The Israel Consumer Council, represented by the Class Action Litigation Clinic at the Interdisciplinary Center in Hertzeliya* filed an objection to approval of the arrangement, arguing that the agreement does not provide suitable compensation to HOT customers who were allegedly harmed by the company’s conduct.
The District Court in Petach Tikva ,recently, rejected an application by HOT** (the Israeli cable television provider) and the class action plaintiff to approve a compromise arrangement in the class action against HOT. The Court’s ruling was issued following an objection filed by the Consumer Council, represented by attorneys from the Class Action Litigation Clinic at the Radzyner School of Law, The Interdisciplinary Center, Herzliya, Prof. Alon Klement and Adv. Roni Avissar-Sadeh. The class action, first filed in 2010, was over the fact that HOT had not disconnected customers, and had continued to collect payments from them, notwithstanding those customers’ requests to terminate their subscriptions.
In the application to approve the compromise agreement filed by the parties with the court, it was agreed that HOT would give its customers a benefit in the form of making available additional channels at no cost, as well as contributing the sum of 7 million shekels toward an educational project in the city of Be’er Sheva. In addition, it was agreed that approval of the arrangement would also apply to customers of Telecom, a subsidiary of HOT, which provides telephony services, even though the class action was not filed against the latter company.
The court accepted the position put forward by the Consumer Council. The Council showed that, prior to filing the arrangement for approval by the court, HOT had already publicized the fact that it was making the contribution, and had even commenced the project. Thus, the Council argued, the cash donation (which is the principal part of the arrangement) should not be seen as a real form of compensation to the class. The court accepted the Consumer Council’s arguments, and ruled that, as far as the contribution was concerned, it was not being made as a result of the compromise arrangement, but was, in fact, a donation already planned by HOT, independent of the class action suit. Regarding the benefit being offered, the court ruled that it was insufficient to offer a benefit to current subscribers, and the company should aim to return the monies themselves to those of the company’s subscribers who had been harmed by its inaction; this is because it was not proven that the customers affected could not be identified. In addition, the court ruled that inclusion of Telecom in the arrangement is contrary to law, and, to the extent that there were irregularities in Telecom’s services, these cannot be resolved by including the company in a compromise arrangement in an action in which it was not a party. In light of its substantial shortcomings, the court therefore rejected the arrangement.
The court’s decision demonstrates the importance of the involvement of public bodies, such as the Consumer Council, in the approval stage for compromise arrangements in class action suits. This protects the rights of consumers in Israel, and ensures that the goals of the class action suit are achieved.
Council CEO, Adv. Ehud Peleg, welcomed the court’s decision, saying, “It is unacceptable for major players in the economy to create a ‘chain of immunity’ for themselves through approval of compromise arrangements that do not provide real compensation for the public. The Council must represent consumers at this stage as well, to prevent their rights being ignored.”
Prof. Alon Klement, a specialist in class action suits and supervisor for the clinic at the Interdisciplinary Center, adds: “The goal of cooperation between the Israel Consumer Council and the Class Action Litigation Clinic is to rewrite the agenda when it comes to class actions. No longer can there be compromises that contribute nothing to the public, or which have no deterrent value as far as the defendants are concerned. When a compromise arrangement comes up for approval, two parties who have no dispute between them come to the court and ask it to approve the arrangement. However, at this stage they also represent a population whose rights and obligations are also being determined as part of the arrangement, but whose voice is not heard in the court. The Class Action Litigation Clinic has set itself the goal of representing the public interest in class actions, so as to prevent approval of compromise arrangements that are not appropriate for the public – as in the present instance.”
* The Radzyner School of Law, The Interdisciplinary Center, Herzliya,
** HOT Telecommunication Systems Ltd. is a company that provides cable television, last-mile Internet access, broadband and telecommunication services in Israel