Fraud, crime and even unintended acts can result in loss of money for a variety of creditors. Risk assessments not always reveal gaps in transactions or regulatory constraints. Adversity often comes unexpected and victims are caught by surprise. These very moments require accurate and professional action, refrained from emotion to ensure maximum recovery.
Although the class action finds its origin in the American common law system, the European civil law allows for group action where civil parties can join in public actions managed by governments, request a judge to rule on identical claims, or enforce a dialogue with the wrongdoer.
Examples of suitable cases for collective action relate to bank failures, investment fraud, market manipulation, Ponzi, pyramid, and pump and dump schemes, and other forms of boiler room and telemarketing fraud, as well as multi level and network marketing operations. The objective of a class action and group claim is to achieve a settlement by using effective and efficient negotiation strategies and Alternative Dispute Resolution. Alongside fund recovery, collective action can halt the conduct of fraudsters and other illicit actors. However, not every loss is the result of fraud and attributable acts by the controlling minds of a legal entity. Therefore, it is essential that class actions and other collective claims are justified by a legal foundation and thus handled with care to avoid uncontrolled and unsuccessful emotional mud fights between the parties.
The ultimate goal of a collective claim is indemnification of victims. A side effect is that when a case provides evidence of illegal acts, law enforcement can decide to prosecute the matter. The advantage of public prosecution is that civil parties can join in the proceedings that allow for private settlement of their claims. Such alternative recovery routes have proven to be successful, where traditional rules of creditor hierarchy and ‘pari passu’ are bypassed in such private settlements and thus result in higher payments to participating victims.