be intentional or may be accidental. In any case, it is clear that this expression makes certain legal prohibitions into prohibitions that are like torts under the Civil Wrongs Ordinance. The question is whether they thus become torts for all intents and purposes. In my view, the statement “Any act or omission … shall be treated as a tort under the Civil Wrongs Ordinance...” should be understood as creating a new cause of action that is like a tort. Such a cause of action is not parallel to a tort but comparable to a tort in the sense that it applies the doctrines of the Civil Wrongs Ordinance to the act or omission. In the matter before us, it applies the compensation doctrine and the causation doctrine (see the opinion of Justice Cheshin, para. 34). However, this cause of action is special to the Consumer Protection Law. It is independent in nature, and it must be interpreted within its context, in the framework of the purpose it was intended to serve, and in relation to the said doctrines, which must be interpreted in a manner that is consistent with the purpose of the Consumer Protection Law and its enforcement by means of class actions. Chief Justice Barak’s statement in his recent opinion in CA 2622/01 Director of Property Improvement Tax v. Aliza Levanon (not yet published) are apt to the matter before us:

           

A statute is a living entity that resides in its social environment. With changes in social conceptions, the meaning of the statute changes in the understanding of the social environment in which it operates. … Life is in constant motion, and with it, the law. This is the basis of the interpretive approach – accepted in England and Israel – that “the law is always speaking”, and that the law must be given an updated interpretation. Interpretation is a renewing process. Old language must be given modern meaning that is consistent with the needs of modern life. Thus the statement of Prof. Radbruch, that “The interpreter may understand the law better than its creators understood it; the law may be wiser than its authors” (see G. Radbruch, “Legal Philosophy,” in The Legal Philosophies of Lask, Radbruch and Dabin,   K. Wilk, trans. (1950) 141). … The laws of a society move with it over the course of its history, and in that movement, their meaning changes in order to serve the society in which they act. I addressed this is the Lindorn case, noting:

“The meaning to be given to a legal statement – like the statement ‘his spouse’ – is not fixed for all times. The law is part of life, and life changes. As reality changes, the meaning of the law changes. The language of the law remains as it was, but its significance changes along with the ‘changing conditions of life’ (ibid., p. 32).”

 

I need only adopt this appropriate, correct approach in the matter before us, and applying it requires an interpretation that is appropriate and proper to the issue of injury and causation. In my opinion – as opposed to the opinions of my colleagues – the requirements of injury and causation between the violation of the “prohibition of deceit” and the injury are met in the matter before us.

 

Injury

 

11.       Injury how? Section 31 (a1) of the Law states: “Consumers injured by the wrong are entitled to remedies for the wrong…”, while sec. 35A (b) states: “Where the cause of action is injury, it is sufficient that the plaintiff show that the consumer incurred injury”. In the matter before us, monetary injury is claimed as the result of overcharging consumers in comparison to what should have been charged had the calculation been made as advertised. That differential is sufficient to meet the Law’s requirement of injury. The injury incurred by a consumer who utilized the international direct-dialing service is expressed in the difference between the price advertised by Bezeq, and the price actually charged (hereinafter: the “price differential”). The price differential is an injury, inasmuch as had the advertised price been charged, the consumer would have saved the excess payment. That differential is an actual out-of-pocket loss that should be deemed an injury as required by the Law.

 

Causation

 

12.       Causation how? As no one doubts that there was a publication liable to mislead, and having found that injury was caused to the consumer, we must consider whether there was a causal connection between the publication and the injury. I addressed the nature of causation in general in the Appeal, and I will not repeat what I wrote in that regard (p. 605). I will, therefore, consider the disputed issue of whether the consumer meets the requirement of causation when he was not actually misled by the misrepresentation. In my view, the required causal connection exists for the purpose of the cause of action granting a consumer damages for the injury incurred by him.

13.       Inasmuch as the Law establishes that an act or omission (including a misleading publication) is to be treated as a tort under the Civil Wrongs Ordinance, and does not create a parallel to specific torts in the Civil Wrongs Ordinance, we cannot say that the prohibition of deceit under sec. 2 (a) of the Law is like the tort of fraud or the tort of negligent misrepresentation, which require reliance as a precondition (on the tort of negligent misrepresentation, see: CA 106/54 Weinstein v. Kadima Cooperative Association Ltd., IsrSC 8 1317; and on the tort of fraud, see: CA 614/84 Sapir v. Eshed, IsrSC 41 (2) 225, 239). My position is that the tort perpetrated by a publication that is liable to mislead does not require reliance in order to entitle a consumer to damages for injuries incurred by him due to that publication, and we are not bound by the reliance requirement of those torts. Had the legislature intended to draw a parallel between the prohibition of deceit and one of the torts requiring reliance, we would have expected that it would have done so expressly. Moreover, there is no logic behind creating a separate tort in a special law with a special purpose that corresponds to a tort that already exists in the Civil Wrongs Ordinance, for if that were the case, what would be achieved by enacting the separate tort? We should not assume that the legislature wasted its words, and moreover, the Consumer Protection Law was enacted in order to create special causes of action for the special area of consumer protection. In addition, it should be noted that there is no small number of torts that do not require reliance, both in the Civil Wrongs Ordinance and outside it. It would appear to me that the reliance requirement is not required for establishing causation by the wording of the Law and its purpose.

14.       As a rule, the reliance requirement comprises the assumption that were it not for the representation upon which you relied, and were it not for your reliance thereupon, you would not have negatively altered your situation, and would not have acquired the service or product misleadingly represented. In other words, you would have chosen to refrain from acquiring the product or service. In the case of the service in this matter – direct-dialed international calls – there was no such choice at the relevant time. It was a monopoly of Bezeq, which was a government corporation. The service itself is one that is incomparable. Modern life is inconceivable without it. And at the relevant time, it could not be obtained from any other provider. In such circumstances, one can say that the reliance requirement is of no consequence or significance. Moreover, in the modern age, in which the consumer receives services from large public corporations – sometimes exclusive in the field – the consumer public cannot be expected to keep abreast of the “flood” of advertisements published by the various corporations in regard to discounts, promotions, etc., as a condition for obtaining damages for injury incurred as a result of misleading advertising. Consumers cannot be expected to scrutinize the accounts and calculations of those corporations, and investigate whether they correspond to their advertisements. It is not even clear that they could do so. In the matter before us, Bezeq conducted ongoing advertising campaigns, and the consumers cannot be asked to keep track of those advertisement as a condition for an award of damages. They should be able to rely upon the assumption that if a company decides to conduct a campaign or grant discounts or make calculations that are more beneficial to the consumers, and publishes that, then it will act in accordance with what it published and will grant the benefit to the consumers regardless of whether or not the consumers saw, read or relied upon the advertisements when making use of the service. Moreover, a large proportion of the consumers pay their telephone bills by means of standing bank orders. The details of the bills are not always examined before payment. I find no economic or other logic to awarding a refund for overcharging only to those few who keep track of advertisements and check bills. I do not believe that it is just or fair to “punish” the consumer who does not do so, and to allow the company to profit from the loss of the consumer that derives from the supplier’s misleading advertisements. Indeed, Bezeq is under no obligation to advertise discounts, campaigns or beneficial charging plans, but if it does so, it must stand behind those advertisements and put them into practice for the entire consumer public. Having failed to do so, it committed a tort that resulted in injury for which it is liable for damages to all the consumers who used the service, whether or not they relied upon the advertisement and whether or not they were aware of it, and it must refund the overcharged fees to the consumers. All of the above leads me to the conclusion that there is no need of reliance in order to meet the causation requirement for the purpose of obtaining damages.

15.       If I were of the opinion that actual deception of the consumer, as well as reliance upon the supplier’s representation were required as a precondition to the remedy of compensation – and I do not so hold – I would favor adopting a presumption that when a supplier makes a representation that is liable to mislead a consumer, a consumer who purchases the product or service would be deemed to have been exposed the representation and to have acted thereupon. My reasons for adopting that presumption partially correspond to those that lead me to conclude that reliance is not required.

            The import of the said presumption is that a consumer who purchases a product or service from a supplier may assume that the price charged for the product or service is the correct price in accordance with the supplier’s advertisements, without regard for whether or not he was exposed to the advertisements. This assumption is all the more justified when we are concerned with a product or service provided by a monopoly. Such a presumption would prevent the artificial distinction between the consumer public that used the product or service misleadingly advertised, while unaware of the misrepresentation, and the consumers who were aware of the misleading information. (in regard to the presumption of reliance, see; LCA 8332/96 Shemesh v. Reichert, IsrSC 55 (5) 276, and what was stated there in regard to securities is equally applicable to the matter before us).

16.       Holding that there is no need for the consumer’s reliance upon the misleading publication does not render the need for causation superfluous. In regard to the need for a causal connection between the publication and the injury, I am in full agreement with my colleague the Chief Justice and my colleague Justice Cheshin, but as opposed to them, I am of the opinion that such a causal connection exists in the case before us, as I explained in the Appeal, and I will quote what I stated there: “In my view, the representation created by the supplier should be deemed as a promise to the consumer public, which binds it and requires it to act in accordance with the representation. That promise grants the consumer a right, and places an obligation upon the party making the representation to the consumer public. When the supplier fails to meet the obligation that it assumed by means of the representation, and charges a price higher than that promised in the representation, it breaches its obligation, and the consumer incurs injury in consequence of that breach. Therefore, even if the consumer was not exposed to the misleading publication and did not alter his manner of use of the product or service – in the matter before us, the number or duration of calls – he still incurs injury, inasmuch as the price he was charged for the product or service was higher than the price at which was entitled to purchase the product or service” (the Appeal, at p. 605, between marginal letters D and E). Take, for example, a situation in which a consumer purchases a product in a supermarket, regarding which there is an advertisement at the entrance of the store stating that the price has been lowered. The consumer does not see the advertisement (or due to a language problem, does not understand it). He purchases the product, paying the full price at the checkout. Clearly, the advertisement that the price was lower than that actually charged is liable to mislead a consumer. Similarly, I believe that the consumer incurs an injury in the form of a “price differential”, which constitutes a real, tangible loss. By an appropriate interpretation of the necessary causation, that injury is causally connected to the prohibition upon deceit, inasmuch as due to the misleading advertisement and the difference between it and the actual conduct, the consumer suffered injury. That is sufficient to meet the causation requirement both factually and legally. Factually, the said injury caused to the consumer is a result of the fact that the supplier published a representation that it did not put into practice. Legally, the injury is causally connected to the representation by the foreseeability test, inasmuch as when a supplier makes a false representation, it foresees that charging contrary to the representation will cause a loss in the form of a “price differential”. It also meets the risk test, as the injury falls within the scope of risk of the supplier’s conduct, and the common-sense test, which looks at the total conduct of the tortfeasor and its contribution to the injurious result (on the legal tests for causation, see: CA 145/80 Vaakin v. Beit Shemesh Local Council, IsrSC 37 (1) 113, 145-146; CA 576/81 Ben Shimon v. Barda, IsrSC 38 (3) 1, 7; CA 119/86 Keny Housing v. Netanya Local  Planning and Building Board, IsrSC 46 (5) 727, 749).

            The issues before us in this case, and the proposed solutions, are not exclusively ours. In interpreting Israeli law in regard to the subject of consumer deception in general and class actions in particular, we should also look to American law, which inspired the adoption of class actions in our legal system.

 

Comparative Law

 

17.       The consumer protection laws of various states of the United States establish the prohibition of deceit in language such as “an act liable to mislead a consumer”, similar to the wording adopted in sec. 2 (a) of the Consumer Protection Law. Thus, secs. 349 and 350 of New York’s General Business Law establishes that deceptive acts or practices by a business are unlawful, as are misleading advertisements. Although the sections speak of deception and its prohibition, the New York courts have held that they should be understood as prohibiting any act that is liable to mislead a consumer (Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, 623 N.Y.S.2d 529 (Ct.App.1995); BNI New York Ltd. v. DeSanto, 675 N.Y.S.2d 752 (City Ct.1998), at p. 755; Small v. Lorillard Tobacco Co. Inc., 679 N.Y.S.2d 593 (A.D. 1 Dept.1998, at p. 599).

            Section 2 of the Consumer Fraud and Deceptive Business Practices Act of the State of Illinois expressly establishes that deception is unlawful, whether or not any person has actually been deceived or damaged thereby. Identical wording appears in the law of the State of Minnesota (sec. 325F.69 of the Consumer Fraud Act).

18.       The various wordings there are similar to the wording of our Consumer Protection Law. It is worth noting that the construction given to similar sections in various states is not uniform insofar as the requirement of reliance upon the misrepresentation for the purpose of receiving a compensatory remedy. Three basic trends can be identified: The first requires proof of reliance upon the deceptive representation. The second does not require reliance upon the representation, and it is sufficient to prove a causal connection between the deception and the injury incurred. The third does not completely abandon the requirement of reliance, but it is a reduced requirement that is met by assumptions, presumptions and conclusions drawn from the circumstances (for a survey of the American legal situation in this regard, see the comprehensive article of G. Wilson & J. Gilmer, “Minnesota’s Tobacco Case: Recovering Damages without Individual Proof of Reliance under Minnesota’s Consumer Protection Statutes,” 25 Wm. Mitchell L. Rev. (1999) 567). Below, I will note a number of cases from among the many available that demonstrate each of the said approaches. For the first approach, see Oliveira v. Amoco Oil Co., 201 Ill. 2d 134, 776 N.E.2d 151, 201 Ill. 2d 134, 267 Ill. Dec. 14 (2002); and see: Zekman v. Direct American Marketers, Inc., 695 N.E.2d 853, 182 Ill. 2d 359, 231 Ill. Dec. 80 (1998). For the second approach, see: Brooks v. Midas-International Corp, 47 Ill. App. 3d 266, 361 N.E. 2d 515 (1977) in which the defendant guaranteed in its advertisements that it would replace a muffler for only an installation charge but charged the full replacement price. The suit was certified as a class action for the purpose of seeking damages, holding that reliance is not a requirement for the purpose of obtaining damages for consumer deception. This approach is consistent with mine. The same is true in regard to the judgment in Connick v. Suzuki Motor Co., Ltd., 174 Ill. 2d 482, 675 N.E.2d 584, 174 Ill. 2d 482, 221 Ill. Dec. 389 (1996), in which a class action was certified against a company, inter alia, for publishing the safety features of an automobile based upon allegedly incorrect information that the company gave to a magazine. The Supreme Court of Illinois held that the plaintiffs did not have to prove reliance as a condition to establishing a cause of action. It further held that in the absence of proof of an intervening cause, it was sufficient that the plaintiffs show that the automobiles were purchased after the misleading information was published in order for there to be causation between the misleading publication and the injury incurred. For the third approach, see Vasquez v. Superior Court of San Joaquin County, 484 P.2d 964(S.Ct.Cal.1971), in which the Supreme Court of California held that there was no need to prove reliance upon the misrepresentations of the sellers by direct evidence, and that it could be proved implicitly by inference from the circumstances of the case, or even by a presumption of reliance. Similarly, in Amato v. General Motors Corp., 463 N.E. 2d 625 (Ct. App. Ohio, 1982), the majority of the Ohio court certified a class action against General Motors for equipping Oldsmobiles with less prestigious engines without informing the buyers.  The court did not entirely waive the reliance requirement, but held that it could be inferred from the circumstances of the case, or by establishing a presumption of reliance.

            As we see, people are the same everywhere, and not only are the issues and problems similar, but so are the disagreements among jurists in various states with similar, if not identical, legal foundations.

            Weighing all of the considerations, balancing them, and giving due weight to each of them, tilts the scales in favor of the trend that deems misleading advertising to be an act that establishes a cause of action for damages, if injury was caused, without requiring reliance for the purpose of establishing causation between the act and the injury.

19.       In conclusion, in my view, the Petitioner has a cause of action for damages for the injury caused him by the misleading advertisement, due to the overcharging. Therefore, if my opinion were adopted, the petition would be granted and the Petitioner’s suit would be certified as a class action.

 

                                                                                                                        Justice

 

Justice E. Mazza:

 

            I have reread the opinions of the majority in the Appeal – my colleagues the Chief Justice and Justice Englard – and the dissent of my colleague Justice Strasberg-Cohen. I have also read the opinions of my colleagues Justice Cheshin and Justice Strasberg-Cohen in this Further Hearing. I cannot concur in the opinions of the majority in the Appeal and that of Justice Cheshin in this proceeding. In my view, that approach does not give proper expression to the special purpose of the consumer class action. Instead, it transfers the traditional doctrines of tort law – foremost among them the doctrine of tortious causation – to the consumer environment, in which they are inappropriate, and sanctifies them as is. As a result of this view, the approach focuses too much upon Barazani the man, and too little upon the group of consumers that he seeks to represent, and the injury that it suffered. In this regard it is important to emphasize that it was never positively proven in the proceedings before the District Court that Barazani was not exposed to the misleading advertisement. The factual assumption in this regard, upon which the majority largely relied in the Appeal, as did Justice Cheshin in the Further Hearing, is based exclusively upon the fact that Barazani did not claim that he was exposed to the advertisement. Here, too, I believe that the view of my colleagues is deficient in its almost mechanical adoption of traditional rules of proof. That approach, which I do not believe represents the desired law, is also not required by the existing law. In presenting my dissenting opinion, I will first consider the uniqueness of the consumer cause of action and the appropriate scope of consumer class actions for misleading advertising. I will conclude by addressing the matter of Barazani and the question of whether he has a personal cause of action and for which remedies.

 

The Purposes of Tort Law as opposed to the Purposes of the Consumer Class Action

 

2.         The purposes of traditional tort law are not congruent with the purposes of consumer protection law and do not exhaust them. It is commonly said that the primary purposes of tort law are achieving corrective justice, effective deterrence of potential nuisances, and distributive justice (see, for example: D. More "Human Rights from a Tort Law Perspective" 12 Tel-Aviv U. Stud. L. 81, 90-93 (1994); A. Porat, “Collective Responsibility in the Law of Torts," Mishpatim 23 (1994) 311, 330-333, 344-349, 369-371). We can agree that corrective justice and effective deterrence are common to both tort law and consumer protection law. However, other important purposes are served by consumer protection law with which traditional tort law is not generally concerned. In her book, Dr. Orna Deutch lists no less than seven purposes that are special to consumer protection law: levelling the playing field; reinforcing personal autonomy; the concept of consumer sovereignty; protecting the rights to prosperity and social welfare; ensuring the credibility of the local market; and maintaining trust in the social order (O. Deutch, The Legal Status of Consumers (2002) 27-37 (Hebrew). She emphasizes that “the purpose of consumer protection is not limited to the law’s support of the individual consumer. Improper conduct toward consumers harms not only the consumer, but also honest business people and the entire commercial sector, as well as public trust in the local economy and the public authorities that oversee the commercial sector” (ibid., p. 15). Prof. Sinai Deutch suggests a somewhat different division and definition of the purposes of consumer protection law (S. Deutch, Consumer Protection Law, vol. 1 (2001) 119-126, and see the purposes listed in paragraphs 2-3 of the opinion of Justice Strasberg-Cohen in this Further Hearing). However, each of the approaches undeniably leads to the conclusion that consumer protection law is intended to realize special objectives that go significantly beyond the basic objectives of traditional tort law.

3.         To these general objectives of consumer protection law one may add the special objectives of consumer class actions. We can find an expression of this in a case recently decided by this Court:

 

As a legal institution, the class action is of special importance in realizing objectives that individual actions cannot attain. It serves the interest of the individual by providing a remedy for injury in circumstances in which filing suit would not be worthwhile without the other members of the group. It serves the public interest that strives to deter large economic institutions from violating the law, and that seeks to achieve more effective enforcement of behavioral norms intended to protect citizens and prevent the exploitation of their weakness as individuals. It may also advance the objectives of procedural efficiency, uniformity of decisions, and reducing litigation (CA 1338/97 Tnuva Central Cooperative for the Marketing of Agricultural Produce in Israel Ltd. v. Rabi Tawfiq (not yet published), para. 2 of the opinion of Procaccia, J.).

And also see LCA 3126/00 State of Israel v. A.S.T Project Management and Manpower Ltd., IsrSC 57 (3) 220, paras. 7-8 of the opinion of Justice Strasberg-Cohen, and the citations there.

4.         The material difference between the purposes of tort law and consumer protection law yield the conclusion that the traditional legal doctrines of tort law must be examined carefully – and changed and adapted as necessary – before applying them to consumer law in general, and class actions in particular. Generally speaking, one might go so far as to say that no traditional doctrine is self-evident in the context of consumer law. We are concerned with a unique area that requires distinct treatment that accords with its special purposes.

 

The Meaning of Section 31 (a) of the Consumer Protection Law

 

5.         Against this background, we can proceed to the interpretation of sec. 31 (a) of the Consumer Protection Law. This provision states: “Any act or omission in violation of Chapters Two, Three, or Four shall be treated as a tort under the Civil Wrongs Ordinance [New Version]”.  My colleagues are divided as to the meaning of the prepositional prefix “as” – referred to by Justice Cheshin as the “kaf of comparison” ^[8]  – in the phrase “as a tort”. In my opinion, this question is of little importance. Even were we to assume that the prefix was of no significance, and that sec. 31 (a) should be read as if it stated that an act or omission as stated were torts, it would not mean that certain parts of the Consumer Protection Law should be treated as if they were actually comprised by the Civil Wrongs Ordinance. And clearly, changing the physical location of consumer provisions does not alter their special objectives. So, let us take go even further: even were the Consumer Protection Law, in its entirety, comprised by the Civil Wrongs Ordinance, and even if it were subject to sec. 3 of the Civil Wrongs Ordinance, according to which “the matters enumerated hereinafter in this Ordinance shall constitute civil wrongs,” even then we would have to interpret and apply these special torts in accordance with their consumer purposes, which, in general, are not identical to the purposes of the other torts established under the Ordinance.

6.         Consider, for example, sec. 4 of the Civil Wrongs Ordinance, which states:

 

                        Trivial Act

4.      An act shall not be considered a civil wrong where had it been a repeated act it would not lead to establishing an adverse claim, and where a person of ordinary sense and temper would not complain with regards to it.

 

Obviously—and so it has also been held – sec. 4 expresses the traditional doctrine of de minimis in the context of tort law. See: CA 3901/96 Ra’anana Local Planning and Building Board v. Horowitz, IsrSC 56 (4) 913, pp. 928-929, and the citations there. Adopting the approach that would apply the doctrines of the Civil Wrongs Ordinance – as is and in in their entirety – to the consumer causes of action defined in sec. 31 (a) of the Consumer Protection Law would require that we apply sec. 4 of the Civil Wrongs Ordinance to those causes of action. One will readily realize that such an approach would entirely nullify the primary purpose of the consumer class action, which is of particular importance specifically in regard to cases in which each individual claim is, itself, de minimis, and “a person of ordinary sense and temper would not complain with regards to it”. We would note that the facts of the case before us in this Further Hearing constitute a good example of such a situation. Applying the traditional de minimis doctrine to class actions would, therefore, lead to the result that most legitimate potential plaintiffs would have no personal cause of action, inasmuch as under the plain language of sec 4, the act (or omission) of the dealer who harmed them “shall not be considered a civil wrong”. The conclusion to be drawn from this is that not only is it necessary to adapt the de minimis doctrine of sec. 4 of the Civil Wrongs Ordinance to collective consumer protection before applying it (and compare: the Tnuva case, ibid., at para. 11 of the opinion of Naor, J.), but that the same is true for all the other doctrines of the Ordinance as a precondition to applying them to the consumer causes of action and to consumer class actions.

7.         My colleague Justice Cheshin concludes from the absence of any provision to the contrary in sec. 31 (a) of the Consumer Protection Law, that there is no alternative to applying the doctrines of the Civil Wrongs Ordinance to a consumer tort under sec. 2 (a) of the Law. As he states:

 

Indeed, nothing in the language of sec. 31 (a) of the Law would show that the tort under sec. 2 (a) removes it from the fundamental principles or doctrines of the Civil Wrongs Ordinance … On the contrary, the Law refers us clearly and unreservedly to the Civil Wrongs Ordinance. Section 2 (a) situates itself as one of the native torts of the Civil Wrongs Ordinance, and it would therefore appear that the fundamental principles and doctrines of the Civil Wrongs Ordinance apply, in their entirety, with the same effect and force with which they apply to the native torts.

 

With all due respect, I am of the opinion that even in the absence of an express provision to that effect in sec. 31 (a) – and I question whether such an express provision is needed at all – the application of traditional tort law to consumer causes of action can and should be restricted. The need for such restriction is clearly required by the substantial material difference between the purposes of consumer torts and of the regular torts. Indeed, one can understand the problem and discomfort involved in new and different interpretation of first principles. My colleague Justice Cheshin explained it well in the case before us:

 

Moreover, not only is the language of the Law crystal clear, but efficiency also points to the solution presented by the Law. Inasmuch as the acts and omissions external to the Ordinance are tortious in nature, it is but natural that we should employ the same traditional, familiar doctrines that tort law created and developed over so many years such that they have become foundational to the legal system.

 

However, despite the difficulty, it is unavoidable. Prof. Sinai Deutch (the attorney for the Israel Consumer Council in this Further Hearing) addressed this in an article that referred to the case under appeal:

 

The Consumer Protection Law is an innovative law, inasmuch as Israel’s highest court is first addressing its interpretation only at the present time. It may also be reasonably assumed that, in the early stages of its interpretation, there will be some fear of disconnection from firmly-rooted, ancient legal traditions. However, it is the understanding of the importance of the subject that must lead to reconsideration in this regard…there is no reason to apply the rules of civil law in their entirety to the Consumer Protection Law. Independent interpretation of the Consumer Protection Law’s legal terminology is needed in accordance with its purpose and objective (S. Deutch, “Consumer Class Actions: The Demand for Personal Reliance on Misrepresentations of the Deceiver,” (2 Moznei Mishpat 97, 126 (2001-2002) (Hebrew) (hereinafter: “Consumer Class Actions”).

 

Even Justice Cheshin would appear to agree that the traditional tort doctrines are not “revealed truth”. He expressly notes that, “Since we are concerned here with transplanting a new organ into the body of the Civil Wrongs Ordinance, we must closely examine whether a particular doctrine of the Ordinance is compatible with the foundations, essence and structure of the new tort”. But after stating that – and referring to the sources he cited – he did not set out to “closely examine” whether the traditional doctrines were indeed compatible to the cause of action of consumer deception, but rather assumed their compatibility as if it were self-evident.

 

The Compatibility of the Tort-Law Causation Doctrine to a Class Action for Deceptive Advertising

8.         As we have seen, the traditional doctrines of tort law must be adapted to the special purposes of the consumer class action. In regard to the case before us, it will suffice to focus upon the adapting of the doctrines of tortious causation to the special needs of a class action filed in regard to the mass publication of a misleading advertisement.

            I refer to the “doctrines of causation” in the plural, inasmuch as even in traditional tort law, the subject of the existence of a causal connection between the tortious conduct and the harmful result is subject to a number of doctrines, which occasionally compete and occasionally operate in unison (see, in general: I. Englard, “Causal Connection” in The Law of Civil Wrongs – General Principles of Tort Law, G. Tedeschi, ed. (2^nd ed., Jerusalem, 1977) 178; I. Gilead, “Causation in Israeli Tort Law – A Reexamination,” 14 Mishpatim 15 (5744) (Hebrew)). The need for creating different doctrines of causation derived from the need to contend with different aspects of a complicated and complex phenomenon that earned the nickname “indeterminate causation” (see: A. Porat & A. Stein, Tort Liability under Uncertainty (2001); A. Porat & A. Stein, “The Evidential Damage Doctrine: A Positive Analysis of the Law,” 21 Iyunei Mishpat 191 (Hebrew); A. Stein, “How to Resolve the Indeterminate Causation Problem that Arises in Medical Malpractice Litigation,” 23 Iyunei Mishpat 755 (Hebrew)).

            Traditional tort law proposes practical solutions for situations of “indeterminate causation” in which it would be too much to ask the plaintiff to prove positively the existence of a direct, factual causal connection between the tort of the defendant and the injury incurred, under the “but-for” test (i.e., the “sine qua non test”). Under such circumstances, when the plaintiff proves the defendant’s tortious behavior, that his injury, and the possible existence of a factual causal connection between the tort and the injury, then tort law may come to his aid and fill in what is missing for proving the existence of a factual causal connection. This legal “aid” may be expressed in various recognized ways: by transferring the burden of proof to the defendant, who will be required to prove the absence of a causal connection; by establishing presumptions against the defendant in regard to various aspects of the causal dispute; by imposing liability upon “joint tortfeasors”, where their relative part in causing the injury is unknown; in defining an injury as an “indivisible injury” that the tortfeasor must bear in its entirety, even if he caused only part; and by recognizing alternative tests to the but-for test for factual causation (such as the “common man” test or the “substantial factor” test. See: Englard, ibid., at pp. 193-195; Gilead, ibid., at pp. 17-19; Porat, ibid., at p. 376). It should also be noted that new doctrines have been added to the traditional doctrines of causation over the last few years, which primarily serve to circumvent the problems and injustices that are sometimes involved in the strict application of the traditional but-for test. Among these new doctrines, some of which have already been adopted (in various contexts) by the case law, one can find the doctrines for probabilistic damages for the loss of a chance of recovery, or for loss of chance and creation of risk, and for MSL (Market Share Liability) suits; as well as the doctrine of mass liability and the doctrine of evidential damage (see the survey in Porat & Stein, in the second, fifth and seventh chapters of their above book).

9.         We can conclude from the above that even in traditional tort law – and all the more so in modern tort law – the but-for test is no longer the answer to everything. In many cases – where the purposes of tort law justify it – the right of a plaintiff to damages is recognized even when he is unable to show that no injury would have been caused but for the tort of the defendant. Against this background we may more sharply ask why the majority in the Appeal, and why Justice Cheshin in this Further Hearing, found it necessary to be so demanding in regard to the proof of reliance of Bezeq’s customers upon the misleading advertisements, as part of their insistence upon the demand for a causal connection in accordance with the but-for test. As the Chief Justice stated in the Appeal (IsrSC 55 (4) 584, 622-623), in referring to the approach of Justice Strasberg-Cohen:

 

As we know, the meaning of the factual causal connection is that but for the tort, the injury to the victim would not have occurred. This is the sine qua non test. In the matter before us, the factual causal connection requires that but for the prohibited deceit, the consumer would not have talked on the telephone in the manner that he actually did. Such a causal connection occurs only if the consumer relies upon the misleading character of the advertisement. If the consumer does not rely upon the misleading advertisement, then the extent of his phone calls is not influenced by the content of the advertisement. My colleague emphasizes the creation of the representation, but she does not prove the existence of the factual causal connection between creating the representation and the occurrence of the injury. In the absence of a factual causal connection, there is no possibility of examining the existence of a legal causal connection, which is based upon the factual background of the factual causal connection.

 

Justice Cheshin also notes – although in less emphatic language – that:

 

…there was no causal connection between Bezeq’s advertisement and the “harm” caused to Barazani, if only by reason of the fact that Barazani never read that advertisement, and therefore, in any event, he is not entitled to sue on that basis. Indeed, Bezeq committed a tort by publishing the advertisement – that is the basic assumption in this case – but the mere existence of a tort is insufficient to entitle a person to redress. That person must show that due to that tort, he incurred harm, and that precondition was not met in regard to Barazani.

 

What derives from this approach is that in order to ground a (personal or class) action for pecuniary damages for misleading advertising, the plaintiff must show that he relied upon the misleading advertisement, which led to a direct change in consumer conduct. With all due respect, I am of the opinion – which I will explain below – that this demand is not necessarily required by the language of the Law. The question, then, is what is the purpose of this demand, and what rationale does it serve? To this, I have found no convincing answer in the opinions of my honorable colleagues. It would appear that their only explanation is that class actions are a powerful tool, comprising many dangers, and should, therefore, be used with caution (see, in this regard, the opinion of my colleague the Chief Justice in the Appeal, at p. 620). That is, of course, undeniable. But defining Barazani as not being a “proper plaintiff” for a class action is based solely upon the finding that he does not meet the reliance requirement. Even if that finding were well founded – and I have questioned that from the outset – I cannot agree that Barazani’s non-reliance upon Bezeq’s misleading advertisement disqualifies him as a representative plaintiff in a class action.

10.       A requirement by which a consumer can acquire a cause of action only if he can prove that he relied upon the misleading advertisement and changed his consumer conduct as a direct result would frustrate ab initio the possibility of many potential suits based upon a cause of action of consumer deception by mass advertising. The reason for this is that in many such cases the requirement cannot be met. Few consumers can recall the details of the commercial advertisements to which they are exposed, directly or indirectly, and few consumers can honestly testify that were it not for the exposure to a particular advertisement, they would not have acquired the advertised product or service, or would have used it to a lesser extent. After all, it is well known that modern mass advertising is often intended to influence consumers in strange and mysterious ways, and not necessarily by speaking directly to their consumer consciousness. Often, consumers are not even aware of being influenced by an advertisement, neither when they are exposed to it, nor after the advertisement is supposedly forgotten. And we need hardly mention that these assumptions are particularly true in regard to advertisements in regard to matters of little consequence, which are the ones that hold the primary potential for consumer class actions. Thus, the procedural solutions that Justice Cheshin mentions in paras. 54-55 of his opinion – such as that each consumer prove his right to a remedy by means of an affidavit – cannot be deemed practical.

            Moreover, in many cases of consumer deception through advertising, it can be established positively that, as a result of the advertisement, there was no direct change in modes of consumer conduct of the sort that my colleagues require for “reliance”. The case before us provides a good example of this. The deception in Bezeq’s advertisements concerned a fraction of a meter unit – of several seconds – at the end of every international phone call. Would anyone imagine that a Bezeq customer, assuming he were aware of the deception, would put down the phone precisely at the end of a meter unit in order to avoid being charged for fractions of a unit as for whole unit? The obvious conclusion is that Bezeq’s deceptive advertising did not lead to customer reliance upon the content of the advertisement, and certainly did not lead to a direct change in the modes of consumer conduct. The change that the advertising may have caused in consumer consciousness – and conceivably the one that Bezeq sought to achieve by the said advertisement – was a change of a general nature in the perception of Bezeq as a reliable, fair company that charges only for the services it provides. Such a change in the advertiser’s reputation could cause – and we may assume that it indeed causes – a change in consumer consumption habits, which may be expressed in generally greater frequency of use of the advertised product or service, as well as other products or services of the advertiser. But this is an indirect – and generally unconscious – change in consumer consumption habits. It is doubtful that any of the consumers whose consumption habits were indirectly influenced by the advertisement could prove that he relied upon the advertisement, and the extent of the advertisement’s influence upon his consumption habits. But the advertiser benefits from its deceptive advertising, which indirectly led to an increase in its market share. The additional profits that the advertiser realizes from the increase in its market share – which also involve unjust enrichment at the expense of both its customers and its competitors – are, truth be told, the true injuries inflicted upon the consumer interest as a result of the misleading advertisement. It is only because those injuries are impossible – or, at least, are very difficult – to measure and quantify that the examination typically focuses only upon the direct damages that my colleague Justice Strasberg-Cohen refers to as “price differentials”. As a result, insisting upon reliance in regard to misleading mass advertising would severely impact upon the very possibility of initiating class actions for misleading advertising.

11.       In his opinion in the Appeal, the Chief Justice noted the possibility of creating a “presumption of reliance” in favor of consumers, but left the matter open for future consideration (ibid., at p. 621). In his opinion in this Further Hearing, Justice Cheshin adopted a similar position. He also notes that “we should broadly interpret the concept of reliance such that it comprises more than just direct reliance”. These solutions present something of a desirable development, but I fear that their practical advantage is limited. Proving a consumer’s reliance is no simple task, and it is sometimes impossible. That is not the case in regard to an advertiser’s ability to contradict the presumption of reliance. It is sufficient that it ask each of the consumers if and how he would have changed the manner of his use of the advertised product or service were it not for the misleading element in the advertisement. At the very least, those consumers who used the product or service prior to the misleading advertisement will find it very difficult to answer that question. We can almost assume that most, if not all, will have to answer in the negative, or that they do not recall the advertisement or its details, or that they do not know the answer, and the dealer will be deemed to have met the burden of proof and refuted the presumption of reliance. On the other hand, it is clear that my colleagues do not suggest creating an absolute presumption of reliance in favor of consumers. Such a presumption would greatly improve the chances of success of a consumer class action, like that before us, but would entirely nullify the requirement – to which my colleagues cling – of a factual causal connection between the misleading advertisement and the injury incurred by the consumers.

12.       It should be obvious that the requirement that a misleading advertisement lead to a direct change in modes of consumer behavior – which is what the “reliance requirement” demands –not only does not advance the special purposes of the consumer class action. Let us return to the seven objectives as set out by Dr. Orna Deutch: levelling the playing field; reinforcing personal autonomy; the concept of consumer sovereignty; protecting the rights to prosperity and social welfare; ensuring the credibility of the local market; and maintaining trust in the social order. Clearly, the demand for reliance advances none of these objectives. Rather, it leads to negating many consumer causes of action that might advance those objectives. In practice, the demand for reliance undermines those objectives and frustrates their realization. The same is true in regard to the special purposes of consumer class actions. As Justice Procaccia pointed out in the aforementioned Tnuva case, the class action “serves the interest of the individual by providing a remedy for injury in circumstances in which filing suit would not be worthwhile without the other members of the group. It serves the public interest that strives to deter large economic institutions from violating the law, and that seeks to achieve more effective enforcement of behavioral norms intended to protect citizens and prevent the exploitation of their weakness as individuals”. In those case in which the personal injury of each of the individuals is very small, one might say that there is no real importance to the personal interest involved in the class action. The primary importance of such cases is focused upon the public interest. But the public interest in enforcing law and integrity in the consumer field has little in common with the reliance requirement, and certainly not with requirement of a direct, factual, causal connection between the misleading advertisement and the harm to the consumers. The public interest focuses primarily on the violation itself and the possible harm to the public as a whole, and not upon the question of whether there was an actual causal relationship between the violation and the harm caused to some consumer. We thus find that strict observance of the demand for a causal connection – like the requirement of proof of reliance – will lead to the frustration of many consumer class actions, and the public interest that they were meant to serve suffers.

 

Constructive Reliance and a Consumer Causal Connection

 

13.       From the perspective of the laws of consumer deception in advertising, the main thing is the very existence of an advertisement with the potential to mislead in regard to a material aspect of a transaction, which the advertiser intended to reach as large a public as possible, and influence modes of consumer behavior. Once the potential to deceive is proven, and once it is proven that the advertiser indeed intended that the misleading advertisement reach consumers and influence their consumer behavior, it is only right that we hold that there is a basis for the existence of constructive reliance by the consumers upon the misleading advertisement. The question of whether the dealer actually achieved its goal – i.e., that the misleading advertisement indeed reach its intended audience and actually mislead it – is of limited importance. This expresses a central difference between the law of consumer deception and general tort law (as opposed to certain particular torts, such as the torts of fraud, deceit, etc.). The normal starting point in tort law is that the tortious event was not planned by the tortfeasor, and that the tortfeasor was not interested in its occurrence. The assumption is that potential tortfeasors do not have an interest in causing injury, and that they generally have an interest in preventing injury, unrelated to the risk of being required to pay damages to the victims. From this, inter alia, we derive the principle that tort law is not intended to punish the tortfeasor, but rather to compensate the victim for his loss. For the same reason, tort law does not impose liability for the mere creation of a danger, which, in and of itself, is not deemed an injury (for a broader discussion, see: A. Porat, "Compensation for Risk-Creating and Loss of Chances," 23 Iyunei Mishpat 605 (2000) (Hebrew)). That is not the case in regard to consumer deception. The typical situation that these laws address is one in which the supplier of a product or service who publishes a misleading advertisement is interested in and intends to cause the consumer injury, inasmuch as, from its perspective, it reaps direct profit from that injury. Therefore, the incentive to cause harm in the area of consumer deception is inestimably greater than the incentive to invest in preventing harm, which is the typical fear in the field of torts. Experience shows that the fear that consumer deception may harm the reputation of the advertiser is often distant and ineffective. In any case, when it is shown that the advertiser intended to mislead, the necessary conclusion is that, at least in that case, the said fear was not sufficient to deter. Indeed, the temptation to deceive consumers – as a means for increasing an advertiser’s profits – is not inconsequential. The purpose of the tort regarding misleading advertising does not focus upon the harm caused by the advertisement to a particular consumer, but rather upon the existence of a potential for the causing of harm to the consumer public, and the advertiser’s intention to cause that harm in order to reap profits. Conceivably, that was the reason that, in defining the prohibition of deceit in sec. 2 (a) of the Consumer Protection Law, the legislature chose the phrase “liable to mislead”. Moreover, another interpretive conclusion that derives from the definition of the tort is that the legislature also intended to create a unique definition of the causal connection required for consumer deception. With all due respect, assuming that this wording is relevant only to actions for declaratory and preventative remedies renders the definition of a publication “liable to mislead” as a tort nearly devoid of all practical content, inasmuch as it is hard to imagine that any consumer would be interested in filing a suit for the sole, ultimate purpose of merely obtaining declaratory or preventative relief.

14.       The conclusion required from the distinctions I addressed above is that the laws of consumer deception must contend with the reliance requirement and the issue of causation differently than tort law. Instead of the requirement of personal reliance by each and every consumer – which is the requirement of traditional tort law – we should adopt a doctrine that recognizes “constructive reliance” of all the consumers at whom the advertiser directed its misleading advertisement. And rather than the requirement of proof of a factual causal connection between the misleading advertisement and the injury of each and every one of the plaintiff consumers, we should adopt a doctrine that recognizes a “consumer causal connection” that would be derived from the combination of a potentially misleading advertisement and the intention of the advertiser that the advertisement reach the consumers, mislead them and thereby influence their behavior. The elements of the suggested formula for establishing a consumer cause of action overturn the accepted formula for a cause of action in tort to some degree. Whereas in an action in tort, meeting the reliance requirement is a precondition to the existence of a causal connection, in a consumer action, the existence of constructive reliance is derived as a necessary result of proof of the elements of the consumer causal connection. But this reversal does not detract from the completeness of the formula, in all of its elements. And note: adapting the tort doctrines to the consumer tort does not contradict the legislative imperative. On the contrary, such an adaptation is part of an interpretive process that makes it possible to advance the special objectives of the consumer cause of action in general, and of consumer class actions in particular, and as I shall demonstrate below, does not contradict the language of the law.

 

A Pecuniary Remedy for Consumer Deception

 

15.       When can consumers obtain a pecuniary remedy due to a potentially misleading advertisement? In my opinion, it would be proper to establish that consumer deception gives rise to a (personal and class) cause of action for pecuniary relief upon the fulfillment of three conditions: a violating advertisement, injury, and a “consumer causal connection”. As opposed to this, we should also recognize a defense that would generally be available to the advertiser if it be found that the consumer-plaintiff knew the actual facts, and the violating advertisement could not, therefore, negatively influence his behavior.

            The first element (the element of breach) is fulfilled upon proof of a breach of one of the prohibitions upon deceit established under the Consumer Protection Law for which one may sue for damages under sec. 31 (a) of the Law. For our purposes, the relevant prohibition is that established under sec. 2 (a) of the Law, according to which even an advertisement that is “liable to mislead” in regard to a material element of a transaction is deemed a violating advertisement. And note: once it is proved that the advertisement is liable to mislead, there is no further need to address the question of actual deceit.

16.       The second element is that of injury. While achieving the consumer objectives could suffice with the potential for causing harm to the consumer interest that is presented by an advertisement liable to mislead, in the absence of proof of injury, damages cannot be awarded to consumers claiming to have been injured by the violating advertisement. That is the import of the reference of sec. 31 (a) – titled “Compensation” – to the Civil Wrongs Ordinance. That is also the import of sec. 31 (a1), which states: “Consumers injured by the wrong are entitled to remedies for the wrong and so are dealers, who in the course of their business are injured by deceit, as said in section 2” (for a different view, see M. Deutch, Commercial Torts and Trade Secrets (2002), p. 49). This is simply the legislature’s decision to limit the scope of potential plaintiffs to that group of consumers and dealers who were actually injured and that, therefore, have a direct interest in suing and obtaining a pecuniary remedy. However, the injury that the plaintiffs must prove is not necessarily the injury that each victim can prove by direct evidence. Provable injury caused to a group of consumers can also entitle the group to global damages from the advertisers without a need for the court to determine the personal injury of each member of the group (see, in this regard, reg. 9 (c) of the Consumer Protection (Procedures in regard to a Class Action) Regulations, 5755-1995, and paras. 13-20 of the opinion of Naor, J. in the Tnuva case, above). We should also recognize the possibility that bringing evidence of the profit that accrued to the advertiser from the misleading advertisement be deemed sufficient proof of the injury to the injured consumers. My assumption is that, on the basis of such evidence, the court can award pecuniary damages, which are not necessarily restitution, to the injured consumers. As we have stated, the injury to the consumers from a misleading advertisement constitutes profits for the advertiser, and evidence proving the extent of that profit would therefore prove the extent of the injury. I would parenthetically note that, in my opinion, defining consumer deception as a tort does not detract from the victims’ right to sue for restitution, whether by force of contract (where the product or service was provided to the consumer in the context of a contractual undertaking), or upon a cause of unjust enrichment.

17.       The third element addresses the existence of a consumer causal connection. As explained above, I am referring to a causal connection adapted to the special objectives of consumer protection law – both personal and collective – and in the case before us, the special needs of the laws of consumer deception. Some form of causal connection between the breach and the injury is, indeed, required. That, as my colleagues have shown, is required by the Civil Wrongs Ordinance referred to by sec. 31 (a) of the Consumer Protection Law, and it is also required by sec. 31 (a1) of the Law, under which (as earlier noted) the right to relief is granted to one “injured by the wrong”. However, an examination of secs. 2 (a) and 35A (b) of the Consumer Protection Law reveals that the existence of a causal connection – required, as noted, by secs. 31 (a) and 31 (a1) of the Law – cannot be construed as identical to the requirement of the traditional causal connection of the Civil Wrongs Ordinance. Section 2 (a) expressly suffices with a publication that is “liable to mislead”, and does not require that there be actual deception, while sec. 35A (b) of the Law – treating of “class actions” – states that “where the cause of action is an injury, it is sufficient that the plaintiff show that injury was caused to a consumer”. In addressing the meaning of sec. 35A (b), Dr. Orna Deutch writes:

 

The legislature provided a certain leniency in regard to consumer actions in that when injury is an element of the cause of action (such as in the tort of negligence), there is no need that the plaintiff show that he himself incurred an alleged injury, but rather it is sufficient that an injury was caused to some consumer (O. Deutch, in her abovementioned book, at p. 244).

 

I am of the opinion that we may learn from sec. 35A (b) that, for the purpose of filing a class action, it is sufficient to show the existence of a consumer injury, and there is no need to show a factual causal connection between the breach and that injury. This construction accords with the special purposes of the consumer class action, which I addressed above, which are also not consistent with the requirement of personal reliance.

18.       It would appear that in regard to the question of the existence of a causal connection between consumer deception and the injury caused to the victim, secs. 2 (a) and 35A (b) of the Law contradict secs. 31 (a) and 31 (a1) of the Law. Whereas the latter (which are of a “general” nature) appear to reflect a requirement of a causal connection, it would appear that one may understand from the former (which are of a “specific” nature) that no causal connection be proved. However, I do not believe that the contradiction between the general provisions and the specific provisions in this matter can be resolved by preferring the specific provisions (by virtue of their being lex specialis). In the matter before us, we should prefer the interpretive principle that requires that we find a way to harmonize the provisions so that they may coexist. The formula that I suggested above for a “consumer causal connection” accords well with the appropriate interpretive approach. The requirement of a consumer causal connection – based upon a merger of the requirements for injury together with potential causation and intention to injure – prevents the possibility that liability might be imposed for the mere creation of a danger by a tortfeasor acting in good faith, and thereby gives proper expression to the purposes of the general provisions. At the same time, this formula grants preference to the consumer objectives of the specific provisions. That is expressed in the replacement of the requirement for an actual factual causal connection between the misleading advertisement and the injury under the but-for test with a requirement that suffices with proof of a potential factual causal connection (similar to the concept of apportioning tort damages based upon probability), together with proof that the advertiser intended to create an actual factual causal connection. In other words, meeting the demand for a consumer causal connection would not require proof that the advertisement actually misled the victim and caused his injury, and not even that he was aware of the advertisement and relied upon it in some way, but rather it would suffice to show that the advertisement was liable to mislead the victim and cause his injury, and that the advertiser intended that.

            It would appear to me that, in the context of the prohibition of consumer deception, the requirement of a consumer causal connection also reflects the lex ferenda. Adoption of the said formula would advance the special objectives of consumer protection law and of consumer class actions, and would ensure protection of good-faith advertisers who do not intend to mislead and cause harm when the factual causal connection between their advertisements and the injury is in doubt (needless to say, when the factual causal connection is not in doubt, nothing would prevent the filing of a class action even for injury resulting from an advertisement that was not intended to mislead, but that nevertheless, actually misled). I would like to emphasize that even in the absence of secs. 2 (a) and 35A (b), which support my suggested interpretation, the tort requirement of a factual causal connection can and should be made more flexible and should be adapted to the special needs of consumer deception. I have already pointed out that such flexibility has been adopted in a variety of ways in tort law itself, for the purpose of realizing appropriate objectives of tort law. Thus, for example, Israeli law recognized the possibility of awarding tort damages based upon probability in cases in which it was not proved – as would be required by the balance of probabilities – that but for the tortious conduct of the defendant, the plaintiff would not have incurred injury. This was held in regard to the loss of a chance of recovery (see the landmark case, CA 231/84 Histadrut Health Fund v. Fatach, IsrSC 42(3) 312., which has been followed repeatedly in later cases), as well as in regard to not obtaining informed consent for medical treatment (CA 4384/90 Vaturi v. Leniado Hospital, IsrSC 51 (2) 171, 191-192, and compare CA 2781/93 Daaka v. Carmel Hospital, Haifa, IsrSC 53 (4) 526 (English translation:  http://versa.cardozo.yu.edu/opinions/daaka-v-carmel-hospital). Having found that it is possible to arrive at a desired result by means of interpretation even within the confines of the Civil Wrongs Ordinance, that should be the case a fortiori in the framework of the Consumer Protection Law, whose special objectives justify and require that we not subject it to the regular doctrines of tort law.

19.       On the other hand, as stated, a defense should be allowed to an advertiser on the claim that the victim was actually aware of the true facts of the situation and, therefore, the violating advertisement could not have negatively affected him. The reason for this is that the prohibition upon consumer deception is not intended to protect such victims. The prohibition upon consumer deception is intended to protect consumers who are liable to be misled, and not those who cannot be misled. In effect, this can be seen as an aspect of the good-faith duty that applies to every person seeking pecuniary redress for consumer deception. After all, it would not be appropriate to obligate a supplier of a product or service, who published a misleading advertisement, to compensate a person who was not a potential victim of the deception, and an action for compensation in such circumstances might be deemed to constitute abuse of process.

            The said defense must be positively proven by the advertiser. In other words, in order to meet the burden of proof, uncertain answers like “I don’t know” or “I don’t recall” to questions put to the consumer-plaintiffs will not suffice. It may be assumed, therefore, that an advertiser may make effective use of this defense primarily in response to suits by “special” plaintiffs, such as its employees, commercial competitors, or other experts in the relevant field, regarding whom it would be possible to bring evidence in regard to the state of their knowledge at the time they acquired the service or product.

 

The Matter of Barazani

 

20.       At the outset I noted that the approach of the majority in the Appeal and of Justice Cheshin in the Further Hearing focuses overmuch upon Barazani himself, and too little upon the large pubic of victims of the misleading advertisement whose case Barazani sought to press. A perfect expression of this can be found in the very establishing of the Archimedean assumption that Barazani was not exposed to the misleading advertisement and did not rely upon it, and that this is sufficient for the conclusion that Barazani is not an “appropriate plaintiff”. Of course, I do not disagree that a precondition for certifying a class action is that the representative plaintiff have a personal cause of action against the defendant. That is expressly required by sec. 35A (a) of the Consumer Protection Law. But, in my view, we should not exaggerate the importance of that condition. In ascertaining whether it has been met, the court need not split hairs in its examination of the details of the personal suit of the representative plaintiff, but should suffice with facial proof that he has a personal cause of action, and that we are not concerned with a person who is merely hitching a ride on someone else’s dispute. The court should concentrate its examination upon two other questions: Is the subject of the suit appropriate to a class action? And is the representative plaintiff qualified and equipped to properly represent the interest of the public on behalf of which he seeks to sue? These considerations are of special importance in a consumer class action. Dr. Orna Deutch addresses this (in her abovementioned book, at pp. 245-246):

 

The personal interest of the injured plaintiff who files the class action is, in any case, negligible in relation to the amount of the suit for the entire class. In a realistic view of the significance of the suit, it is of no consequence whether the personal suit of the victim constitutes a negligible part of the entire suit, or is actually nonexistent. In both cases, he presumably “defends the honor” of the entire group, and actually advances a different personal interest, which is the benefit that accrues from his representative standing in the suit, which is expressed in the special damages and compensation awarded to the plaintiff for his efforts. Why condition standing in the suit upon a formal demand for the existence of such minimal involvement on his part?

It would seem that it is, indeed, difficult to justify the said requirement. What must be ensured is that the representative of the group be a proper representative who can bear the burden of conducting the suit both in terms of its material and its costs, and that he not have a conflict of interests. However, there is nothing in common to these requirements and the question of whether the plaintiff was personally harmed by the act at issue. His personal injury represents but an insignificant part of the whole suit. In any case, the matter pursued is a “public suit”, while the significance of the personal suit of the plaintiff is but symbolic. In that light, I think it proper to refrain from this demand in its entirety.

The reason given for this demand, which I noted above, according to which if the plaintiff has no personal cause of action, the proceedings will focus upon the personal defense against the plaintiff, and the matter of the entire group will be sidelined, begs the question. If the law establishes that the question of the existence of a personal cause of action is irrelevant, then the defenses against the individual plaintiff are irrelevant, and the proceedings will, in any case, focus upon the entire class of plaintiffs.

In the consumer framework, the requirement of a personal cause of action leads, in practice, to one of two results: either no appropriate plaintiff will be found who is willing to “contribute” his cause of action to the proceedings in the service of the general public, or, if such a consumer be found, he will often be nothing more than a kind of “straw man” backed by some commercial group organized for the purpose of obtaining the compensation attendant to succeeding in a class action.

And indeed, the demand for the existence of a personal cause of action in the consumer context has drawn criticism in the legal literature.

(and see: M. Bar-Niv, (Bornowski), “The Limits of the Consumer Class Action,” 19 Iyunei Mishpat 251, 257-258 (1994) (Hebrew).

 

21.       On point, I am of the opinion that Barazani showed that he had a prima facie personal cause of action – and most important – that Bezeq’s misleading advertisement, upon which his suit was based, was appropriate for a class action. Indeed, Barazani did not claim that he had been exposed to the advertisement, but he also did not state the opposite. In fact, in the proceedings before the District Court – which did not focus upon this question – Barazani was never asked if he had been exposed to the advertisement. Under these circumstances, we may, and should, assume that Barazani’s situation is no different than that of most of Bezeq’s other customers. Whether the consumers were exposed to the advertisement and remember it, or whether they learned of the matter of the advertisement at a later stage, it is clear that it would only have aroused their attention when it was discovered that the advertisement was misleading, and that as opposed to what Bezeq had promised its customers, it continued to charge them for whole meter units. It  is clear from the apparent facts that the advertisement was intended to influence Bezeq’s customers to increase their use of the advertised service, and that would appear, on its face, to lead to a conclusion that the misleading advertisement could justify recognizing the concrete reliance of all the customers to whom Bezeq directed its advertisement.

            The suit that Barazani submitted to the court was appropriate, by its nature, to be addressed as a class action. We are concerned with a large community of Bezeq subscribers whose accounts were charged for international telephone calls at a rate that was higher than the rate that Bezeq was entitled to charge according to its advertisement. Addressing the class action on the merits would allow the court to decide whether Bezeq’s advertisement indeed comprised the elements of a misleading publication that warranted pecuniary relief. If the court were to answer this question in the affirmative, it could easily determine the extent of direct injury. Proving the direct injury is not contingent upon the question of whether the customers made greater use of the specific service as a result of the advertisement, but upon the difference between the amounts the customers who used the service were charged and the amounts that Bezeq was entitled to charge its customers based upon its advertisement. This can easily be determined, inasmuch as Bezeq undoubtedly has all of the necessary data for calculating the difference in regard to each customer, and I cannot imagine that Bezeq would seek to conceal that information from the court.

22.       One last comment in conclusion. While the District Court decision that was the subject of the Appeal dismissed Barazani’s request to permit him to file a class action for pecuniary relief, it accepted his alternative request to file a class action for declaratory relief. However, the majority in the Appeal granted Bezeq’s counter-appeal and rescinded the permission granted to Barazani to submit the suit for declaratory relief. In stating the reasons for that decision in the Appeal, the Chief Justice wrote:

 

Should we not recognize Barazani’s ability to serve as a representative plaintiff for declaratory relief stating that Bezeq’s advertisement was “liable to mislead” a consumer? This question raises several problems, which can be left for future consideration for the following reasons: In his complaint, Barazani defined the members of the group as the community of Bezeq customers who paid a higher fee than that advertised by Bezeq, and as a result incurred monetary harm. Barazani does not “properly represent the interests of all the members of the group” (sec. 43B (4) of the Law), inasmuch as he did not himself suffer monetary harm as a result of the deception. Therefore, Bezeq’s we should grant the appeal, and find that Barazani is also not an appropriate representative plaintiff in regard to the declaratory remedy.

 

Was it proper to deny Barazani the limited permission granted him to file a class action for declaratory relief? The answer to this question – that Justice Cheshin did not address in his opinion – must, in my opinion, be no. After all, even according to the approach of the Chief Justice in the Appeal, Barazani has a personal cause of action against Bezeq because its advertisements were “likely to mislead” him, in which framework he could have petitioned for non-monetary relief, such as a restraining order. The basis for denying his request to file his personal suit for declaratory relief as a class action could accord with the opinion of the majority in the Appeal if there were another representative plaintiff before the court – who met the reliance requirement and even suffered monetary harm as a direct result of the deception – who might represent the interests of the consumers better than Barazani. But I fear that such was not the case. To date, no such alternative representative plaintiff has presented himself before the court, and even if we were to assume that such a plaintiff may yet appear in the future, I fear that his suit may be denied in limine by reason of prescription.

 

Conclusion

 

23.       Subject to the above, I concur in the opinion of my colleague Justice Strasberg-Cohen that the petition for a Further Hearing should be granted, and that the Petitioner should be allowed to file a class action, as requested.

 

                                                                                                            Justice

 

 

Justice Dalia Dorner:

 

            In my opinion, the Petition should be granted. The reason for this is that the Petitioner relied upon the misleading representations of Bezeq and was harmed as a result of that concrete reliance. In any case, all of the elements of the tort were present, and the Petitioner is an appropriate plaintiff for a class action.

 

The Legal Foundation

 

1.         The Consumer Protection Law, 5741-1981 (hereinafter: the Law), intervenes in contracts between unequal parties, and imposes an increased duty of fairness upon the stronger party – the supplier – toward the weaker party – the consumer. See LCA 8733/96 Langbert v. State of Israel, IsrSC 55 (1) 168 (hereinafter: CA Langbert), at p. 174. The Law is firmly anchored in established doctrines of contract law. See Sinai Deutch, “Consumer Contracts Law versus Commercial Contracts Law,” 23 (1) Iyunei Mishpat 135 (2000). The purposes of the Law – among them, reinforcing personal autonomy, advancing commercial fairness and the protection of market integrity – well accord with the freedom of contract, which requires the full realization of a true meeting of minds of the parties to a transaction. This freedom is infringed when the consumer is misled into believing that he is undertaking obligations under transaction conditions that are different from the actual ones. Moreover, the duties of the dealer clearly reflect the overarching good-faith principle of Israeli contract law, which justifies eroding the once accepted principle of caveat emptor. See Gabriela Shalev, Contract Law (2^nd ed., 1995), 221.

            The Law was intended to provide an additional layer of defense to the consumer public that is exposed to deception by means of well-developed marketing and advertising methods (see the Consumer Protection Law Bill, H.H. 5740 at p. 302). This is achieved both by augmenting the duties of suppliers, and by broadening the means available to consumers for enforcing their rights. These means include criminal offenses and civil causes of action, among then the tort prohibiting deceit in sec. 2 (a).

 

The Contractual Framework for the Relationship between Dealers ad Consumers

 

2.         Many consumer transactions are premised upon a significant amount of consumer faith in the suppliers. In the framework of such relationships, consumers are not expected to check, before purchasing a service, that they will be charged the declared price, and they can rely upon the suppliers not to charge more than that price. If the consumer should discover at a later date that he was overcharged, he can demand and receive a refund. That is well-established in the accepted contractual doctrines that require that if a supplier charge more than the correct, advertised price, the consumers will be entitled to a refund of the difference, as well as in the social reality grounded upon them, in which consumers actually tend to place their trust in suppliers without checking that every transaction conforms with the advertisements.

            A supplier’s advertisements concerning a specific price grants the consumers a right not to pay more. In any case, if the supplier charge a higher price, that would constitute a breach of contract that would entitle even consumers who were not exposed to the advertisement to a pecuniary remedy. That right can be grounded in the following three different ways.

            The first way sees a supplier’s advertisement of a price as an irrevocable offer to the public, which can be accepted by the objective performance of its conditions, while the dealer is bound by the advertised price, and makes the possibility of purchasing the product or service for a price that will not exceed it, available to the public.  See Daniel Friedman & Nili Cohen, Contracts, vol. 1 (1991) 182; Shalev, ibid., at p. 115. The consumers are not expected to check the price prior to the transaction. In any case, by accepting the offer, the parties agree to the advertised price. The supplier will be required to refund any additional charge to the consumer.

The second way sees the contract as comprising an implied term that requires the supplier not to charge a consumer more than the advertised prices. Such a term is required by the expectations of the parties. Overcharging constitutes a breach of that term.

The third way classifies the said overcharging, particularly where it concerns consumers who were not exposed to the advertisement, as a bad-faith performance of the contract.

3.         It is on the basis of this legal conception, independent of the precise manner of its grounding, that consumers actually behave in practice. Typical Israeli consumers do not check, and are not expected to check, that the prices they are charged for each and every product in the supermarket are identical to the price printed on the product, and certainly do not check, and are not expected to check, that they received the discounts that were advertised by the chain from which they made the purchase. Consumers rely that they will be charged the prices, and credited with the discounts, as advertised. Similarly, the consumers of the telephone companies do not check the prices and current discount campaigns before each and every phone call, relying that they will be charged in accordance with the correct advertised prices.

 

Section 2 (a) of the Law

 

4.         When a supplier publishes notice that the price of a service is lower than a specific price, the consumer public to which the advertisement is directed – including consumers who are not exposed to the advertisement – acquires a right to receive the service at the price stated by the supplier. When consumers purchase the services of the supplier, they rely, in practice, on the fact that the price they will be charged will be the advertised price.

            That reliance exists regardless of whether the advertisement is innocent and clear or whether it is ambiguous and misleading (and see, for example, CA Langert, above). In both cases, the consumers acquire a right, and the suppliers are subject to an obligation, that they will not be charged more than the maximum price reflected in the advertisement, less the deceit, that they would be have been charged in accordance with the advertisement. The difference between the two types of cases regards the consequences that directly result from the advertisement. Only in the case of a misleading advertisement can one acquire those remedies established by law that do not require proof of injury, such as restraining orders. Moreover, only a misleading advertisement can be deemed tortious conduct. The potential to mislead must be evaluated at the time of publication, in accordance with the factual situation at that time. An innocent advertisement cannot be deemed misleading if its content is unambiguous, only as the result of the future conduct of the supplier. Otherwise, every advertisement would be deemed “liable to mislead”, as suppliers always have the ability to breach their obligations.

            However, a supplier commits a tort under sec. 2 (a) of the Law even in the absence of a misleading advertisement both when he presents a consumer with an invoice based upon a price that is different and higher than the advertised price, and when he charges a consumer – e.g., by means of a standing bank order – a higher price than that advertised. Such conduct constitutes an instance of doing “anything – by deed or by omission, in writing, by word of mouth or in any other manner … which is liable to mislead a consumer on any substantive element of the transaction”. That is so because when a supplier demands or charges a particular price, he makes a representation upon which consumers rely, and according to which, that is the correct price as advertised. The consumers are entitled to purchase the service at the advertised price, whatever it may be, and when they pay the supplier the amount in the invoice, or permit the supplier to charge their accounts, they do so on the basis of reasonable reliance that the supplier will not charge more than what was advertised. There is a kind of “integrity of the price” (see Basic v. Levinson, 485 U.S. 224, 247 (1988)).

            The difference between the amount the consumer should pay according to the advertisement and the amount actually charged is the injury caused to that consumer. This injury caused to the consumer is connected by a direct, factual connection to the tortious conduct of the supplier. The consumer paid the additional amount due to the supplier’s deceit. Had the supplier not breached its duty, and had it charged the consumer the correct price, the consumer would have paid the correct price and would not have been injured.

            Therefore, there is no need to prove exposure to the advertisement and conduct resulting from that advertisement in order to be entitled to damages for that deceit, and it is not required under current Israeli law. Other countries that have similar tort and consumer protection laws do not all have a similar requirement, particularly in regard to class actions. Compare, for example, Slaney v. Westwood, Inc. 366 Mass. 688 (1975); Amato v. General Motors Corporation, 463 N.E.2d 625 (1982); Carpenter v. Chrysler Corporation, 853 S.W.2d 346 (1993); Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972); Seth William Goren, “A Pothole on the Road to Recovery: Reliance and Private Class Actions Under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law”, 107 Dick. L. Rev. 1.

 

From the General to the Specific – Bezeq and Barazani

 

5.         Bezeq does not currently expect its customers – and certainly did not expect its customers at the time relevant for this case, when it was a monopoly – to use its telephone services only after checking their price. Thus, there is a “standing payment order” arrangement by which the consumer grants Bezeq the right to access his bank account, and the consumer absolutely relies upon Bezeq, while Bezeq des not usually append to a consumer’s bill the full details of phone calls charged. In doing so, Bezeq intends to create an equal arrangement for those who were exposed to the advertisement in regard to its fees and acted thereupon, and those who were not exposed to the advertisement and, therefore, did not act thereupon. As noted, according to the factual findings in the earlier proceedings, the meaning of the advertisement was simple and clear. Nevertheless, Bezeq made a different representation to the consumers, whether in the telephone bill or in charging their accounts, according to which the correct method for calculating was different from the method of calculation in the advertisement, and led to a higher charge. In doing so, Bezeq deceived the consumers, and committed the tortious act. There is no difference between this conduct by Bezeq’s and a case in which it would include the advertised method of calculation in the telephone bill, except that, in practice, it charged a higher fee.

            Considerations of “legal causation” also do not require reducing the tortious liability. Compare sec. 16 of the opinion of Justice Tova Strasberg-Cohen in this Further Hearing, and see FH 12/63 Leon et al. v. Meshullam Ringer, IsrSC 18 (4) 701, at p. 715 per Witkon, J.; CA 145/80 Vaaknin v. Beit Shemesh Local Council, IsrSC 37 (1) 113, at p. 145; and compare Itzhak Englard, Aharon Barak & Mishael Cheshin, The Law of Civil Wrongs, Gad Tedeschi, ed., (1970) 187.

            It should be noted that in light of the finding that the meaning of the advertisement – that Bezeq would not charge “for the time period not actually used for the call” – was clear, the conduct could not have constituted tortious conduct under sec. 2 (a) of the Law. But even if it had been found that the advertisement was misleading, there still would have been legitimate, concrete reliance by the consumer that he was being charged the correct amount as advertised, and therefore the elements of the tort would have crystalized on the basis of the tortious conduct committed in the charging.

            Barazani therefore has a personal cause of action against Bezeq. The existence of Barazani’s personal cause of action having been proved, whether or not he was exposed to the misleading representation, the path to representing the group in a class action is open to him.

            I, therefore, concur with the result recommended by my colleagues Justices Tova Strasberg-Cohen and Eliahu Mazza, according to which the Petition should be granted and the filing of the class action should be allowed.

 

                                                                                                                        Justice

 

The petition is dismissed in accordance with the majority opinion, and the judgment of the Supreme Court in CA 1977/97 is affirmed.

Given this 13 day of Av 5763 (11 August 2003).

 

The Chief Justice                                The Deputy Chief Justice                               Justice

Justice                                                 Justice (ret.)                                                     Justice

           

 

 

In the Supreme Court

LCA 3973/10

 

Before:                                                President (ret.) A. Grunis

                                                Justice U. Vogelman

                                                Justice N. Sohlberg

 

The Petitioner:                         David Stern

 

                                                v.

 

The Respondent:                     Verifone Holdings, Inc.

 

A motion for leave to appeal the decisions of the  District Court (Cent. Lod) of April 26, 2010 and August 25, 2011 in Class Action 3912-01-08 by President H. Gerstl

 

On behalf of the Petitioner:    Adv. Gil Ron; Adv. Aharon Rabinovitz;

                                                Adv. Jacob Aviad; Adv. Nadav Miara

 

On behalf of the Respondent:            Adv. Josef Ashkenazi; Adv. Moshe Yacov;

                                                Adv. Hanan Haviv

 

Judgment

 

President (ret.) A. Grunis:

1. A court in the United States approves a settlement in a class action being heard before it. According to the terms and conditions of the settlement, it applies to the members of the represented class who are located both in and outside of the United States. What effect does approval of the settlement have on a class proceeding on the same issue in Israel? This is the question before us.

The chain of events

2. The motion at bar for leave to appeal has undergone many twists and turns since being filed. I will, therefore, briefly describe the chain of events, focusing on the issue that is now to be decided. The Respondent, Verifone Holdings, Inc. (the Respondent) is a foreign company that was incorporated in the State of Delaware in the United States. The Respondent engages in the development of secure electronic payment systems and solutions. The Respondent’s shares are traded on the New York Stock Exchange (NYSE), and in the period between July 2006 and July 2010 they were also traded on the Tel Aviv Stock Exchange (TASE). In December 2007, the Respondent published immediate reports on the stock exchanges in the U.S. and in Israel, in which it was stated that errors had been discovered in its periodic financial statements in relation to the first three quarters of the financial year ended October 31, 2007. After this publication, there was a sharp drop in the value of the Respondent’s stock. These circumstances led to the filing of 16 actions in the United States against the Respondent by its shareholders, ten of which were motions for class certification, and six of which were motions for approval of derivative suits. The hearing of nine of the class proceedings was consolidated before the Federal Court in California (In re Verifone Holdings, Inc. Securities Litigation, Civil Action C 07-6140 MHP, decision of January 18, 2008; this consolidated proceeding shall hereinafter be referred to as the “Class Proceeding in the U.S.”). Various entities contended in the California court for appointment to the position of the lead plaintiff in the consolidated proceeding (“Lead Plaintiff”), including several Israeli institutional bodies (“Phoenix”, “Harel”, “Clal Finance”, “Prism”, “Batucha Investment Management” and “Yashir Investment House”). Ultimately, the California court chose to appoint a body named “National Elevator Fund” as lead plaintiff.
3. On January 27, 2008, the Petitioner, David Stern (hereinafter: the Petitioner) filed a motion for class certification against the Respondent (hereinafter: the Motion for Class Certification in Israel) in the District Court (Cent. Lod). In this proceeding, the District Court was asked to certify a class action against the Respondent on behalf of any person who purchased shares of the Respondent on TASE between March 7, 2007 (the date of publication of the first erroneous financial statement) and December 2, 2007, and who held the stock on December 3, 2007 (the date of publication of the immediate report in Israel in which the error was exposed). The Petitioner asserted that following the discovery of the errors that occurred in the Respondent’s financial statements, the value of its shares fell by approximately 46%. It was asserted that the Respondent bears responsibility to its shareholders for inclusion of the misleading details in the financial statements (pursuant to Section 38C of the Securities Law, 5728-1968 (hereinafter: the Securities Law)). The Petitioner stated that he estimates that the damage to the class members (in Israel) is in the sum of NIS 2.48 billion.
4. As aforesaid, I will review the rest of the chain of events only in brief. The Respondent filed a motion for dismissal in limine of the Motion for Class Certification in Israel, and alternatively to stay the proceedings (it is noted that the Respondent did not file an answer in response to the Motion for Class Certification in Israel, and in fact, such an answer has not been filed to date). The main grounds of the motion were the proceedings which were pending in the U.S. and which concern the same issue, and forum non conveniens considerations. The Respondent asserted, inter alia, that the law applicable to the Motion for Class Certification in Israel is U.S. law. At the hearing held before the District Court on May 25, 2008, the parties reached a stipulation whereby the court would first address the issue of the law applicable to the Motion for Class Certification in Israel. On September 11, 2008, the District Court ruled that the law applicable to the Motion for Class Certification in Israel is U.S. law ( H. Gerstl, P.). A motion for leave to appeal (LCA 8517/08) was filed from this decision. In a decision of January 27, 2010, this Court ordered the dismissal of the motion for leave to appeal, ruling that the District Court must also address the issue of staying the hearing of the Motion for Class Certification in Israel until the class proceeding in the United States is decided (A. Grunis, E. Arbel and N. Hendel, JJ.). It was further ruled that once the matter was decided, this Court could hear both the stay of proceedings issue and the issue of the applicability of foreign law. On April 25, 2010, the parties filed joint notice with the trial court whereby they agreed that the hearing of the Motion for Class Certification in Israel be postponed “based on the Honorable Court’s ruling regarding the applicability of the foreign law”, and without derogating from the Petitioner’s ability to seek to appeal the ruling regarding the applicability of the foreign law. The District Court (H. Gerstl, P.) ordered the postponement of the continued hearing of the proceeding, as agreed (decision of April 26, 2010).
5. On May 24, 2010, the motion for leave to appeal at bar was filed, from the trial court’s decision of April 26, 2010, in which the District Court ordered a stay of the proceedings (although the grounds of the motion for leave to appeal relate to the issue of the applicability of the foreign law, which was decided in the District Court’s decision of September 11, 2008). On September 1, 2010, the Petitioner filed with this Court (after being granted leave) new evidence -- a judgment that had been issued by the Supreme Court of the United States, after the granting of certiorari, in which the extraterritorial applicability of U.S. securities law was addressed (Morrison v. Nat'l Austl. Bank Ltd., 561 U.S. 247 (2010), judgment of June 24, 2010 (hereinafter: the Morrison case)). The Petitioner asserted that in Morrison, it was ruled that U.S. securities law is not applicable outside of the U.S., and therefore, so he claims, the law applicable to the Motion for Class Certification in Israel is the law in Israel, and there is no room to order the continued postponement of the hearing of the proceeding. In my decision of October 13, 2010, I ordered that the handling of the motion for leave to appeal be suspended and that the District Court decide the consequences of the ruling in the Morrison case on the Petitioner’s case. On August 25, 2011, the District Court decided that the judgment in Morrison does not change its position with respect to the applicability of the foreign law, and therefore the stay of the hearing of the proceeding would remain in place. In accordance with my decision, on November 13, 2011, the Petitioner filed an amended motion for leave, in which the District Court’s decision of August 25, 2011 was also challenged. On February 4, 2013, the Petitioner gave notice (after hearing this Court’s comments at the hearing that was held on January 9, 2013) that he agrees that in view of the existence of the Class Proceeding in the U.S., the hearing of the proceeding that he instituted in Israel be postponed, while he retains the possibility of “resuming the proceedings upon circumstances so justifying”. Accordingly, we ordered, in our decision of February 10, 2013, that the hearing of the proceedings being conducted in Israel between the parties be postponed, and that if the Petitioner would petition for resumption of the hearing of the motion for leave to appeal at bar, the hearing would be resumed from the point at which it was left off.
6. In the meantime, there were developments in the proceedings in the United States. On August 9, 2013, the parties in the Class Proceeding in the United States filed a motion for approval of a settlement that was reached between them (hereinafter: the Settlement, or the Agreement). It is this Settlement which now stands at the center of the hearing before us (the Settlement was filed for our inspection in a notice on behalf of the parties of May 1, 2014). According to the Settlement, the Respondent’s shareholders in the relevant period will be entitled to financial compensation. According to the provisions of the Agreement, the class to which the Settlement applies includes any person who purchased shares of the Respondent between August 31, 2006 and April 1, 2008 (with the exception of officers of the Respondent and members of their families), “on any domestic or foreign exchange or otherwise”; sec. 1.3 of the Agreement). It is already possible to see that this definition of the class includes the class, as defined in the Motion for Class Certification in Israel, in terms of both geography and time (since the definition of the class in the Motion for Class Certification in Israel relates to whoever purchased shares of the Respondent on TASE between March 7, 2007 and December 2, 2007). The sum total of the settlement is U.S. $95 million (sec. 1.22 of the Agreement; this amount includes the representing counsel’s fees, secs. 1.16 and 5.2(c) of the Agreement). The representing counsel requested the award of fees in his favor at a rate of 20% of the settlement (i.e., 20% of U.S. $95 million; Annex A1 to the Agreement). The Agreement stated that the average compensation amount that would be due to the class members, before deduction of the fees of the Lead Plaintiff’s counsel, was U.S. $0.71 per share (ibid.).

In accordance with the provisions of the Settlement, the notice regarding the Agreement would be sent by mail to the class members who may be located with reasonable effort (sec. 6(a) of Appendix A to the Agreement). It was further agreed that an announcement would be published regarding the Agreement in three newspapers, “Investor’s Business Daily”, “Globes” and “The Business Wire” (sec. 6(b) of Appendix A to the Agreement). According to the Agreement, every member of the class is required to prove his entitlement to receive compensation by sending an appropriate form within 90 days after delivery of the notice regarding the Agreement (sec. 5.4 of the Agreement) (hereinafter: the “Entitlement Forms”). The representing counsel has discretion to permit submission of the Entitlement Forms also after this period if an undistributed balance remains in the settlement account (sec. 5.5 of the Agreement). It was further agreed that any balance that would remain in the settlement account after a period of six months would be distributed, insofar as possible, to the class members who applied for receipt of compensation and who proved their entitlement. If a balance remains after this additional distribution, it was agreed that it would be donated to a public cause (an organization which gives legal aid to the needy; sec. 5.6 of the Agreement). The Settlement further determined that each member of the class may be heard at the court hearing the proceeding, and object to approval of the Agreement (secs. 10 and 12 of Appendix A to the Agreement). Each member of the class may also give notice that he wishes to leave the class, in which case he will not be entitled to compensation by virtue of the Agreement and will not be subject to the decision in the proceeding (sec. 11 of Appendix A to the Agreement). The settlement further determined that approval of the Settlement will constitute res judicata vis-à-vis all of the class members (sec. 8 of Appendix A to the Agreement).

7. On October 15, 2013, the Federal Court in California issued “preliminary approval” for the Settlement (Edward M. Chen, J.). On December 30, 2013, the Petitioner filed with the Californian court (according to the date scheduled therefor) objection to approval of the Settlement. The objection was filed on his behalf and on behalf of the class that he seeks to represent in the Motion for Class Certification in Israel. On February 14, 2014, a hearing was held at the Federal Court in California on the objection filed by the Petitioner. The Petitioner, two of his Israeli counsel (Adv. Gil Ron and Adv. Nadav Miara) and a U.S. attorney whom they retained, were present at the hearing. On February 18, 2014, the Federal Court in California rejected the Petitioner’s objection to the Settlement. In its decision, the court addressed in detail the claims raised by the Petitioner against approval of the Agreement. We will address the court’s rulings in this context in greater detail below. The Federal Court in California further found that the settlement was fair and fitting, and that the fees at the rate requested by the representing counsel should be approved. However, the California court ordered that further publications be made in Israel regarding the fact of the Agreement. With respect to the applicability of the approval of the Settlement to the members of the class in Israel, the court added as follows: “However, as the Court noted on the record and reiterates here, this order granting final approval is not intended to dictate to the Israeli courts (nor does this Court opine on) the enforceability of the releases contained in the settlement agreement or the applicability of Morrison should the Israeli investors’ claims be permitted to proceed in Israel”. On February 20, 2014, the lead plaintiff in the Class Proceeding in the U.S. announced that notice in Hebrew would be sent by mail to many class members in Israel, that an announcement would be published in Hebrew in the “Globes” newspaper, and that the last date for the class members in Israel to submit the Entitlement Forms would be extended. The final approval of the Settlement was granted on February 25, 2014.

The parties’ claims in the supplementary pleading

8. In accordance with my decision of June 26, 2014, the parties filed a supplementary pleading in which they addressed the applicability of the Settlement that had been approved in the U.S. to the Motion for Class Certification in Israel. The Petitioner claims that the Settlement gravely discriminates against the class members in Israel, and therefore should not be recognized as preventing the continued hearing of the Motion for Class Certification in Israel. The Petitioner claims that defects occurred in the manner in which the class members in Israel were informed of the Agreement, and that, in fact, they were denied the right to withdraw from the class and object to approval of the Settlement. According to the Petitioner, the notice in Hebrew regarding the Agreement was delivered to the class members in Israel after the date for filing objections to the Agreement, and the date for withdrawing therefrom had lapsed, and the information that was provided therein was only partial and was inarticulately presented. The Petitioner adds that there are differences between the securities law in Israel and such law in the United States He claims that in the United States, the security holder is required to prove the mens rea of fraud or gross negligence in order to establish a cause of action due to an error that occurred in a financial statement, while in Israel, there is no need to prove such grounds. Therefore, so the Petitioner asserts, there was room to set apart the class members in Israel from the rest of the represented class in the United States, and to award the Israelis higher compensation. Despite these differences between the various class members, the Petitioner asserts that the Settlement makes no explicit reference to the existence of the class members in Israel, and that, in fact, the attention of the United States court was drawn thereto only at a later stage, following the objection that he filed. Thus, for example, the Settlement states that the settlement will be published in the “Globes” newspaper, without stating that it is an Israeli newspaper. On the Entitlement Forms, the class members were even required to declare that they were not aware of a legal proceeding that had been filed on their behalf on the same issue, which is not true in respect of the class members in Israel. The Petitioner adds that the United States court expressed grievance that its attention had not been drawn to the existence and uniqueness of the class in Israel. The Petitioner further states that, on the merits, the compensation that was granted to the class members in the Settlement is too low.

The Petitioner further refers, in the supplementary pleading, to the conditions for recognition of a foreign judgment pursuant to the Foreign Judgment Enforcement Law, 5718-1958 (hereinafter: the Foreign Judgment Enforcement Law). The Petitioner asserts that a class settlement issued in a foreign country should only be recognized if the right of the class members in Israel to a fair proceeding is not prejudiced. According to him, the right to a fair proceeding of the class members includes the right to receive notice of the settlement, to withdraw from the settlement, to object thereto, and the settlement being fair. According to the Petitioner, the Settlement in the case at bar does not meet these conditions. The Petitioner emphasizes in his arguments the fact that the California court explicitly ruled that it was not deciding the issue of the applicability of the settlement to the class members in Israel. Finally, the Petitioner believes that the issue of the applicability of the Settlement should be decided by the District Court. The Petitioner further seeks that we decide the issue of the applicability of the foreign law, since this decision bears consequences for the fairness of the settlement vis-à-vis the class members in Israel.

9. The Respondent, conversely, claims in the supplementary pleading on its behalf that the settlement that was approved in the United States is fitting and fair, and that it establishes res judicata in respect of the Motion for Class Certification in Israel. The Respondent rejects the Petitioner’s claims whereby the rights of the class members in Israel were denied. The Respondent specifies in its arguments the considerable efforts made to locate the class members in Israel and inform them of the Settlement and the terms and conditions thereof. The Respondent states that many class members from Israel submitted the Entitlement Forms, and a considerable portion of the “entries” to the designated website that was set up for purposes of implementation of the Settlement was from Israel. Thus, although the scope of the trade on TASE in shares of the Respondent in the relevant period was approx. 7-8% of the entire scope of the trade in its shares, it was found that 28% of all of the entries to the website mentioned were from Israel and approx. 25% of the Entitlement Forms that were submitted by way of delivery of documents arrived from Israel (as distinguished from forms that were submitted online, in respect of which the Respondent did not have full data to classify the identity of the persons submitting the forms by place of residence). In the Respondent’s opinion, the intense participation of the class members in Israel in the settlement that was reached reveals that they were well aware of the fact of the Agreement, and that many of them believed that it was a fair and fitting agreement. The Respondent adds that the Petitioner does not present even a single case of a member of the class in Israel who sought to object to the Settlement or to withdraw therefrom and was prevented from doing so. The Respondent emphasizes in its claims that the Petitioner played an active part in the hearing on approval of the Settlement in the United States, and that his claims were addressed there and rejected. The Respondent adds that the Petitioner even admitted to the California court that in his opinion, the settlement is fair. Therefore, the Respondent asserts that the judgment approving the Settlement in the United States should be recognized pursuant to the Foreign Judgment Enforcement Law, and the Motion for Class Certification in Israel denied due to the existence of res judicata. The Respondent attached to the supplementary pleading on its behalf an expert opinion regarding the foreign law, whereby approval of the Settlement in the United States establishes res judicata vis-à-vis the class members. It is noted that the Petitioner filed, after leave was granted, a response to the Respondent’s supplementary pleading, in which it added a response to its claims.

Discussion and decision

10. We decided to hear the motion as if leave had been granted and an appeal filed according to the leave granted. As aforesaid, the motion for leave to appeal before us has undergone various twists and turns since it was filed. The issue now before us is the applicability of the Settlement that was approved in the United States to the class proceeding that the Petitioner filed in Israel. The question is whether approval of the Settlement in the United States establishes res judicata vis-à-vis the Petitioner and vis-à-vis the class that he purports to represent in Israel, so as to bring an end to the proceeding that he initiated.

Res judicata arising from a judgment issued in a foreign country

11. In order for the Respondent to establish a claim of res judicata due to a judgment that was issued in a foreign country, the judgment must undergo a process of “acceptance” in Israel, pursuant to Israeli law. “So long as the foreign judgment has not undergone a process of acceptance, it has no status in Israel at all, either for the purpose of enforcement thereof in Israel or for the purpose of recognition thereof as a res judicata; it is treated as never having existed” (Celia Wasserstein Fassberg “On the Finality of Foreign Judgments”, 18 Mishpatim 35, 53 (1988); also see CApp 499/79 Ben Dayan v. ADS International Ltd., IsrSC 38(2) 99, 103 (per M. Ben-Porath, D.P.) (1984) (hereinafter: the Ben Dayan case)). The acceptance of a foreign judgment in Israel is mainly regulated in the Foreign Judgment Enforcement Law. The Foreign Judgment Enforcement Law comprises several “tracks” for acceptance of a foreign judgment: declaration of the foreign judgment as an enforceable judgment (secs. 3-10 of the Law), direct recognition of the foreign judgment (sec. 11(a) of the Law) and indirect or “incidental” recognition of the foreign judgment (sec. 11(b) of the Law) (see the survey in CApp 4525/08 Oil Refineries Ltd. v. New Hampshire Insurance Co., paras. 16-19 of the opinion of E. Arbel, J. (December 15, 2010); CApp 1297/11 Levin v. Zohar, paras. 5-6 of the opinion of N. Hendel, J. (December 29, 2013) (petition for further hearing dismissed in CFH 304/14) (hereinafter: the Levin case); Nina Zaltzman Res Judicata in Civil Proceedings, 565-566 (1991) (Hebrew)). It was ruled that when a party in a proceeding in Israel claims the existence of res judicata due to a foreign judgment, the appropriate track is that of indirect recognition of the judgment, pursuant to Section 11(b) of the Law (see Ben Dayan at p. 112 (per A. Barak, J.); CApp 490/88 Basilius v. Adila, IsrSC 44(4) 397, 404 (1990) (the Basilius case); C.A. 970/93  Attorney General v. Agam, IsrSC 49(1) 561, 568 (1995) (per E. Goldberg, J.); CApp 3294/08 Goldhar Corporate Finance Ltd. v. S.A. Klepierre, para. 6 (September 6, 2010) (hereinafter: the Goldhar case)). Section 11(b) of the Law prescribes that “incidentally to a hearing on a matter that is within the jurisdiction thereof and for the purpose of such matter, a court or tribunal in Israel may recognize a foreign judgment, even if subsection (a) does not apply thereto, if it deems it is lawful and just to do so”.
12. Among the considerations that the court must examine as to whether “it is lawful and just” to recognize the foreign judgment, it has been held that it may look to sec. 6 of the law, which lists events, upon the occurrence of which a foreign judgment will not be enforced in Israel. Another source to which it is customary to refer in this context is English law (see Goldhar, para. 6, and the authorities cited there). One of the considerations usually examined is whether the court issuing the foreign judgment held jurisdiction. However, in this regard it was ruled that if a person cooperated with the conduct of the proceedings at the foreign court and did not challenge the court’s jurisdiction there, he may not argue that they were conducted ultra vires ( the Goldhar case, para. 7; Ben Dayan, at p. 106 alongside the letter D (per M. Ben-Porath, D.P.); Amos Shapira “Recognition and Enforcement of Foreign Judgments” (Part Two), 5 Iyunei Mishpat 38, 51-52 (1976)). 

13. Another central criterion to be considered is whether the right of the counter-litigant to due process was prejudiced at the foreign court, or whether the proceedings conducted therein were inconsistent with the rules of natural justice. The main argument that is usually raised in this context is that the litigant with respect for whom the recognition of the foreign judgment is requested was denied a fair opportunity to raise his arguments before the foreign court (see the Levine case para. 6 of the opinion of N. Hendel, J; Basilius, p. 406; CApp 221/78 Ovadia v. Cohen, IsrSC 33(1) 293, (1979)hereinafter: the Ovadia case)). The burden of proof with respect to the violation of the right to due process is imposed on that litigant who argues the violation (see, ibid., p. 296 (per M. Ben Porath, J.); CApp 1268/07 Greenberg v. Bamira, para. 13 (March 9, 2009) hereinafter: the Greenberg case)).
14. Various additional  considerations that case law notes in this respect are whether the recognition of the foreign judgment is repugnant to public policy (see the Ben Dayan case, p. 107 (per M. Ben Porath, D.P.); for regarding broader discussion, see also Amos Shapira "The Recognition and Enforcement of Foreign Judgments", 4 Iyunei Mishpat 509, 530-534 (1974)), and whether the seeker of recognition acts in good faith (see:. Goldhar, para. 8). It should be noted that an indirect recognition of a foreign judgment pursuant to sec. 11(b) of the Law, does not require mutual treaty between Israel and the country wherein the judgment was issued (as distinguished from direct recognition pursuant to sec. 11(a) of the Law; see: Levine, para. 6 of the opinion of N. Hendel, J.). It should be further be emphasized that within the recognition of the foreign judgment, the correctness of the judgment on its merits is not to be examined (see: Basilius, p. 406; Greenberg, para. 10).
15. A finding by the Israeli court that the foreign judgment should be (incidentally) recognized does not conclude the matter, and the court must still determine whether the recognized judgment establishes res judicata in Israel. Different opinions have been expressed in the case law in this regard as to whether such a review should be carried out according to Israeli law or also according to the laws of the foreign country (see: Basilius, p. 411; Goldhar, para. 6). In any case, the foreign law applicable to the matter is a fact that requires proof (ibid., para. 9). However, one can also make recourse to the parity of laws presumption, whereby there is a presumption that the foreign law is identical to the Israeli law (see: Basilius, p. 411).

Indirect recognition of a judgment in a class action issued in a foreign country

16. In this age of globalization, more and more class actions cross international borders and comprise class members from different countries and even continents (see: Guidelines for Recognizing and Enforcing Foreign Judgments for Collective Redress, International Bar Association 6 (2008) (hereinafter: the IBA Guidelines)). This is also relevant to class actions under securities law, since in this area the trading of securities is also becoming increasingly cross-border (see: ibid., p. 17). That being the case, how should we examine whether it would be "lawful and just" (as per the language of sec. 11(b) of the Enforcement of Foreign Judgments Law) to recognize a judgment in a class action that was issued in a foreign country? How is the recognition of a foreign judgment in a class action different from the recognition of a foreign judgment pertaining to a non-class action?
17. In a proceeding (in personam) that is not a class action, only the rights and obligations of the litigants who are present in court are heard and decided. Conversely, a class action is a proceeding which contemplates, inter alia, the rights and obligations of additional players, who are absent from the court room, namely the class members. In a class action, the lead plaintiff seeks to conduct a proceeding on behalf of the class members, and the outcome of the class action might bind them, for better or for worse (see Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2550 (2011): "The class action is 'an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only' (quoting Califano v. Yamasaki, 442 U.S. 682, 700-701 (1979); Hansberry v. Lee, 311 U.S. 32, 40-41 (1940)). Hence, prior to a recognition of a foreign judgment in a class action, the rights of the class members should be considered, as well as the concern regarding the violation thereof (see: John P. Brown, “Seeking Recognition of Canadian Class Action Judgments in Foreign Jurisdictions: Perils and Pitfalls,” 4(2) Canadian Class Action Rev. 220, 222 (2008)) (hereinafter: Brown).
18. The aforesaid is particularly relevant in relation to a class settlement certified by a court in a foreign jurisdiction. A class settlement has a great potential of discrimination against the rights of the class members, since the lead plaintiff and the defendant may collaborate in negotiation and reach agreements that harm the class members and at their expense. There is a concern that the two may agree to high legal fees and compensation to the lead plaintiff and his counsel, in return for an agreement that is not optimal for the represented class. The agreement can be harmful to the class members in two main ways: compensation which is lower than what would be reasonable for each one of the class members, or an expansion of the scope of causes of action in respect of which res judicata shall be established following the certification of the agreement (see: Amir Weizenbluth "Adequate Representation in Class Settlements") 43(1)  Mishpatim 351, 366-367 (2012) (hereinafter: Weizenbluth); Greenberg v. Procter & Gamble Co. (In re Dry Max Pampers Litig.), 724, F. 3d (6^th Cir. 2013) 713, 715).
19. In the case of a number of class proceedings pertaining to the same issue and conducted in different tribunals, and when a settlement is achieved in one of these proceedings, the said concern for harming the class members is further intensified. First of all, from the perspective of the lead plaintiffs and their counsel in the various proceedings, the situation generates competition over the compensation and counsel fees which will be awarded upon the conclusion of the proceeding, since even if the proceedings are not consolidated, it is unlikely that compensation and legal fees will be awarded against the same defendant in more than one proceeding (however, see para. 21 below). Therefore, the lead plaintiffs and their counsel have an incentive to rush the negotiations and reach a settlement with the defendant as quickly as possible. The faster they reach the settlement, and the more expansive the settlement is, the better they can "ploy" their competitors, the lead plaintiffs and their counsel in the other proceedings. On the other hand, a lead plaintiff who chooses to pursue the proceeding to its conclusion, or to start negotiating at a later stage thereof, may leave empty handed. There is no doubt that at times such conduct might be at the expense of the class members and involve their inadequate representation (see John C. Coffee, Jr., “Class Wars: the Dilemma of the Mass Tort Class Action,” 95 Colum. L. Rev. 1343, 1370 (1995) (hereinafter: Coffee, “Class Wars"): "The first team to settle with the defendants in effect precludes the others (who may have originated the action and litigated it with sufficient skill and zeal that the defendants were eager to settle with someone else"; Samuel Issacharoff & Richard A. Nagareda, “Class Settlements Under Attack,” 156 U. Pa. L. Rev. 1649, 1666 (2008) (hereinafter: Issacharoff & Nagareda). We explained elsewhere the lead plaintiff’s incentive to be the first to file the motion for class certification (see LCA 4778/12 Tnuva Central Cooperative for the Marketing of Agricultural Produce in Israel Ltd. v. Naor, para. 7 (July 19, 2012); LCA 4253/14 Halfon v. Shemen Oil and Gas Resources Ltd., para. 10 (December 29, 2014)). When several class proceedings treat the same causes of action and are conducted concurrently in several courts (whether in the same country or in different ones), the lead plaintiffs and their counsel have another incentive, which is to be the first to conclude the proceeding. These two incentives (to be the first to initiate the proceeding and the first to conclude it), might prejudice the quality of representation of the class members.
20. The concern for harm to the class members also exists from the perspective of the defendant. In view of the "competition" between the various lead plaintiffs, the fear arises that the defendant may choose to focus on the proceeding in which he deems the lead plaintiff and the forum to be most convenient, in an attempt to promote negotiation for settlement in that proceeding. By such conduct, which American law refers to as  "reverse auction", the defendant attempts to identify a class proceeding, among those filed against him, in which he can reach a favorable settlement, and which encompasses the causes of action that are contemplated in the remaining proceedings (see: Reynolds v. Benefit Nat'l Bank, 288 F.3d 277, 282 (7^th Cir. 2002); Coffee, “Class Wars,” p. 1372; Myriam Gilles & Gary B. Friedman, “Exploding the Class Action Agency Costs Myth: The Social Utility of Entrepreneurial Lawyers,” 155 U. Pa. L. Rev. 103, 161-162 (2006)). We would note that also in cases in which no settlement is achieved, the defendant can act to expedite the hearing of a class action that he deems convenient, and procrastinate in others, thus influencing the forum before which the arguments against him shall be heard (see Arthur R. Miller & David Crump, “Jurisdiction and Choice of Law in Multistate Class Actions After Phillips Petroleum Co. v. Shutts,” 96 Yale L.J. 1, 24 (1986); also see Henry P. Monaghan, “Antisuit Injunctions and Preclusion Against Absent Nonresident Class Members,” 98 Colum. L. Rev. 1148, 1160-1161 (1998) (hereinafter: Monaghan)).
21. Indeed, a defendant who follows this path assumes the risk that an unfair settlement that he entered into shall eventually not be recognized by other tribunals, and he may be charged with additional payment to the class members or any part thereof (see Brown, p. 220; IBA Guidelines, p. 9-10; Tanya J. Monestier, “Is Canada the New Shangri-La of Global Securities Class Actions?” 32 NW J. Int'l L. & Bus. 305, 334 (2012)). That risk might be an incentive to the defendant to avoid executing an unfair settlement that prejudices the rights of class members. However, sometimes this is a calculated risk taken by the defendant.
22. As we can see, there is a difference between the recognition of a foreign judgment in a class action and the recognition of a foreign judgment in a non-class action, in terms of the identity of the litigant whose rights are feared to be harmed. In a non-class proceeding, the recognition would normally not raise any particular difficulty for the plaintiff in the foreign tribunal, since he is the one who initiated the proceeding there. Usually, the question under consideration would be whether the rights of the defendant in the foreign tribunal were prejudiced. On the other hand, in class proceedings, the recognition of the foreign judgment is usually requested by the defendant, attempting to establish res judicata in regard to the represented class (after the defendant has completed, successfully according to him, a class proceeding in a foreign tribunal). In that case, the question is whether the rights of the class members were prejudiced by the local tribunal. The Canadian court explained this issue, as follows (Currie v. McDonald's Restaurants of Canada Ltd. 74 O.R. (3d) 321, 330 (Ont. C.A. 2005) (hereinafter: the Currie case)):

"In a traditional non-class action suit, there is no question as to the jurisdiction of the foreign court to bind the plaintiff. As the party initiating proceedings, the plaintiff will have invoked the jurisdiction of the foreign court and thereby will have attorned to the foreign court's jurisdiction. The issue relating to recognition and enforcement that typically arises in whether the foreign judgment can be enforced against the defendant.

Here, the tables are turned. It is the defendant who is seeking to enforce the judgment against the unnamed, non-resident plaintiffs. The settling defendants, plainly bound by the judgment, seek to enforce it as widely and as broadly as possible in order to preclude further litigation against them".

The considerations to be taken into account for incidental recognition of a foreign judgment in a class action

23. We shall now return to the Enforcement of Foreign Judgments Law. It would seem that nothing prevents the application of sec. 11(b) of the Law even to the incidental recognition of a foreign judgment issued in a class action. However, there is a question regarding the manner of implementation of the various criteria that the court must consider in this context, in view of the aforementioned special characteristics of the recognition of a foreign judgment in a class proceeding (on the need to adapt the regular rules for the enforcement and recognition of a foreign judgment in a class action, see Brown, p. 222; for a review of the guidelines established in this respect by the International Bar Association, see the abovementioned IBA Guidelines). We would note that the discussion below suits both a foreign judgment that approves a class settlement and a foreign judgment deciding a class action on its merits.
24. As stated above, one of the relevant considerations for the purpose of incidental recognition of a foreign judgment is that the judgment was issued with authority. Presumably, this consideration should also be taken into account also with respect to a foreign judgment that was issued in a class action. However, in my opinion, in the case of a class action conducted abroad, and in view of the various interests that we addressed above, it would be appropriate to require that the foreign court also have a substantial connection to the dispute in the class action. This will reduce the concern for "ploy" by a foreign lead plaintiff and by the defendant in a court which they find convenient and which is unrelated to the dispute, while prejudicing the rights of the represented class. This appears to be the approach in Canada (see the Currie case, p. 328-329, where this test is referred to as a "real and substantial connection" to the forum wherein the judgment was issued; and also see, in English law: Mark Stiggelbout, “The Recognition in England and Wales of United States Judgments in Class Actions,” 52 Harv. Int'l L. J. 433, 464 (2011) (hereinafter: Stiggelbout)). Indeed, in various contexts it was ruled that in order to recognize a foreign judgment incidentally, a sufficient connection is required between the foreign  court and the subject of the proceeding, according to the rules of private international law jurisdiction, in force in Israel (see, for example, regarding the recognition of a bankruptcy order that was issued in a foreign country, MApp 10359/01 Sussman v. the Official Receiver, IsrSC 56(3), 160 (2002); Shlomo Levin & Asher Grunis, Bankruptcy 415 (3rd ed., 2010) (Hebrew)). In this regard, questions arise such as whether a significant part of the represented class is present in the foreign country. Another relevant question is whether the class members could have reasonably anticipated, at the time of engagement with the defendant, that future disputes between them would be decided by the foreign court (see: Currie, p. 332; and cf. LCA 10250/08 Katziv v. Zao Raiffeisenbank, para. 7 (March 18, 2010)). Obviously, also with respect to class proceedings, a litigant who cooperated in a proceeding conducted in the foreign court, and did not challenge the court's jurisdiction, may be deemed as having accepted the jurisdiction of the foreign court (see para 12 above).
25. As noted, an additional consideration that we addressed in regard to the recognition of a foreign judgment is whether the right to due process of the litigant against whom the recognition is requested has been violated. As we saw, in addressing the recognition of a judgment in a class action, the question that would normally arise pertains to the protection of the class members' rights. How must we examine whether the class members right to due process has been violated? United States case law customarily includes three elements in the right of the class members to due process, as follows (Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811-812 (1985) (hereinafter: the Phillips Petroleum case)): first, receipt of proper notice regarding the proceeding, and being afforded an opportunity to participate therein; second, being afforded the opportunity to withdraw from the proceeding; and third, appropriate representation by the lead plaintiff (and his counsel) throughout the proceeding (some refer to these elements as "voice"; "exit" and "loyalty", by analogy to the discussion of shareholders rights in corporate law; see Issacharoff & Nagareda, p. 1701; John C. Coffee, Jr., “Class Action Accountability: Reconciling Exit, Voice, and Loyalty in Representative Litigation,” 100 Colum. L. Rev. 370, 376-377 (2000)). These three elements, according to diverse United States case law, are the ones required to secure "due process" for the class members. These elements were recognized as the considerations to be weighed for the recognition of a class action decided by one court as binding the class members in a class action that is heard by another court (see, e.g.: In re Diet Drugs Prods. Liab. Litig., 431 F.3d 141, 145 (3d Cir. 2005) (hereinafter: the Diet Drugs case)); Gotthelf v. Toyota Motor Sales, U.S.A., In., 525 Fed. Appx. 94 (3d Cir. 2013) (hereinafter: the  Gotthelf case)); Debra Lyn Bassett, “U.S. Class Actions Go Global: Transnational Class Actions and Personal Jurisdiction,” 72 Fordham L. Rev. 41 (2003)); this is also the common approach in Canada, see the survey in Brown, p. 231-234; also see IBA Guidelines p. 14 and 26-27; Stiggelbout p. 470 and 499-500).  
26. I shall briefly review each of the three aforesaid elements. Regarding a proper notice of the proceeding, it seems there is no need, in the matter at bar, to set hard and fast rules regarding the question what would be considered sufficient notice. In Canada, it was held that personal delivery of notice to each one of the class members is not required (see Canada Post Corp. v Lépine 1S.C.R. 549, para. 43 (hereinafter:  the Lépine case)). On the other hand, there is   a view that personal delivery of notice to each class member is preferred, whenever possible (see: IBA Guidelines p. 27). Obviously, the costs of such publication or delivery of notice should be considered, according to the circumstances of the matter. Regarding the content of the notice, it must include a description of the legal proceedings and the settlement (if any), and an update of the class members of their rights and the expected implications of the proceeding for them. Furthermore, they should be updated regarding their right to appear before the foreign court and to object to a settlement reached there (see: the Lépine case para. 45;the Phillips Petroleum case p. 812).

The right of a class member to withdraw from the class has also been recognized as a central aspect of the right to due process. (see: Currie, p. 333-334). The notice delivered to the class members should also inform them of that option (see: IBA Guidelines, p. 27).

As for the condition that the class members must be adequately represented, in the legal literature we find the opinion that claims of inadequate representation should focus upon conflicts of interests between the lead plaintiff (and his counsel) and the class members, in whole or in part, or conflicts of interests among the class members, as distinct from arguments that representation was inadequate because the compensation awarded by the foreign court is insufficient on its merits, whether by a judgment or by a settlement (see the article of Issacharoff & Nagareda; and also see IBA Guidelines, p. 26; Stiggelbout, p. 474-475; the Gotthelf case, p. 102-103; and also cf: Restatement of the Law, Second, Judgements, para. 42(d)-(e)). A possible conflict of interests may derive from a difference in the applicable law in each one of the countries. If Israeli law favors the class member as compared to the applicable law in the foreign country, a settlement abroad awarding uniform compensation to all class members may raise a concern of improper representation of the class members in Israel. This is the case, inasmuch as uniform compensation will result in the transfer of wealth from the class members in Israel to the class members abroad. In such case, it may not be proper to negotiate on behalf of all of the class members (both in Israel and abroad) in their entirety (see: Issacharoff & Nagareda, p. 1681-1683; Lépine, para. 56; Wolfert v. Transamerica HomeFirst Inc., 439 F.3d 165, 173 (2d Cir. 2006) (hereinafter: the Wolfert case)). Obviously, additional differences among class members in each of the various countries may also lead to conflicts of interests. Similarly, a settlement whereby some of the class members are treated differently, while the whole class was represented as one by a single lead plaintiff, raises concern of misrepresentation of that part of the class (see: Weizenbluth, p. 386-387).

27. Nevertheless, it would seem that an examination of the compensation level and other terms and conditions of a class settlement that was certified overseas, on their merits, should not be ruled out when such compensation, terms, and conditions clearly and manifestly deviate from what is reasonable (see IBA Guidelines, p. 14, where it was recommended that such an examination be conducted when compensation is "patently inadequate"; and also cf: Celia Wasserstein Fassberg Foreign Judgments in Israeli Law – Deconstruction and Reconstruction, p. 76-77 (1996) (Hebrew)). In extreme instances, it would seem that recognition of a foreign judgment in a class proceeding may be denied for repugnance to public policy (see: Stiggelbout, p. 471-472).

28.Another issue that arose in United States case law concerns the circumstances in which a party will be permitted to raise a claim that the right of the class members to due process was not properly protected ina class proceeding heard in another court. Various opinions have been expressed on this issue. According to one approach, such an “indirect challenge” of the proceeding at the other court may be permitted only if no fair opportunity was given to raise the said claimsin the challenged proceeding. In other words, according to this approach, it is enough that an opportunity was available – even if not exploited -- in the challenged proceeding, in order to bar an “indirect challenge” of the outcome of the proceeding (see the majority opinion in Epstein v. MCA, Inc., 179 F.3d 641, 648-649 (9th Cir. 1999)). Conversely, a different position was also expressed in United States case law whereby an indirect challenge of class proceedings should be permitted in a broader spectrum of cases. According to this position, the possibility of claiming that a defect occurred in a class action decision will be barred only vis-à-vis a party who appeared at the challenged proceeding, and only in regard to claims that he raised and that were explicitly decided (see the dissenting opinion of Thomas, J. in Epstein, ibid., at p. 655). According to a third opinion (which may be referred to as the middle approach), if various claims in connection with the right of the class members to a due process were heard and decided by the court hearing the challenge, each party, including a party who did not appear himself at the other court, will be barred from raising the same for a second time in the framework of an indirect challenge. Thus, if a member of the class objects to a class settlement at a foreign court and the foreign court explicitly addresses his claims and rejects them, any other member of the class will also be barred from raising the same claims in an Israeli court (see the dissent of Wiggins J., In re Epstein, ibid., at p. 651;. Diet Drugs, at p. 146; and also see: Wolfert, at p. 172, in which the position was expressed that the class member will be barred from raising in an indirect challenge a claim that was heard and decided in the challenged proceeding, even if the claim was raised therein by the defendant; for a survey of the various positions, see: Issacharoff & Nagareda, at pp. 1652-1653 and pp. 1714-1718, and see: Patrick Wooley, “Collateral Attack and the Role of Adequate Representation in Class Suits for Money Damages,” 58 U. Kan.. L., 917 (2010); also see: IBA Guidelines, at p. 25).

In the matter before us, there is no need to decide among the different approaches. Suffice it to say that weight should certainly be afforded to the foreign court’s decision concerning claims of a denial of due process by the class, if these claims are raised for a second time in an Israeli court. In any event, it appears that according to all of the approaches described above, when the party who raises claims of a denial of due process to the class members is the same party who raised those claims in the foreign court (as occurred in the case at bar), decisive weight should be afforded to the fact that his claims were rejected by the foreign court. In such a case, the rulings of the foreign court may be deemed as establishing a quasi “collateral estoppel” vis-à-vis the party whose claims were rejected, which prevents him from trying his luck for a second time by raising the same claims. In such a case, the party seeking class certification in Israel, who is barred from claiming against defects in the foreign judgment, may also be deemed as lacking a personal cause of action to represent the class members in Israel. See Issacharoff & Nagareda (at p. 1715-1716):

“At the very least, adaptation of preclusion principles for collateral attacks should guard against the situation of a literal ‘do-over’. It would be intolerable to allow a collateral-attack plaintiff to escape the binding effect of a class settlement by raising the same structural defects in the class representation that she previously had raised on direct review in the original court and where she had lost on that precise point… Clearly, there must be finality where the very same class member made the same structural claims in the form of an original objection in the rendering court. No plausible conception of adequate representation can countenance a literal re-presentation of the same structural claim collaterally”.

29.A further matter that should be emphasized pertains to the court’s involvement when deciding whether to recognize a foreign judgment in a class action. In regards to recognition of a foreign judgment that is not in a class action, it was held that “the process of recognition of the foreign judgment, checking all of the recognition conditions, need not be performed in each and every case, and such an examination of the fulfillment of a condition or the existence of a defense against recognition will be performed in accordance with the claims of the party opposing recognition” (the Basilius case, at p. 404, emphasis original – A.G.), as an expression of the adversarial approach prevailing in Israel. However, it is highly doubtful that such an approach is appropriate when we are concerned with class proceedings. It should be borne in mind that, usually, the class members will not have an interest in appearing before the court and raising claims in connection with the consequences of the foreign judgment, due to the low value of the personal cause of action to each of them. Moreover, there is also no assurance that the claims of possible harm to the class members will be presented properly by the party seeking class certification, since the issue of recognition of the foreign judgment will often arise before class certification and before a ruling that the petitioner represents the class members in an appropriate manner and is eligible to act as lead plaintiff. Therefore, and in view of the fact that we are concerned with the rights of persons absent from the courtroom, considerable supervision and involvement are required by the court (see: the Raynolds case, at p. 279-280).

30.A further comment is that when dealing with a proceeding concerning securities, it is necessary to consider sec. 35Z of the Securities Law, whereby, “If action was brought before a Court in Israel under any enactment, on grounds that derive from an interest in the securities of a foreign corporation, the Court may – on application by a party – stay the proceedings in the action, if it learns that action was brought before a Court abroad on the same grounds or on similar grounds, and that until a judgment that is no longer subject to appeal is handed down in that action”. This provision reflects the legislature’s inclination to respect and not frustrate proceedings that are being conducted at a foreign court in connection with companies whose securities are “dual-listed” (see: Amir Licht “Dual Listing of Securities,” 32(3) Mishpatim 561, 617 (2002) (Hebrew)). However, if the proceeding in the foreign country ends in a judgment, the recognition and enforcement thereof must be performed pursuant to the provisions of the Foreign Judgment Enforcement Law. In the proceeding at bar, there is no need to decide whether, in view of Section 35Z above, there is room to relax the conditions for recognition or enforcement of a foreign judgment in regard to a company whose securities are “dual-listed”. 

31.To complete the picture, I will note that the issue of recognition of a judgment in a class action may also arise in the court in which the cross-border class action is heard. In the United States, it has been held that when  a class certification, in which some of the class members are located overseas, is concerned, it is necessary to consider, at the class certification stage, whether foreign courts will recognize the outcome of the proceeding. If the chances that the judgment in the class action will be recognized in the foreign country are not high, this constitutes grounds for not certifying the class action with respect to class members located in such country, in the context of the requirement that for purposes of class certification, it is necessary to examine whether it is the most efficient method of deciding the dispute (see: In re Vivendi Universal, S.A. Sec. LitigIn re Alstom SA Sec. LitigThus, in one case that arose in the United States, the court denied certification of a class action against members of the class located in various countries, including Israel (Anwar v. Fairfield Greenwich, 289 F.R.D. 105, 121 (2013)).

32.If a foreign judgmentin a class action is recognized (indirectly), it is necessary to further enquire as to its significance for the proceeding being heard in Israel. Aside from the question of the foreign judgment’s consequences under the applicable law of the court that issued it (which must be proved as a fact, or if necessary, by recourse to the parity of laws presumption), the significance of the foreign judgment will also be decided according to Israeli law (see para.15, above). It should be borne in mind that if the proceeding is at the stage of the hearing of the motion for class certification, denial of the motion does not establish res judicata vis-à-vis the class members (and see: Smith v. Bayer Corp., 131 S. Ct. 2368, 2379-2382 (2011) (the Smith case)). The consequences of recognition of the foreign judgment affect only the party filing the class certification motion. It may of course be wondered what is the practical reason for the filing of an additional, identical class proceeding by another class member, but this is the outcome whenever a class certification motion is denied (although it has been ruled that the denial of a class certification motion may also have certain repercussions for a later class certification motion concerning the same issue and filed by another lead plaintiff; see CC (Tel Aviv District Court) 1043/00 Rosenfeld v. The Social Security Covenant Implementation Organization (October 24, 2002) (Justice E. Hayut), appeal denied in CApp 10688/02 (March 27, 2003); CApp 2505/06 Becker v. Cellcom Israel Ltd., paras. 16-17 (December 9, 2008)).

In addition, if the party seeking class certification (or the lead plaintiff, if the class action has been certified) has asserted his claims at the foreign court and his claims there were rejected, as we have seen above, he himself will be barred from raising these claims for a second time in the Israeli court (see the discussion in para. 28). In such a case, too, the consequences of the recognition of the foreign judgment apply only to him, and it is possible that if another member of the class files a new proceeding on the same issue, the court will be required to address the claims regarding the due process claims of the class members on the merits.

33.To summarize our discussion thus far: a foreign judgment in a class action may be recognized incidentally. This recognition is conducted pursuant to sec. 11(b) of the Foreign Judgment Enforcement Law, according to which the foreign judgment may be recognized if “it is lawful and just to do so”. A first consideration that must be taken into account is whether the foreign judgment was issued by a court with jurisdiction to hear the proceeding. In this context, it is also necessary to examine whether the foreign court has a substantial link to the issue being heard in the class action. The participation of the lead plaintiff or the party seeking class certification in the proceeding in the foreign court may be deemed as consent to the foreign court’s jurisdiction. A further consideration is whether the right to due process of the members of the represented class was violated. In this regard, three main elements must be addressed: serving proper notice to the class members of the class proceeding in the foreign court and affording the class members an opportunity to participate therein; giving the class members an opportunity to withdraw from the proceeding; and adequate representation of the class members by the lead plaintiff (and his counsel) at the foreign court throughout the conduct of the proceeding. Examination of the outcome of the class action in the foreign court on the merits (or examination of a settlement that was approved in a foreign country on the merits) will only be performed in cases in which the outcome is clearly and manifestly unreasonable. Similarly, the foreign judgment will be denied recognition for repugnance to public policy only in exceptional cases. Weight should further be afforded to the fact that the claims being raised against recognition of the foreign judgment were already heard and decided by the foreign court. In addition, decisive weight should be afforded to the fact that the party raising the claims against recognition of the foreign judgment in Israel raised these claims himself in the foreign court, and his claims there were rejected.

If the court finds that the foreign judgment should be recognized, what is its significance for the proceeding being held in Israel? The consequence of the foreign judgment pursuant to the foreign law is a fact that needs to be proven, and insofar as necessary, the parity of laws presumption may be drawn on. According to Israeli law, if the proceeding in Israel is a class proceeding which is at the stage of class certification, denial of the class certification motion does not establish res judicata vis-à-vis the class. In such a case, recognition of the foreign judgment applies only to the party filing the class certification motion. In a case in which the foreign judgment is recognized without hearing the claims in connection with the right of the class to due process on the merits, because the party seeking class certification (or the lead plaintiff) are barred from raising the same, recognition of the foreign judgment is applicable only to the party seeking class certification (or the lead plaintiff).

From the general to the particular

34.There is no doubt that the manner in which the motion for leave to appeal at bar was heard is irregular. The proceeding underwent many twists and turns while it was pending before this court. In this framework, the parties submitted evidence regarding the developments that occurred over time in a manner which is inconsistent with the regular conduct of a proceeding in a court of appeals (although it is emphasized that the parties did not object to the filing of this evidence). There is a dispute between the parties on the adequacy of the notice that was given in Israel regarding the class proceeding in the United States, on the opportunity that was given to the class members in Israel to withdraw from the Settlement, and on the adequate representation of the class members in Israel before the foreign court. Hence, the question arises as to whether it was correct to remand the case to the trial court in order that it hear such new evidence and decide these disputes between the parties.

35.However, ultimately I reached the conclusion that there is no point in remanding the case to the trial court. Based on the material before us, it appears that it may clearly be ruled that the foreign judgment that was issued in the class proceeding in the United States should be recognized, and that such recognition leads to denial of the Motion for Class Certification in Israel. First, and with regards to the issue of jurisdiction, the Petitioner appeared at the court in the United States and raised his claims on the merits in his objection to approval of the Settlement. The Petitioner did not refer us to where he denied the jurisdiction of the court in his pleadings that were filed in the United States  (I would add that inspection of the Petitioner’s claims in the supplementary pleading reveals that he, indeed, did not deny the jurisdiction of the court in the United States to hear the proceeding; paras. 50-52 of the supplementary pleading on behalf of the Petitioner, and para. 12 of the Petitioner’s response to the supplementary pleading on behalf of the Respondent). The Respondent referred us to a pleading that was filed by the Petitioner with the California Federal Court in which he explicitly asserted that his claims against the Settlement ought to be heard in the United States and not in Israel (para. 32 of the supplementary pleading on behalf of the Respondent, which refers to Chapter III of Exhibit 27 to the supplementary pleading on behalf of the Petitioner). By his said conduct, and in the absence of an argument from the Petitioner on the issue of the convenient forum for a factual hearing at the trial court, he should be deemed as having agreed to the jurisdiction of the court in the United States It also appears that there can be no real dispute that the class proceeding has a substantive link to the United States in view of the fact that it concerns trade in securities of a United States company which was mainly performed in the United States.

36.With regard to the Petitioner’s claims of a violation of the right of the class members in Israel to due process, as specified above, decisive weight should be afforded to the fact that the Petitioner himself already raised these claims before the California court, and that they were heard there and rejected. I will briefly review the California court’s rulings on the matter (decision of February 18, 2014, Exhibit 29 to the supplementary pleading on behalf of the Petitioner). After having heard the Petitioner’s claims at the hearing held before it, the California court found that the Settlement was reasonable and fair vis-à-vis investors from Israel. The court added that the Petitioner’s claims regarding inadequate representation of the class members were not proven. In this context, it was held that the Petitioner did not prove that the class members from Israel ought to receive higher compensation due to a difference between securities law in Israel and such law in the United States The California court referred to the ruling of the District Court in Israel, whereby the law that applies to the Motion for Class Certification in Israel is United States law. The California court further added that the class proceeding in Israel is still in its infancy. Under these circumstances, the California Federal Court ruled that the Petitioner had “a long road ahead” in order to succeed in the proceeding that he had initiated in Israel. The California court’s said conclusion appears quite logical under the circumstances. The California court also referred in its decision to the relatively high rate of participation of investors from Israel in the Settlement. It transpires from the data presented in such decision that the rate of participation of Israeli investors in the settlement was considerably higher than their percentage in the entire class represented in the class proceeding in the United States It was held that these data reveal that the class members in Israel were aware of the Settlement, and also that they undermine the Petitioner’s claims in connection with the manner of representation of these class members. The court also rejected the Petitioner’s claim in connection with the implications of the judgment in the Morrison case. Finally, the United States court ordered the publication of an additional notice regarding the fact of the Settlement among the class members in Israel, and extension of the date for the filing of the Entitlement Forms by them.

37.As we can see, the Petitioner’s claims were heard in detail by the California court and rejected. Under these circumstances, there is no room to permit the Petitioner to raise his claims yet again in the Israeli court, even according to the broadest approach to an “indirect challenge” of a class proceeding (see the discussion in para. 28 above). Indeed, there is no claim before us on the part of any member of the class in Israel, apart from the Petitioner, asserting that he did not receive adequate notice of the class proceeding in the United States, or that his rights were violated in any way. All we have before us is the Petitioner whose claims were already raised and rejected by the foreign court. Hence, there is no reason to accept the Petitioner’s claims regarding a violation of the class’s right to due process, and there is also no reason to remand the case to the trial court to hear his claims. I will add that the Petitioner has no serious, arguable claim with regards to the body of the terms and conditions of the Agreement, which claim, as aforesaid, will only be heard in exceptional cases. The conclusion is that there is no impediment to recognizing the foreign judgment pursuant to sec. 11(b) of the Foreign Judgment Enforcement Law.

38.Notwithstanding my said conclusion, I will not deny that I am dissatisfied with the manner in which the Respondent conducted itself. In the Settlement itself, no explicit reference is made to the fact that a considerable portion of the class members are persons who are located in Israel and purchased shares of the Respondent on TASE. This matter was subsumed in the manner in which the represented class was defined (sec. 1.3 of the Settlement, whereby the class members are any person who purchased shares of the Respondent in the relevant period “on any domestic or foreign exchange or otherwise”). The manner in which it was stated that the notices of the fact of the Agreement would be announced in the newspapers is particularly puzzling: “once in Investor’s Business Daily, once in Globes, and once over the Business Wire” (sec. 6(b) of Appendix A to the Agreement), without stating that the second of the three newspapers is an Israeli newspaper. In addition, on the Entitlement Form the class members were required to declare that they had not initiated a proceeding in connection with the subject matter of the Settlement, and that they are not aware of such a proceeding having been filed on their behalf (sec. IV of Appendix A2 to the Settlement). Clearly, this declaration is not true with respect to the class members in Israel in view of the filing of the Motion for Class Certification in Israel. Moreover, in one of the pleadings that was filed in the framework of the hearing on approval of the Settlement (on behalf of the lead plaintiff in the United States), an attempt was made to convince the court that the class is homogeneous, and then too, without saying a word about the difficulty presented by the fact that a considerable portion of the class members is located in another country, and in whose regard there is an additional class proceeding (Exhibit 7 to the supplementary pleading on behalf of the Petitioner).

Moreover, it transpires from the documents that the Respondent attached to the supplementary pleading on its behalf, that it filed several affidavits with the California court regarding the manner in which the Settlement was announced and regarding the pace of implementation thereof (Exhibit 2 to the supplementary pleading on its behalf). In the first of the affidavits that were attached, of December 16, 2013, no explicit mention was made of the existence of the class members in Israel. Then, too, the notice in the “Globes” newspaper was described alongside the other notices that were published in the United States, without stating that this notice was made in Israel. On December 30, 2013, the Petitioner filed his objection to the Settlement (Exhibit 20 to the supplementary pleading on behalf of the Petitioner). Subsequently, on January 16, 2014, an additional affidavit was filed by the Respondent, and this time providing substantial details regarding the existence of the class members in Israel, the notices that were sent to them, and the rate of response on their part according to the Settlement. This affidavit finally stated that the “Globes” newspaper is a newspaper distributed in Israel, and that this notice of the settlement was made in Israel. This conduct raises a suspicion that, prior to the filing of the objection by the Petitioner, the Respondent, together with the lead plaintiff in the United States, tried to underplay the fact of the existence of the class members in Israel.

Indeed, at the time of the hearing in the California court on the Petitioner’s objection to approval of the Settlement, the court expressed irritation that it was not aware of this problematic aspect of the Agreement (pp. 56, 62 and 68-69 of the transcript of the hearing of February 14, 2014, Exhibit 28 to the supplementary pleading on behalf of the Petitioner). The court was also troubled by the adequacy of the notice that was given to the class members in Israel, and even informed the Respondent of the concern of a future indirect challenge of the approval of the Settlement (ibid., at p. 24, line 22ff., and at p. 63). In view of the court’s comments at the hearing, the Respondent published an additional notice of the Settlement in Israel, this time in Hebrew, and the date for the filing of the Entitlement Forms by the class members in Israel was also extended.

39.In my opinion, there is no doubt that the Respondent ought to have clearly informed the California court of the problem presented by the existence of the class members in Israel, at its initiative and at the stage of the filing of the Settlement for the court’s approval. A separate and in-depth hearing on the Settlement and the motion to approve it ought to have been dedicated to the issues concerning the existence of no few class members from outside of the United States However, although this was not done, ultimately the California court was informed of the foregoing difficulty, it explicitly addressed it, and decided the issue. This was done following the objection that the Petitioner filed to the Settlement, and to his credit, it is noted that the objection led to the publication of an additional notice of the settlement in Israel and to the extension of the date for the filing of the Entitlement Forms. In any event, once the California court addressed the matter, and decided as it did, there is no room to permit the Petitioner to try his luck by raising the same claims once again in Israel.

40.Having reached the conclusion that the judgment approving the Settlement in the class proceeding in the United States should be recognized, the question arises as to the implications thereof for the Motion for Class Certification in Israel. The Respondent filed an expert opinion in respect of the significance of the judgment in the United States, but it appears that in this regard too, there is no point in remanding the case to the trial court for a factual hearing of the issue. The fact that the foreign judgment establishes res judicata pursuant to United States law is quite clear in view of the provisions of the Settlement, and in view of the definition of the represented class according to the Settlement. The Petitioner has no good claim in connection therewith. It is noted that the judgment that was issued in the United States is final (it is noted that another class member filed an appeal from the judgment with the Federal Court of Appeals and the appeal was denied by consent: Exhibit 1 to the supplementary pleading on behalf of the Respondent). Although the California court ruled that it was not deciding upon the consequences of approval of the Settlement in respect of the proceeding being held in Israel, this is inconsequential. Leaving the significance of a judgment to a proceeding in another country as an open issue to be decided by the court in the other country is a technique used by courts from time to time (see the survey in Brown’s article, at pp. 224-226; and see the Smith case, at p. 2375). The question of the significance of the foreign judgment in Israel is determined by the court in Israel, as we shall now do.

With respect to the implications of the foreign judgment in Israel pursuant to Israeli law, the proceeding is at the class certification stage. Therefore, the implications of recognition of the foreign judgment are vis-à-vis the Petitioner only, and not vis-à-vis the class in Israel. This is particularly true when the claims regarding violation of the right of the class members to a process were not heard by us on the merits, since the Petitioner himself is barred from raising the same.

41.We find, under the circumstances created, there is no point in remanding the case to the trial court for a factual hearing on the parties’ claims. The parties were given a full opportunity to present their claims on the matter before us. It should be recalled that a court of appeals has broad jurisdiction to decide disputes between the parties, and in this context the court of appeals is granted jurisdiction to issue any decision that may be issued by the trial court, and to issue a decision in favor of the respondent even without the filing of an appeal or a counter-appeal on its part (see sec. 462 of the Civil Procedure Regulations, 5744-1984).

42.However, I would reemphasize that as aforesaid, in my judgment no examination was performed on the merits of the claims in connection with the right of the class members in Israel to due process, since the Petitioner himself is barred from raising such claims after he raised them in the United States and they were rejected there. Therefore, if, in the future, these claims are raised by another member of the class in Israel, the competent court may be required to address the same on the merits. In such an examination, weight will probably also be afforded to the rulings made at the California court (and see para. 32 above). I, of course, express no position with regard to the fate of such a proceeding.

Final comment

43.In CApp 3441/01 Anonymous v. Anonymous, IsrSC 58(3) 1, 23 (2004), Chief Justice A. Barak stated (not in connection with class actions):

“In today’s reality, many Israeli citizens litigate outside of Israel. We are indeed living in a world that is becoming ‘one large village’ (LCA 2705/97 Hageves A. Sinai (1989) Ltd. v. The Lockformer Co., at p. 114). In this reality, motions to recognize foreign judgments of all types and varieties are becoming commonplace. The various dilemmas arising from the issue must be regulated in legislation. The dilemmas revolving around this proceeding will prove the extent to which the issues are complex, and ought to be given a detailed and structured legislative solution”.

With this I concur. The manner in which foreign judgments in class actions are recognized ought to be regulated in legislation. Thus, the certainty with regards to the conditions required for recognition of a foreign judgment in a class action will increase, and the parties will be able to plan their steps accordingly.

44.In conclusion, I propose to my colleagues that we hold that the Settlement that was approved in the class proceeding in the United States be recognized in Israel for purposes of the class proceeding in Israel. Hence, the motion for class certification that was filed in Israel should be denied, and we so order. In view of the Respondent’s conduct, which I specified above, I propose that we make no order for costs.

President (ret.)

Justice U. Vogelman:

 

I concur.

                                                           

 

Justice N. Sohlberg:

 

I concur.

                                                           

 

 

Decided as stated in the judgment of President (ret.) A. Grunis.

 

Given this day, Nissan 13, 5775 (April 2, 2015)

 

 

 

President (ret.)                        Justice                         Justice

 

CA 10085/08 and

Counter Appeal

CA 6339/09

CA 7607/09

 

Tnuva Central Cooperative for the Marketing of Agricultural Produce in Israel

 

v.

 

1. Estate of the late Tufik Raabi

2.  Israeli Consumer Council

 

 

The Supreme Court sitting as the Court for Civil Appeals

[29 November 2010]

 

Before Justices E. Hayut, U. Vogelman,  Y. Amit

 

 

Israeli Legislation  Cited

Class Actions Law, 5766-2006, ss. 20, 22, 23

Restrictive Trade Practices Law,  5748-1988

Banking  (Service for Customer) Law, 5741-1981

Equal Rights for Disabled Persons Law, 5758 – 1998, ss. 19 (54)   - 19 (64)

Male and Female Workers Equal Pay Law 5756- 1996, s. 11

Standards Law 5713-1953, ss. 9(a), 17 (a) (1), 17 (b)

 

 

Israeli Supreme Court Decisions Cited

 

[1]        CA 1338/97  Tenuva Central Cooperative for the Marketing of Agricultural Produce in Israel Ltd v. Raabi,  IsrSC 57 (4) 673 [2003]

[2]        CA 1977/97 Barazani v. Bezeq Israel Telecommunications Company Ltd, IsrSC 55 (4)  584 (2001);

[3]        FHC 5712/01 Barazani v. Bezeq Israel Telecommunications Company Ltd, IsrSC 57 (6)  385 (2003);

[4]          CA 2781/93 Daaka v. Carmel Hospital, Haifa   IsrSC 53(4)  526 [1998-9] IsrLR 409

[5]          LCA 3126/00 State of Israel v. E.S.T. Project Management and Manpower Ltd, IsrSC 57 (3), 220 (2003)

[6]        FHC 5161/03  E.S.T   Project Management and Manpower Ltd v. State of Israel, IsrSC  60 (2) 196 (2005)

[7]        CA. 8430/99 Analyst I.M.S. Trust Funds Management (1986) v. Ard Industrial Investment and Development, 256  IsrSC 56 (2)

[8]        LCA 4556/94 Tetzet v. Zilbershatz, IsrSC 49(5) 774 (1996);  

 

[9]        CA 345/03 Reichart v. Raabi Moshe Shemesh Heirs  (not yet reported) 7.6.2007)

 

[10]      CA 3506/09 Zaig v. Waxelman, Waxelman Accountants (not yet reported)( 4.4.2011)

 

[11]      CA 3613 Ezov v Jerusalem Municipality  IsrSC 56 (2) 787 (2002).

 

[12]      LCA 8733/96 Langbert v. State of Israel – Israel Lands Administration, IsrSC 55 (1) 168  (1999).

 

[13]      CA 7028/00 A.B.A. Trust Funds Management Ltd v. Elsynth Ltd (not yet reported, 14.12.2006)

 

[14]      HCJ 2171/06 Cohen v. Knesset Speaker (not yet reported, 29.8.2011)).

 

[15]      CA 10262/05 Aviv Legal Services Ltd v. Hapoalim Bank, Head Management  (not yet reported, 11.12.2008)

 

[16]      CA 3901/96 Local Planning and Building Committee v. Horowitz, IsrSC 56 (4) 913, 328 (2002)

 

[17]      CA 4576/08 Ben-Zvi v. Prof. His  (not yet reported, 7.7.2011)

 

[18]      CA 8126/07 Estate of the Late Bruria Zvi  v. Bikkur Holim Hospital (not yet reported, 3.1.2010);

[19]      CA 9590/05 Rahman Nuni v. Bank Leumi LeIsrael Ltd , (not yet reported  10.7.2007)

 

[20]      CA 6153/97 Shtendal v. Prof. Yaakov Sadeh , IsrSC 56 (4) 746 (2002)

 

[21]      CA 9936/07 Ben David v. Dr. Entebbe (22.2. 2011)

 

[22]      CA 9817/02 Weinstein v. Dr. Bergman, (not yet published, 16.6. 2005)

 

[23]      LCA 9670/07 Anon v. Anon (not yet reported,6.7.2009)

 

[24]      CA 2967/95 Hanan Vakshet Ltd v. Tempo Beer Industries Ltd,  IsrSC 51 (2), 312 (1997)

 

 [25]     FHC 4693/05 Carmel Haifa Hospital v. Malul  (not yet reported, 29.8.2010)

 

[26]      355/80 Anisimov Ltd v. Tirat Bat-Sheva Hotel. IsrSC 35 (2) 800 (1981)

 

[27]      CA 4022/08 Agbaba v. Y.S. Company Ltd],(21 October 2010 paras 10 – 24; 

 

[28]      C.A. 754/05 Levi v. Share Zedek Hospital) (2007) IsLR 2007  131

 

[29]      CA Reznik v. Nir National Cooperative Association for Workers Settlement [not yet published]   (20.7 2010]

[30]      CA  1509/04 Danush v  Chrysler Corporation (not yet published, 22.11.2007)

[31]       CA 9134/05  Adv. Eliezer Levit v. Kav Of Zafon, Cooperative Association for Services Ltd  [not yet reported, 7.2.2008)

[32]      AAA 2395/07  Accadia Software Systems Ltd v. State of Israel – Director of Tax and Stamp Duty 27.12.2010)

[33]      CA 7094/09 Borozovsky  Conveyancing Ltd v. Ichurn Itur Veshlita Ltd (14.12.2010) 

           

 

American Cases

 

[34]Affiliated Ute Citizens of Utah v. United States 406 U.S. 128, 153-154 (1972) ;

 

[35 ]Binder v. Gillespie 184 F.3d 1059, 1063-1064 (9th Cir. 1999)

 

[36]; Poulos v. Caesars World Inc. 379 F.3d 654, 666 (9th Cir. 2004

 

[37] Kennedy v. Jackson National Life Insurance Company, 2010 U.S. Dist. Lexis 63604, 25-28 (N.D.Cal 2010)

 

[ 38]  Negrete v. Allianz Life Insurance Company of North America 238 F.R.D 482, 491-492 (C.D. Cal. 2006)[.

 

[39]Klay v. Humana, Inc.382 F.3d 1241, 1259 (11th Cir. 2004)

 

[40] Johnson v. The Goodyear Tire & Rubber Company, Synthetic Rubber Plant, 491 F.2d 1364, 1379-1380 (5th Cir. 1974);

 

[41]Cooper v. Allen, 467 F.2d 836, 840 (5th Cir. 1972)

 

[42]Allison v. Citgo Petroleum Corp., 151 F.3d 402, 417 (5th Cir. 1998);

 

[43 ]Reeb v. Ohio Department of Rehabilitation and Correction, 435 F.3d 639, 650-651 (6th Cir. 2006);

 

[44] Fuhrman v. California Satellite Systems, 179 Cal. App. 3d 408, 424-425 (1986);

[45] Altman v. Manhattan Savings Bank, 83 Cal. App. 3d 761, 767-769 (1978);

 

[46] Stilson v. Reader's Digest Association, Inc., 28 Cal. App. 3d 270, 273-274 (1972);

 

[47] Birnbaum v. United States, 436 F. Supp. 967, 986 (1977).

 

[48] Bates v. UPS 204 F.R.D. 440, 449 (N.D. Cal. 2001)

 

[49]  Olden v. LaFarge Corp. 383 F.3d 495, 509 (6th Cir. 2004)-

 

[50] Hilao v. Estate of Ferdinand Marcos, 103 F.3d 767, 782-787 (9th Cir. 1996)

 

[51 ] Wal-Mart Stores, Inc. v Dukes, 131 S. Ct. 2541, 180 L. Ed. 2d 374 (2011)

 

[52] Midwestern Machinery v. Northwest Airlines 211 F.R.D. 562, 572 (D. Mn. 2001)

 

[53 ] McLaughlin v. American Tobacco Co.

 

[54 ]: Pettway v. American Cast Iron Pipe Co., 494 F.2d 211 (5th Cir. 1974);

 

[55] Stewart v. General Motors, 542 F.2d 445 (7th Cir. 1976);

 

[56]  Bowe v. Colgate-Palmolive Co., 489 F.2d 896 (7th Cir. 1973); 

 

[57] United States v. Wood, Wire & Metal Lathers Int. Union, Local Union 46, 328 F.

 

[58]Hood v. Eli Lilly & Company 671 F. Supp 2d  397, 434-453 (E.D.N.Y. 2009)

 

[59] Long v. Trans World Airlines, Inc., 761 F. Supp. 1320 (N.D. Ill. 1991))

 

[60] Allison v. Citgo Petroleum, 151 F.3d 402, 414-415 (5th Cir. 1998);

[61] Lemon v. Int'l Union of Operating Engineers, Local No. 139, AFL-CIO 216 F.3d 577 (7th Cir. 2000);

[62] Jefferson v. Ingersoll Int'l, Inc. 195 F.3d 894 (7th Cir. 2001); 

[63] Reeb v. Ohio Department of Rehabilitation and Correction, 435 F.3d 639 (6th Cir. 2006).

[64]  Fibreboard Corp., 893 F.2d 706, 712 (5th Cir. 1990).

 

[65]  Windham v. American Brands, Inc., 565 F.2d 59 (4th Cir. 1977)

 

[66]  Redish; Powell v. Georgia-Pacific Corporation, 119 F.3d 703, 706 (8th Cir. 1997)

 

[67]  Airline Ticket Commission Antitrust Litig, 268 F.3d 619, 625 (8th Cir 2001)

 

[68] Folding Carton Antitrust Litig. 744 F.2d 1252 (7th Cir. 1984)

 

[69]  Houck v. Folding Carton Admin. Comm., 881 F.2d 494 (7th Cir. 1989)

 

[70]  Cuisinart Food Processor Antitrust Litig38 Fed. R. Serv. 2d (Callaghan) 446 (D. Conn.1983).

 

[71] Democratic Cent. Comm. v. Washington Metro. Area Transit Comm'n

 

[72]  Domestic Air. Transp. Antitrust Litig

 

 

 

For the petitioners — T. Feldman, Y. Elam, F. El-Ajou, H. Jabarin.

For the respondents — A. Helman, A. Segal-Elad, H. Gorni.

 

 

JUDGMENT

 

Justice E. Hayut

 The decision forming the subject of the appeals before us was given in a consumer class action that was approved for filing against Tnuva Central Cooperative for the Marketing of Agricultural Produce in Israel Ltd (hereinafter – “Tnuva”).  The suit concerns the misleading of the consumer public and the production of a dairy product in contravention of the official standard in force on the dates relevant to the suit, by reason of the addition of silicon to  long lasting low fat (1%) milk, that was manufactured and marketed by Tnuva, without making any mention of the silicon component on the product.

Factual Background and the Process of Approving the Suit as a Class Action

     1. At the end of 1993 a problem of over-frothing arose in the process of mixing long lasting milk containing 1% fat (hereinafter: “the milk”) as a result of a problem in one of the machines on the production line. Given the high cost of the malfunctioning machine (about 300 – 400 thousand  U.S dollars) the personnel of the Rehovot dairies decided to solve the problem of  frothing  by adding a chemical substance known as “Polydimethyilsiloxane” , the trademark for which is E-900, to the milk.  This substance is known as “silicon” and was purchased by the dairy in Rehovot, from Amgal Production of Chemicals (1989) Ltd (hereinafter: "Amgal")  without informing the central management of Tnuva.  The Amgal company purchased the silicon from an English company. The aforementioned addition of the silicon to the milk continued from 25 January 1994 until 6 September 1995, just after the affair was exposed. During that period the Tnuva dairy in Rehovot produced and marketed to the public an overall amount of 13 million liters of milk.

The addition of the silicon to the milk was first exposed in the media on 30 August, 1995 and Tnuva's initial reaction consisted of a sweeping denial  of the allegation against it.  This was the case both in an interview of the director of the  Tnuva Milk department, Mr. Yosef Yudovitz and in the official press releases on behalf of Tnuva published in a number of papers on 31 August, 1995, in which it stated that the Tnuva long life milk was free of the silicon supplement and that independent laboratory tests verified this (similar pronouncements also appeared on  1 September, 1995).  The Tnuva representatives continued to deny the addition of silicon in a hearing conducted in the Knesset Economic Committee on 5 September 1995, but soon after that, on 10 September 1995 an internal commission of inquiry appointed in the wake of the publication determined that indeed a silicon supplement had been added to the long life milk that contained 1% fat, in the Tnuva dairy of Rehovot, and the commission's conclusions were published in the media. In the wake of these conclusions, Tnuva recalled all of the cartons of 1% long life milk from the shelves of the stores, to which it was feared that the silicon had been added, and the manager of the Rehovot dairy was suspended from his position.   The National Food Service of the Ministry of Health likewise decided  that Tnuva would have to destroy all of the milk containing silicon and it was prohibited to use it, even as food for animals.  It was further decided on 12 September 1995 to revoke the permit that had been given to Tnuva confirming appropriate conditions of production. Tnuva on its part decided on the same day to establish a commission to investigate the affair, which would give recommendations on "lessons to be learnt and conclusions to be drawn in each and every area that it found appropriate, including personal conclusions"  The committee  headed by Prof. Yehuda Danon, and after it had heard the testimonies and examined the documents,  it published the "Committee's Report on the Examination of Long Life Milk" (hereinafter: the Danon Committee Report"). In the framework of the Report criticism was leveled against senior workers in the Tnuva dairy, against the senior management of Tnuva by reason of the absence of supervision and inspection in the Tnuva dairy, and even against the Food Service in the Ministry of Health, and the Institute for Inspection and Quality in the Trade and Industry Office that was supposed to have conducted supervision and inspection of the quality of the food.

2.    The state on its part on 30 January, 1996 filed an indictment against Tnuva in the Magistrates Court of Rehovot, and against  its CEO and against the manager of the Milk Department and the manager of the dairy for offences of misleading in an advertisement, pursuant to ss. 2(a), 7 (a)(1), 23 and 27 of the Consumer Protection Law 5741-1981 (hereinafter:
"Consumer Protection Law") and against Tnuva and the manager of its dairy in Rehovot for the offences of failing to comply with an official standard pursuant to ss.  9(a), 17 (a)(1) and 17 (b) of the Standards Law 5713-1953 (hereinafter:"Standards Law"). On 4 March 1997 the defendants were convicted by force of their confessions for the offences that were ascribed to them, and the Court accepted the plea bargain that was reached between them and the state, in accordance with which a financial penalty was imposed on Tnuva and the other defendants  (the financial penalty imposed on Tnuva was for the sum of NIS 28,000).

Another proceeding instituted against Tnuva was the present proceeding, which began in a suit filed in the Tel-Aviv Jaffa District Court  on 14 September, 1995 by the late Tufik Raabi (hereinafter:  "Raaabi") along with an application for the certification of the suit as a class action (CF 1372/95, Mot. 11141/95. In his (amended) suit, Raabi claimed that he had consumed long lasting low fat (1%) milk during the relevant period and that the silicon was not specified as one of the ingredients on the packaging of the product, and as such Tnuva had violated the provisions of sections 2,4, and 17 of the Consumer Protection Law.  Raabi further alleged a infringement of an “unwritten contract” with him and with the consumer public in its entirety and negligence on the part of Tnuva in all of the stages involved in “production, supervision, marketing and advertising of the facts related to the addition of the prohibited material to the milk and the fact of the reasonable probability of a real and/or potential health hazard in the product that it marketed”.  In his petition Raabi requested restitution of the sums he had paid in consideration for the milk that he had purchased in the relevant period and compensation for the mental anguish caused to him by the addition of the silicon and by reason of the “misleading and contemptuous” conduct of Tnuva. Raabi’s request for his suit to be recognized as a collective action relied on Chapter F’1 of the Consumer Protection Law, which at that time included an arrangement for the filing of a collective action based on the grounds specified therein. 

3.    The Tel-Aviv District Court (the late Honorable Judge M. Telgam), on 13 June 1996 certified Raabi’s request to file a class action in the name of all of the milk consumers during the relevant period, but the court stressed that in this case it would not certify the remedy of restitution because Raabi had already consumed the milk and had not claimed that any real damage had been caused by its consumption, and he further stressed that even though there was nothing to prevent Raabi from proving that his health had been damaged thereby,  he was not permitted to represent the members of the group regarding “future bodily damage”.

An appeal and a counter appeal against the certification decision were filed by the parties to the Supreme Court (CA 1338/97 Tnuva Central Cooperative for the Marketing of Agricultural Produce in Israel Ltd v. Raabi  [1]  (hereinafter: Decision on the Certification Request)). Tnuva challenged the certification of the suit as a class action and Raabi challenged the determination that the class action would not include the remedy of restitution, and the fact that there was no award for legal fees in his favor. The Israeli Consumer Council joined as a party to the hearing (Raabi and the Israeli Consumer Council will hereinafter be referred to as “the representative plaintiffs”), and in the Attorney General joined as a party in the appeal proceedings, in support of the confirmation of the class action

4.    On 19 May, 2003 in a majority decision, this Court rejected the aforementioned appeals filed by the parties and left the decision of the District Court intact in the sense of certifying the filing of a class action. Regarding this, Justice M. Naor held that the damages claim by Raabi concerns the  non-pecuniary damage that was caused to him by negative feelings, and feelings of disgust, which stem from the consumption of milk that contains silicon “with all of the associations attendant thereto” and that damage of this kind was prima facie “remunerable damage”. The justice further ruled that the addition of the silicon supplement to the milk in defiance of the standard constitutes an  infringement of individual autonomy, and that under the circumstance this not a “trivial matter) (de minimis), and that despite the fact that the Consumer Protection Law does not contain a provision that enables a compensatory award for the benefit of the public or the benefit of a group (all or in part) the court is permitted to award this kind of remedy in a suit under the Consumer Protection Law in appropriate cases in which there is a structural difficulty in locating the consumers. All the same, Justice Naor ruled that the Court would not intervene with the District Court’s decision not to award restitution in this case. Regarding the plaintiffs’ group Justice Naor ruled that it would include all those who had consumed  long life milk of 1% to which silicon was added  during the period between 23 October 1994 and September 1995”, having regard for the fact that the provision in the Consumer Protection Law that allowed the filing of a collective action came into effect on the 23 October 1994 and the fact that in the month of September 1995 the dairy products containing silicon were removed from the shelves.

Deputy President, S. Levin concurred with the ruling of Justice Naor (subject to the issue of awarding a remedy to the public being left as requiring further consideration), and Justice Proccaccia ruled in her minority opinion that the suit should not be recognized as a class action.  She held that the chances of Raabi’s personal suit succeeding are not “self evident” and in her view, "the claim concerning the injury as a result of the inclusion of the supplement in the food product, in deviation from the standard, but without having caused any damage to health, does not dictate, "self evidently" that damage flows naturally in the regular course of events".  Justice Proccaccia added that she would also have refrained from approving the suit as a class action in accordance with the discretion conferred to the court in this matter  (s. 35A of the Consumer Protection Law), inter alia given the fact that the nature of the alleged damage  is not necessarily common to the entire consumer public, and "it is connected to the individual health threshold of each consumer and significantly dependent upon it."

The Class Action Proceedings

5.    Once the suit was certified as a class action, the District Court (Judge Dr, E. Benyamini)  ordered the publication of a notification to the public and the filing of amended claim sheets in accordance with the prescribed conditions of the certification. In the amended statement of claim that they filed, the representative plaintiffs claimed that the approximate number of members in the plaintiff group was estimated at about 43% of the population, which constitutes over two million consumers, and that the members of the group should be compensated for infringement of their autonomy and negative feelings occasioned by inter alia deception, contempt, mental anguish, nausea, aversion to essential food products, fear and anxiety.  According to the representative plaintiffs, the members of the group in their entirety should receive compensation of NIS 8000 for each consumer included in the plaintiff group.  Tnuva on its part argued that the claim relating to the infringement of individual autonomy should be rejected, because no such infringement was actually  caused, and if caused, it was minor and peripheral, in the category of de minimis.  In this context Tnuva stressed,  inter alia  that the addition of silicon to the milk  did not harm the consumers and that silicon was a recognized, approved, and frequently used food supplement all over the world.

6.    The first stage of preliminary proceedings in the Lower Court was intended,  inter alia to crystallize the proceedings for the hearing and the means of proving the suit. In this framework the Lower Court  ruled that the evidentiary stage would not be divided into separate hearings for the question of responsibility and the question of damage.  The court further rejected Tnuva's request to establish a system for proving the non-pecuniary damage on an individual basis, ruling that already at the preliminary stage  "it was clear that the only way of proving damage in this case, if at all, in the absence of any method for locating the purchasers of the milk, is by way of market surveys for the entire consumer public, or even a few sample affidavits of milk consumers, along with the affidavit of [Raabi]” (para. 14 of the decision). On the other hand, the court left open the question of whether it was possible to award general compensation to the entire plaintiff group based on this form of proof.  In addition the court ruled that insofar as in accordance with the standard silicon was prohibited for the use of cows'  milk for drinking, there was no need to rule on the question of whether its use constitutes a health hazard, but it added that when examining the non-pecuniary damage caused by an infringement of autonomy and negative feelings, importance attached to the question of whether there are studies that show the possibility of damage to health as a result of the use of silicon and the question of the quantity necessary to cause such a risk. The reason for this is that if there are experts who contend that there is a possibility of damage to health, then it becomes necessary to address the question of  the consumer’s right “to decide whether he was interested in refraining from taking any risk involved in the consumption of the  milk”. The court further ruled that to the extent that there was proof for the ground of the claim and the alleged damage, and it was determined that compensation should be ruled for the benefit of the group or the public, it would consider the appointment of an expert- examiner and Tnuva would be obligated to supply him with the required economic data.

On 13 October, 2004 the Court actually appointed an expert-examiner in accordance with Regulation 124 of the Civil Procedure Regulations, 5744-1984  (Prof. Yechezkel Ofir, an expert in economic and marketing (hereinafter – Ofir)), and in its decision of 17 March, 2005  the Court further ruled that “the relevant population for this claim is, essentially, the people who actually purchased the milk” and that the intention was to those who purchased the milk in Israel (para. 16 of the decision). All the same, in that decision the Court ruled that the plaintiff group would also include persons who had consumed the milk in hotels, restaurants, and cafes (as distinct from those who consumed it at places of work and who did not actually purchase the milk that was consumed), notwithstanding that with respect to them it would be difficult to prove an infringement of autonomy because they did not choose the category of milk that they had drunk..

 

The Partial  Decision of the District Court

7.    In its partial decision of 7 October 2008 the District Court ruled that the class action suit should be accepted.  In its opening comments the Court noted that the Class Action Law, 5766-2006 (hereinafter – “the Law” or the “Class Action Law”) which was enacted and came into force after the certification of the suit as a class action, would also apply to suits pending at the time of its publication, and hence would also be applicable to this particular class action suit. Even so, the Court ruled that “regarding the ground of claim and the plaintiff group, a decision would be given in accordance with the Consumer Protection Law, which as stated, only applies to the a “consumer” as defined in the law”, while also pointing out that with the enactment of the Class Actions Law, the representative plaintiffs had not petitioned to amend the statement of claim and broaden the scope of the group in accordance with the broadened grounds of claim for which a class action can be filed under the Law.

In the partial decision the Court conducted an extensive survey of the evidentiary material submitted to it, including, inter alia, the Report of the Danon Committee, an expert opinion and public opinion surveys. Regarding the criminal proceedings, the Court held that for purposes of the class action it was not possible to base "factual findings" on the holdings of the Court in the criminal proceedings, inter alia because in that proceeding, witnesses were not heard and evidence was not submitted. Still, the Court ruled that Tnuva's admission to the commission of the offences and the convicting verdict also constitute evidence against it in the proceeding at hand ( whether by force of an admission of a litigant or by force of the provision of section 42A of the Evidence Ordinance [New Version] 5731-1971).  

As a preliminary remark, with implications for both the grounds of the suit and the proof of damage, the Court ruled that it was not required to rule on the "scientific question" pertaining to the existence of a health risk in the drinking of milk containing silicon, and that for purposes of the suit it was sufficient to examine the question of whether it was possible to rule out the possibility of such a health hazard. The Court determined that based on the evidentiary material presented, it could rule that even if there was no proof that the drinking of milk containing silicon caused, or was liable to cause immediate health damage to the consumers, it was not possible to rule out the existence of a health hazard in the long term, especially for children. The Court added that according to its approach, the consumers were entitled to know that the milk contained silicon  in defiance of the law and the relevant standard,  and that in these particular circumstances it was not possible to rule out the health risk involved its consumption, and it also added that had it been required to rule on the aforementioned scientific question  it would answered it in the affirmative, given  the existence of a standard which was presumably based on considerations of  public health and which would transfer the onus of proving the absence of a health hazard to the party in breach, and Tnuva, had not discharged that onus.

8.    In adopting Raabi's version, which was that he purchased within the State of Israel (and not within the areas of Judea and Samaria) as claimed by Tnuva, low fat long life mile of Tnuva which was produced in the Tnuva dairy in Rehovot in the period relevant to the suit, the Court held that Raabi has a personal ground of claim against Tnuva. The Court likewise held that even had its conclusion been different it would not have determined the fate of the class action, inasmuch as following the certification, the suit was that of all of the members of the group, and at all events, it was possible to replace a representative plaintiff who lacked a person grounds of claim, by force of s.8(c) (2) of the Class Actions Law

Regarding the existence of the ground of misleading, the Court noted that in fact it was not disputed that Tnuva misled its consumers and added that "misleading" is too delicate a word to describe Tnuva's conduct, which bordered on consumer fraud". This act of misleading, he added ,was done intentionally with respect to matters that were most definitely essential from the consumers' perspective, because it was an act of misleading regarding the essence and nature of the product (s. 2(a)(1) of the Consumer Protection Law), its components (section 2(a) (2) of the Consumer Protection Law), the risks involved in its use (s. 2(a)(4) of the Consumer Protection Law), and relating to its compliance with the standard (2(a) (11) of the Consumer Protection Law). The Court stressed in this context that the milk was a product that was supposed to be "as pure and natural as possible" and that to a large degree it was consumed by a relatively vulnerable population. It should also be added that the misleading in this case was compounded with the breaching of the obligations imposed on Tnuva by force of the Standards Law, and in this context the Court addressed the fact that the Israel Standard relating to drinking milk which prohibited the addition of silicon to milk is a binding official standard which also involves (as opposed to the "general" Israeli standard) "significant obligations", and it is prohibited to produce or to trade in a product that does not comply with its conditions.  By the same token, Tnuva did not indicate the existence of the silicon supplement on the packaging, and in doing so breached its disclosure duties pursuant to section 4(a) of the Consumer Protection Law, because the product that did not meet the requirements of the standard and was substantively defective and in accordance with section 17 (a) of the Consumer Protection Law.  The Court further held that once it was proved that Tnuva as a dealer had made a misleading representation, the assumption should be that the consumers were exposed to the representation and acted upon it, and the Court emphasized that misleading with respect to the Consumer Protection law can also take place by way of failure to make proper disclosure. In this context the Court further ruled that it was not necessary to prove what exactly each consumer knew and the presumption was that the consumer placed his trust in the dealer and there were no grounds for imposing a duty upon the consumer to clarify whether the product he had purchased complied with the requirements of the Law or the standard.  In view of this the Court ruled that in the case before us the foundation of misleading was fulfilled.

9.    In referring to the rule established in CA 1977/97 Barazani v. Bezeq Israel Telecommunications Company Ltd, [2] at p. 584 (hereinafter "Barazani"); and FHC 5712/01 Barazani v. Bezeq Israel Telecommunications Company Ltd [3] at p. 386  (2003) (hereinafter Further Hearing Barazani the Court noted that the misleading of a consumer constitutes a grounds in tort, by force of the provision of s. 31 (a) of the Consumer Protection Law, and that as such, it was subject to the "doctrinal first principles of the Tort Ordinance [New Version]. The Court further added that even if it was a conduct based grounds (as opposed to consequential) for the purposes of the receiving compensation it was necessary to prove damage and a causal connection between the act of misleading and the damage, as wall as the consumer's awareness of the misleading picture and his reliance thereupon. In our case, so ruled the Court, there was misleading by way of omission, "and it is undisputed that the consumers relied on the fact that the milk that Tnuva produced complied with the requirements of the Law and the standard also indicating that Tnuva never claimed to the contrary.

Regarding the categories of damage by dint of which the action was approved as a class action, the Court noted that these included "non pecuniary, non-tangible, damage that included  negative feelings, such as the feelings of disgust, mental anguish and discomfort, as well as the infringement of individual autonomy" , the thrust of which was the right to formulate a decision  whether to agree to a certain proceeding, in a considered, intelligent and informed manner and with knowledge of the relevant facts. The Court further noted that the non-pecuniary damage caused as a result of the infringement of autonomy admitted of compensation even in the absence of bodily damage, in accordance with the criteria established CA 2781/93 Daaka v. Carmel Hospital, Haifa  [4] 526 (hereinafter – Daaka).  In that context the Court rejected Tnuva's claim that the suit should be rejected given that the injury falls into the category of a "trivial matter", holding that that fact of the damage being mild need not stand in the plaintiff's way, and the very fact that the act damaged the public at large indicates that the act is not trivial.  According to the Court's approach, the severity of the act in this case must be assessed from the perspective of the group in its entirety and not that of the individual consumer.  According to this approach an act consisting of the misleading of the broad consumer public regarding the contents and legality of the production of milk, which is a basic product, cannot be considered as "trivial"..

Regarding the proof of personal damage that was caused to  Raabi, the Court adopted the essence of his claim, which was that as a result of his exposure to the case he experienced negative feelings such as disgust, anger and annoyance by reason of the fraud  and anxiety regarding the consequences of drinking.  The Court noted that though it could be argued that Raabi's feelings were "exaggerated" it was not possible to argue with subjective feelings., and it rejected Tnuva's claim that his feelings stemmed from the publications in the media according to which silicon is suspected of being a carcegengous product. Regarding the damage caused to the members of the group, the Court noted that in principle they were obligated to prove the alleged damaged that they sustained, but that in a mass collective action, as in the case before us, it is not practically possible for each one of the members of the group testify, or even to actually locate all of the milk consumers.  Referring to Regulation 9 (c ) of the Consumer Protection (Procedure for a Class Action), 5755-1995, and s. 20 of the Class Actions Law, the Court ruled that under these circumstances it would suffice to prove the damage in "from a general perspective". The Court noted that the representative plaintiffs had sufficed with the testimony of Mr. Raabi and in the expert opinion prepared by the experts Prof. Mevorach and Dr. Katz on behalf of Maagar Mohot based on a telephone consumer survey (hereinafter: “computer survey”), and that they should rather have filed the affidavits of a number of consumers; however, its position was that the evidence filed was sufficient for the proof of the damage and the determination of its rate, and in this context the Court rejected the claims raised by Tnuva against the consumer survey and its reliability, noting inter alia that drafters of the expert opinion had made a reliable impression, and that they had knowledge and experience in their field.

10.  Giving detailed consideration to the results of the consumer survey the Court noted that the survey indicates that the range of negative feelings (including revulsion, anxiety, fear, anger hatred, disappointment) were to a large or intermediate degree shared by about 66% of the milk consumers. At the same time, the Court accepted Tnuva’s claim concerning a certain inconsistency between the data presented and its claim that in the fifth question, (pertaining to the time at which the negative feelings emerged) the interviewees should not have been presented with the representation whereby the publications concerning the health hazards of silicon were verified both by the Ministry of Health and by Tnuva. However, since the two questions defined by the Court as “cardinal” questions in the survey  (the feelings of the interviewees and the grading of their severity) were asked before the question tainted with the aforementioned defect,  the Court deemed that there was no concern  that the survey  was  biased. The Court was prepared to assume, to be on the safe side,  that the survey’s findings tended to somewhat exaggerate the negative feelings, but ruled that this did not lead to the conclusion that the survey was defective in its entirety, and it further held that it had been persuaded that the survey was adequately grounded and that its findings were consistent with plain common sense.

In this context the Court further added that Tnuva on its part had sufficed with claims against the consumers survey presented by the representative plaintiffs, but did not present its own consumer survey from the relevant period and one can only wonder why. Accordingly, despite the element of exaggeration evident in the survey data presented by the plaintiffs, the Court deemed that its conclusion should be accepted, namely that various non-pecuniary damages were caused to the majority of the consumers, unrelated to the question of the health hazards involved in the consumption of milk containing silicon. On this count the Court dismissed Tnuva’s claims, based on the survey conducted by Prof. Gotlieb on its behalf in 2004 and the expert opinion of Prof. Hornik and Prof. Perry that it had submitted.  The Court stated that indeed there is a hierarchy in the categories of infringements of individual autonomy, but this, and the conceivable existence of damages graver than those in the case at hand, does not compel the conclusion that Tnuva’s conduct did not cause a substantial infringement of the consumer’s autonomy. The Court also rejected additional arguments made by Tnuva concerning the proof of the damage in this case, pointing out, inter alia, that for purposes of proving the damages head of infringement of autonomy it was not necessary to prove that the plaintiff would have refrained from acting in the manner that he acted had he been aware of the true situation, and for our purposes – that the consumers would have refrained from purchasing the milk had they known that it contained silicon.  A fortiori there is an infringement of the  consumers’ autonomy when it can be reasonably assumed that most of them, indeed, would not have purchased the milk had they known that the “classic health product” was actually manufactured in defiance of the Law and the standard, using silicon at a rate that was ten times greater than the rate permitted in other food products, and especially if they had known that some of the experts maintain that consumption of milk containing silicon may be a health hazard.  In this context the Court rejected Tnuva’s argument that silicon is a food supplement in other food products and is not harmful, pointing out that the silicon was purchased by Tnuva as a cleaning product, and which was not supposed to have been in the milk. The Court further noted that the infringement of individual autonomy emerges clearly from the consumers’ survey, but its approach was that it was not necessary to produce evidence of this damage – “the infringement of autonomy occurs along with the violation of the obligation to provide the consumer with all of the information, and the violation is an immanent result of tortuous conduct. The denial of the consumers’ right to decide whether to purchase and consume Tnuva milk, in a balanced, informed and knowing manner, being aware of the relevant facts, constitutes independent remunerable  damage, even in the absence of any other damage, and even absent proof that the consumers would have avoided purchasing the milk had they known all the facts”.  The Court added that the fact that Tnuva concealed  the insertion of the silicon into the milk from its consumers, combined with the fact that this was a matter critical for the consumers, is proof of the infringement of the consumer's autonomy in terms of being denied the right to choose the product of his choice in a considered, intelligent and informed manner, in other words the right to prefer a product that does not contain silicon manufactured in compliance with the requirements of the law and the standard. The Court further ruled that the right to autonomy is a basic constitutional right, the infringement of which mandates a appropriate and significant compensation.

11.  Regarding the evaluation of the damage the Court held that it was appropriate to have consideration for the gravity of the infringement of the right on Tnuva’s part in this case, and the infringement’s influence on the consumers’ decision and its degree of importance for them (in as much as the issue concerns a basic, “pure” product consumed by a vulnerable population. The Court added that even after giving consideration for the fact that the feelings of the interviewees may have been significantly affected by the media publications concerning the health hazard attendant to the consumption of milk containing silicon, half of those asked experienced negative feelings that are unrelated to anxiety, and it ruled that feelings of anxiety do not necessarily stem from the publications, but rather from Tnuva’s conduct. In this context the Court rejected the claim that the media publications severed the causal connection between the acts of Tnuva and the damage, stressing that the consumer cannot be expected to undertake an in-depth investigation of medical studies before he purchases milk, and if the addition of silicon to the milk was proscribed by law and the standard, and there are experts who deem that it may constitute a health hazard under certain circumstances, then the fear of the consumers is understandable and natural. This concern, it was ruled intensifies the infringement of the consumer’s autonomy,  just as it intensifies the accompanying negative feelings. The consumer is permitted to assume, and presumably did assume that the milk standard is intended to protect his health , and when Tnuva absolutely ignored the standard, the fear for health is justified and well based, even without the publications to the effect that silicon is suspected of being carcegenerous.

Accordingly, it was held that it had been proved that the group in its entirety had incurred damage by reason of infringement of individual autonomy.  The Court further determined that about a half of the group’s members suffered non-pecuniary damage that found expression in various negative feelings, based on the consumers' survey and an estimation that took into account the possibility that exaggerated media publications had partially contributed to the negative feelings.

Regarding the size of the group, in other words, the number of consumers in Israel who purchased the silicon during the determining period (between 23 October, 1994 and September 1995) for domestic needs, or for hotels, restaurants and cafes, the Court endorsed the expert opinion of  Ofir, the court expert, being impressed by his reliability and expertise, and preferring it over the expert opinions submitted by Tnuva.   The Court further mentioned that Ofir had determined (based on the weighted average of the various methods of calculation) that 166, 307 households had purchased the milk, but given that in an average household a number of people purchase milk, Ofer determined that the number of people who had purchased the milk ranged between 166,307 (number of households) and 330,000  (adult purchasers) with a tendency towards the lower number. This being so, the Court determined that the number of members in the group, i.e. the adults who purchased the milk during the relevant period, was 220,000 people, and that the members of this group were entitled to compensation for an infringement of their autonomy and a half of them were entitled to additional compensation by reason of negative feelings.  

12.  The plaintiffs requested that the remedy be calculated the sum of the damages to be awarded to each one of them  multiplied by their total numbers and in this context the Court noted that the high road was indeed that of individual compensation for each member of the group (sections 20(a)(1) and 20 (a) (2) of the Class Actions Law). This however is only possible when the number of members in the group is not large, when their identities are known and where they are able to prove their damage in the customary manner. On the other hand, there is a need for a certain degree of flexibility in proving damage when there is a practical difficulty of requiring each group members to prove his claim in the customary manner (by reason of their large numbers or because they cannot be expected to retain the relevant documents), and also where there is no practical means of locating all the members of the group  or where many of them will simply not bother to prove their damage due to its low rate. To overcome the difficulties involved in proving damage, its allocation and quantification in such cases, case law in the U.S.A developed a mechanism known as (FCR) Fluid Class Recovery, which was dwelt upon extensively by this Court. The Court did not ignore the fact that the case law in the U.S.A in this context is not uniform  but deemed that with the necessary caution “ideas can be drawn from it” for our purposes, while stressing that from the Explanatory Note to the Class Actions Law it emerges that the Israeli legislator “had this mechanism”. The Court referred to section 20(a) (3) of the Class Actions Law in accordance with which the Court is entitled to award overall compensation to a group, indicating that this section refers to the granting of a personal remedy to the members of the group and seeks to overcome the difficulty in calculating personal damage. The Court likewise referred to section 20 (c ) of the Law that allows an award of a general compensation to the public  or to the members of group, all of them or in part, while pointing out that this section is intended for cases in which it is not possible to locate the members of the group or to pay them compensation on a personal basis, notwithstanding that for purposes of granting this remedy too it is appropriate “to attempt to evaluate the sum of personal compensation owing to each individual member of the group in order to determine the sum of the overall compensation, and to ascertain that the sum of overall compensation does not exceed the estimated sum of aggregate damage that was caused to the group members…. it is likewise important to determine, at least by way of estimation the number of members in the group. This will assist the court to determine in the most accurate manner possible the overall sum for the group, for purposes of granting a remedy to the group or to the public” (para. 107 of decision).

On the other hand, the Court stressed that this sum of overall compensation does not necessarily reflect the product of the sum of personal damage suffered by each member multiplied by the number of members in the group, and some of the group’s members may actually not receive compensation at all, whereas other, non-members, will benefit from the compensation. The Court further added that the infringement of autonomy and the “negative feelings” in this case are at all events non-pecuniary damages the determination of which by definition requires estimation and hence by nature cannot be precise.  Accordingly, it is possible to determine the compensation for non-pecuniary damage by way of estimation alone and then to multiply it by the number of members in the group, which can similarly be determined on the basis of estimation, or the global payment can be determined by way of estimation. The Court mentioned that at all events, the unavoidable reality of it being an estimate need not negate the granting of a remedy in the group’s benefit. The Court did not ignore the fact that section 20 (a)(3) of the Law states that the court may award an overall pecuniary compensation that will be divided between the members of the group, provided that it admitted of “precise calculation” but it deemed that this term should be interpreted in accordance with the purpose of the law and the section.  The Court further mentioned that this term is missing from section 20 (c ) of the Law, which deals with a remedy for the benefit of a group or the public and that s. 20 (e) of the Law stressed that the demand for the proof of damage would not prevent compensation for non-pecuniary damage. The Court further mentioned that occasionally the practical goal of the legal process requires that compensation be awarded in accordance with a uniform criterion even if it is clear that there are differences between the various plaintiffs, and this is the case at hand. The Court addressed the consumers survey that was presented and ruled that it proved the damage relating to the negative feelings in accordance with the degree of certainty required in a civil proceeding, especially having consideration for the fact that it only concerned the criterion or calculating the global compensation that could be determined on the basis of an evaluation. Similarly, the Court noted that in the decision pertaining to application for confirmation of the suit as a class action, the Supreme Court assumed that there was no escaping the award of compensation for the benefit of the group, and it further mentioned that Tnuva’s claims in the respect undermine the decision to approve the suit as a class action. The Court further rejected Tnuva’s alternative claim to the effect that at the very most it was possible to base the compensation on “wrongful profit” that it gained by reason of the acts forming the subject of the suit. The Court likewise rejected Tnuva’s claim that at the end of the day it had only incurred losses by reason of the affair and as such it had no wrongfully gained profits. The additional claim raised by Tnuva as an alternative claim, argued that the profit made reached amounted to NIS 350,000 only and it was likewise rejected by the Court

Regarding the determination of the damage, the Court stressed that in its claim sheets Tnuva did not refer to section 20 (d)(2) of the Class Actions Claim which authorized the court to have consideration for the damage liable to be caused to the defendant or to the public requiring its services due to the payment of the compensation.  All the same, and even though no claims or explicit data was presented to it regarding this matter, the Court ruled that the evidential material indicated that the compensation would not impair the ongoing activity of Tnuva or jeopardize its economic stability and that at the very most, the compensation would have a negative effect on its profits in the near future. The Court similarly emphasized that in order to achieve the aims that are at basis of the class action, the remedy for the plaintiff groups must be efficient and substantive.    

13.  For all of the reasons mentioned, the Court decided on a monetary remedy in favor of the group, by force of s. 20 (c) of the Class Actions Law, to be calculated on the basis of an identical sum for each member of the group. The Court further ruled that awarding compensation for the sum of NIS 8000 for each member of the group, as requested by the representative plaintiffs, was perhaps appropriate for a personal claim, but in this particular class action would have meant a monetary remedy amounting to an overall sum of NIS 1.76 billion, which is unreasonable. Having consideration for the entirety of the data, the Court ruled that Tnuva should pay a global sum of NIS 55 million, which reflects personal damage at the sum of NIS 250 for each member of the group (NIS 250 X 220,000), while pointing out that this sum, and even in excess thereof, was most definitely suffered by each members of the group, even if only by reason of the breach of individual autonomy.

The Court further determined that the sole practical remedy was the remedy in favor of the group, which should be divided in accordance with three objectives:

       (1)        Awarding a benefit to the members of the group by  reducing the price of the product (or increasing its contents without raising the price). The Court noted the difficulties involved in the realization of this remedy, noting that its certification would require an economic expert opinion, the certification of the Director of Antitrust and the position of the Attorney General, and supervision of its execution by force of s. 20 (f) of the Law;

2. Transfer of  part of the compensation sum to a research and scholarship fund in the field of food and nutrition which have implications for public health
3. Distribution of milk free of charge to populations in need via non-profit organizations so involved.

The Court further ruled that “the allocation of the sum between the three approved objectives will be determined after it becomes possible to confirm the discount from the price, in accordance with the conditions determined, and after an allocation plan is filed for the two other objectives”, and it noted that it could be expected that the parties would reach agreement concerning the manner of allocation of the sum of compensation in accordance with the above, so that the Court would not be compelled to enforce a settlement upon them.

Regarding the compensation for the representative plaintiffs and the legal fees for their attorney, the Court noted that the application for a legal fees award for the sum of NIS 400 million is unreasonable and unfounded. It further ruled that at that stage the compensation and legal fees should not awarded given that the final conclusions had yet to be drawn regarding the manner of allocating the overall sum of compensation, but after having considered the criteria for the determination of the rate of  legal fees and compensation, the Court ordered the payment of an intermediate sum “against the account of the final sums” as follows: compensation to Raabi's heirs for the sum of NIS 150,000; compensation to the Consumers Council for the sum of NIS 250,000; legal fees for the sum of NIS 500,000; and court expenses for the sum of NIS 100,000.

Tnuva rejected the partial decision of the trial court and appealed against it in this Court (CA 10085/08; hereinafter – the Tnuva appeal); the representative plaintiffs on their part filed a counter appeal against the decision (hereinafter: the appeal of the representative plaintiffs) but before the hearing of these appeals, the District Court gave a supplementary decision

The Supplementary Decision of the District Court –

The Final Compensation and Legal Fees Awarded and the Manner of Allocating the Compensation

14.  In the supplementary decision of 17 June 2009, the District Court gave effect to the agreements reached by the parties, with the cooperation and the agreement of the Attorney General. The agreements were as follows: (a) The allocation between the three objectives would be – the discounts arrangement 22%, the research and scholarship fund 33.33%, and the distribution of milk products to the needy 44.6%; (b) the distribution of milk products (not only the long lasting milk forming the subject of the suit) would be over a period of five years, beginning as of the commencement of fulfillment of the decision, via a NPO known as "Latet" ["To give" – Trans.] and Mishulhan leShulhan  ["From One Table to another Table" – Trans.]; (c )For purposes of transferring the compensation for research purposes in the field of food and nutrition, a research fund would be established, headed by the Chief Scientist of the Ministry of Health. The management of the fund (whose members are stipulated in the agreement) will select the research programs that will be entitled to the scholarships and supervise them. The sum of the compensation will be utilized over a period of five years, unless the need arises to continue to use the sum thereafter as well; (d) the particulars of the discounts arrangement will be formulated following the decision on the appeal filed against the partial decision and will be based on the existing data at that time and will apply to all categories of long lasting milk (1% to 3% fat)  and will be completed within five years from the commencement of execution. This arrangement merited the certification of the Director of Antitrust but the Court noted that there might be a need to return to the Court in the event of a significant time period passing until the beginning of its execution. The Court further mentioned that should the parties fail to agree on the details of the discounts arrangements, it would appoint an expert to determine its details. The Court further added that the execution of the partial decision in accordance with the agreements specified would be delayed until  a decision was given on the appeal that was filed against it.

Regarding the final compensation and legal fees the Court ruled that the interim sums determined in the decision were to be supplemented by the following sums: Raabi’s heirs would receive compensation for the sum of NIS 350,000; the Consumer Council would receive compensation for the sum of NIS 750,000; the attorneys of the representative plaintiffs would receive the sum of NIS 2,000,000 and regarding this the parties agreed that the compensation would be paid within thirty days of handing down the supplementary decision, as well as 60% of the fees that was to be awarded and that payment of the balance would be postponed until after the decision on the appeal. Finally, the Court ruled that an advertisement should be published in the three main newspapers, including the central elements of the decision.

The parties have also challenged the supplementary decision before us.  The representative plaintiffs on their part appealed this decision ( CA 6339/09) and Tnuva too  has requested our intervention (CA 7607/09). The parties' claims in the appeals against the partial decision and the supplementary decision (which will hereinafter be jointly referred to as “the decision” were filed together). 

Tnuva’s Claims

15. Tnuva claims that the Lower Court's decision should be overturned, and alternatively that the sum of compensation ruled against it should be significantly reduced. They claimed that the District Court had aimed at accepting the class action and had avoided the accepted procedural rules. Tnuva further argues that from the decision it emerges that the basic principles of tort law do not apply to consumer class actions for non-pecuniary damage, and that this unlawfully defies the parameters of the Class Actions law contrary to its language, its guiding principles and in defiance of the law determined in the further hearing in the matter of Barazni [2] . Tnuva claimed that the Lower Court actually cancelled the requirement for a causal connection between the misleading and the damage, and emphasizes that in the decision in the matter of Daaka [4] the infringement of the autonomy stemmed from the urgency of the information and its centrality in the individual decision making process. It follows that when the information does not influence the individual decision making process there is no basis for awarding him compensation. Alternatively Tnuva claims that if the  Daaka  [4]  decision is interpreted as a decision that which abandons the requirement of the causal connection, it should be restricted to its specific context and the exceptional circumstances in that case that pertained to the infringement of  informed consent to medical treatment, and it claimed that a deviation from the classical rules of tort is not justified in the context of the tort consumer deception and deviates from the Supreme Court’s decision in the Barazani Further Hearing [3]  Here, Tnuva refers to the Court’s decision to the effect that for purposes of compensation under the tort head of infringement of autonomy, there is no requirement for an examination of the personal particulars of each victim, and the conclusion is that the victim himself does not constitute a factor in the calculating formula

Tnuva further claims that the representative plaintiffs did not prove that they incurred any damage as a result of its acts and that in fact, the damage was caused as a result of media publications and not as a result of the negating of their choice in purchasing milk. Tnuva further claims that  the Court erred in its estimation of the  sum of compensation in a uniform manner for all members of the group, notwithstanding the differentiation in the sum of compensation that the members of the group are prima facie entitled to based on their personal particulars. Its claim, which it seeks to anchor in the Israeli and American case law, is that non-pecuniary damages are by definition individual and cannot be assessed in a uniform manner, and that they include the damage caused by infringement of autonomy which likewise is individual-subjective. Furthermore, Tnuva claims that in the case at hand compensation for the group and the public should not have been awarded and that at all event there was no basis for calculating the overall damage based on a simple multiple of the number of members in the group by the rate of personal damage. Tnuva also claims that the sum assessed by the Court as representing the damage from which each member of the plaintiffs group suffered  - NIS 250 – is an arbitrary sum that was determined without any supporting evidence and without giving any substantive reasons for the manner of its determination.  In addition, Tnuva points out that in awarding a uniform damage the Court failed to distinguish between the members of the group, who according to its own determination had suffered from negative feelings as a result of the consumption of the milk, and those who did not suffer these feelings; nor did it distinguish between those for whom the fact of the addition of the silicon would have influenced the decision to consume the milk and those for whom it would not have influenced is consumer conduct.

16.  Tnuva also claims that the overall compensation awarded by the Court is exaggerated and unprecedented and it stressed that its entire profits from the sale of milk during the relevant period stood at  NIS 3.4 million. The claim was that the Court actually awarded penal compensation as attested to by the “penal” terminology that is used in the decision, even though this has not place in the framework of a class action, in accordance with the provisions of section 20 (e) of the Law.

Tnuva found an outstanding example of this in the Court’s rulings regarding the health hazard in the consumption of food containing silicon and argued that the sole purpose of the discussion of the matter was to clarify to the reader exactly “why Tnuva is deserving of a punishment”. Tnuva claims that in this matter the Court handed down contradictory decisions as well as decisions that contradict that which was stated in the decision relating to the certification application. It further argues that the trial court avoided the exercise of its authority to rule on the veracity of the claims of the representative plaintiffs, and that it imposed a “featherweight” evidentiary because it contented itself with the existence of a few studies (which were presented to it incidentally), without ruling on their veracity, and without having been presented with a detailed expert opinion on the matter. Tnuva emphasized that the official standard prohibited the addition of any substance to the milk (apart from Vitamin A or D  in particular circumstances) and did not relate specifically to the addition of silicon. Similarly, Tnuva claimed that the official force of the standard had already expired in 1998 and that it was no longer binding upon milk producers, and that in other standards it had been permitted to add silicon to food products, even to such as are consumed by infants, in quantities similar to those that it added to the long standing milk and in dimensions in excess of those involved in the case at hand. Tnuva further added that the trial court’s determination that the health hazard could be inferred from the very violation of the standard was unfounded and was actually in contravention of the provision of s. 17C (a) of the Standards Law. Tnuva further argued that the absence of a health hazard from the consumption of silicon may be inferred from the Danon Committee Report and the holdings of the court in the criminal proceeding conducted against it. At all events, its approach was that even given a determination of the possibility of a health hazard, this would not constitute sufficient basis for a ruling of compensation, because compensation cannot be ruled  based on a possibility, not proven, of negative feelings being caused by a theoretical risk to health.  In this context Tnuva added that the Court’s determination to the effect that milk is a “natural and pure” product cannot stand, because the consumer conception is that milk is a processed product that contains different food supplements and only a minority of consumers are of the opinion that was presented by the Lower Court.  Tnuva also dwelt on the discrepancy between the compensation awarded in the case at hand and the compensation ruled in other class actions.

17.  Tnuva further claimed that s. 20 (c ) of the Class Actions Law establishes  compensation for cases in which there is  no possibility of determining or locating the members of the plaintiff group, and hence the Lower Court erred when determining that the section applies when it is not possible to determine the sum of the damage.  Tnuva stresses that the section was not intended to “supersede” the regular rules of evidence and to enable an arbitrary determination of the amount of scope of the damage and sums of compensation. Furthermore, Tnuva argues that the Lower Court erred in determining that the compensation mechanism of s. 20 (a)(c) of the Law differed from that of s. 20 (c) of the Law, claiming that compensation under s.20( c) was also subject to the requirement of “precise calculation” prescribed in s. 20 (a)(c ) of the Law.  Accordingly, compensation for the public benefit or for the benefit of a particular group can only be awarded when personal compensation would not be practical were the requirement of “precise calculation” to be complied with.  Tnuva submitted that insofar as the case at hand does not admit of accurate calculation of the damage or even estimation based on “stable” statistical data, the Court had no choice other than to reject the suit. Tnuva further added that in the U.S.A., when there is no possibility of accurately calculating the damage to a group or where the damage is non-pecuniary, the Court does not approve the filing of a class action.

Alternatively, Tnuva claims that even if the case at hand warrants the ruling of compensation for the benefit of the group’s members, it should not have been assessed in the manner adopted by the Lower Court.  Its argument was that since the damage caused to each member of the group cannot be determined it is not correct to arbitrarily determine the compensation based on multiplying any particular sum of damage by the number of members in the group. Rather, it should be based on the "wrongful profit" that it accumulated.  Tnuva claims that compensation based on calculation of profit overcomes the difficulties in the case before us: it would  reflect the consequences of the event that gave rise to the suit; it would prevent the difficulty of assessing non-pecuniary damage and the unified "pricing" of the negative feelings, despite the differences between the members of the group. It will also prevent the difficulty of assessing damages in accordance with unsubstantiated surveys. According to Tnuva, the profit it gained from the execution of the wrong is NIS 1,645,900 in the terms of the principal, and with the addition of the interest and linkage differentials (from the middle of the period) it  comes out to NIS 4,981,616.  Alternatively, Tnuva claims that the compensation should be calculated based on the sum saved by using the silicon to solve the problem of frothing, which comes out to  USA$400,000 (which with the addition of linkage differentials and interests comes out to NIS4, 346,991). It was claimed that this sum can be supplemented by a reasonable deterrent factor. In addition, Tnuva claims that even if it be determined that the number of members of the group should be multiplied by any particular sum of damage, certain substantive defects in the method of evaluation  conducted by the Lower Court must still be remedied. Its claim was that this multiplication should only include consumers who suffer from substantive negative feelings due to the consumption of milk and it should not include feelings related to "positions or viewpoints" which they hold as a result of the Tnuva's conduct (such as temerity and contempt).  Tnuva's position is that based on the data presented in the court, consumers who answer that definition constitute about 15% of the members of the group defined by the District Court. Tnuva also maintains that the number of members in the group should be fixed at 166,000 (the minimal threshold determined in Ophir's expert opinion) and alternatively at 200,000 (allegedly claimed by Ophir in his testimony.

18.  Tnuva further claims that the sum awarded by the Lower Court for remuneration and legal fees is excessively high, emphasizing that it constitutes 7% of the total sum of compensation. In addition, it claims that this sum deviates from the  guiding criterion for such matters, prescribed in the Law (ss. 22 and 23 of the Law)  and in settled case-law. Regarding the Israeli Consumer Council Tnuva argues that the former did not invest significant work, nor did it assume any risk; that it is a budgeted statutory body and not a private person who requires incentives; that the Consumer Council did not initiate the proceeding and joined it at a relatively late stage; and finally, that its degree of involvement was minimal and negligible. Regarding the legal fees of the representative plaintiff's attorneys, Tnuva claims that the fee is unprecedented, that has no consideration for the manner in which the suit was handled and the discrepancy between the remedies that were requested and those that were ultimately awarded, and adds that the sums awarded by the  Lower Court are liable to pave the way towards abuse of the tool of the class action.

Claims of the Representative Plaintiffs

19.  In the counter appeal, the representative plaintiffs claim that  given the Court's holding that the sum of NIS 8000 for each consumer is appropriate for a personal claim, there is no justification for reducing it to NIS 250 just because the context is that  of a class action. They stressed that Tnuva too did not claim that the defense under s. 20 (d)(2) of the Class Actions Law was applicable to this case.  The representative plaintiffs further claim that the reduction of the compensation empties the class action proceeding of its contents and is inconsistent with the Court's determinations to the effect that grave damage was caused, justifying commensurate compensation. The representative plaintiffs add that increasing the compensation sum will not harm the public, inter alia having consideration for the sales data and profits of Tnuva, and they complain that the group of those represented was significantly reduced, to include only those who purchased the milk regularly, whereas it should also have included incidental purchasers.  They add that the sole reason for the reduction of the group was that Tnuva provided partial information to the court expert who was appointed for purposes of assessing the size of the group.

The representative plaintiffs further claim that Tnuva's pleadings ignore the decision given on the certification application, in an attempt to revisit an already settled matter. Regarding Tnuva's claims concerning the health risks posed by the milk, the representative plaintiffs claim that the Lower Court ruled on this matter in the wake of Tnuva's request to present evidence on the matter and that the findings themselves were over and above what was required. According to the representative plaintiffs, the very prohibition on the addition of silicon to the milk in an official, binding standard (published as a regulation of legislative effect) and its breach, combine to establish the grounds for claim in the framework of the suit. In addition, there was proof of the grounds for action under the Consumer Protection Law (also having consideration for the provisions of the Standards Law). It was proven that silicon posed a potential health hazard, and it was proven that Silicon was aware of the problem and of the defect involved in the addition of silicon to the milk. In this context the representative plaintiffs stress that when Tnuva purchased the silicon from the Amgal company, it made a representation that it was purchasing it as a cleaning material and they also stress that silicon was added to the milk at a rate that was ten times higher than the level permitted under the provisions of the silicon producer for purposes of using silicon in food (they claim that the silicon was added at a rate of one liter per 10000 liters of milk, whereas according to the manufacturer’s instructions it is permitted to add it at the rate of a “ten parts for a million”). The representative plaintiffs further claim that both in relation to Raabi and in relation to the group as a whole, damages had been proved with respect to infringement of autonomy and negative feelings relating to the consumption of milk. The representative plaintiffs stress that in this context it was proved that had the consumers been aware of the existence of silicon in the milk they would not have purchased it, and this is by virtue of both the importance of the official standard and the fact that its breach renders the product “worthless at best”. The representative plaintiffs also add that there are likewise no grounds for interfering with the findings of the Court regarding the occurrence of damage and the gravity of Tnuva’s acts in view of the positive impression made by the witnesses and the experts on behalf of the court. They also stress that the autonomy of the individual is a constitutional right, and hence its infringement should merit commensurate compensation, and they claim that this does not constitute an award of punitive compensation.

The representative plaintiffs add that there are no grounds for interfering with the Lower Court ’s holding that the damage caused as a result of the infringement of autonomy is an inherent element of the tortuous conduct, and that this is also the conclusion from the Daaka [ 4 ] ruling. In addition, they claim that in the present case it is appropriate to award uniform compensation based on an assessment stating that inasmuch as the right to autonomy is a constitutional right, it is an identical right for each member of the group, and that the provisions of the Class Actions Law enable a cumulative calculation of the damage incurred by all the members of the group. They further add that the damage caused in this case is essentially given to assessment by way of estimation; that the arrangements in the Law enable the proof of damage in a manner that is not particularistic and individually based but rather general and all inclusive and that the tendency in case law is consistent with the need to award uniform and equal compensation to all of the plaintiffs as such. The representative plaintiffs stress that this result does not contradict the ruling given in the Barazani Further Hearing [3] and they add that as opposed to Tnuva’s argument, the FCR mechanism does not negate awarding compensation in cases of this kind, indicating that in certain cases American case law awarded “average compensation” multiplied by the estimated number of members in the group. They further state that the FCR mechanism is essentially intended for the distribution of overall compensation, and that the current criticism of this mechanism pertains to the question of distribution of compensation to a group or the public and not to the manner of evaluation of the compensation in accordance therewith.  

20.  The representative plaintiffs further request to dismiss Tnuva’s argument for reducing the sum of compensation owing to them, emphasizing that the compensation  awarded to them constituted a mere  2.5% of the sum ruled in favor of the group as a whole. The attorneys for the representative plaintiffs argue that in fact the Court “punished” them for the discrepancy between the sum ruled in favor of the group (which was unjustifiably reduced) and the remedy which they petitioned for in the name of their principals. Their argument is that in this context the Court mistakenly applied the provision of s. 23 (b) (5) (which provides that in ruling attorneys fees the court may have consideration for the discrepancy between the remedy sued for and the remedy actually awarded), and that it failed to consider all the relevant factors  The attorneys for the representative plaintiffs claimed that they had done a significant amount of work, directing attention to the novel claims that they raised in the proceeding, and they challenged the Lower Court ’s determination that part of the proceeding had not been properly conducted, pointing out that all of their objections had been relevant.

The Class Action and the Consumer Protection Laws -  Meeting of Principles

21.The class action is a special procedural tool for the effective and efficient promotion of principles, values and substantive legal rights. This legal institution is currently regulated in the Class Actions Law which is a comprehensive and detailed framework law that established standard rules for the filing and conducting of class actions. The Law was enacted in 2006 after this Court called upon the legislator to regulate the institution of a class action in a comprehensive statutory arrangement (see LCA 3126/00 State of Israel v. E.S.T. Project Management and Manpower Ltd [5]; FHC 5161/03  E.S.T  Project Management and Manpower Ltd v. State of Israel [6],  but the importance of the class action had been recognized in Israel many years before the enactment of the Class Actions Law. Thus, a series of laws and “local” arrangements relating to the filing and conduct of class actions was already in place, most of which were incorporated as chapters in those laws during the nineties of the previous century. They included provisions that are essentially similar to  the criteria and conditions the fulfillment of which enables the filing of a class action in that particular realm. See Chapter F’1 of the Restrictive Trade Practices Law,  5748-1988 (hereinafter – the Restrictive Trade Practices Law); Chapter F’1 of the Banking  (Service for Customer) Law, 5741-1981 (hereinafter – the Banking Law); ss. 19 (54)   - 19 (64) of the Equal Rights for Disabled Persons Law, 5758 – 1998; s. 11 of the Male and Female Workers Equal Pay Law 5756- 1996. All of these specific arrangements were repealed with the enactment of the Class Actions Law (see ss. 32 – 35, 38 – 40, and 42 of the Class Actions Law) and even before its enactment, the E.S.T [6] decision negated the possibility of basing a class action on Regulation 29 of the Civil Procedure Regulations, 5744-1984, which until that time had served as a normative source and a procedural framework for the filing of class actions in areas lacking a specific statutory arrangement as mentioned above.

This  importance of the class action was discussed by this Court both before and after the enactment of the Class Actions Law in a series of decisions that address its advantages as a legal tool for enabling the realization of the right to file a personal claim in cases where the filing of a claim was not profitable or not feasible for the individual. In addition, this Court’s case-law has dwelt upon the importance of the class action in the promotion of public interest as a legal tool that assists in the efficient enforcement of the law and deters financial magnates who rely on the passivity of the individual, abuse their power, and harm unincorporated groups such as consumers or investors in securities. An additional element of importance of the class action considered in the case-law is that this procedure prevents the multiplicity of suites and hence saves judicial resources, and from this perspective too, the institution of class actions makes its contribution from a public interest perspective (for the definition of the objectives and goals of the Class Action, see s.1 of the Class Actions Act; on this matter see also: CA. 8430/99 Analyst I.M.S. Trust Funds Management (1986) v. Ard Industrial Investment and Development, [7] at p. 256; 8 LCA 4556/94 Tetzet v. Zilbershatz, pp. 783-785 [8]; CA 345/03 Reichart v. Raabi Moshe Shemesh Heirs, paras. 8 – 9 of opinion of the President Beinisch [9]; Sinai Deutch “A Decade for the Class Action  Suit – Interim Summary and Looking to the Future  Shaarie Mishpat 4, 9, 21- 24 (5765) (hereinafter – Deutch -  Decade for the Class Action); Steven Goldstein and Talia Fisher “Interaction Between Mass Actions and Class Action:  Procedural Aspects”  Mishpatim 34, 21, 24- 26 (5764) (hereinafter – Goldstein and Fisher)).

Along with the inherent advantages of the class action it should be remembered that incorrect use of this tool involves not insignificant dangers (see Analyst  [7], at p 256; Tetzet [8], FHC E.S.T [6] at p. 785 [6] at p. 237; Alon Klement “The Boundaries of the Class Action in Mass Tort”,  Mishpatim 34, 301, 325- 331 (5764) (hereinafter – Klement, Boundaries of the  Class Action)). The laws of class action and their judicial supervision are thus intended to maintain an appropriate balance between the risks and chances of the proceeding and to ensure  that it realizes the legal, economic and social goals for the promotion of which it was established (see CA 3506/09 Zaig v. Waxelman, Waxelman Accountants [10] paras. 7 – 8 ; and Tetzet [ 8] at pp. 785 – 786).

22.  One of the outstanding areas in which the advantages of the class action are demonstrated is the laws of consumer protection. Israeli legislation contains a large series of legislative acts intended for consumer protection. The central law in this context is the Consumer Protection Law, enacted in 1981. This law includes detailed provisions concerning the duties and prohibitions applicable to dealers, in other words, to manufacturers, importers, tradesmen  and providers of services, with the aim of subjecting the business sector to a regime of appropriate conventions of behavior, to establish fair game rules in dealer-consumer relations, and to prevent the misleading of consumers with regard to an asset or service that he consumes (on the goals of the Consumer Protection Law - see Sinai Deutch, Consumer Protection Law 120 – 126 (Vol. A. 2001); Explanatory Note for the Draft Bill (Hatza’ot Hok 1469, 302- 303, 5740).  Other laws intended for a similar purpose are for example, the Banking Law (Service to Customers), Supervision of Financial Services (Insurance) Law, 5741-1981 and the Restrictive Trade Practices Law. These laws and additional laws admitting of classification in the category of consumer protection law regulate various aspects of this protection and are intended to prevent unjust enrichment on the part of large financial concerns or on the part of State authorities, at the expense of the individual.  

The point of departure for consumer protection law is the structural imbalance that characterizes the consumer transaction when struck between a financial body, occasionally a large and multi-tentacled company, or even a retail trader and the individual consumer (assuming that he lacks the size advantage of organized consumption).  The legislator accordingly pinpointed this population sector as requiring intensified legislative protection to ensure that the dealer, having the advantages of knowledge and economic ability, does not misuse these advantages for reaping quick profits at the consumer’s expense, while deceiving him in essential matters affecting the nature of the transaction.  For example, the Consumer Protection Law seeks to ensure that when entering into a transaction the consumer has full and fair information concerning the nature and the details of the transaction, the assumption being that this will enable the consumer to plan his actions and enter into a transaction that is optimal and desirable from his perspective. Additional prohibitions in the Consumer Protection Law concern the exploitation of the consumer’s distress, exploitation of his physical or mental weakness, or his ignorance of the language, and the prohibition of exerting undue influence upon him (see CA 3613 Ezov v Jerusalem Municipality [11 ], at p. 801; LCA 8733/96 Langbert v. State of Israel – Israel Lands Administration [12], pp. 175- 176 (hereinafter – Langbert); Sinai Deutch “Consumer Class Actions: The Requirement for Personal Reliance on the Misrepresentation of the Deceiver” Nethanya Law Review 2, 97, 110 – 114 (5762) (hereinafter – Deutch, The Requirement for Personal Reliance). Apart from the importance of the consumer protection laws in redressing the imbalance of power between the dealer and the consumer and strengthening the consumer’s personal autonomy, these laws are also important in realizing public interest of inestimable importance such as: the notion of consumer sovereignty; protection of the right to welfare and social rights, promotion of the principle of fairness in trade, protection of the reliability of the local market, and maintaining trust in the social order and the provisions of the law.

23.  Having synoptically outlined the underlying objectives and goals of consumer protection law, and the objectives and goals of the class action as a legal procedural institution, we can easily identify the “meeting of principles” between the goals intended to be promoted by the class action tool and the values and rights that these laws seek to protect. Hence, the class action can overcome both the inbuilt balance of power between the dealers – those with the economic advantage - and the consumers, and the lack of profitability that frequently accompanies the filing of a claim by the isolated consumer, given the relatively small amount of damages he has incurred (See Barazani [2]; Deutch - The Requirement for Personal Reliance, 115. Regarding the systems for civil enforcement in the area of consumer protection, see Moshe Bar-Niv (Bornovski)).

Indeed, the tool of the class action is actually one of the most significant measures placed by the legislature at the consumer’s disposal for the enforcement of his rights under the laws of consumer protection (see Deutch – a Decade for the Class Action, 18 – 20 according to which most of the class actions filed in Israel are “consumer actions” by force of the various consumer laws.  On the other hand, the implementation of the provisions pertaining to consumer class actions has also been criticized. See Deutch “Consumer Class Actions – Difficulties and Proposed Solutions” Bar Ilan Law Studies 20,  299 (2004); see also CC (Center) 5567-06-08 (Nazareth) Bar v. Ateret Industries 1996 Ltd, para. 39  [  ] where the court observed that in many of the cases it would have been preferable had the consumer deception been handled in an alternate framework, such as the imposition of punitive compensation rather than as a class action proceeding). As mentioned, the provisions for filing a class action under the Consumer Protection Law used to be included in Chapter F’1 of that law, along with additional enforcement measures included therein, inter alia - the administrative mechanism in the charge of the Commissioner of Consumer Protection, and the Consumer Protection Authority, and the criminal system which purported to enforce the norms established by this law via the criminal law  With the enactment in 2006 of the Class Actions Law and the establishment of a comprehensive framework arrangement for the filing and conduct of class actions, came the revocation inter alia of Chapter F’1 of the Consumer Protection Law, so that as of today, as mentioned, the provisions of the Class Actions Law govern the filing and the conduct of class actions in all areas, including in the areas of consumer protection (see s. 3 of the Class Actions Law, and item 1 of the Second Schedule of the Law). 

Tnuva’s Act of Misleading

24.  The proceeding before us began with an application for the certification of a class action, filed in 1995 in reliance on the provisions of Chapter F’1 of the Consumer Protection Law. As described above in the chapter on the facts, already in 1996 the District Court approved the filing of Raabi’s personal claim as a class action, and Tnuva’s appeal against the certification decision was rejected by this Court in the year 2003 (CA 1338/97). The proceedings for the certification of the class action were similarly handled in accordance with the provisions of Chapter F’1 of the Consumer Protection Law then in force.  However, after the District Court began hearing the approved class action, the Class Actions Law was enacted, and as indicated by the decision of the Lower Court, its provisions provided the basis for the decision on various issues, including the provisions pertaining to the compensation and fees. The application of these provisions to our proceeding was correct, given the provision of s. 45 (b) of the Class Actions Law, which determines that the provisions of the Law (apart from the provision of s. 44) “shall also apply to application for a  certification of a class action and a class action that was pending before the court on the date of publication of this law” (see CA 7028/00 A.B.A. Trust Funds Management Ltd v. Elsynth Ltd [13] paras 16-18 ; HCJ 2171/06 Cohen v. Knesset Speaker [14] para. 46.  The Lower Court further added, and rightly so, that even though the Class Actions Law did not limit the grounds for a class action exclusively to the “consumer”, as defined in the Consumer Protection Law, the class action in this case should be adjudicated in accordance with the original grounds that were based on the Consumer Protection Law  and in relation to a consumer group answering the definition of “consumer” in that law (“one who purchases an asset…..primarily for his personal, domestic or family use”, given that the representative plaintiffs did not apply to amend the claim  and file additional evidence in the  wake of the new law, that broadened the circle of potential plaintiffs in this context (and see Alon Klement “Guidelines for the Interpretation of the Class Actions Law, 5766-2006), Hapraklit 49, 1354-135 (5767) (hereinafter – Klement).

25.    In the class action before us it is claimed that Tnuva violated the prohibition on misleading  established in s.2 of the Consumer Protection Law, which provides that

A dealer shall do nothing—by an act or an omission, in writing, by word of mouth or in any other manner—likely to mislead a consumer as to any matter material to a transaction (any such act or omission hereinafter referred to as a “misleading act”…)

The thrust of the misleading act ascribed to Tnuva is that Tnuva added silicon to low fat (1%) long lasting milk without this ingredient being mentioned on the packaging and in defiance of the official and binding standard in force at that time, and in so doing mislead the members of the group, consumers of long lasting milk regarding a “material aspect of the transaction” pertaining to the “the quality, nature, quantity and type of any commodity or service” (s. 2 (a) (4);  and “the conformity of the commodity or service to a standard, specification or model” (s. 2 (a)(11).

It was further claimed that Tnuva breached the duty of disclosure imposed on it as a dealer, pursuant to s. 4 (a) of the Consumer Protection Law, to disclose to the consumer, inter alia:

(1) any defect or qualitative inferiority or other feature known to him that materially diminishes the value of the commodity;

   Likewise it was claimed that Tnuva had breached the obligation of indication  as prescribed in section 17 of the Consumer Protection Law, which likewise expresses the broad duty of disclosure imposed on the dealer and which provides  inter alia that:

A dealer shall indicate the following particulars upon, or upon a thing attached to, goods intended for the consumer:

                          ------

(a)  the quantity of the commodity and a detailed statement of the basic materials of which it consists.

The prohibition on misleading and the duty of disclosure and indication imposed on dealers in accordance with the Consumer Protection Law, were intended to realize one of the Law’s central underlying goals, namely providing all of the information required by the consumer in order to enter into an intelligent engagement that gives true expression to the principle of the freedom of contractual engagement (see Langbert  [12], p. 175 – 176).

26.              The Lower Court accepted the claims of the representative plaintiffs, and in its decision ruled that the Tnuva had committed an act of misleading that was prohibited under the Consumer Protection Law and had breached its statutory duties of disclosure by adding silicon to the milk without disclosing that fact to the consumers and without disclosing that the addition of silicon as stated contravenes Standard No. 284 of the Israeli Standards Institution, which at that time was the official and binding standard for purposes of “cow’s milk for drinking” (hereinafter: “the standard).

Evidently,  at this stage of the hearing of the appeal, Tnuva no longer contests the fact that it mislead its consumers. Indeed, in the summations filed on its behalf in the appeal it confirms that it “mislead the consumers by way of omission in its failure to indicate on the packaging of the long standing milk that a froth preventing food supplement was added, bearing the trade name “E-900” (section 2.1 of Tnuva’s summations).  Similarly, it would seem that there can be no doubt regarding the consumer’s right to be aware of the ingredients of the product that consumes . This right is the basis of the duties of disclosure and indication imposed on the dealer in this context, which we addressed above, and it may be asserted that these duties become doubly important when considering that the issue concerns milk which is a basic food product consumed by numerous consumers.

As mentioned, one of the substantive matters to which the prohibition of misleading applies under the Consumer Protection  Law is the “conformity of the asset or service to the standard, specification or model” (s. 2 (a)(11)). In our case Tnuva contravened the prohibition in this sense too because the definition in  s. 105 of the standard enumerates the materials that can be added to the various milk products and silicon is not included among these products.  Our concern is with a standard  that was declared as the Official Standard on 13 October. 1987 (O.G. 3473, 2274). As such Tnuva is bound by s. 9 (a) of the Standards Law, which prohibits the production and the sale of a milk product that does not comply with the requirements of the standard (for an analysis of the grounds for declaration of a standard as official and the duties established by the standards (see Eliyahu Hadar, Behind the Standards Law, 56- 92 (1997)), and accordingly Tnuva mislead its consumers with respect to the product’s conformity to the standard (see also s. 107.5 of the standard, which establishes that the supplements – if added -  must be indicated, and see Official Standard No. 1145 regarding the “Indication of Prepackaged food”).  Parenthetically, it bears note that nonetheless, in 1998 the declaration concerning the official status of some of the sections, including s. 105, was cancelled, and today they have the status of recommendations only (see Notification of Expired Validity of Standards (Food Standards) as Official Standards, O.G. 4649, 5759, 334, 336). Tnuva argues this issue is also of substantive significance for purposes of this proceeding too, and this claim will be discussed below. 

27.  As mentioned, Tnuva no longer disputes the fact that its acts are tainted by having been misleading within the meaning of the Consumer Protection Law and by its violation of the disclosure duties imposed on it by force of that Law. Nonetheless, Tnuva maintains that the Lower Court erred in ruling that it must compensate the group members for the non-pecuniary damage allegedly caused to them under the circumstances. The thrust of Tnuva’s claims as dwelt upon above, is that the act of misleading did not cause any real and compensable damage to any of the group members , and that even if thy incurred real damage,  the causal connection between the alleged damage and the act of misleading was not proved. At all events, Tnuva further added that the Court erred in holding that compensation must also be awarded under the head of infringement of autonomy to group members in respect of whom it was not proved that they had experienced negative feelings due to their consumption of milk containing silicon.

Misleading a Consumer as a Wrong in Tort in  the Representative Context

28.  The legal field in which the consequences of the Tnuva’s actions must be examined in this case is the field of Tort, referred to by s.31 (a) of the Consumer Protection Law, which instructs us that:

“Any act or omission in contravention of Chapters Two, Three or Four shall be treated as a civil wrong under the Civil Wrongs Ordinance (New Version)”

Our concern is with a consumer tort rooted in the Consumer Protection Law, but the body and head of which are formulated in accordance with the basic principles and doctrines of Tort Law.  In other words, to merit a pecuniary remedy based on a consumer tort the plaintiff must prove damage and demonstrate the causal connection between his tortuous conduct and the alleged damage. This applies both to an individual suit relying on a Consumer Protection Law and to a class action relying on that kind of tort (see comments of Justice (former title) M. Cheshin in Barazani Further Hearing [3]. Still, it bears note that to the extent that our concern is with a class action, the court’s application of Tort Law must also be based on the specific principles and rules drawn from the specific field of class actions, which occasionally pose practical problems relating to the location of the members of the group and awarding compensation to each one of them, as well as difficulties in proving the causal connection and proving the damage caused to each one of the group members. There may also be cases in which had a single plaintiff filed a monetary suit by reason of a consumer tort his suit would have been rejected by reason of the negligibility of the remedy – being in the category of des minimis, which does not justify compensation under the general law of Tort (see s. 4 of the Tort Ordinance). On the other hand, when concerned with a consumer tort committed against an entire group of consumers and not just against the single plaintiff, the court will be required to take a different perspective of the remedy requested in the name of the group in the framework of the class action. In such a case the court will be required to examine the class action and the requested remedy taking into account the underlying principles of this specific proceeding, which is intended inter alia to provide a solution to sub-enforcement in cases in which the individual claim would be considered as a negligible claim. When hearing a class action the court cannot limit itself to examination of the remedy in accordance with the regular laws of Tort that would be applicable to an individual suit, and its decision must incorporate the principles and rules drawn from the specific field of class actions.

The need to combine the general laws of Tort with the principles and rules drawn from the laws of class actions, inter alia by relaxing the requirements pertaining to the proof of the damage caused to the members of the group, was dealt with by Justice M. Cheshin (former title) in Barazani Further Hearing [3]  (ibid,  423 – 425). Today, with the enactment of the Class Actions Law, the legislature has equipped us with a detailed statutory arrangement that consolidates the principles and the rules to be applied to the various kinds of class actions and provides a solution to the typical difficulties, some of which we dwelt upon above, and which may arise in this particular proceeding. For example, s. 20 of the Law, to which we will return below, relates to “proof of entitlement to a remedy and payment of financial compensation” and prescribes the specific arrangements for the award of remedies in class actions. The unique nature of the class action proceeding and the need for awareness thereof in the application of principles of the general law of Tort to such an action were addressed by Deputy President E. Rivlin in CA 10262/05 Aviv Legal Services Ltd v. Hapoalim Bank, Head Management [15] where he stated that:

It cannot be denied that that in certain cases the collective-representative character of the proceeding may affect the manner of examining the causal connection, just as it has implications for other elements. The subject of the causal connection in class action suites was discussed at length in Barazani Further Hearing [3]. The majority view as penned by Justice Cheshin dwelt on the basic need for fulfillment of the elements of a personal claim as a condition for the certification of the representative proceeding, specifically the  foundation of the causal connection required for certain grounds of claim. The court noted that the representative context may influence the interpretation of the foundation of the personal grounds, but noted that this possibility was limited and qualified. Conceivably and without making a definite determination on the matter at this time, the Class Actions Law may extend this possibility in view of its emphasis on the collective aspect and its relaxation of the conditions required to be fulfilled for the collective action, all with the purpose of realizing the objectives of the class action…  A strict and case specific interpretation of the foundation of the causal connection would thus be liable to seal the fate on numerous class actions, contrary to the objective of the Class Actions Law. According to another approach, in suitable cases there would be an examination of the causal connection from the perspective of a “meta-plaintiff” who reflects the shared interest of all of the potential plaintiffs, and takes the cumulative damage into account.  Such an examination of the causal connection could fulfill the requirement of the causal connection even in cases where it would not have existed in accordance with the individual case based examination.

   De Minimis

29.  The representative plaintiffs claimed that the group members should be compensated for the non-pecuniary damage caused to them under the circumstances, under two heads of damage: One of them is the infringement of the personal autonomy of the group members and the other for the negative feelings that they experienced upon being informed that they had drunk milk containing silicon.

Upon certifying Raabi’s claim as a collective suit this Court, per Justice M. Naor, in the decision on the certification application, ruled that:

 “The damage claimed by Raabi consists of non-pecuniary damage; negative feelings and feelings of repulsion. The non-pecuniary damage claimed by the plaintiff is the feeling of repulsion stemming from the fact that the case concerns silicon, with all of its negative associations. In my view, damage of this kind is prima facie compensable damage. The act of misleading regarding the contents of the milk in this case is prima facie an infringement of individual autonomy” (p. 681- 682 of the decision).

In that decision, this Court further noted that the infringement of individual autonomy had already been recognized in Tort Law as a compensable head of damage, referring to the decision in Daaka [4].  In its discussion of the class action that was certified as stated, the Lower Court deemed that in the circumstances of our case the group members suffered non-pecuniary damage and in this context dismissed Tnuva’s claim that the failure to specify all of the product’s ingredients did not gave rise to an infringement of autonomy and did not justify the alleged negative feelings. This is Tnuva’s argument before us.

Indeed, a defect in the indication of a food product’s ingredients will not always warrant compensation for infringement of autonomy and negative feelings, and there may certainly be cases in which notwithstanding the existence of a particular defect in reporting the contents of a product, compensation will not be justified.  Justice Naor dwelt on this point in the decision on the certification of the application, noting that:

The insertion of a silicon supplement in the milk, in defiance of the standard constitutes an infringement of individual autonomy, but my comments should not be taken to mean that any case of a deviation from a provision of a standard or of inaccurately reporting its contents will justify a suit. There may be quite a few cases in which a slight deviation from the provisions of any particular standard, even where it concerns food, will not justify a personal suit and by extension a class action. A suit will not be justified where the infringement is de minimis ….  (p, 684).

I concur with Justice Naor’s comments, but they are of no avail to Tnuva in this case, for as noted by the Lower Court, the harm in this case is not in the category of de mimimis from the collective-representative aspect.  

30.  In support of its claims in this matter Tnuva presented the expert opinion of Prof. Hernik who evaluated “from the perspective of a researcher of consumer behavior (the marketing person) whether and if so to what extent, there was an infringement of what is referred to as the consumers' 'autonomy of will'". In his expert opinion, Prof. Hernik acknowledged that in principle and conceptually there was an infringement of the autonomy of will in any case in which the list of contents does not actually conform to the ingredients of the product, except that in order to assess the degree of harm one must evaluate the influence of the misleading act on the consumer’s ability to choose. Prof. Hernik determined that according to his approach, the harm to infringement of autonomy caused to the consumers in this case was negligible and that the misleading media publications had generated a public storm, and lead to an 'imaginary infringement'  of autonomy of the consumers' will.” Tnuva also presented the expert opinion of Prof. Michael Perry who reached a similar conclusion and noted that in accordance with the criterion he had established for examining whether substantive harm had been caused to the autonomy of the consumer’s will, the harm in this case did not exceed a harm that was “trifling” and did not justify compensation.

I do not accept this approach and as I mentioned above, my view is that the Lower Court was correct in its dismissal of Tnuva’s claim that the harm was “trifling” and “negligible” and not deserving of compensation.

The concept of “de minimis” is one that does not admit of advance demarcation and in another context it has already been ruled that:

The question is how to measure harm and when to consider harm as being minimal, The answer depends on the nature of the right that was violated, the purpose of the infringement and additional circumstances of each particular case, and in accordance with which it may vary from case to case (see citation in CA 3901/96 Local Planning and Building Committee v. Horowitz [16]

In the case at hand Tnuva added silicon to low fat long lasting milk to overcome the problem of over frothing  and it chose this solution to save the cost of replacing a machine that was broken. In doing so Tnuva contravened the official standard then in force, according to which it was prohibited to add supplements to the milk that were not specified in that standard. Furthermore, Tnuva failed to indicate on the packaging that the milk contained silicon and the Lower Court established a factual finding that the silicon added to the milk was purchased by Tnuva as a cleaning material from the Amgal company (paras. 35 and 144 (b) of the decision ). In its appeal Tnuva challenges this factual finding but I have not found grounds for interfering with it, and given that this finding remains intact it supports the conclusion that in the first place Tnuva sought to conceal the fact that it had added silicon to the milk.  A similar conclusion also emerges from Tnuva’s conduct after the exposure of the case, when it denied having added silicon to the milk. Tnuva’s problematic conduct as described supports the presumption that the omission of silicon from the list of the ingredients specified on the relevant package was not incidental and that its purpose was to  blind the consumers to the fact that the milk it produced and marketed included this ingredient, in the knowledge that this was a substantive matter that was likely to influence the consumers’ decision whether to purchase the milk.

This was therefore a conscious and illegitimate act of misleading by the intentional concealing of information with all of its attendant severity in terms of the relations between Tnuva as a dealer and the relevant consumer group. Furthermore, silicon is an artificial chemical substance which has absolutely no nutritional value and should not be found  in milk. Accordingly, the reasonable consumer does not expect to find it in milk. Tnuva’s effort in its summations to present the silicon, post facto as a popular “food supplement” in food products lacks sufficient anchorage in the evidence and cannot be accepted,  especially given that it emerged that the Tnuva’s sole reason for adding the silicon was its desire to resolve the problem of frothing for a low cost.  Likewise, no substantive significance can be given to the fact that the standard for cows milk for drinking was officially cancelled already back in 1998. Tnuva repeatedly stresses this fact in its summations and attempts to derive therefrom that adding supplements to the milk, including the addition of silicon, is not a negative act  However, it would seem undisputed that even after the cancellation of the aforementioned standard as a binding standard, silicon did not become a supplement for milk with any of its producers, including Tnuva.   We may therefore continue on the assumption that even in the absence of a binding standard, this was a substance that the reasonable consumer would not expect to be added to the milk that he consumed.  

31.  Another claim stressed in Tnuva’s summations is that silicon is not likely to cause damage to health.  Regarding this matter Tnuva relies inter alia on the conclusion of the Danon committee and the findings of the Magistrates Court in the criminal proceeding, as well as on the expert opinion of Dr. Aharon Eizenberg and Prof. Nissim Garti,  submitted on its behalf. In the absence of damage to health Tnuva contends that no damage was caused to the milk consumers that we are concerned with and that at the most this is a trifling matter that does not warrant compensation. Indeed, the representative plaintiffs did not present an expert opinion on their behalf to prove the allegation hat silicon is injurious to health and neither did the District Court rule on this matter, writing that:  

Indeed, it has not been proved that drinking milk containing silicon caused or is liable to cause immediate harm to the health of consumers. However, in the view of Health Ministry experts, also representing the position of the Ministry of Health as presented by the Attorney General in the appeal against the decision to certify the suit, it is not possible to rule out the existence of a health hazard in the long run, primarily to children, in the wake of drinking milk that contains silicon in view of the fear of consumption in excess of the acceptable daily intake (ADI)…

In the framework of this proceeding there is no cause for ruling on the scientific question of the degree to which the drinking of milk containing silicon poses a health risk. For purposes of this claim it suffices that the existence of such danger cannot be ruled out, at least according to some of the experts. From the plaintiffs’ perspective, it suffices that it was proved that Tnuva’s consumers were entitled to know, upon deciding to purchase milk that it had produced, that it contained silicon in defiance of the law and the standard and that under certain circumstances one cannot rule out the risk to health posed by its consumption” (para. 35, emphasis added).

In this ruling, the Court relied largely on the position of the Attorney General that was submitted to this Court in the framework of an appeal against the decision concerning the certification of the suit as a class action, which it stated that:

In an examination conducted by the National Food Authority of the Ministry of Health, it was not found that this substance is harmful to health, but the fact that there was a determination of ADI [acceptable daily intake) indicates that in excess of ADI there is no certainty concerning its safety in terms of health and the existence of a long term risk cannot be ruled out.  Given that in Israel large quantities of milk are consumed (not necessarily long lasting milk) primarily by children, then with respect to the consumption of milk containing silicon the consumption may exceed the ADI level.  The position of the Ministry of Health is therefore that it lacks information indicating that silicon is harmful to health, but it cannot rule out the existence of a long term risk, in cases involving the consumption of large quantities [para.3, emphasis added]

In addition,  regarding this matter it would not be superfluous to refer to the Danon Report which Tnuva seeks to rely upon.  The Danon Commission did indeed conclude that experience shows that silicon is not harmful to health, does not cause birth defects and that there is no scientific proof of it being carcinogenous (p. 55 of the Danon Commission Report). All the same, the Commission took into consideration the fact that Tnuva had added silicon to the milk “to a degree that exceeded what was permitted according to the manufacturer’s instructions, without examining and considering the effects of its heating and the attendant dangers. The Report further mentioned that “attempts were made in the dairy to reach a dosage that would be suffice for the required blocking of the froth, but without consulting with any entity in the Ministry of Health or any other licensing authority”, and that the silicon was added to the milk in a quantity and dosage that exceeded the level approved for foods other than drinking milk that this fact “necessitates an additional investigation of matters relating to the ordering of the material and the use thereof (p. 14-15 of the Danon Commission Report).

Accordingly it is difficult to accept Tnuva’s claim that there are unequivocal conclusions regarding the influence of the silicon added to the milk with respect to its influence on the consumers’ health, and this is sufficient grounds for not interfering with the Lower Court ‘s conclusion that under certain circumstances one cannot rule out the possible health risk involved in the consumption of milk containing silicon. Similarly, I also accept the Lower Court’s position that at all events every person has the right to choose whether he wishes to expose himself and his family to the material the nature of which is unknown to him. Hence, the fact that it was not positively proved that silicon is actually liable to harm consumers’ health has implications for the intensity of the infringement of autonomy (see Daaka  [4 ], p. 583; Nili Karako-Ayal, “Estimation of Compensation Due to Damage from Infringement of the Right to Autonomy”  - in the wake of CA 2781/93 Ali Daka v. Carmel Hospital, Hamishpat, 11,  267, 270-271 (5767) (hereinafter – Karako-Ayal)), but not on its infringement per se as a result of the fact that the consumer introduced a chemical substance into his body, the essence and character of which were unknown to him without having had the opportunity of deciding whether he wanted it (see s.1 of the Attorney General’s response to Tnuva’s application to submit additional evidence in the framework of the hearing on the application for certification in this Court. Regarding the significance of the health risk in class action proceedings in the case law of the District Court, see also CF 2593/05 (Tel-Aviv Jaffa) Solomon v. Guri Import and Distribution Ltd, para. 44 [   ] ; CF 1624/07 (Capp 8767/07)(Tel-Aviv Jaffa) Hova v. Milko Industries Ltd  [   ](27.1.2020); CF. 1126/07 (CApp 3058/07) (Tel-Aviv Jaffa) Arges v. Tnuva Central Cooperative for Marketing of Agricultural Products in Israel Ltd, para. 16 [   ] ; CF 1545/08  Alfasi v. Super Pharm Israel Ltd  [     ] and CF 1424/09 ((Tel-Aviv Jaffa) Guttman v. Neviot – Teva Hagalil Ltd.

In view of all the above, there is grounds for the Lower Court’s determination that under these circumstances there was an infringement of the consumer’s autonomy to decide whether or not he desired to consume  milk containing silicon and prima facie this is not a “trifling” infringement falling into the category of de minimis,  not warranting compensation.

32.  This conclusion gains added force inasmuch as our concern is with a class action in which it was proved that Tnuva’s act of misleading harmed the broad consumer public and the Lower Court  rightly ruled that under these circumstances the severity of the harm must be examined from the perspective of the entire group and “not from the perspective of an isolated consumer”. Indeed, I already mentioned the approach whereby the de minimis  rule does not apply, in the simple sense, to the foundation of damage in a typical class action,  insofar as “its central feature is the accumulation of insignificant instances of damage, which when considered individually would not have materialized into a legal proceeding; this approach has established itself in the case law of this court (see Aviv Legal Services Ltd [15], para. 10; also see comments of Justice Mazza in Barazani Further Hearing [3], 447). All the same, it should be emphasized that the fact that a large group of plaintiffs in a class actions alleges an accumulation of minor damages, does not necessarily negate the possibility that the matter is de minimis  from the group perspective as well. As noted, the precise borders of this concept do not admit of determination in advance and in a class action proceeding the answer to the question of whether the damage is of a minimal nature that does not warrant compensation depends on the circumstances of each case and may change having consideration for the particular circumstances of each case.

At all events, in the case before us, given the existence of a large group that  alleges damage as a result of Tnuva’s actions, the severity of which from a consumer perspective has already been discussed, precludes the conclusion that the matter is de minimus, even in the context of a class action. This is the case even though one cannot rule out the possibility that the existing discrepancy between the members of the group in terms of the intensity and scope of the injury may lead to the conclusion that had each member of the group filed a  personal claim the remedy claimed by each one of them separately would be de minimis.  Another question  concerns the number of group members who are entitled to compensation for this injury and what is the rate and the model of compensation for purposes of ruling in our case. When considering the number of the members of the group entitled to compensation attention should also be given to the issue of splitting up the compensation for non-pecuniary damage in the current case.  The reason for this is that the Lower Court held that compensation should be awarded for the Tort head of infringement of autonomy and separately for the tort head of negative feelings.  It will be recalled that in this context the Lower Court accepted the position of the representative plaintiffs and in reliance on the consumer survey that was presented to it (adjusting its results downwards), and ruled that: "a uniform rate should be ruled for the infringement of individual autonomy, whereas with respect to about half of the members of the group it will be supplemented by damage by reason of negative feelings" (para. 84 of decision).  Nonetheless, it bears note that ultimately the Lower Court ordered the payment of overall compensation (NIS 55 million), stating that this sum "reflects the personal damage that is estimated for each individual of the group, of the sum of NIS 250 (para. 134 of decision), and without actually distinguishing between the heads of damage that were mentioned and without differentiating between the members of the group in its entirety whom it had determined were entitled to compensation for the infringement of autonomy and half of the members of the group, who were additionally entitled to compensation for negative feelings. Accordingly in their appeal the representative plaintiffs challenge this ruling, and we must therefore address the fundamental issue of the splitting up of the non-pecuniary compensation, as mentioned.

However, prior to addressing the subject of the scope of the compensation  awarded we must first address the essence of the central damages head  which was at the forefront of this class action.

 Infringement of Autonomy

       33.  In the Daaka  [4] case, Israeli law recognized for the first time that the non-pecuniary damage involving the infringement of autonomy is "damage" in the sense of the Torts Ordinance, and that as such is compensable (on compensation for non-pecuniary damage in Tort Law in general, see s. 76 of the Torts Law. Also see CA 4576/08 Ben-Zvi v. Prof. His  [17] (hereinafter: Ben Zvi); Eliezer Rivlin " Compensation for Non Pecuniary Damage –Broadening Tendencies" -  Shamgar Volume,  Part 3, 21, 45 (2003); Yifaat Biton Dignity Aches: Compensating Constitutional Harms, 9 MISHPAT UMIMSHAL (Haifa University LR) 137 (2005) (hereinafter: Biton).   In the Daaka [4] case the court held that the  fundamental right to autonomy means the right of every person "to decide his or her deeds and wishes in accordance with his or her choices, and to act in accordance with those choices". It ruled that this right encompasses all of the central aspects of a person's life, from which it may be derived inter alia that "every person has freedom from unsolicited non-consensual interference with his of her body". It further held that this freedom is one of the expressions of the right to dignity given to every person, and is anchored in Basic Law: Human Dignity and Freedom.

These rationales, which in Daaka [4] lead to the recognition, protection and compensation for an infringement of autonomy of the body, are relevant and applicable to cases in which there is an infringement of the victim's autonomy in central aspects of his life due to the denial of his freedom to choose and the breach of the duty of disclosure to him. For example, the court recently recognized the damages head of infringement of autonomy in a case in which the autonomy violated was that of the family relatives of the deceased person, and pertained to the manner of treating his body (see in Ben- Zvi [17]. Hence, contrary to Tnuva's claim, the recognition of the damages head of infringement of autonomy is not, and should not be limited to cases of medical negligence or exclusively to autonomy of the body. The principles underlying the recognition of this head of damages and the constitutional right protected by such recognition, in appropriate cases, will justify compensation for infringement of autonomy even where other torts are concerned, such as the consumer tort in our case (see Tzachi Keren-Paz "Compensation for Violation of Autonomy: Normative Evaluation, Developments and Future Trends" Hamishpat 11, 187, 192-194 and the examples cited in the footnotes) (2007) (hereinafter – Keren-Paz); Dafna Barak – Erez, "Constitutional Torts in the Era of Basic Rights" Mishpat UMimshal 9, 103, 121-122, 129 (2006)).  In her in her decision to certify Raabi's suit as a class action, Justice Naor was guided by the approach that rejects the limitation of the boundaries of the damages head of non-pecuniary damages for infringement of autonomy to Tort of negligence in general and specifically medical negligence.  Her approach was rightly adopted by the Lower Court when it awarded compensation for the damages head of infringement of autonomy, having found that by its actions Tnuva had committed an act of misleading against Raabi and against the group of consumers that he represented, by failing to disclose the existence of silicon on the packaging of the milk that it produced and marketed.

34.  It is important to note that in the Daaka [4] case the infringement of autonomy was classified as a head of non-pecuniary damage in the framework of the tort of negligence, and not as a separate tort in its own right. Following the decision in Daaka [4] the view was expressed that it was appropriate to recognize the infringement of autonomy as a constitutional tort that gives rise to an independent grounds of claim (on this, see the comments of the Deputy President in CA 8126/07 Estate of the Late Bruria Zvi  v. Bikkur Holim Hospital [18]; Ben-Zvi [17] in para. 54 of his decision and in the same vein, the opinion of Justice Amit, in Ben Zvi  para. 21.  Also see Rivlin, 45 and see and compare to Keran Paz;  Nili Krako Ayaal "The 'Informed Consent' Doctrine – An appropriate Ground of Claim where the Patient's Right to Autonomy was Violated" Hapraklit 49, 181, 222-223 (2006)). However, our case law  has yet to give deep consideration to this weighty issue of recognizing a new tort created by case-law and the case at hand does not require  a discussion and decision on the matter. The reason is that the representative plaintiffs in this case took the path of settled case -law, and classified the infringement of autonomy as a  non-pecuniary head of damage in the framework of the tort of misleading which it attributed to Tnuva in accordance with the Consumer Protection Law. Inasmuch as the representative plaintiffs did not claim in the Lower Court or before us that in this context the plaintiff's  right to compensation for infringement of autonomy should be recognized as a  (sic)right ,should be recognized as an independent tort based on the violation of a constitutional right entitling the plaintiff the issue can be left pending further examination and there is not cause for us to address the matter on refer to it on our own initiative.

The Requirement of a Causal Connection

35.  Tnuva further added that the Lower Court erred by deviating from the law set forth in FHC Barzani [3 ] dwelt on above, and had actually waived the requirement for a causal connection between the act of misleading and the damage. Tnuva claimed that the representative plaintiffs failed to prove that their decision would have been influenced by having been informed in advance.  Since the grounds of misleading, by definition, requires that the consumer rely upon the dealer’s conduct, then absent proof of such reliance, according to Tnuva, there are no grounds for an act of misleading under the Consumer Protection Law.

On the other hand, the representative plaintiffs claim that to the extent that the concern is with the head of damage in the form of infringement of autonomy, then it will be regarded as having been proved, even if the victim would have acted in the same manner had he been presented with all of the information, and that at all events, in the case at hand it had positively been proved that the consumers would not the purchased milk containing silicon.

36.  Indeed, in the Further Hearing Barazani [3] and we already addressed this point above, the court ruled that the requirement for a causal connection in s. 64 of the Tort Ordinance also applies to consumer torts pertaining to misleading advertising, and even where the tort is grounds for a class action. All the same, the court also ruled that to the extent that the matter concerns consumer torts, the requirement of reliance deriving from the requirement for a causal connection will be interpreted broadly so as not to include to direct reliance only” but also “an indirect causal connection by way of a reasonable chain of causes from the publication and until the consumer” (ibid.,  414- 415). In Barazani [2] it was further ruled that in a class action proceeding based on the provisions of Chapter F’1 of the Consumer Protection Law and its relevant regulations enacted by force thereof  (provisions that as stated were cancelled in the interim in the Class Actions Law) it may be necessary to relax the stringency in proving the causal connection having consideration for the nature of this unique proceeding, and the fact that “the court is entitled to prescribe appropriate methods of proof at its own discretion for the causal connection between the misleading publication and the damage caused to each one of the members of the group, including the damage that was caused to each and every one of them (ibid.,  424). In that matter there was no proof at all of a causal connection, not even indirect, as claimed by Barazani, given that Barazani was not actually exposed to the publication. For this reason the court dismissed Barazani’s application to approve his personal claim as a class action and ruled that his personal suit does not show any grounds.

Tnuva’s attempt to rely on the Barazani ruling and to claim that in this case too it was not proved that there was a causal connection between its conduct and the non-pecuniary damage being claimed, cannot stand, for a number of reasons:

First, the claim was raised by Tnuva at the stage following the certification of the class action and to the extent that it is directed against the group as such, it must be remembered that three years after the decision in the  Further Hearing Barazani  [3], the Class Actions Law was passed, unifying all of the principles and rules to be applied to the various categories of class actions. The Law consists of a comprehensive, detailed statutory arrangement, including the methods of proving entitlement to the remedy being claimed, and inter alia it enables the granting of remedies for the public good in appropriate cases where it is not practical to prove the damage caused to each member of the group and  a fortiori the causal connection between the damage and the tortfeasor’s conduct (s. 20 (c ) of the Law). As specified below, this outline was adopted by the Lower Court and under these circumstances the demand to prove the causal connection between Tnuva’s conduct and the damage in respect of each individual of the group is problematic.

Second, the decision in Barazani [3] concerned misleading by action due to the misleading advertisement of Bezeq concerning the tariffs per conversation, and as mentioned it was held that insofar as Barazani was not even exposed to the misleading advertisement, there was no causal connection between the publication and his alleged damage.  Our case on the other hand concerned misleading by omission committed by Tnuva in its failure to disclose the fact of the silicon being added to the milk. Tnuva claims that the plaintiffs must prove that had they been exposed to that fact in a timely manner they would not have purchased the milk. It would seem that a requirement of a plaintiff to prove that had he been aware of the fact he would have acted otherwise would be particularly difficult to prove and in many cases even impossible. Indeed, this position is reinforced to the extent that our concern is with a class action. On the difference between misleading by an act and misleading by omission with respect to proving a causal connection in the representative context, see our comments in CA 9590/05 Rahman Nuni v. Bank Leumi LeIsrael Ltd [19] which overturned the District Court’s decision to dismiss the application for certification of a class action because of the plaintiff’s failure to prove the causal connection. In our judgment in the appeal we reversed this decision and ordered that the file be remanded to the lower court, indicating that “it seems that the question of the requirement of the causal connection in this case is also worthy one further consideration. This matter involves complex questions, the first of which is whether to apply the rule set by this Court for purposes of the ground of misleading, in FHC 5712 Barazanai  [3] even where it concerns the grounds of “non-disclosure” (ibid., para. 6) (regarding the similar approach taken in American Law in various contexts, see: Affiliated Ute Citizens of Utah v. United States 406 U.S. 128, 153-154 (1972) [34]; Binder v. Gillespie 184 F.3d 1059, 1063-1064 (9th Cir. 1999) [35]; Poulos v. Caesars World Inc. 379 F.3d 654, 666 (9th Cir. 2004) [36 ]. See also, CF (Tel-Aviv-Jaffa) 2405/04 Ben Ami v. Hadar Ltd [  ] paras. 72- 73 (14.2.2010).

We may thus conclude that to the extent that the consumer tort on which the class action is based on is misleading by way of omission, (by way non-disclosure) this may justify leniency regarding the proof of the causal connection between the wrongful conduct and the alleged damage.

Third, as opposed to the Barazani case [2], which was a monetary claim (tariff differentials), the head of damage being sued for in this case pertains to non-pecuniary damage  in the form of infringement of autonomy. Regarding this head of damage it was ruled that there was no need to prove a causal connection between the failure to disclose relevant information and the choice made by the victim (see: Daaka [4], 567-570; CA 6153/97 Shtendal v. Prof. Yaakov Sadeh [20], at p. 760; CA 9936/07 Ben David v. Dr. Entebbe [21] para 11 of Justice Hendel’s decision; CA 9817/02 Weinstein v. Dr. Bergman,[22]  para. 18). For a critique of the Daaka [4] decision, see Assaf Yaakov “Informed Consent and Duty to Disclose, Tel-Aviv University Law Review  31, 609 (2009). The rationales in this context that guided the court in Daaka [4] and in other matters pertaining to medical negligence are applicable to the same degree with respect to an infringement of autonomy caused as a result of the consumer tort committed by a dealer who misled a consumer.  Indeed, the non-disclosure per se involves the denial of the consumer’s freedom of choice. In our case, by failing to specify silicon as one of the components of the product, Tnuva deprived the consumers of the possibility of making an intelligent choice and deciding whether they wish to purchase and consume it. This suffices as proof of an infringement of autonomy. Another question is whether this suffices to establish a right to compensation or whether it must further be shown that consequential damage was also caused to the plaintiff, finding expression in negative feelings given the denial of his freedom of choice. I will address this point further on. 

37.  At all events, even had we ruled that the circumstances of this case necessitated bringing proof that the members of the group would not have purchased the milk had they known that it contained silicon, this requirement for a causal connection in a class action  might conceivably have been satisfied by a determination in the manner of a "collective causal connection" (on this see Aviv Legal Services [15]para. 10). This kind of collective causal connection may be substantiated by the assumption that the group members, and at least the majority thereof, would have replied in the negative had they been asked in advance whether they would purchase milk to which Tnuva had added an artificial  supplement the  nature of which they were ignorant, and in defiance of the standard,  in order to overcome the problem of excessive frothing (compare C.F. 1036/66 (Capp. 1877/06) (Tel-Aviv Jaffa) Tal v. Rabin Medical Center (Beilinson Campus), para. 12) [  ] See also regarding the use of "generalized evidence" in American Law: Kennedy v. Jackson National Life Insurance Company, 2010 U.S. Dist. Lexis 63604, 25-28 (N.D.Cal 2010) [37];   Negrete v. Allianz Life Insurance Company of North America 238 F.R.D 482, 491-492 (C.D. Cal. 2006)[38]; Klay v. Humana, Inc.382 F.3d 1241, 1259 (11th Cir. 2004) [39]. Regarding the exception to the application of the doctrine in cases in which extensive differentiation between the members of the group was proved, see Poulos v. Caesars World, Inc. [36]. Further support for the application of this doctrine in the circumstance of the case before us can be adduced from the fact that it was Tnuva's intentional actions that created the situation which encumbered the process of locating the members of the group and the conduct of an individual examination of each of the elements that must generally be proved in the according to the law of tort.  Additional support for the existence of a causal connection between the act of misleading committed by Tnuva and the consumers' choice to consume the milk, can be fond in the trends evidenced in the consumers survey that was presented, and which we will address further on.

   38.  Tnuva further adds that at all events, the publications in the press concerning the damage to health caused by silicon consumption severed  the causal connection between its own acts and the bad feelings experienced by consumers, which it claims were  by and large the result of publications that post facto turned out to be unfounded.  This claim regarding the causal connection is not grounded in evidence, and in this matter as the one whose act of mass misleading caused uncertainty regarding the precise influence of the publications on the feelings of the consumers, it is Tnuva that bears the onus of proving the opposite (compare: Johnson v. The Goodyear Tire & Rubber Company, Synthetic Rubber Plant, 491 F.2d 1364, 1379-1380 (5th Cir. 1974)[40]; Cooper v. Allen, 467 F.2d 836, 840 (5th Cir. 1972) [41]. Accordingly, this argument is rejected.

Assessment of the Compensation for the Infringement of Autonomy – The Objective Approach and the Splitting Up of the Compensation for Non-Pecuniary Damage.

39.  How does one assess the compensation for the tort head of infringement of the right to autonomy?

Based on the constitutional features of the right to autonomy some favor the objectification of the assessment of the compensation for its infringement. For example, Dr. Tzahi Keren-Paz argues that "freedom of choice can be viewed ….as an asset with objective value" and hence "it is appropriate to award a sum that reflects the social value attaching to the denial of freedom of choice. This sum should even be awarded absent proof of consequential, subjective damage (feelings of shock and anger) by reason of the denial of freedom of choice" (Keren-Paz, 196-198). Keren-Paz sees special justification  for an objective assessment of compensation for infringement of autonomy in the consumer context. In his view, "the deterrent consideration (that focuses on the dealers) must also justify the compensation award in circumstances in which the compensatory factor (that focuses on the legitimate damaged interest of the consumer) does not provide sufficiently strong support for the compensation due to the problem of under-deterrence of the dealers…"(Keren-Paz, 242).  The scholar Dr.Nili Karko-Ayal likewise suggests that compensation should be assessed  in accordance with the value of the right to autonomy on the one hand, and the gravity of its infringement, on the other hand (see Karko-Ayal and see the opinion of Judge Strasbourg-Cohen in the Daaka case [4], at p. 619).

This approach deviates from the traditional principles of the laws of tort, that are based on a subjective, individual assessment of amount of compensation, and from the conception of compensation as being intended to restore the victim's position to the status quo ante and to provide him a remedy for the damage caused to him, including non-pecuniary damage. This point was mentioned by Justice Or in the Daaka case [4 ] when he awarded compensation for a  victim under the tort head of infringement of autonomy, where he said:

Naturally, matters relating to the proof and the extent of damage are determined in accordance with the particular data in each individual case and the evidence submitted in court. The substantive criterion for generally determining the amount of compensation to which the victim is entitled is the criterion of restoring the situation to its original [ex ante – ed.] state. This criterion is an individual one. It requires an individual assessment of the gravity of the harm caused to the specific victim (p. 582-583)

The difficulty involved in application of a "pure" objective criterion for purposes of determining the sum of the compensation for an infringement of autonomy was likewise addressed by scholar Prof. Dafna Barak-Erez in her discussion of claims filed by the individual against an authority, where  she emphasized that in this context as well:

…the principles of tort should not be deviated from  by awarding compensation that is detached from the concrete infringement and its circumstances. The sum of the damages cannot and need not reflect the universal value of the right… compensation that purports to reflect the general value of the right should be rejected  for a number of reasons. First it is illegitimate from a principle-value based perspective, because it purports to attach a price tag to the right itself. Second, it benefits the plaintiff in a manner that extends beyond his own particular damage, and thus deviates from the principle of restoring the status quo ante. In the realm of Tort law, compensation is determined in accordance with the damage to the victim himself, and not in accordance with the value of his right from the perspective of the other person (Dafna Barak-Erez, Constitutional Torts 277 (1993) (hereinafter – Barak-Erez)).

It is not superfluous to mention that in academic writing in the field of tort one can discern trends that deviate from the traditional perception whereby Tort law is intended to grant remedial damages to the specific victim in order to restore the status quo ante. Hence for example, there are some who contend that punitive damages that are not derived from the victim's damage may in appropriate cases provide a solution to sub-enforcement and therefore constitute an efficient form of deference A. Mitchell Polinsky & Steven Shavell, Punitive Damages: An Economic Analysis, 111 Harv. L. Rev. 869 (1998), as well as to heal societal damages caused by the tortfeasor to the victims who did not come to court  (Catherine M. Sharkey,Punitive Damages as Societal Damages, 113 Yale L. J. 347 (2003). Deputy President, E. Rivlin recently addressed this matter in the matter of Ben Zvi  [17] in  where he treated the matter of punitive damages, noting that today, the case law in Israel too has recognized the court's authority to award damages of this kind in the framework of the law of tort, and he also mentions that :"despite the sharp analytical distinction between punitive damages and remedial damages, on a practical level the contradiction is not so sharp, at least in the realm of non-pecuniary damage"  (paras. 37- 39 of his opinion, see also in LCA 9670/07 Anon v.Anon [23], paras 22-27 or the opinion of Justice E. Rubinstein, and the opinion of the Deputy President E. Rivlin).

However, to the extent that the compensation to be evaluated and awarded is claimed as part of a class action, one must remember the provision of section 20 (e) of the Class Action Law, which provides that: 

In a class action the Court shall not adjudge exemplary compensation and it shall also not adjudge compensation without proof of damage….but the aforesaid shall not prevent the award of compensation for other than monetary damage.

    Thus, the Class Actions Law stymied the possibility of awarding punitive damages in a class action. All the same, the Law established other special compensatory mechanisms that enable realization of the principle of remedial justice, for example, by way of imposing a cy-pres obligation on the tortfeasor for the damage caused, and principles of efficient deterrence, such as obligating the tortfeasor to provide a remedy for the public interest for the widespread social damage that he caused, and I will address this matter below.

40.  I do not accept the objective approach to the evaluation of the sum of damages for infringement of autonomy that I reviewed above. The head of damage of infringement of autonomy is encapsulated in the negation of the victim’s freedom of choice, and in the majority of cases involves the non-disclosure of a matter that is critical for the victim. Accordingly at the very least as far as it concerns class actions, a presumable starting point for evaluation of the non-pecuniary damage caused to those whose autonomy was violated, is that as a result of that infringement they experience anger, frustration and insult (of varying degrees of intensity, according to the concrete circumstances of the case).  These feelings which resulted from the tortfeasor’s conduct, justify compensation for non-pecuniary damage. However, there is no conclusive presumption that these feelings are experienced by the victim in every case of an infringement of autonomy. Accordingly, should the tortfeasor successfully prove that notwithstanding that his conduct negated the freedom of choice of the plaintiff or of the members of a group, they remained indifferent and unmoved, it may be determined that they are not entitled to damages under this head of damage because in truth, despite the denial of their freedom of choice, they did not sustain any non-pecuniary damage as a result. My approach, whereby the compensation for infringement of autonomy is awarded by reason of the subjective consequential damage expressed in feelings of anger, frustration and other similar negative feelings caused by the tortfeasor’s conduct, gives rise to the another conclusion – that there are no grounds for severing the compensation for infringement of autonomy from the compensation for mental anguish and negative feelings caused to the victim by that infringement (as distinct from the non-pecuniary head of damage relating to other infringements in framework of the same claim). A different approach to this matter was expressed by the Lower Court, even though, at the end of the day, as mentioned, the Lower Court awarded a sum total of NIS 250 as non-pecuniary damages for each member of the group without distinguishing between those members of the group who experienced negative feelings and those regarding whom it was proved by the consumers survey did not suffer feelings of this kind (regarding this matter, see the dispute between the Deputy President E. Rivlin and Justice Y. Amit, in the matter of Ben – Zvi [17] (see Keren-Paz, 203-208). 

A conclusion similar to my conclusion on the matter also emerges from the findings of Justice M. Naor in the decision given in the appeal on the decision to approve Raabi's suit as a class action.  In that context Justice Naor relates in the same breach to the non-pecuniary damage caused by the infringement of autonomy and to the negative feelings attendant to that damage. In her own words:

…..[t]he damage claimed by Raabi is non-pecuniary damage, negative feelings and feelings of revulsion. The non-pecuniary damage which he claims is characterized by the feeling of revulsion that stems from the fact that the material concerned is silicon with all of its attendant associations. In my view damage of this kind is compensable damage. The act of misleading concerning the contents of the milk in this case, prima facie, constitutes, an infringement of individual autonomy. Our concern is with a food product.  Consumers are entitled to determine what to ingest into their mouths and bodies and what to avoid. For example, if a person wishes to only eat kosher food and post facto it becomes clear to him that the food that was misleadingly presented to him, was not of that nature, will feel a sense of revulsion and an infringement of his autonomy…  (ibid.  681-682, emphases added).

     Indeed, to the extent that it concerns Raabi  - the representative plaintiff – after hearing his testimony and the testimony of his son, the Lower Court ruled that Raabi had experienced substantial negative feelings upon becoming aware that the milk that he had consumed contained silicon, and that Tnuva had refrained from specifying this component on the packaging; in the words of the Lower Court:

,,,[a]s a result of these acts the plaintiff was denied the ability to make an intelligent and informed choice concerning the purchase of an alternative product, that does not contain  a supplement that it prohibited by law for use in milk for drinking. It is likewise clear that the negative feelings experienced by Raabi stem from the acts of Tnuva. It could be claimed that these feelings were exaggerated, having consideration for the fact that it was not proved that silicon causes a health risk. But one cannot dispute his [Raabi's] feelings as such: [Raabi] subjectively felt a sense of disgust (nausea), anxiety,  as a result of having drunk the milk containing silicon as well as anger and rage by reason of the fraud.  All of these fall into the category of non–pecuniary damage that is neither peripheral nor negligible and is indeed compensable… " (para. 57, emphases added).

     There is no justification for interference with these rulings of the Lower Court, for as stated they are based on the testimonies of  Raabi and his son, and on the Court's direct impression from those testimonies. However, in order to determine the precise compensation to be awarded, if at all, in favor of the group on whose behalf Raabi handled the class suit, proof of subjective damage caused to Raabi will not suffice and additional complex questions must be addressed, relating to proving the entitlement of the members of the group to the pecuniary compensation that was claimed, including, inter alia,  the question concerning the difference between the group members who experienced negative feelings as a result of the denial of their right to chose whether nor not to consume milk containing silicon and the group members who remained indifferent to the aforementioned denial of their free choice.

41.  As mentioned above, under the circumstances, at the time of the handing down of the decision on the class action it was not possible to individually identity each member of the group and to determine the individual right of each one of them to  a remedy. As such it was not possible to rule on the class action in favor of the group in accordance with the evidentiary paths  set forth in section 20(a) of the Class Actions Law. In order to determine the compensation, the Court was required to utilize the framework of s.  20 (c) of the Class Actions Law, which was intended for those cases in which "Court concluded that, under the circumstances, pecuniary compensation for all or some members of the group is not practical, either because they cannot be identified and the payment cannot be made at a reasonable cost, or because of other reason".

Based on the opinion of Prof. Ofir, who was appointed as expert on the Court’s behalf, the Lower Court ruled that during the relevant period 220,000 consumed the long-lasting milk containing silicon.  Basing himself inter alia on the data he received from Tnuva, Prof. Ofir estimated that the number of households that had purchased the milk stood at NIS 166,307, and in his testimony in Court Prof. Ofir noted that the number of adult purchasers during the relevant period stood at 330,000. As such, according to his approach, the number of members in the group ranged from between 166,307 to 330,000 (p. 672 of the protocol). The Court’s determination that in this context one should consider a group number about 220,000 persons is therefore a cautious and conservative estimate (see comments of Prof. Ofir, p. 672 – 674 of the protocol), which will not be interfered with.

What remains to be examined is how many of those belonging to the aforementioned group of milk consumers actually experienced negative feelings as a result of the infringement of their autonomy.

The representative plaintiffs submitted an expert opinion drawn up by Dr. Katz and Prof. Mevorach, based on a consumers survey, from which it emerges that 26% of those questioned, who represent the general population, were indifferent to the publication to the effect that the milk contained silicon. Under the assumption that this percentage, pertaining to the general population, is also likely to reflect the interviewees who did not actually consume the long lasting low-fat milk during the relevant period, it would be appropriate to address the essential findings of the expert opinion that reflect the percentage of consumers of this milk before the publication from out of the total population (43%), and the percentage of consumers from out of these who continued to drink this milk even after the publications concerning the inclusion of silicon therein (30% out of the 40%, which represents 13% of the entire population). The expert opinion of Dr. Mevorach and Dr. Katz indicates that 66% of those who previously consumed long lasting, low fat milk of Tnuva (which they claim represent 28% of the total population) experienced negative feelings  in the wake of that publication, at various levels of intensity, including "revulsion, nausea, anxiety, fear, anger, hatred, disappointment, deceit, lying, fraud, temerity, contempt, irresponsibility, bad feelings (section 3 of the survey), whereas 30% continued to consume the milk even after the publication.

In our case and based on the data presented by the representative plaintiffs, there are grounds to conclude that some of the group members remained indifferent to the addition to the silicon to the milk.  26% of those asked specifically stated that this was their feeling: "indifference, no problem, not correct and other feelings that are not negative"- page 5 of the expert opinion of  Dr. Katz and Dr. Mevorach, subsection (b) of the answers to question 3, and "nothing, unmoved and indifferent" and "they made a mountain out of a molehill" – (the encryption page of the answers to question 3), and in the absence of a datum in the survey conducted regarding how many of those questioned had consumed silicon in the past, I think that the percentage of "indifferent consumers" can be derived from the datum in the expert opinion relating to those who continued to consume long lasting milk even after the publication of the silicon matter (30% of the overall number of consumers in the past, and 13% of the entire population). Accordingly, from out of the overall number of consumers of long lasting low fat milk during the relevant period, the number of whom stood at 220,000 according to the determination of the Lower Court there should be a reduction of  30% of "indifferent consumers" who did not experience negative feelings even after having been informed that the milk that they had consumed contained silicon, and that Tnuva refrained from indicating this element on the packaging.  The scope of the group entitled to compensation for the infringement of autonomy that caused them negative feelings, therefore stands at 154,000 people.

42.  In its pleadings, Tnuva objected on a number of counts to the  Lower Court's willingness to base findings and conclusions on the consumer survey relied upon in the expert opinion of Dr. Katz and Dr. Mevorach. Basing findings concerning subjective feelings on surveys is problematic. Even so, inasmuch as the Lower Court ruled that the structure for proving the pecuniary compensation to be awarded in this case is the one prescribed by s. 20 (c ) of the Class Actions Law in view of the practical impossibility of identifying the group members and in ruling individual compensation, under the circumstances, the reliance on an expert opinion based on a consumers survey gives expression to a degree of leniency regarding the modes of producing evidence which is occasionally required in the context of class actions. The need for such leniency was already addressed by the court in Barazani [3], as mentioned above and is now grounded in explicit legislation in the provision of s. 20 (c ) of the Class Actions Law (on the "enlisting" of statistic data for proof of damage where there is structural vacuum in terms of the possibility of presenting individual data, see and compare: Eliezer Rivlin and Gai Shani "A Rich Conception of the Principle of Restoring the Status Quo Ante in the Doctrine of Compensatory Damages"  ,  (hereinafter: Rivlin and Shani); Gai Shani: "The Principle of 'the Matter Speaks for Itself' in the Law of Torts – Revisited”; A. Porat & A. Stein Tort Liability under Uncertainty 87-92 (2001);  Naturally, the court's reliance on the expert opinion based on the consumers survey is conditional upon the court having found the expert opinion to be worthy of reliance, having considered the entirety of claims raised regarding it.

In the case before us, having examined the survey's findings,  the expert opinion of the Dahaf Institute on Tnuva's  behalf (drawn up by the expert, Dr. Mina Zemach), and the expert opinion of the Court expert who gave his opinion on the survey, the Court held that "The testimony of Professor Mevorach and Prof. Katz made a reliable impression, and  my impression is that they are professionals with experience and knowledge in their field" (para. 60). The Court rejected Tnuva's claim that the survey's results are biased, and that the questions presented to the interviewees included the assumption that silicon causes health hazards. For example, Dr. Mina Zemach on Tnuva's behalf mentioned question three that was presented to the interviewees ( "What did you feel in the wake of the publications  concerning  Tnuva's insertion of silicon into long lasting low fat milk, and its health risks?"). She claimed that the final clause of the question relating to health risks was altogether unnecessary and that there was reasonable grounds to fear that "this biased wording contributed to part of the serious defects of the study" (page 4 of the expert opinion, page 11 of the expert opinion).  Rejecting this assertion, the Court ruled that the presentation to the interviewees was authentic because it was proved that at that time there were publications concerning the health risks of silicon.  All the same, to be on the safe side, the Court was prepared to assume that the survey’s findings that tended to exaggerate the negative feelings somewhat, even if not to the extent of justifying the survey’s disqualification, as claimed by Tnuva, should be taken into account when determining the number of consumers who experienced negative feelings (about half according to the Lower Court’s holding as opposed to 66% according to the survey).  There was no justification for interfering with the conclusion that the wording of question number three did not warrant interference (regarding this, see comments of Prof. Mevorach in his testimony, p. 287 – 291, 296- 298 of the protocol). Furthermore the Court further ruled, correctly, to disqualify the fifth question of the survey, in which the interviewees were asked “Did your negative feelings emerge immediately with the initial publications or after that publications were also verified by the Ministry of Health and by Tnuva. The Court noted that this question contains potentially misleading information because of the possible implication that Tnuva and the  Ministry of Health had verified the publication concerning the health hazard, when in fact this was not the case/

  Accordingly no defect can be found in the Lower Court’s willingness in this case to rely on the expert opinion of Dr. Katz and Prof. Mevorach (that relies on a consumers survey) for purposes of determining the portion of the group that experienced negative feelings as a result of the infringement of their autonomy. By extension  our own reliance on this expert opinion cannot be negated as a means of determining the size of the group, along with the deletion of the “indifferent consumers” as set forth in section 41 above.

The Degree of Damage

     43.  We are required to determine the degree of damage, which in this case means the non-pecuniary damage incurred by consumers as a result of drinking milk containing silicon. Assessing the degree of damage expressed in victim’s negative feelings of anger, frustration and insult, and other like feelings caused by the tortfeasor’s wrongful conduct, and determining the compensation owing to him by reason of such damage, is no easy task. The reason is that damage of this kind is essentially subjective-individual damage, largely dependent upon the personal emotional barometer of each individual. This point was addressed by Justice T. Or in the Daaka [4] case in his ruling on the specific, non-pecuniary damage incurred by the plaintiff  due to the infringement of his autonomy. He wrote the following:  

The damage in this kind of case involves a predominantly subjective aspect, giving rise to inevitable difficulties in assessing it. Ultimately, the sum of compensation in each particular case, similar to compensation for other non-pecuniary damages, is a matter of judicial discretion, and it is thus determined by making an evaluation based on all the relevant circumstances and the impression of the court. The court must therefore adopt a balanced approach. It should give the appropriate weight to the fact that basic human rights were violated, which dictates an award of appropriate compensation as opposed to a symbolic compensation. On the other hand, considering the difficulties inherent in the procedure of accessing the damage, judicial restraint is required, and exaggerated compensation awards should be avoided.

    If the assessment of non-pecuniary damage for infringement of autonomy poses difficulties in individual cases, the difficulty is multiplied sevenfold when the court is required to assess the damage in a class action, and particularly when it is impossible to locate the members of the group and form an individual assessment regarding each member concerning the intensity of the infringement of autonomy and the subjective negative feelings experienced by reason of the infringement.  The subjective nature of the damage also impedes upon ‘damage averaging’  and for this reason in the U.S.A. there is a reluctance to approve a class action for compensation for non-pecuniary damages (see Allison v. Citgo Petroleum Corp., 151 F.3d 402, 417 (5th Cir. 1998)[42]; Reeb v. Ohio Department of Rehabilitation and Correction, 435 F.3d 639, 650-651 (6th Cir. 2006)[43]; Fuhrman v. California Satellite Systems, 179 Cal. App. 3d 408, 424-425 (1986) [44]  ]; Altman v. Manhattan Savings Bank, 83 Cal. App. 3d 761, 767-769 (1978) [45]; Stilson v. Reader's Digest Association, Inc., 28 Cal. App. 3d 270, 273-274 (1972)[46]; Birnbaum v. United States, 436 F. Supp. 967, 986 (1977) [48].

See also the comments of Justice A. Proccaccia in a minority opinion in the decision on the application for certification, 697.

In Israel, this approach was rejected by Justice Naor, with whom the Deputy President S. Levine concurred. In the application for certification, Justice Naor held as follows:

The court will not award penal compensation in a class action, and similarly will not rule compensation without proof of damage, other than as specified in item 9 of the Second Schedule. However, the aforementioned does not preclude the ruling of compensation for non-pecuniary damage (emphasis added).

 All the same, while there is no impediment in principle to the awarding of non-pecuniary compensation, in the framework of a class action, cases may arise in which the difficulty of determining the rate of damage will justify non-certification of the filing of a class action or its dismissal on its merits (regarding this, see the case law of the district courts before and after the enactment of the Class Actions Law (CC (TA-Jaffa) 388/96 Yaari v. Israel Lands Administration, [   ] s. 6 (e) and (f); CC  (TA-Jaffa) 2331/06 Lubinsky v. Nazrian, [    ] 5- 6  ; CApp (Naz.) 1528/05 Barzilai v. Frinir (Hadas 1987)  Ltd,[    ]s. 27.2  (d). On the other hand, see CC (TA-Jaffa) 1586/09 Hayyut v. Telran Immediate Messages Ltd [   ]para. 4 (b) (5); CC (TA) 1341/00 Mazal v. Discovery International Modelling Agency Ltd [   ].

44. In our case, the Lower Court deemed that the difficulties in assessment of damage by reason of it being pecuniary damage and by reason of the practical difficulty of locating the members of the group and forming an individual impression of the damage caused to each one of them, do not justify the dismissal of the class action.  For purposes of assessing the damage and fixing the compensation, it resorted to the specific mechanisms of s.20 of the Class Actions Law,  and fixed the complex model for compensation that we described above, and in accordance with which it ultimately determined the remedy.

In this appeal, Tnuva again argues that our concern is with tortuous compensation that is generally assessed on an individual basis, and that given the representative plaintiff’s failure to prove the precise damage caused to each member of the group, the Court erred in its failure to dismiss the suit for that  reason. Tnuva further claims that the damage in this case does not admit of “uniformity"” because  the degree of damage incurred by each consumer differed, hence it argued that the sum awarded by the Court to each member of the group (NIS 250) was arbitrary and with no evidentiary grounding and should thus be set aside.

The representative plaintiffs claim on the other hand that the Lower Court rightly determined that this case admits of  an “average reasonable compensation” which when multiplied by the number of the members of the group would constitute the overall sum of compensation and that its determinations in this regard are consistent with the legislative intention as well as with the American case law in this context. However, their claim is that the sum per individual as determined by the Court is too low and in their appeal they seek to fix it at a minimum of NIS 8000, in view of the Court’s own determination to the effect that had it been confronted with an individual claim, this is the sum that is could have awarded for non-pecuniary damage.

45.  Section 20 of the Class Actions Law, titled “ “Proof of Entitlement to Remedy and Payment of Pecuniary Compensation” provides as follows:

(a) If the Court decided all or part of a class action in favor of all or part of the group in whose name the class action was conducted, than as part of its decision to award pecuniary compensation or other relief to members of the group it may make, inter alia, an Order specified below, as the case may be, on condition that doing so will not place an unnecessarily heavy burden on members of the group or on the parties:
	(1) to pay pecuniary compensation or to provide some other relief, at a rate and in a manner that it will prescribe, to each member of the group whose entitlement to the said compensation or relief has been proven;
	(2) that each member of the group prove his entitlement to the compensation or other relief;
	(3) to pay pecuniary compensation in an overall amount and how to calculate the share of each group member, on condition that the total compensation can be calculated exactly on the basis of evidence before the Court: if the Court ordered compensation to be paid in a said overall amount, then it may order how the remaining amount is to be divided among the members of the group in proportion to their damage, if one or several members did not claim their share, did not prove their entitlement to compensation or relief, were not located or could not be paid their share for some other reason; however, no member of the group shall receive pecuniary compensation or other relief in excess of the full compensation or relief due to him; if, after the said distribution to the members of the group an amount is left, then the Court shall order it to be transferred to the State Treasury.
(b) If the Court ordered that every group member prove his entitlement to pecuniary compensation or other relief, then it may make Orders about:
	(1) how and when entitlement shall be proven by members of the group and how it is to be divided, and for that purpose it may appoint a person with suitable qualifications (in this section: the appointee); if the Court decided to appoint an appointee, then any person who deems himself injured by an act or omission of the appointee may apply to the Court that ordered the appointment and the Court may approve, cancel or change the act or omission and make any Order on this matter, all as it finds proper; the appointee's pay and expenses, as well as how they shall be paid, shall be prescribed by the Court;
	(2) the payment of expenses to a group member, in an amount to be set by the Court or by the appointee, for the trouble involved in proving entitlement to the said compensation or relief.
c) If the Court concluded that, under the circumstances, pecuniary compensation for all or some members of the group is not practical, either because they cannot be identified and the payment cannot be made at a reasonable cost, or because of some other reason,

In the  Reichart [9] case, Justice Adiel pointed out in that in class actions there are a variety of methods of determining the damages, which are applied to a broad range of circumstances and in addressing the provisions of section 20 of the Class Actions Law he stated that:

…[O]n the other hand the point of departure may be the means of proof prescribed in s. 20 (a) (2) of the Class Actions Law….

whereby damage is proved by affidavits filed by each member of the group. Additional means of proof, essentially similar to the individual process, are based on the determination of damage for each member of the group, but without the conduct of the detailed process of filing affidavits, but rather by a general calculation based on undisputed factual data or admitting of simple proof.  Naturally, the two methods may be combined by drawing up a general formula to be applied to each individual of the group, in accordance with data specifically concerning him. On the other hand, there are additional ways of determining compensation, based on determining an overall sum of damages that was caused to the group in its entirety, using the methods outlined above. Finally, in cases in which the damage cannot be calculated (even where it is undisputed that it was incurred) there is the possibility of determining the sum of compensation by way of estimate (para. 67 of his opinion).   

    Justice Adiel further noted that Israeli law, similar to American law outlines two principal methods for determining damages in class actions. The first is the individual calculation whereby the damage is determined giving distinct consideration to each member of the group. According to this approach, after establishing the responsibility of the defendant in the question common to all of the group members, a separate decision is made regarding the damage caused to each one of its members and the cumulative sum of damages proved by the group members will constitute the sum of the defendant’s final liability.  This method of calculation is anchored in s. 20 (a) (1) and (2) of the Class Actions Law, cited above. Its advantage is that is consistent with the method of compensation prescribed in the General law and the principles of rectificatory justice on which it is based. It is generally involves the acceptance of affidavits from the group members or a calculation based on undisputed factual data or such as admits of simple proof (see Reichart [ 9 ], para. 67). In American law various additional  mechanisms were established, intended to assist in the individual assessment of damages in an efficient and economic manner (see e.g. Bates v. UPS 204 F.R.D. 440, 449 (N.D. Cal. 2001) [48] – the conduct of separate actions following the date of establishing the tortuous liability); Olden v. LaFarge Corp. 383 F.3d 495, 509 (6th Cir. 2004) [49]- the appointment of an expert whose role was to conduct separate hearings for each victim).  Some of these found their way into Israeli law (see se\. 20 (b)(1) of the Class Actions Law (see E.S.T  Project Management[6], pp.. 246-347; and Tetzet  [8], 788)

46.  Given the advantages of the approach based on individual calculation, it would seem that it is to be preferred or purposes of determining the remedy in class actions, to the extent that it is possible and this indeed was the approach taken  by the court in Reichart where it stated that “inasmuch as our case enables the determination of damages on an individual basis, I see no grounds for taking the path of the overall calculation (see Reichart para. 72). However this approach is not always applicable. The difficulty in applying it arises for example when the group members cannot be identified or located; when under the circumstances it is not possible to present data or documents sufficient for proving individual damage; when the damage incurred by each member of the group is minimal and presumably the group members or most of will be  unwilling to cooperate for purposes of proving it on an individual basis. Likewise, where the clarification of the individual damage caused to each one of the group members requires the investment of expensive resources and considerable judicial time  which have no justification under the circumstances, (see Steven Goldstein “The Class Action Suit – For What and Why” Mishpatim  9 (5739 416, 430 – 431) (hereinafter:  Goldstein))

The first difficulty that we addressed, of locating the members of the group is characteristic of representative plaintiffs in consumer matters (see decision in the certification application, p. 685) and  as mentioned, this difficulty also arose in our case given the impossibility of locating all of the consumers who consumed long lasting low fat milk during the relevant period. In confronting difficulties of this nature and others, some of which we mentioned, American law developed a second method of calculation – the method of overall calculation which was also adopted in Israeli law. According to this method, a “group compensation” can be determined on the basis of the damage caused to the group as a whole, even if the damage incurred by each member of the group was not proved prior to the determination of the overall compensatory sum. The purpose is to prevent the frustration of the goals of the class action in cases in proving individual damage is problematic. In the same vein, there were cases in which American case law resorted to “hybrid mechanisms” such as: an expert using a statistical formula to calculate the damages of the group members; an expert who conducts hearings and individual evaluations in relation to a representative sample of victims  (Hilao v. Estate of Ferdinand Marcos, 103 F.3d 767, 782-787 (9th Cir. 1996)[50](even though it appears that the use of this mechanism was restricted in a recent case: Wal-Mart Stores, Inc. v Dukes, 131 S. Ct. 2541, 180 L. Ed. 2d 374 (2011) [51] (hereinafter  Wal-Mart); the division of the group into sub-groups bearing typical features and the determination of an overall compensatory sum for each sub-group (see also LabA (NLC) 633/08 Erez v. Gal Maton Newspaper Marketing and Distribution Ltd [23], para. 18 (11 January, 2011)

The development of the system of overall calculation in American law began with the establishment of the Fluid Class Recovery mechanism (FCR), dwelt upon by the District Court in its decision. In its classical format, this is a three stage mechanism intended for compensation of the group members, and was described by the Californian Supreme Court as follows:

First, the defendant's total damage liability is paid over to a class fund. Second, individual class members are afforded an opportunity to collect their individual shares by proving their particular damages, usually according to a lowered standard of proof. Third, any residue remaining after individual claims have been paid is distributed by one of several practical procedures that have been developed by the courts" (The State of California v. Levi Strauss & Co. 41 Cal. 3d 460, 472-473 (1986)

       (hereinafter: Strauss)

The first stage of this mechanism is the determination of the sum of the group compensation which the defendant must pay and which he will deposit in a special fund established for that purpose.  At the second stage members of the group are given an opportunity to prove (at level of proof lower than the accepted level in personal suits)  the individual damage and in doing so receive their portion as personal compensation. At the third stage the balance of the sum is allocated in accordance with the various models that were developed by the court for that purpose. It is quite apparent that the three stages of the FCR process described do not provide an answer to all of the difficulties we mentioned. For example, in cases which preclude a determination of the sum owing to each member of the group, or such as the case before us, in which there is no possibility of locating the members of the group.   In order to provide a solution for these cases American law developed a variety of methods that deviate from the classic FCR model, some of which will be considered in what follows, along with the challenges raised against them, as we will presently show. (until here Case Review)

47.  In Israeli case law, the overall calculation approach was mentioned as a possible method of calculation already before the enactment of the Class Actions Law. For example, Justice (former title) Cheshin wrote in the Barazani Further Hearing [3] that: "Where awarding separate compensation for each of the group members is not practical, the court is permitted to obligate the defendant to pay compensation using special compensatory systems or other remedies, as it deems appropriate, provided obviously that the defendant is not compelled to pay more than the damage that was actually incurred" (ibid, at p. 425. See LCA E.S.T.  [5]; the decision on the certification application, at pp. 685-688; CC (TA – Jaffa) 2036/01 Mannela v. Mifal HaPayis  [  ]  para. 8). The mechanism of the overall calculation method was further established as part of the individual arrangements interspersed among the various legislative acts and by force of which class actions could be brought in the past (see e.g. the provisions established in s. 216 (b) of the Companies Law, 5759-1999; in s. 46I of the Restrictive Trade Practices Law, 5748; s. 16 I of the Banking (Customer Service) Law 5741-1981). This mechanism appears in s. 20 (a)(3) of the Class Actions Law, that as mentioned, replaced the individual arrangements and which regarding this matter states that the court may rule that:

"payment of pecuniary compensation in an overall amount and how to calculate the share of each group member, on condition that the total compensation can be calculated exactly on the basis of evidence before the Court…."

Furthermore, s. 20 (a)(3) of the Law contains a provision regarding the division of the compensation according to which in the event of a balance remaining after the distribution of the compensation to those victims who proved their damages and claimed compensation, it will be allocated proportionately between the group members, "provided that no member of the group shall receive pecuniary compensation or other relief in excess of the full compensation or relief due to him" and in that case the balance will be transferred to the State Treasury.

This provision is essentially similar to the classic format of the FCR mechanism mentioned above, and it enables the Court to determine overall compensation subject to the conditions prescribed in the section. In  Reichart  [   ] the court emphasized in this regard that the condition for the determination of overall compensation under s. 20 (a) (3) of the Law is that "the sum of overall compensation admits of precise calculation based on evidence before the court", and the court further added that "in terms of the principles for calculating the damage and its manner of determination, including the evidentiary law concerning weight and admissibility, there is no substantive difference between the methods used for an overall calculation and the methods used  for establishing individual damage…". The court further stressed in Reichart  [9] that even at the stage of allocating compensation among the group members consideration may be given to special individual data that is proved with respect to its individual members (para. 64 of the decision).

The difference between the various alternatives established in s. 20(a) relating to the manner of calculating the compensation and its allocation among the group members is that in first two alternatives (s.s. (1) and (2) the method of calculating damage  proceeds from the individual to the general, and the sum imposed on the defendant is the sum total  of the amounts to be received by each one of the group members.  In the third alternative, on the other hand (s.s. (3))  the process is reversed in the sense that initially the overall sum for the which the defendant is liable is determined, after which  that sum is allocated between the group members in accordance with the court's instructions, and subject to the caveat that overall compensation will not be awarded unless admitting of precise calculation based on the evidence before the court.

   48.  We already mentioned that the classic format of the FCR mechanism did not resolve all of the problems that arose in American Law concerning entitlement to a remedy and pecuniary compensation in class actions. This is also true with respect to the overall calculation method prescribed in s. 20 (a)(c), under the inspiration of that mechanism. The Israeli legislator was aware of this and hence added further mechanisms in s. 20 (c) of the Class Actions Law for determining remedies in class actions. Given the importance of this section for our purposes, we will again present the provision verbatim, which provides as follows:

"If the Court concluded that under the circumstances pecuniary compensation for all or some of the members of the group is not practical either because they cannot be identified and the payment cannot be made at a reasonable cost or because of some other reason then it may order other relief to be given for the benefit of all or part of the group or for the benefit of the public, as it deems appropriate under the circumstances of the case"

Is the court's permission to grant a remedy under this section "for the benefit of all or part of a group" or "for the benefit of the public" subject to the conditions enumerated in s. 20(a)(3) of the Class Actions Law, including the condition concerning "exact calculation" of the sum of overall compensation, as argued by Tnuva?.

The Lower Court dismissed this claim and ruled that:

Section 20 (a)(3)  [enables] the calculation of the overall compensatory sum for the group, and the waiver of individualized proof of damage. However, this is still considered as personal  compensation or a remedy for those members of the group who can be located and whose entitlement was proved, by way of allocating the sum of overall compensation between the those members. This must be clearly distinguished from the additional possibility at the court's disposal under s. 20(c ) of the Law, to rule a relief for the benefit of all or part of the group  or for the benefit of the public in those cases in which the Court concluded that under the circumstances pecuniary compensation for all or some of the members of the group is not practical either because they cannot be identified and the payment cannot be made at a reasonable cost or because of some other reason" (para. 104 of the decision, emphasis in source).

   Thus, according to the approach of the Lower Court s. 20(a)(3) of the Law establishes an independent for the determination of remedies and compensation in collective suits, existing alongside the other tracks prescribed in this context in s. 20(a)(1) and (2) and in s. 20(a)(3).  The Lower Court further added that in any case it was also unable to accept the interpretation that Tnuva attempted to give to the requirement for “precise calculation” included in s. 20(a)(3) of the Law, writing that:

Regarding that requirement for “precise calculation” of the overall sum of pecuniary compensation, it bears note that this requirement is implemented in a liberal manner in the U.S.A.  and it would seem that the legislative intention in Israel was to the take the path of American judicial experience. As noted by Hon. Justice Adiel (paras. 63 and 67) the overall calculation in U.S.A. relies on statistical calculations,  such as sample testing, or the use of mathematical models, which by definition do not lead to a “precise” calculation of the damage caused to the group. Likewise, and this point too was mentioned by Judge Adiel, the overall calculation system is used to overcome the difficulty of “simply calculating the damage of each individual of the group”, for example, in the absence of admissible documents or the difficulty of locating all of the members of the group.  Likewise, there is a difficulty in “precisely” calculating non-pecuniary damage, which necessarily involves estimation. Under these circumstances it is clear that the calculation of the compensation cannot be mathematically precise, and this was not the legislative intention. It is further important to point out that the requirement for “precise calculation” of the sum of the overall compensation was established in section 20(a)(3) of the Law, which deals with personal  compensation, for the group members, but not in s. 20(c) of the Law which relates to the a remedy for the for the benefit of the group (para. 100 of the decision, emphasis in source).

 49.   I accept the Lower Court's  position that the mechanisms of s. 20  (c ) of the Class Actions Law are intended to provide an answer for those cases in which it is not possible to precisely calculate the damage and distribute it according to one of the mechanisms prescribed in s. 20 (a) of the Law. Indeed, contrary to the position presented by Tnuva, s. 20(a) is not limited to difficulties in distributing the compensation between the members of the group ("because they cannot be identified and the payment cannot be made at a reasonable cost"). Section 20 (c) of the Law enables the award of a flexible remedy "for the benefit of the group" or "the benefit of the public" even in cases in which the awarding of compensation to the members of the group is not practical "for some other reason". Another reason of this kind may exist in those cases that preclude a precise calculation of the overall damage given that the data indicating the damage are not external data, such as a price hike of defined sum, but rather a collection of individual damages the precise proof of which depends on the testimony of each and every member of the group and  obtaining these testimonies is problematic – by way of example – if there is no possibility of identifying the members of the group.  In that situation, adherence to the regular rules of compensation in tort would frustrate the rationale and the underlying goals of the institute of the class action, which is intended to "protect the interest of the individual harmed who does not bother bringing an action; it represents a public interest in enforcing the provisions of the Law of which the class action is a part; it has a deterrent value against the violation of Law; it prevents the abuse of power by holders of control, whose portion of the capital is occasionally totally disproportionate to their power, and hence prevents manipulations at the expense of the "small investor"; it saves resources and prevents the multiplicity of suits" (CA 2967/95 Hanan Vakshet Ltd v. Tempo Beer Industries Ltd [24] at p. 323. See also the goals enumerated in s. 1 of the Law). It is for these reasons that the Class Actions Law outlines special arrangements that "occasionally deviate from the regular law and leave a broad margin of discretion for the court) Hanan Vakshet Ltd v. Tempo Beer Industries Ltd (as per President D. Beinisch, para. 6 of her opinion).

Structural failures of the kind discussed above in terms of the ability to prove "by precise calculation" the overall damage that was caused to the group or the individual damage caused to each member of the group, are particularly typical of consumer class actions. In cases of this kind there is an increased risk that the tortfeasor will profit and the profits reaped as a result of the tort committed will remain in his hands purely because of the difficulty of arriving at a precise calculation of the damage  which is spread over a large group of victims who cannot be identified (see Deutch, "A Decade for the  Class Action Suit", 33). American case-law refers to these profits as "ill-gotten gains". Regarding the justification for deviating from the classic principles of rectificatory justice in tort in this context, the Supreme Court of California wrote the following in the aforementioned Strauss case:

Fluid recovery may be essential to ensure that the policies of disgorgement or deterrence are realized. Without fluid recovery, defendants may be permitted to retain ill gotten gains simply because their conduct harmed large numbers of people in small amounts instead of small numbers of people in large amounts" (Strauss, p. 472).

50.  Indeed, s. 20 (c) of the Class Actions Law deviates substantially from the correlative principle underlying the regular principles of compensation which mandate total correlation between the circle of victims and the circle of the compensated. Compensation funds are not transferred to the victims and are used for "the benefit of the group" as such or "the benefit of the public", the assumption being that the victims  will derive indirect benefit. As such, the victims' interest in receiving compensation for the damage incurred is not realized in full.  However, from the victim's perspective the alternative of no remedy at all being awarded would support the award of a  remedy for the benefit of the group or the public, because partial and indirect benefit is preferable to not receiving any remedy at all.

A similar rationale also underlies the developing trend  that has developed in general Tort law, other than in the context of the class action, in cases of repetitive tendency. This tendency reflects the recognition that when applying the balance of probability rule in examining the causal connection between the acts of a particular tortfeasor and the damages caused to the victims at large it is preferable to promote the principle of rectificatory justice, even by way of cy pres comme possible, because the application of the principle in the classical sense, will in many cases achieve a result that is altogether remote from the restoration of the status quo ante.  This point was addressed  by Deputy President E. Rivlin in FHC 4693/05 Carmel Haifa Hospital v. Malul  [25] where he noted:

…in certain cases the principle of rectificatory justice  should be adjusted so that it focuses on the overall picture and not just on the isolated claim of a particular plaintiff before the court.  This enables a harmonization between the conception of rectificatory justice and the notion of relative compensation (para. 52 of his opinion. See also in para. 48 of Justice M. Naor's opinion).  

If the general law of tort is prepared to deviate from the principle of correlativity in suitable cases then a fortiori  it is both appropriate and correct to do in class actions. This is because in the class action and primarily those concerning consumer wrongs, the fundamental principle and goal that we seek to realize focuses on the achievement of effective and efficient deterrence against the dealers who breach the law and the consumers' rights ( see Deutch. "A Decade for the  Class Action Suit", 33). For otherwise the ones who profit are the tortfeasors who are large bodies that provide services to immense numbers of clients, and as such spread their damages among a large group of victims whose identity is not known, and their ill-gotten gain will remain in their own hands.  Redressing the injury caused to the individual victim on the other hand, is a less dominant interest in the class action given the fact that in most cases the damage caused to the individual consumer is relatively minor.

   Regarding the awarding of a remedy in the area of class actions in the U.S.A. by application of the principle of cy pres comme possible which originates in the laws of trust and means "as near as possible" and is also referred to as "next best recovery" see Natalie A. DeJarlais, The Consumer Trust Fund: A Cy Pres Solution to Undistributed Funds in Consumer Class Action, 38 Hastings L.J. 729 (1987); Stewart R. Shepherd, damage Distribution in Class Actions: The Cy Pres Remedy, 39 U. Chi. L. Rev. 448 (1972))for a critique of the expansive application of this principle, see  M. H. Redish, P. Julian & S. Zyontz, Cy Pres Relief and the Pathologies of the Modern Class Action: A Normative And Empirical Analysis, 62 Fla. L. Rev. 617 (2010) (hereinafter" Redish).

Hence, in terms of policy considerations both those anchored in the general rules of tort and those specific to the laws of class actions, we should strive to ensure that inability to identify the victims does not create an insurmountable obstacle to filing a claim in court (see A. Porat, "Collective Liability in Tort Law", Mishpatim 23, 311, at pp. 384-385), and see also comments of Justice E. Mazza in Barazani Further Hearing [3], at pp. 449 – 451).  In this context, for purposes of the class action proceedings the possibility of awarding a remedy for the benefit of a group or the public as established in s. 20 (c ) of the Class Actions law constitutes an important component.    

51.  All the same, we should not forget that another one of interests to be pursued in the class action proceeding is that of fairness to the defendant and protection of his substantive and procedural rights. From this perspective, and given that our concern is with a monetary remedy, we are obligated to ensure that the relaxing and flexibility of the procedural rules anchored in the Class Actions Law do not produce a situation in which obligation imposed upon him exceeds the sum of the damage that he caused) (regarding the dismissal of the motion to certify a class action inter alia by reason of this concern, see McLaughlin v. American Tobacco Co. [53 ]. Indeed, from the tortfeasor's perspective less importance attachés to the question of how the compensation is distributed. His substantive interest concerns the extent of the sums that he will be obliged to pay, and less with the question of how they are utilized thereafter. The desire to protect the interest of the defendant as mentioned underlies, inter alia, the provisions of the s. 20 (e) of the Class Actions Law, which negates the awarding of exemplary damages against the defendant and also negates the awarding of compensation without proof of damages (apart from in a suit in accordance with s. 9 of the Second Schedule). Another balance between the public interest of the victims on the one hand, and the defendant's interest on the other hand may also be found in the provision of section 20 (d)(2) of the Class Actions law in accordance with which in the awarding of the remedy the court may also have consideration for "the damage that is liable to be caused – by the payment of compensation, its amount or the manner of its payment – to the defendant, to the public that uses the defendant's services or to the general public by damaging the defendant's economic stability, as opposed to the expected benefit for members of the group  or for the public".  Parenthetically, it should be noted that Tnuva did not make any claims in court in reliance on the provisions of s. 20(d) (2) of the Law. It was for this reason that the Lower Court found no reason to consider these provisions and there are no grounds for us to address them at the appeal stage.

52.  American case-law offers a variety of approaches to the question of whether and under what circumstances the sum of compensation in class actions can be determined other than by a precise calculation. Some have contended that where there is no possibility of determining the overall sum in a precise manner, there are generally no grounds for using the FCR doctrine (on this interpretation of the FCR doctrine, see Michael Malina, Fluid Recovery as a Consumer Remedy in Antitrust Cases, 47 NYU L. Rev. 477, 488-491 (1972)). All the same, in order to resolve the difficulties that arise in this context the various U.S.A. courts, the courts have developed statistical mechanisms that enable the evaluation of the damage caused to a group, while waiving to certain degree the demand for "precision" (hence  damage was determined in relation to the average wage which was determined based on statistical means, see: Pettway v. American Cast Iron Pipe Co., 494 F.2d 211 (5th Cir. 1974) [54]; Stewart v. General Motors, 542 F.2d 445 (7th Cir. 1976)[55]; Bowe v. Colgate-Palmolive Co., 489 F.2d 896 (7th Cir. 1973)  [56]; United States v. Wood, Wire & Metal Lathers Int. Union, Local Union 46, 328 F. Supp. 429, 442 (S.D.N.Y. 1971)[57].  Similarly, the court enabled proof of damage by way of sampling and by means of other statistical methods. See e.g. Hilao v. Estate of Ferdinand Marcos [50].  For a different approach see Hood v. Eli Lilly & Company 671 F. Supp 2d  397, 434-453 (E.D.N.Y. 2009)  453 [58].

In Another case  (Long v. Trans World Airlines, Inc. 761 F. Supp. 1320 (N.D. Ill. 1991 [[59]) the court wrote that:

"Defendant has no "right" to an individualized determination of damages for each plaintiff; the desire for accuracy must be balanced against other factors such as the burdens of discovery in relation to the size of the individual claims." (Id. at 1327).

Even among scholars it has been contended that creative use should be made of "aggregate proof) in order to assess the rate of collective damage caused to the members of a group. This was noted by the scholars A. Conte & H.B. Newberg, in their book Newberg on Class Actions (Vol. 3, 4^th ed.2002):   

"There are occasions when it is feasible and reasonable to prove aggregate monetary relief for the class from an examination of the defendant's records, or by use of a common formula or measurement of damages multiplied by number of transactions, units, or class members involved, or by reasonable approximation with proper adherence to recognized evidentiary standards". (Id. 476).

53.  The interests we have examined that underlie the class action lead to the conclusion that where a remedy is awarded for the benefit of a group or the benefit of the public under s. 20 (c ) of the Class Actions Law, we should aspire to ensure that the overall sum of liability is consistent with the overall damages caused by the defendant. In order to determine this sum there is no impediment to adopting a method of estimation, which is an accepted and recognized method in our system for quantifying damages  in cases in that do not admit of precise calculation of the  damage incurred by the individual victim. This point was addressed by this Court in CA 355/80 Anisimov Ltd v. Tirat Bat-Sheva Hotel  [26],:

In those cases, in which, the nature and character of the damage, enable the production of accurate data, the victim-plaintiff must do so, and should he fail to do so damages will not be awarded to him. On the other hand, in cases in which the character and the nature of the damage render it difficult to prove the degree of damage and rate of compensation with certainty and accuracy, it will not frustrate the victim's claim, and it will suffice if adduces such data as can reasonably be obtained, while granting discretion to the court to make an estimate that supplements that which is missing  (p. 899).  

It was further ruled that in appropriate cases statistical data can be used for determining the scope of the damage (see; Rivlin, Shani, at pp. 506 – 507), and the expert opinion. As such, and a fortiori, this method may be used where it concerns a group. All the same, it is stressed that the evaluation of the damage by estimation does not mean the determination of an arbitrary amount which seems to be no more than a guess, and the court using its discretion in such a case must base the sum it determines upon  appropriate anchors that enable the evaluation of damage by way of estimation, as stated (see Daaka [4] at p. 583, Barak Erez, 277).

54.  The non-pecuniary damage which the Lower Court was requested to award in this class action is in the genre of damages the nature and character of which  do not admit of precise calculation and in cases of individual claims too, will always be subject to the court's estimation (apart from compensation claims for road accidents in respect of which the Compensation for Road Accident Victims (Calculation of Compensation for Non-Pecuniary Damages)  Regulation 5736-1976 (hereinafter Road Accident Regulations), prescribes  formula for determining non-pecuniary damage as a derivative of the rate of disability and a ceiling sum determined in the ss. 4 (a)(3) and 4 (b) of the Compensation for Road Accident Victims Law, 5735-1975). Regarding the essence and the methods for calculating non-pecuniary damage in differing contexts, see CA 4022/08 Agbaba v. Y.S. Company Ltd [27], paras 10 – 24;  C.A. 754/05 Levi v. Share Zedek Hospital [28]).

In s. 20 (e) of the Class Actions Law, the legislator authorized the court to  award compensation for non-pecuniary damage caused to the group member. However, the determination of non-pecuniary damage in the present case is no simple task. As mentioned, there is no possibility of identifying the group members who consumed long lasting, low fat milk during the relevant period for the suit, and hence the Court availed itself of statistical data and expert opinions in reliance upon which it reached a conservative, cautious determination that the group comprised 220,000 members. We concluded that the reference group for purposes of compensation for damage occasioned by infringement of autonomy is limited to that portion of the consumers group who incurred consequential damage due to the infringement of autonomy and who experienced negative feelings in various forms upon becoming aware that the milk they drank contained silicon.  Our determination regarding the number of group members included in the group of those entitled to the said compensation (154,000) was also based on statistical data and the expert opinions presented in the proceeding. Our concern is therefore with a group numbering over 100,000 people, whom can be neither identified nor located, and even were it possible to locate them, it is doubtful whether it would even be appropriate to instruct each one of them, or even some of them to submit an affidavit specifying the intensity of the negative feelings that they experienced in order to award compensation in accordance with one of the mechanisms established in s. 20 (a) of the Class Actions Law. Given the impossibility of determining compensation based on individuated evidence or precise calculation and the impossibility of identifying the members of the group entitled to compensation, we are left with the compensatory mechanism established in s. 20 (c ) of the Class Actions Law, which enables the determination of overall compensation based on an estimation for the benefit of the group or the public. The question that presents itself is how, if at all, to estimate the "collective" non-pecuniary damage in this case, and whether the fact of its being non-pecuniary damage that is characterized by subjective, individualistic features, should preclude the possibility of "uniformity" in determining the overall sum of compensation, due to the differences between the victims in terms of the results of the damage.

In rejecting Tnuva's claim in this context, the Lower Court ruled that "It is no longer possible to make a sweeping claim that uniform compensation cannot be awarded for non-pecuniary damage, absent the possibility of proving individuated damage" (para. 128) and hence the court fixed the sum of compensation at NIS 55 million, stating that this sum reflects uniform compensation for the sum of NIS 250 for each victim (220,000 X 250) for the non-pecuniary damage caused to the members of the group. The Court further mentioned that had a non-pecuniary compensation for Tnuva's action been awarded in the framework of an individual suit, the sum of the compensation would have been higher, but the court's approach was that this context demanded consideration of the fact that the issue was one of overall compensation being ruled for the group in its entirety or for the benefit of the public, in the absence of the possibility of having consideration for the individual damage caused to each one of its members. In the courts' words:

 [a]fortiori the court does not examine the individual damage of each member of the group, given that  not only is the remedy awarded to the group as a whole, but it is also given to the group and not to its individuals. The court is even entitled to fix the overall sum of compensation for the group based on estimation. This does not mean that the court should avoid the determination of important parameters for purposes of calculating the overall damage. The court must definitely determine the number of members in the plaintiff group, at least by way of estimate. Similarly, the court must assess the scale of the individual damage caused to  each one of the group members, to ascertain that the overall sum of compensation awarded to the group does not exceed the aggregate damage caused to its individuals. However, at the end of the day, the court must determine an overall sum of compensation to be awarded to the group having consideration for the totality of considerations, but it must not ignore the fact that the compensation is not intended as individual =  compensation for each of the group members. The overall compensation  must be commensurate and in proportion to the wrongful act and the circumstances of its commission, even if the division of the sum by the number of group members would indicate a lower rate of compensation by comparison to the rate of individual compensation that would have been awarded had a personal claim been filed against the defendant by reason of that tort.   

Granting the plaintiffs' request would have meant determining Tnuva's liability for an overall sum of NIS 1.76 billion (NIS 8000 X 220,000 members of the group). It is absolutely clear that this result is unreasonable and unrealistic. Having considered all of the circumstances as set detailed above, I determine an overall sum of compensation for the group of NIS 55 million which reflects an estimated rate of damage for each members of the group of the sum of NIS 250. This degree of damage, and even higher, was most definitely caused to each member of the group, even if only by reason of the infringement of individual autonomy (para, 134 (b) of the decision, emphasis in source).

55. In this appeal, Tnuva challenges the determination of the compensation according to the mechanism prescribed in s. 20 (c ) of the Law, arguing that  given the type of the damage (non-pecuniary damage, with subjective-individual features), and given the impossibility of proving the damage to the group in terms of its individual members due to the impossibility of identifying its members, there were no grounds for determining uniform compensation for the group, even at a minimal rate  NIS 250 for each individual). On the other hand, Raabi claims that given the Court's view that the appropriate compensation for the infringement of autonomy had it been a personal suit was not less than NIS 8000, it should have awarded that rate of compensation multiplied by the number of members in the group (which was similarly challenged on the part of Raabi, as detailed above), and the fact that such a significant figure was received as a result

Indeed, in cases in which there is significant differentiation between the group members it may yield the conclusion that the matter is not suited for adjudication as a class action (see s. 8 of the Class Actions Law; CA Reznik v. Nir National Cooperative Association for Workers Settlement  [29] paras. 24 – 27 (hereinafter: Reznik), See also LabApp (Nat.) 425/00 Goldberger v. Guards Association Ltd  [    ] para. 8 ; Civ.App. (Naz) 1528/05 Barzilai v. Ferinir (Hadas1987 ) Ltd (para. 27.2) [  ]; on the other hand, see TM 105/06 (CivApp.30858/06) (Tel-Aviv-Jaffa) Feldman v Municipalities Sewage Association (Dan Region) para. 52 ; CF (Tel-Aviv-Jaffa) 2719-06 Levi v. Israeli News Company Ltd para. 17; and see also Klement, "Boundaries of the Class Action", at pp. 345-346).   It would seem however that the claim concerning differentiation between the group members has the power to bring about the non-certification of the suit as a class action and even its rejection if certified, in those cases in which the differentiation has implications for the establishment of liability or even the very existence of an actionable cause.  The main concern in this context is that it may prejudice the defendant's right to a fair proceeding and to be able to defend himself against each and every one of the group members. This happened in the Resnik [29] case where the defendants raised the prescription claim, the decision on which was not necessarily identical with respect to each and every member of the group, and for that reason the court did find grounds for its certification as a class action.  In that case Justice Gronis stated that "Certain solutions for the absence of homogeneity between the group members are found in ss. 20 (a) – (c) of the Class Action Law, that includes provisions  regarding the remedy that will be awarded by the court".  The court further added that it was not required to rule on the question of the "cases in which the suit should be certified as a class action notwithstanding the existence of individual features, by having resort to the mechanisms of s. 20 of the Class Actions Law, or other solutions" but it still saw fit to stress that there are cases in which "these solutions are unable to provide a solution" and as a result they cannot be certified for filing  as a class action (ibid, para. 27). The issue of differentiation (the foundation of commonality) between the group members was likewise the subject of discussion in  recent decision of the Supreme Court of the U.S.A in the Wal-Mart  issue. In that case a request for certification of a class action was filed in the name of a million and a half employees of the Wal-Mart network based on illegal discrimination against them as women with respect to matters of salary and promotion.  The trial instances and the appellate instance certified the suit as a class action Dukes v. Wal-Mart Stores, Inc. [51] . The Supreme Court however reversed the decision, ruling that the suit should be be certified in view of the plaintiffs' failure to prove that the company had conducted a general policy of discrimination, in other words, it failed to prove the existence of a grounds for claim regarding every single group member. It also held that under the circumstances it was not possible to calculate a compensation sum by statistical methods and by way of a representative sampling, inter alia  in view of the defense claims in the law itself, which the company was able to raise regarding each and every company in the group.

Tnuva's argument concerning differentiation is to no avail in our case.  Its argument relates exclusively to negating the possibility of awarding uniform compensation for the non-pecuniary damage sustained by the group members under the circumstances, in view of what it claims is the lack of uniformity among the victims in this context.  In the Court's eyes, this differentiation did not justify the non-certification of the suit as a class action and I concur with the stance of the Lower Court that neither does it preclude the award of a remedy after the clarification of the class action that was certified as stated.   First, even in suits that are not conducted as class actions in which there are multiple plaintiffs, such as suits for building defects, the court does not refrain from awarding uniform compensation by way of estimation for the non-pecuniary head of damage (on "uniformity of damage" for mental anguish in regular suites filed on behalf of a number of plaintiffs, see the district court decisions cited in para. 121 of the decision). Second, as distinct from differentiation among the members of the potential group, that may have implications for the existence of an actionable cause and the basic entitlement of each member to a remedy, where the differentiation concerns the sum of compensation, it finds its solution in the various mechanisms of s. 20 of the Class Actions Law that deal with the remedy that the court is authorized to award. The establishment of these mechanisms is intended to ensure that the differentiation among the group members regarding the determination of the remedy, just like other difficulties in proving damage which stem from the inability to identify or locate the group members, will not frustrate in limine  the clarification of the matter by way of a class action and the realization of the goals upon which this proceeding is based in terms of the public interest and in terms of the group concerned, which we dealt with above at length.  Accordingly, differentiation relating to the rate of the damage, will not  in general prevent the clarification of the class action and the award of a remedy in the framework thereof, including with respect to the award of uniform compensation that will be determined by way of estimation, unless under the circumstances of the particular case prevent the award of an appropriate remedy in accordance with one of the mechanisms set forth in s. 20.

56.       That said, it would not be superfluous to note that differentiation between the group members may occasionally be raised as an argument for denying certification of suit as a class action, or against the award of a uniform compensation in the framework thereof, specifically from the perspective of the potential group members, in those cases in which awarding uniform compensation prejudices the rights of those group members who wish to prove their suit on an individualized basis and thereby merit larger compensation. American case-law treated this concern as a potential violation of due process rights, which  in turn lead to the rejection of the certification applications for class action suits, stressing the fact that the mechanisms established in the relevant statutory provisions do no include the right to opt-out of a class action proceeding, see  - Federal Rules of Civil Procedure,  Allison v. Citgo Petroleum, 151 F.3d 402, 414-415 (5th Cir. 1998) [60]; Lemon v. Int'l Union of Operating Engineers, Local No. 139, AFL-CIO 216 F.3d 577 (7th Cir. 2000) [61]; Jefferson v. Ingersoll Int'l, Inc. 195 F.3d 894 (7th Cir. 2001) [62]; Reeb v. Ohio Department of Rehabilitation and Correction, 435 F.3d 639 (6th Cir. 2006) [63].

For additional cases in which class actions were not certified in the U.S.A. against the background of the differentiation between the group members, see In re Fibreboard Corp., 893 F.2d 706, 712 (5th Cir. 1990) [64]; Windham v. American Brands, Inc., 565 F.2d 59 (4th Cir. 1977) [65]. However, in the U.S.A. this approach is not relevant to certification applications for class actions in accordance with legislative provisions that contain mechanisms for an opt-out right.

 Israeli law in this context differs. The Class Action Law mandates the registration of the application to certify the suit as a class action, and the registration of its certification in the Class Actions Register (ss. 6 (a) and 14 (b) of the Law, and irrespective of the nature of the suit each and every group member is entitled to give notice that he does not wish to be included therein (s. 11 of the Law).   Moreover, proponents of the approach that views the group as an entity in its own right have  opined that there is need for a "sacrifice" on the part of each member of the group of with respect to his individual rights as a litigant, in view of his obligation to "tie his fate" with the fate of the group  (see David L. Shapiro, Class Actions: The class as Party and Client, 73 Notre Dame L. Rev. 913, 919 (1998).

The claim raised by Raabi in his appeal concerning the paucity of the uniform sum  that was awarded is not based on the claim of differentiation and the claim that any particular member of the group suffers as a result.  Raabi does not dispute the fact that in this case, in the framework of a class action, it was not possible to clarify the individualized damage incurred by each and every group members nor does he dispute that it was not possible to identify or locate them.  His claim relates solely to the smallness of the sum awarded as uniform compensation (NIS 250), given the fact that the Lower Court expressed its view that had the case been adjudicated as an individual claim it would have been appropriate to award far higher compensation (NIS 8000). Accordingly, Raabi claims that the sum of uniform compensation for purposes of calculating the overall compensation for the benefit of the group should be set at  NIS 8000.

57.  Examination of the Raabi's testimony (pp. 71-81 of the protocol) indicates that over a period of years that included the entire period that was relevant for the class action (23 October 1994 until September of 1995) he consumed significant quantities of  long lasting low fat milk. However, the range of consumers of long lasting milk is varied both in terms of the duration of the consumption period and in terms of the scope of consumption. Hence, it may be assumed that the relevant group includes those who did not consume the milk for the duration of the period, those who consumed it in far smaller quantities than those consumed by Raabi and those who drank fresh milk on a regular basis and who only consumed the long lasting milk that they had purchased on rare occasions, when under various circumstances it served as substitute for fresh milk.  This varied range of consumers of long lasting milk that contained silicon must be taken into consideration when determining the uniform compensation to be awarded for the violation of the autonomy of the group members who suffered consequential damage as a result.  The claim of the  representative plaintiffs' that the group in its entirety should be awarded the same compensation (NIS 8000) that was demanded by Raabi as the main plaintiff, fails to consider the differentiation between the group members that we discussed above, and for that reason alone we can dismiss the claim.   Furthermore, contrary to the position of the Lower Court, even on an individual level I see no justification for awarding Raabi compensation for the sum of NIS 8000 (as valued on the date of the suit) for the damage head of infringement of autonomy. This takes into account the fact that we are no concerned with an infringement of the highest conceivable level and the fact that as distinct from compensation awarded in other contexts of non-pecuniary damage, our concern is with negative feelings experienced by the group members for a limited time, the peak of which was presumably when it became known to those who had consumed the milk, post factum, that it contained silicon.  In other words, the non-pecuniary damage is not of the kind that accompanies the victim for life, such as pain and suffering in the wake of permanent physical disability as a result of medical negligence.  As such I think  that on an individual level too, even where it concerns a permanent consumer of long lasting  low-fat milk for the entire relevant period, the compensation sum awarded for consequential damage (feelings of anger, frustration, revulsion, anxiety, fury etc)  resulting from the infringement of his autonomy should not be exaggerated.  A fortiori, the uniform  compensation to be awarded to the entire group should not be exaggerated, given the differentiation between its members in terms of the scope of the damage and its intensity.

58.  This brings us back to the question of what constitutes the group compensation to be awarded in the case at hand, and whether the path taken by the Lower Court was appropriate for its ruling. As mentioned, the Lower Court concluded that compensation amounting to NIS 1.76 billion, which is arrived at by multiplying NIS 8000 for an individual by the number of group members (220,000), is a result that "is unreasonable and unrealistic" and it therefore set the sum of the overall group compensation at  NIS 55 million, stating that this sum "reflects an estimated individual damage of  NIS 250 for each of the individuals of the group".

In view of the great variety in the group in terms of its habits of consumption of long lasting milk containing silicon and in view of other features of the infringement of autonomy which we discussed above, including: the intensity of the infringement, and the fact that one can imaging higher rates of intensity, and the limited duration of the time during which the members of the group experienced negative feelings, I believe that the sum of NIS 250 can be accepted as a sum that is commensurate for purposes of setting the individual, uniform compensation.  The multiplication of this sum by the number of group members who suffered consequential damage by reason of the infringement of autonomy gives us an overall compensation sum of NIS 38,500,000 (250 X 154,000).   In its pleadings, Tnuva proposed that to the extent that it be obligated to pay compensation, it would be appropriate that the profit it made should serve as a basis for its calculation, indicating that the profit was NIS 1,645,900 in terms of the principal and with the addition of interest and linkage differentials (from the middle of the period)  - NIS 4,981, 616. In principle, this model for calculating compensation should not be negated (on the approach whereby compensation based on denial of the tortfeasor's profits realizes the principle of corrective justice in the law of tort, in appropriate cases, see Ernest J. Weinrib Restitutionary Damages as Corrective Justice 1 Theoretical Inquiries in Law 1 (2000).  It has even been claimed that this model is preferable for class actions in which the compensation awarded is a compensation for the benefit of the public under s. 20 (c ) of the law. This is because in cases like these there is no real correlation between the obligation imposed upon the tortfeasor and the public of those who are compensated, and the purpose of remedying the damages of the victims is not really achieved due to the practical inability to identity the members of the group, to identify them or to compensate them. As such, the emphasis should be placed on the other objectives of the law of tort, including effective deterrence and prevention of unlawful enrichment of the tortfeasor. Indeed, the use of unlawfully obtained profit as a departure point for calculating compensation maintains the correlation between the intended purpose of the compensation and the manner of its calculation. However, even though on the level of principle the model based on the denial of profit for calculating compensation for the benefit of the public under section 20 ( c) of the Class Actions Law  should not be dismissed, it must be remembered that this model is not appropriate and not applicable in all of the cases. For example, it would difficult to apply it in a case which the tortfeasor did not profit as a result of the wrongdoing.  As such, when awarding compensation for the benefit of the public the court must examine all of the data before it, and in accordance therewith to formulate the model best suited for its ruling. In our case, at the very outset Tnuva did not present us with detailed, substantiated and reliable data on the basis of which it would have been possible to examine the possibility of calculating overall compensation based on the denial of profit model.  For example, Hagit Adler (who was employed in Tnuva as of 1996 and who served as the marketing manager when she gave her affidavit), stated that at the time of giving the affidavit (November 2004) “Tnuva does not have ….precise data regarding the rate of profitability of long lasting milk of 1% fat during the relevant period (section 17 of the affidavit). Adler did propose to base the findings in this case on the rate of the profitability of long last milk with 1% fat on the later years (1999 – 2001), but regarding these years too, the only thing that was attached was a page of pricing relating to these years, taken from a document that was not presented in full, the authorship of which is not clear nor the data on which it is based, One of the other possible models or purposes of determining compensation for the benefit of the public, is the model that was adopted by the Lower Court and which we too endorsed. This formula, based on statistical data (regarding the number of victims) and uniform individual compensation, complies – albeit in the form of cy-pres calculation -  with the traditional and accepted method of calculating compensation in torts law. All the same, and given that our concern is with cy-pres calculation, the application of the this model must be subject to the caveat that the cy-pres calculation must be done with the requisite caution and tend to be conservative, so that the sum of overall compensation will not spill over into the realm of punitive exemplary compensation which are not to be awarded in representative suits, pursuant to the legislative fiat in section 20 (e) of the Class Actions Law.

In conclusion, the overall compensation that should be imposed on Tnuva in this case according to the model that we endorsed is fixed at NIS 38, 500,000 as valued at the date of the decision of the Lower Court, (17.10.2008).

The Method for Distributing the Compensation Awarded for the Benefit of the Public

59.       In order to balance between the public objectives and the private objective, American law has formulated a variety of mechanisms for providing a remedy for the benefit of the group in its entirety or for the public benefit, including discount mechanisms (“price rollbacks”); the transfer of the compensation funds to government body by way of their designation for goals that will benefit the actual victims (“earmarked escheat”);  a “consumer trust fund”; and in appropriate cases, the relative participation (pro rata) of the current group members in balance of the funds (“claimant fund sharing” (regarding this, see Strauss, at pp. 473- 476). All the same, there are those who have sharply criticized the use of collective compensatory mechanisms for the public benefit in cases in which it is difficult or impossible to the individually compensate the members of the group (see e.g. Redish; Powell v. Georgia-Pacific Corporation, 119 F.3d 703, 706 (8th Cir. 1997) [66]; In re: Airline Ticket Commission Antitrust Litig, 268 F.3d 619, 625 (8th Cir 2001) [67].Regarding the variety of approaches adopted in American case-law on this matter and the differing approaches to the most optimal correlation between the distributive mechanism and the goals of the particular suit and the interests of the group members, see  In re Folding Carton Antitrust Litig. 744 F.2d 1252 (7th Cir. 1984) [68] ; Houck v. Folding Carton Admin. Comm., 881 F.2d 494 (7th Cir. 1989) [69]; In re Cuisinart Food Processor Antitrust Litig.38 Fed. R. Serv. 2d (Callaghan) 446 (D. Conn.1983) .[70]; Democratic Cent. Comm. v. Washington Metro. Area Transit Comm'n [71]   ], 84 F.3d 451 (DC cir. 1996); In re Domestic Air. Transp. Antitrust Litig,    148 F.R.D. 297 (ND Ga 1993) [72] . 

On the approaches adopted by scholars on this issue, see Newberg, 505-543; Anna L. Durand, An Economic Analysis of Fluid Class Recovery Mechanisms, 34 Stan. L. Rev. 173 (1982); Kerry Barnett, Equitable Trusts: An Effective Remedy in Consumer Class Actions, 96 Yale L.J. 1591 (1987); Christopher R. Leslie, A Market-Based Approach to Coupon Settlements in Antitrust and Consumer Class Action Litigation, 49 UCLA L. Rev. 991 (2002).

See also Goldstein, 430- 431. on the use of systems of collective compensation in the Common law states, see Rachel Mulheron, The Class Action in Common Law Legal Systems: A Comparative Perspective, 426-430 (2004)

As indicated by the provision of section 20 (c ) of the Class Actions Law, the Israeli legislator chose an approach that enables an award of compensation for the benefit of the group as a whole and for the benefit of the public according to a system of collective compensation, even in the cases in which technical reasons preclude individuated compensation for the group members. In doing so the legislator expressed the view that the public goals which the Class Actions Law is designed to serve and which we dwelt on at length above are of no less importance than the private goals and hence the  reason to strive to realize those goals even where various difficulties prevent the proving of the precise aggregate of the individual damages caused to the group and the maintenance of conformity between the public of victims and the public of those who are compensated. At the same time, it is important to note that according to the hierarchy prescribed by section 20 (c ) of the Class Actions Law, preference should be given, to the extent possible, to compensatory mechanisms that reflect such conformity, and even when awarding compensation according to section 20 (c ), in the absence of the possibility of awarding it under sub-sections (a) and (b), every effort should be made to structure the mechanism for distribution of compensation in a manner that achieves at least an element of connection between the public of those compensated and the public of victims.

60.  In the case before us, regarding the distribution of the Lower Court held as follows regarding the distribution of the

“Having consideration for the difficulties involved in the solution of the reducing the price of milk, given the immense sum of overall compensation ruled in favor of the group (NIS 55 million) and for reasons of the benefit of the group and the public – the sum of the compensation should be designated for three essential goals – First, benefitting the group members by reducing the price of the product (or increasing the contents without raising the price); second – research and scholarship fund in the field of food and nutrition which have implications for public health; third - distribution of milk free of charge to populations in need via non-profit organizations so involved (para. 144 (O), of the decision, emphasis in source).

In holding that one of the objectives for which part of the compensation sum should be awarded is the providing of a benefit via a discount from the product price, the Court, by its own account,  was at the every least attempting to establish a group connection between the victims of Tnuva’s conduct and those who would gain from the benefit. However, in our case it is doubtful whether such a connection actually exists. The connection which the Lower Court sought to establish in this context proceeds from the assumption that those who consumed long lasting low fat milk of Tnuva during the relevant period continue to do so today as well. The problem is that there is only a low probability that this assumption actually materialized, inter alia because of the passage of time and changes in consumption habits and even more so when considering our conclusion to the effect that compensation for infringement of autonomy during the relevant period (23 October 1994 – September 1995) should not be awarded exclusively according to objective criteria and the victims group should be limited to those who suffered consequential damage as a result of the infringement and experienced revulsion, frustration, anger, and other similar negative feelings. When supplementing this by the considerable dangers generally involved in a discounts arrangement that requires a detailed examination of the influence manner in which the arrangement affects the relevant market (see Amir Israeli “Settlement in a Class Actions that Infringes Free Competition, in the wake of CF 1012/02 Yifaat v. Delek Motors Ltd   [   ] Hearat Din 2 (2) 112, 118 – 125) (5665), and the need to receive a reconfirmation from the Director of Antitrust (due to the passage of time from the time of that the gave the previous confirmation in this context) it would seem that in the current case it is preferable to waive the allocation of part of the compensation for the purposes of the discounts arrangement and to focus on the two other objectives determined by the Lower Court, which serve worthy interests for the benefit of the public in its entirety. The portion deducted for purposes of the discount arrangement will be divided equally between these two objectives and hence the compensation sum shall be distributed in the following manner:

       a.         For the study and research fund – 44.33% and for the distribution of milk products to the needy 55.66%.

       b.         The distribution of the  milk products (and not just long lasting milk that formed the subject of the claim) will be effected over a period of five years from commencement date for the execution of the decision, by way of the 2 non-profit organizations "latet" and “Mishulhan leShulhan”  both of which supply food to dozens of other non-profit organizations around the country, as held by the Lower Court in its decision of 17 June 2009, which gave force to the agreements reached between the parties with the cooperation of the representative of the Attorney General and with his consent, attached to the notification of the parties dated 10 June 2009, in the Lower Court (hereinafter: “the supplementary decision”).

       c.         For purposes of transferring the compensation for research purposes in the field of food and nutrition, a study fund will be established, headed by the Head Scientist of Ministry of Health. The fund management will choose the studies that are to receive scholarships, and will supervise them. The members of the management will be the entities specified in section 6C of the agreements reached between the parties and which were approved in the supplementary judgment.  The intention is to use the entire sum of compensation earmarked for the study fund within 5 years, unless it becomes necessary to use the sum thereafter as well, in keeping with the Lower Court’s decision in the supplementary decision.

       Compensation for the Representative Plaintiffs and

    61.          In its partial decision and its supplementary decision the Lower Court ordered the payment of compensation and advocates fees to the representative plaintiffs and their attorneys, and all told ordered Tnuva to pay the sum of NIS 500,000 to the Raabi heirs; the sum of NIS 1,000,000 to the Israel Consumer Council and the sum of NIS 2,500,000 to the attorneys of the representative plaintiffs.

       Tnuva argues that according to the criteria outlined regarding this issue in the Class Actions Law, there were no grounds for awarding such high sums to the representative plaintiffs and their attorneys. In this context Tnuva contends inter alia that the involvement of the Israeli Consumer Council in this context was only minimal, that it did not assume any risk and did not require any monetary incentive for acting in consumer related matters.  It further submits that the rate of the compensation and advocates fees awarded is far in excess of the rate awarded in other cases, and that in this context it would have been appropriate to have consideration for the discrepancy between the sums demanded by the representative plaintiffs (who initially set their at NIS 4 billion) and the sum that was finally awarded.

The representative plaintiffs on the other hand claim that there are no grounds for interfering in the rate of compensation fixed by the Supreme Court, which does not deviate from the criteria prescribed by statute and case law in this context. On the other hand, they see cause for interfering in the sum of fees awarded to their attorneys and contents that the considerations that guided the court in this matter were mistaken. Inter alia they argued that there was no basis for the finding of the Lower Court to the effect that "the case was not always handled in "the best and most efficient manner" and that under the circumstances there were no grounds for attaching weight to the discrepancy between the sum demanded and the sum awarded  and that their attorneys invested extensive and intensive work over the years in this precedential case, which is tremendously important from a public and consumer perspective.  As such they claim that an order should be given for fees amounting to 20% of the overall sum of compensation.

62.  The criteria for the determination of compensation for the representative plaintiffs are set forth in section 22 of the Class Actions law, which states:

 

Compensation for the representative plaintiff

22. (a) If the Court decided all or part of a class action in favor of all or part of the group, including by way of approving a compromise, then it shall order compensation to be paid to the representative plaintiff,

taking into account considerations said in subsection (b), unless it concluded – for special reasons that shall be recorded – that that

is not justified under the circumstances of the case.

 (b) When it sets the amount of compensation the Court shall, inter alia, take these considerations into account:

 (1) the effort exerted and the risks assumed by the

representative plaintiff by bringing and conducting the class action, especially if the relief requested in the action is declaratory relief;

 (2) the benefit which the class action yielded for members of the group;

 (3) the degree of public importance of the class action.

 (c) In special cases and for special reasons that shall be recorded, the Court may:

 (1) adjudge compensation to the petitioner or representative plaintiff, even if the class action was not approved or if the  

class action was not decided in favor of the group, as the

case may be, taking the considerations said in subsection (b) into account;

 (2) adjudge compensation to an organization that participated in hearings of the class action under the provisions of section 15, if it found that to be justified by the trouble taken and the  contribution made by its said participation in the hearings.

 

Section 23 of the Law established criteria for the ruling of the legal fees of the representative attorney, as follows

23. (a) The Court shall set the representative attorney's legal fees for conducting the class action, including the petition for certification; the representative attorney shall not accept legal fees in excess of the sum determined by the Court as aforesaid.

 (b) When it sets the representative attorney's legal fees under subsection (a), the Court shall, inter alia, take the following considerations into account:

 (1) the benefit which the class action yielded for members of the group;

 (2) the complexity of the proceeding, the trouble taken by the representative attorney and the risk he assumed by bringing and conducting the class action, as well as the expenses he  incurred for that purpose;

(3) the degree of public importance of the class action;

 (4) the manner in which the representative attorney conducted the proceeding;

 (5) the gap between the relief sought in the petition for approval and the relief adjudged by the Court in the class action….".

   The criteria for determining compensation and legal fees are essentially similar and reflect the desire to incentivize the filing of class actions (on the importance of this consideration see Moshe Telgam, "The Class Action – Considerations for the Determination of Fees and Compensation" Shaarei Mishpat 4, p. 227 (5768). All the same, it should be noted that an overincentive in this context could encourage the filing of trivial suits or "inflated" suits with no justification, given that those filing these suits would be primarily interested in the compensation and legal fees that they could expect to receive (on the negative influence of trivial suits and the attendant concern of a weakening of the standing of the class action, see CA  1509/04 Danush v  Chrysler Corporation [30] para. 15).  An additional, and important criteria for the determination of legal fees, reflected in s. 23 of the Law cited above, is the existence of a commensurate relationship between the legal fees and the effort invested in the suit and the benefit it produced. The Law further adds and prescribes in this context a number of criteria intended to guide the conduct of the attorney of the representative plaintiff' so as to create a positive incentive for conducting the suit efficiently and fairly (see CA 9134/05  Adv. Eliezer Levit v. Kav Of Zafon, Cooperative Association for Services Ltd  [31] para. 12 (hereinafter – Levit), regarding s. 23 of the Law.  And see also AAA 2395/07  Accadia Software Systems Ltd v. State of Israel – Director of Tax and Stamp Duty [32] para. 20 (hereinafter – Accadia);  CA 7094/09 Borozovsky  Conveyancing Ltd v. Ichurn Itur Veshlita Ltd [33] paras 11- 14).  As evidenced by the wording of ss. 22 and 23 of the Law, the list of considerations enumerated is not exhaustive and is intended to outline "general guidelines which attest to the general intention of the law and the objectives it seeks to realize" (see Levitt, para. 12). That said, in general the criteria enumerated in the law may be divided into three principal categories: considerations of expenses, considerations of yield for the group represented, and considerations of public guidance (see Klement, at pp. 158 – 162).

63.  A central question to be considered in determining the rate of compensation and the legal fees is whether the filing of the class action was necessary in order to merit the particular remedy (Levit [31] para. 14). The case before us is a classic example of a case which would not have been decided had it not been for the class action. In determining the compensation the court gave consideration to this central consideration as well as to the other pertinent considerations, indicating that the task of differentiating between the representative plaintiffs was done for the main part by the Consumer Council, and in dwelling on the importance of creating incentives for the filing of suits for the Consumer Council as well. The Court further dwelt on the fact that this case made an important contribution to the group and the public and addressed the protracted time period during which the suit was conducted. Regarding the legal fees to be awarded to the representative attorneys the Court addressed the immense amount of work that they had invested, the tremendous benefit bestowed by the suit itself, its importance for the group and for the public as a whole, and the complexity of the issues raised in the file. At the same time, the Court stressed the gap between the remedies demanded and what was ultimately granted, noting that the suit had not always been conducted in the best and most efficient manner"

The rule that the appellate forum does not interfere in the rate of legal fees awarded by the trial forum applies to and is implemented with respect to the rates of legal fees and compensation awarded in class actions, other than in cases where one of the sums awarded is legally flawed or where the decision of the trial forum is otherwise fundamentally flawed in a manner that warrants intervention (see Accadia [32] para. 28, Analyst [7] at p. 263). The policy of non-intervention in sums awarded as legal fees and compensation by the trial forum is even more appropriate where it concerns considerations pertinent to the manner in which the proceeding was conducted.  In the case at hand, the Lower Court examined all of the relevant considerations and balanced between them as required.  Accordingly, had we not reached the conclusion that the sum of compensation to be imposed on Tnuva should be significantly reduced, we would not have intervened in the sums of compensation and legal fee that it awarded. However, since we set the sum of compensation at NIS 38,500,000 instead of NIS 55,000,000  awarded by the Lower Court I think that this also warrants a reduction in the sum of compensation that Tnuva has to pay to the representative plaintiffs and the legal fees to be paid to their attorneys. I therefore propose that we set the sum of compensation for the Raabi heirs at the sum of NIS 300,000, the compensation for the Israeli Consumer Society at NIS 550,000 and the rate of legal fees for the representative attorneys at NIS 1,500,000. In order to remove all doubt, it is clarified that the sums specified above, like the sum of compensation awarded, are according to their value on the day of the decision of the Lower Court (7 October 2008).

 

       Final Word

For all of the reasons set forth above I propose to my colleagues to partially allow Tnuva’s appeal with respect to the rate of the compensation (CA 10085/08) and its appeal regarding the compensation for the representative plaintiffs and the fees of their attorney (CA 7607/09). I further propose to my colleagues to dismiss the counter appeal of the representative plaintiffs in CA 10085/08 and their appeal against the decision in CA 6339/09)

Under the circumstances and bearing in mind that these appeals raised questions of principle that were fleshed out for the first time since the enactment of the Class Actions Law, I would propose to my colleagues not to make any order for the costs of the appeal proceeding

 

                                                                   Justice

Justice I. Amit

 

 I concur with the comprehensive and thorough judgment of my colleague Justice Hayut. My colleague concluded that compensation for infringement of autonomy should only be awarded to those group members who experienced various negative feelings upon becoming aware that they had drunk milk containing silicon. My colleague's approach is consistent with the view that I expressed in CA 4576/08 Ben Zvi v. Prof. His [ 17] paras. 25 – 29, according to which an infringement of autonomy is now included within the framework of non-pecuniary damage. An infringement of autonomy means negating the victim's freedom of choice by failing to disclose a substantive detail, but the infringement of autonomy is expressed by negative feelings such as anger, frustration, insult, revulsion,shock etc.  

                                                                   Justice

 

 

Justice  E.  Vogelman

 

 I concur with the comprehensive judgment of my colleague, Justice E. Hayut.   I am a partner to my colleague's conclusion that the objective approach to the assessment of compensation for infringement of autonomy should not be accepted and that accordingly, where proved that some of the members of the group remained indifferent to the infringement of autonomy, there are no grounds for awarding compensation for that head of damage.

 

                                                                                    Justice

.                      

                  

 

 

 

 

 

 

 

                       

 

 

"

 

 

 

 

 

 

 

 

said in subsection (b) into

account.