A synopsis (limited to Brazilian Law) of Verbic’s article “Consumer class actions in Argentina and Brazil – Comparative analysis and enforcement of foreign judgments”

Publicado em 04 Setembro 2012.

VERBIC, FRANCISCO. CONSUMER CLASS ACTIONS IN ARGENTINA AND BRAZIL COMPARATIVE ANALYSIS AND ENFORCEMENT OF FOREIGN JUDGMENTS

Revista de Processo | vol. 209 | p. 147 | Jul / 2012 | DTR\2012\44844

(A Synopsis limited to Brazilian Law)

The Author makes some comparative remarks and discusses to what extent opinions issued in American consumer class actions can be enforced in Argentina and Brazil.

The three most relevant requirements established in both Argentina and Brazil in order to recognize the validity of a foreign judgment are: (i) public policy considerations (“public order”); (ii) due process of law concerns; and (iii) proper assertion of jurisdiction in the country where the judgment was delivered.

He argues that recognition and enforcement of an American consumer class action judgment against a private corporation is likely to be granted both in Argentina and Brazil, due to the macro similarities between the representative procedural systems established therein and the mechanism regulated in the Rule 23 of the Federal Rules of Civil Procedure.

The attitude of US federal courts toward personal jurisdiction in international cases plus some exceptional devices and procedural tools that might not be easy to find elsewhere, [1] provide foreign litigants with relevant incentives to initiate their international collective cases in the US.

He suggests that in a current scenario of international commerce, internet sales and global enterprises, the time has arrived to start thinking about possible mechanisms to coordinate aggregate cross-border litigation.

Some remarks

Even though it is certainly possible to find differences between the American class actions and the Argentinean and Brazilian collective procedural devices, nowadays those differences are not as relevant as one could imagine beforehand. [2]

Brazil is a federal country as well, integrated by a central government, 26 local states and more than five thousand municipalities. [3] However, contrary to what happens in both Argentina and the US, there is only one code of civil procedure enacted by the federal government, which applies in the whole country.  Brazil is one of the few civil law countries that have developed a sophisticated procedural regime for protecting collective rights, and the first one to introduce that kind of regulation in Latin America. [4]

The regime can be considered as a sub-system within the more comprehensive system of civil procedure and has received the name of “collective civil procedure”. [5]

The cornerstone of the Brazilian system can be found in art. 81 of the CDC (LGL\1990\40), which provides that judicial enforcement of consumers’ rights can be sought on both individual and collective basis. The particular feature is that collective redress is only available when the defendant has violated at least one of the three categories of substantive collective rights described in that same article. [6] The first typified category is that of “diffuse rights”. It encompasses transindividual and indivisible rights belonging to a group of undetermined individuals who are related among them by virtue of factual circumstances. [7] The second type is labeled as “collective”. They are transindividual and indivisible rights as well, but differ from the diffuse in that they belong to a group, category or class of persons related among them or with the opposing party by virtue of a baseline legal relationship. [8] Finally, the CDC (LGL\1990\40) recognizes a third type of collective rights, designated as “individual homogeneous” and described simply as those “resulting from a common origin”. [9] This last category includes individual and perfectly divisible rights, collectivized only for litigation purposes. That is why scholars referred to them as “accidentally collective”, whereas the other two categories are considered as involving “essentially collective” rights. [10]

Art. 82 CDC (LGL\1990\40), modified in 1995 by the Act n. 9.008, provides the list of social actors who are concurrently authorized to promote collective actions on behalf of diffuse and collective consumers’ rights in Brazil. The list includes: (i) the Public Prosecution, maybe the most active participant in this kind of lawsuits; [11] (ii) the Union, states, municipalities and the federal government; (iii) public entities and organisms meant to act on behalf of consumers’ rights; and (iv) private associations, subject to certain conditions. These private associations have to be legally incorporated at least one year prior to the occurrence of the facts that trigger the action, and they have to include the protection of consumers’ rights within their institutional mission. The former requirement, however, can be dispensed by the court when there is a manifest social interest showed by the extension of the damage or by the relevance of the rights involved in the dispute.

The provisions contained in art. 82 also apply to the action in protection of individual homogeneous rights. [12] However, two differences should be noted in respect to the rules that govern the proceedings in these cases. The first one has to do with the role of the Public Prosecution: when it does not act as a named representative it must intervene to control the correct application of the law. [13] The second difference is that in this kind of proceedings the CDC (LGL\1990\40) expressly allows the intervention of those individuals whose rights are involved in the dispute. [14]

The CDC (LGL\1990\40) is complemented by art. 5 of the Public Civil Suit Act, which vests with collective standing not only the four entities already mentioned, but also the Legal Public Defense (Defensoria Pública) and, since 2007, autarchic and public corporations. [15]

It is worthwhile to underline that the Brazilian system does not provide anything about judicial control of adequacy of representation.

The collective action in protection of individual homogeneous rights “is basically an issue class action”. The judgment rendered therein will just declare defendant’s liability, and the members of the group will need to file individual claims to show causation and the scope of damages in order to recover. [16]

The CDC (LGL\1990\40) contains a wide range of alternatives when it comes to shape the adequate remedy for a particular case. The general principle is that any kind of action “capable of providing an adequate and effective redress” will be admissible to protect consumers’ collective, diffuse and individual rights. [17]

Courts are also allowed to grant provisional measures when the claim has serious basis and the interested party gives good reasons for thinking that the judgment on the merits could be deprived of its efficacy in the absence of that measure. [18] In order to compel the party to comply, Brazilian judges have the power to impose daily economic penalties both in the judgment on the merits and in the context of provisional measures. [19]

These directives are applicable in the context of the Public Civil Suit Act too. A particular feature has to do with the destiny of the damages. Due to the fact that global damages obtained in this context will not be distributed among class members, the statute provides that the money must go to a special Fund administered by a Federal Council that will devote it to the solution of the problems caused by the defendant. [20]

According to art. 103 CDC (LGL\1990\40), the res judicata effects of opinions rendered in the context of collective actions will extend: (i) in respect to diffuse rights, erga omnes; [21] (ii) regarding collective rights, ultra partes but limited to the group, category or class of people being represented (here again, with an exception based on insufficient evidence on the merits); [22] and (iii) concerning individual homogeneous rights, erga omnes but only in case of a favorable opinion to the group and only for its benefit. [23]

The regulation on this topic expressly provides that the effect of res judicata in cases involving diffuse and collective rights never can prejudice the individual rights of the members of the affected group. [24] In cases involving individual homogeneous rights, in turn, those members of the group that did not intervene in the proceedings are able to bring individual suits if the opinion is adverse to their interests. Therefore, we can see that the consequences of both systems are the same: no individual right can be prejudice by any representative suit. [25]

The judgment will have expansive effects only if it is favorable to the class, and in no case can prejudice the individual rights of the members of the group. The adverse opinion does not affect individual rights but in regard to the collective cause of action the rule on the topic is one of mutuality.

Brazil does not only tolerate but expressly recognize representative lawsuits as the main aggregate litigation mechanism available to deal with conflicts involving large groups of people. This feature tacitly implies a redefinition of the individual due process right to have “a day in court” when it comes to face collective conflicts. As it is well known, these kind of mechanisms transform that day in court into a right to be “represented” in the proceedings by counsel and individuals (or group organizations and public organisms) that the members of the group did not necessarily choose for that role, and that may act even against the will of some of them.

Recognition and enforcement of American consumer class action judgments in Brazil

In order to present the problem, the Author imagines the following hypothetical: a company incorporated under the laws of New York, its shares are negotiated in the Stock Market of New York and though sporadically, it also does business in New York. It sells 1000 defective laptops in Brazil. A Brazilian buyer moved to New York 2 months after the transaction and obtained a favorable class action judgment against the company and on behalf of himself and the other 999 buyers of defective laptops. The New York Court of Appeals affirmed the opinion and the Supreme Court denied the certiorari requested by the company. As a result, the plaintiff has a judgment condemning the company to repay the value of the laptop, compensatory and punitive damages plus interests. The company has all its assets in São Paulo.

The Author assesses the scope of the three most relevant requirements established in Brazil in order to recognize the validity of a foreign judgment: (i) public policy considerations (“public order”); (ii) due process of law concerns; and (iii) proper assertion of jurisdiction in the country where the judgment was delivered. He argues that recognition and enforcement of an American consumer class action judgment against a private corporation is likely to be granted both in Brazil, due to the macro similarities between the representative procedural systems established therein and the mechanism regulated in the Rule 23  of the Federal Rules of Civil Procedure.

He observes:

The proceeding by which a foreign judgment is recognized for enforcement in Brazil is called “homologation”.

The homologation proceeding is governed by art. 105, I, i,  of the 1988 Constitution, as amended in 2004,  [26] art. 15 of the Law of Introduction to Brazilian Legal System, [27] and Resolution n. 9/2005 (adopted by the SCJ soon after the 2004 amendment to the BFC). [28] This proceeding transforms the foreign judgment into a domestic title, allowing the interested party to proceed towards its enforcement (which takes place in a completely different and independent proceeding). [29] Brazilian judges cannot revise the merits of the case but only its external and formal requisites. [30] Art. 5 of the Resolution n. 9/2005 contains a list of four “indispensable requirements”, i.e.: (i) the foreign opinion must have been issued by an authority with jurisdiction to adjudicate the controversy; [31] (ii) the parties must have received adequate service of process; [32] (iii) the judgment has to be final with force of res judicata; [33] and (iv) it needs to be authenticated by the Brazilian Consul, and accompanied with an official translation. [34] The list is complemented by art. 6, which provides that a foreign judgment will not be homologated in Brazil if it offends “the sovereignty or the public order”. [35]  The Brazilian system does not make explicit any concern about due process of law; and (ii) it has no provision prohibiting homologation when there is a domestic incompatible opinion regarding the same cause of action. However, it is worth to note that Brazilian courts have held that due process of law concerns are entailed in the broader idea of public order.

One last remark before going ahead: Brazilian collective procedural law does not provide for special rules about enforcement of judgments (except for some limited regulation about who have standing to claim that enforcement, and which is the destiny of the damages awarded in the opinion when they have to be applied to repair a global harm). That is why the enforcement of foreign collective judicial opinions is governed in Brazil by the same rules that those applicable to the enforcement of foreign ordinary individual judgments. [36]

a)      Public policy defense (public order)

The idea of public order is mostly employed in a negative sense, as a ground to justify a refusal to apply certain law even when the conflict of law provisions of the forum points in that direction. It is a principle of private international law “which exists in all legal systems, even in the absence of specific precedents”. [37]

Brazilian doctrine and precedents distinguish three levels. The first one is a fundamentally internal or domestic public order, represented by those legal rules and principles that cannot be set aside by agreement between individuals. The second level is that of international law, entailed in those provisions that allow the authorities to deny effect to foreign acts and judgments when they contravene internal principles. This is the level in which the public order defense against a homologation claim should be analyzed. Finally, the third level describes a set of global principles applicable to international relations. [38]

The public order of second level comprehends both substantive and procedural principles and rules. Even though both art. 15 of the Law of Introduction to Brazilian Legal System and the Resolution n. 9/2005 contain express provisions regarding some aspects of due process of law (jurisdiction in the court that rendered the opinion and proper service of process), those requirements do not exhaust the scope of a possible defense based in a violation of that fundamental constitutional guarantee. Any violation of due process that goes beyond lack of jurisdiction and proper service of process can be raised in Brazil by pleading on grounds of public order. One of the most relevant precedents in this respect, at least in the context of our hypothetical, is the one in which the Federal Superior Court declared that the use of juries in American civil trials does not offend Brazilian public order. [39]

Here again, the existing similarities between the mechanisms to adjudicate collective consumer disputes strongly point toward the rejection of the public order defense in the context of this hypothetical.

b)      Due process of law defense

Even though the due process of law defense is not expressly enacted in its legislation (which only contemplates proper service of process and the jurisdictional question), as I have already explained in the previous section “it is certainly encompassed within the principle of public policy”. [40] The right to due process of law is recognized in art. 5.º, LIV of the BFC and encompasses some basic corollaries like the right to display an adequate defense, to contradict the arguments and the evidence of the opposing party, and to obtain motivated decisions. [41] Within this context, in light of the main features of Brazilian collective procedural system there might be no difficulties to enforce in Sao Paulo the judgment obtained by our consumer. The situation would be different in an alternative scenario. In case of an adverse opinion to the group in the class action proceedings, a corporation seeking to enforce a judgment against an individual would probably be impeded to do that. In this case, it is likely that the pro et contra system of res judicata established in the US would not pass the Brazilian due process threshold. As we have discussed, collective judgments rendered in Brazil can only benefit absent members of the class but never prejudice their individual rights.

c)      Jurisdictional defense

In Brazil the due process inquiry is assessed in light of the international concurrent jurisdiction principle. [42] That means that the foreign judgment must have been entered by a court having jurisdiction to adjudicate under the rules on international conflict of laws of those countries. The only exception to that principle in Brazil can be found in art. 89 of the Brazilian Code of Civil Procedure, which vests the Brazilian judiciary with exclusive jurisdiction over cases dealing with real estate located in that country and in certain issues related to successions.

Art. 88 of the Brazilian Code of Civil Procedure contains specific provisions on international jurisdiction to adjudicate. According to that article, Brazilian courts are competent in three scenarios: (i) when the defendant is domiciled in that territory, without regard to its nationality; [43] (ii) when the obligation has to be performed there; [44] and (iii) when the cause of action arises from a fact that took place in that territory. [45]It also contains a special paragraph by which foreign corporations are deemed to be domiciled in Brazil if they have an affiliate or subsidiary company established therein.

There might be no problem to enforce the decision of our consumer if we take into account that proper jurisdiction of the New York federal court (based on the test set forth in “International Shoe” and its progeny) [46] will be acceptable in Brazil because it is also the place where the company is incorporated and doing business (situation that would confer jurisdiction over the case to Brazilian courts as well).

 



[1] The most relevant, beyond class actions, are: extensive pre-trial discovery, jury trial, punitive damages and the “American rule” regarding costs allocation.

[2] In this line, Richard A. Nagareda, Aggregate litigation across the atlantic and the future of american exceptionalism, 62 Vand. L. Rev. 1 (2009).

[3] Art. 1.º Constituição da República (LGL\1988\3) Federativa do Brasil de 1988.

[4] Ada Pellegrini Grinover, Ações coletivas Ibero-Americanas: novas questões sobre a legitimação e a coisa julgada, Report for Brazil to the International Convention of Procedural Law , Tor Vergata University, Rome, May 2002.

[5] See Carolina Gallotti, Fase Inicial do Cumprimento de Sentenca - Lei n. 11.232, de 22.12.2005, In: Marchetto, Patricia Borba, Direito Processual Civil, São Paulo: Juarez de Oliveira Ed., 2009, p. 76-77. See also Gregório Assagra de Almeida, Codificação do direito processual coletivo brasileiro, Belo Horizonte: Del Rey Ed., 2007, p. 48 [(arguing that the CDC (LGL\1990\40) and the Paca conform one sub-system, which he calls “comun” (ordinary); while the rules on diffuse and concentrated controls of constitutionality conform another microsystem, which he calls “especial” (special)].

[6] See Antonio Augusto Mello de Camargo Ferraz and Joao Lopes Guimaraes Júnior A Necessária Elaboracao de Uma Nova Doutrina de Ministério Público, Compatível com seu Atual Perfil Constitucional, In: Camargo Ferraz, Antonio Augusto Mello de., Ministério Público. Instituição e Processo, São Paulo: Atlas, 1977, p. 26 (explaining that by then in Brazil “the principal media of mass communication, production and consume are operating in a mass scale” leading to the emergence of different kind of groups with particular interests of their own).

[10] This distinction between essential and accidental collective rights is taken from the classic work of José C. Barbosa Moreira Tutela jurisdiccional dos interesses coletivos ou difusos, In: Temas de direito processual (Terceira Série), São Paulo: Saraiva, 1984, p. 196.

[11] See Antonio Augusto Mello de Camargo Ferraz and João Lopes Guimaraes Júnior, A necessária elaboracao de uma nova doutrina de Ministério Público, compatível com seu atual perfil constitucional, In: Camargo Ferraz, Antonio Augusto Mello de, Ministério Público. Instituição e processo, São Paulo: Atlas, 1977, 26. For a more comprehensive description of the role of the Public Prosecution in the field of law enforcement, see Carlos Alberto de Salles, Legitimidade para agir: desenho processual da atuação do Ministério Público, In: Camargo Ferraz, Antonio Augusto Mello de, Ministério Público. Instituição e Processo, São Paulo: Atlas, 1977, 228-274.

[15] Art. 5, sections II and IV.

[16] See Antonio Gidi, Las acciones colectivas y la tutela de los derechos difusos, colectivos e individuales en Brasil. Un modelo para países de derecho civil, México: Unam, 2004, p. 62-64 (arguing that this system poses serious limitations for obtaining adequate collective relief, particularly in the context of small claims class actions).

[20] Art. 13 Public Civil Suit Act.

[21] Art. 103, ap. I CDC (LGL\1990\40).

[22] Art. 103, ap. II CDC (LGL\1990\40).

[23] Art. 103, ap. III CDC (LGL\1990\40)

[24] Art. 103, § 1.º CDC (LGL\1990\40).

[25] Art. 103, § 2.º, CDC (LGL\1990\40). See Ada Pellegrini Grinover, The defense of the transindividual interests: Brazil and Iberoamerica, section 12, available at [www.law.stanford.edu/ display/images/dynamic/events_media/Brazil_National_Report.pdf] (explaining that this technique “was devised as an instrument against the possible collusion of the popular party against their counterpart (in order to get a contrary decision with erga omnes effects)”, and that it “has been reproduced from the law of the public civil action and from the consumer defense”).

[26] Article 105. The Superior Court of Justice has the competence to: (CA No. 23, 1999; CA No. 45, 2004)

I – institute legal proceeding and trial, in the first instance, of:

...

i) the homologation of foreign court decisions and the granting of exequatur to letters rogatory;

[27] Lei de Introdução às normas do Direito Brasileiro (LGL\1942\3) (originally named as “Law of Introduction to the Brazilian Civil Code”, Lei de Introdução ao Código Civil Brasileiro (LGL\1942\3)), available at [www.planalto.gov.br/ccivil/Decreto-Lei/Del4657.htm]. Art. 15 says: “Art. 15. Será executada no Brasil a sentença proferida no estrangeiro, que reuna os seguintes requisitos:

a) haver sido proferida por juiz competente;

b) terem sido os partes citadas ou haver-se legalmente verificado à revelia;

c) ter passado em julgado e estar revestida das formalidades necessárias para a execução o lugar em que ,foi proferida;

d) estar traduzida por intérprete autorizado;

e) ter sido homologada pelo Supremo Tribunal Federal.”

[28] Available at [http://bdjur.stj.gov.br/dspace/handle/2011/368]. The Code of Civil Procedure (Lei 5.869 de 11.01.1973) contains only one article on this topic: art. 483, which states that the opinion of a foreign court will only have efficacy in Brazil after being homologated by the SCJ, and that this homologation proceeding will be regulated by the SCJ. However, it must be noted that a project to enact a new code of civil procedure has been recently passed by the Brazilian Senate (on December 15th, 2010) and is awaiting for treatment in the other House. This project, in which Prof. Teresa Arruda Alvim acted as General Reporter, introduce some reforms in the area of enforcement of foreign judgments that should be taken into account (though they do not seem to modify the basic premises of the current system, because they mainly incorporate the requisites now established in the Resolution n. 9/2005). The text of the Project is available at [http://asadip.files.wordpress.com/2010/09/anteprojeto1. pdf]. Regarding the field of enforcement of foreign judgments, the project contains the following provisions:

“Art. 878. A homologação de decisões estrangeiras será requerida por carta rogatória ou por ação de homologação de decisão estrangeira.

Parágrafo único. A homologação obedecerá ao que dispuser o Regimento Interno do Superior Tribunal de Justiça.

[29] Art. 484 of the Code of Civil Procedure states that, once the homologation by the SCJ has been issued, enforcement has to be sought through the same proceedings that apply for enforcement of domestic judgments.

According to art. 4 of the Resolution 9/2005, absent homologation the foreign judgment will not have “efficacy” in Brazilian territory (same wording of art. 483 of the Code of Civil Procedure). See Maria Angela Jardim de Santa Cruz Oliveira, Recognition and enforcement of united states money judgments in Brazil, 19 N.Y. Int’l L. Rev. 1, 2 (2006). See also Nadia de Araujo, Dispute resolution in Mercosul: The Protocol of las lenas and the case law of the Brazilian Supreme Court, 32 U. Miami Inter-Am L. Rev. 25, 46 (2001) (explaining that “If entered by a court in a Mercosul country, the judgment will go directly to the Brazilian Supreme Court for exequatur of the rogatory letter itself. If entered by a court in a non-Mercosul country, the prevailing party must seek homologation of the judgment from the President of the Supreme Court”).

[30] This, in turn, is reflected in the defenses available to the party opposing the homologation petition. Art. 9 of the Resolution 9/2005 provides as follows: “Na homologação de sentença estrangeira e na carta rogatória, a defesa somente poderá versar sobre autenticidade dos documentos, inteligência da decisão e observância dos requisitos desta Resolução” (“in the process of homologation of a foreign judgment and rogatory letters, defenses can only be grounded on authenticity of the documents, scope of the opinion and the requirements established by this Resolution”).

[31] Resolution 9/2005, art. 5, parag. I.

[32] Resolution 9/2005, art. 5, parag. II.

[33] Resolution 9/2005, art. 5, parag. III (“ter transitado em julgado”).

[34] Resolution 9/2005, art. 5, parag. IV. Art. 3, in turn, provides that the petition for homologation must be accompanied with a certificate or authentic copy of the whole opinion and any other “indispensable documents”, all of them with their pertinent translations.

[35] Resolution 9/2005, art. 6 (“soberania ou a ordem pública”).

[36] See Carolina Gallotti, Fase Inicial do Cumprimento de Sentenca - Lei 11.232, de 22.12.2005, In: Marchetto, Patricia Borba, Direito Processual Civil, São Paulo: Juarez de Oliveira Ed., 2009, p. 76.

[37] Osvaldo Marzorati, Los límites del acuerdo arbitral, L.L. 2010-B, 946.

[38] See Carmen Tiburcio, A ordem pública na homologação de sentenças estrangeiras. In: Fux, Luiz; Nery Jr., Nelson; Arruda Alvim Wambier, Teresa, Processo e Constituição, São Paulo: Ed. RT, 2006, p. 209-213.

[39] STF, SEC 4.415/EU, Pleno, 11.12.1996.

[40] Maria Angela Jardim de Santa Cruz Oliveira, Recognition and Enforcement of United States Money Judgments in Brazil, 19 N.Y. Int’l L. Rev. 1, FN 189 (2006).

[41] See Carmen Tiburcio, A ordem pública na homologação de sentenças estrangeiras, In: Fux, Luiz; Nery Jr., Nelson; Arruda Alvim Wambier, Teresa, Processo e Constituição, São Paulo: Ed. RT, 2006, p. 221.

[42] See Enrique Falcón, Comentario al Código Procesal Civil y Comercial de la Nación y Leyes Complementarias, II, Buenos Aires: Abeledo-Perrot, 1998, p. 840; Maria Angela Jardim de Santa Cruz Oliveira, Recognition and enforcement of United States money judgments in Brazil, 19 N.Y. Int’l L. Rev. 1, 12 (2006).

[43] Art. 88, parag. I, BCCP.

[44] Art. 88, parag. III, BCCP.

[45] Art. 88, parag. III, BCCP.

[46] International Shoe Co. v. Washington, 326 U.S. 310 (1945).

Conselho Editorial

Dr. Carlos Alberto Molinaro
(PUCRS)
Dra. Elaine Harzheim Macedo
(PUCRS)
Dr. Humberto Dalla Bernardina Pinho (UERJ/UNESA)
Dr. Sérgio Cruz Arenhart
(UFPR)
Dr. Daniel Mitidiero
(UFRGS)
Dr. Fredie Didier Júnior
(UFBA)
Dr. Lúcio Delfino
(UNIUBE)

 Dr. Antonio Gidi

(Syracuse University College of Law - EUA)

Dr. Darci Guimarães Ribeiro
(Unisinos)
Dr. Gilberto Sturmer
(PUCRS)
Dr. Marco Felix Jobim
(PUCRS)