Michael Hausfeld, aged 72, is a lawyer feared by executives from America to Germany. Cultivating an extravagant look with colorful bow ties and round wire-rimmed glasses, he likes to point to a quote by Holocaust survivor Elie Wiesel that he has framed in his office in Washington, DC: “Indifference to evil is worse than evil itself.” So he has for decades made it his business to fight for justice on behalf of the powerless. He has won $5.14 billion for victims of Nazi-era slave labor and $5 billion for Native Alaskans whose homeland was poisoned by the Exxon Valdez oil spill. He was already filing sexual-harassment suits 45 years before the Weinstein scandal.
And now Mr. Hausfeld is heading back to Germany, on a mission as bold as his bow tie. The 72-year-old wants to transplant American-style class-action law suits to Germany. Naturally, he also wants his own firm to get the resulting fees.
Class-action suits are cases in which an entire group of plaintiffs is represented collectively by just one member of that group, which could be an individual or a firm. The concept originated in the US and has spread to other common-law countries, and even some civil-law systems in Europe. Germany has not yet had class-action cases and considers them alien.
“I can’t stand the great divide between the powerful and the powerless.”
One German firm seeking justice is the J. Kobernuss forwarding company. The family-owned business was founded almost 70 years ago and delivers groceries across Europe in its 90 trucks. But for years, the owner, Hubertus Kobernuss, has been frustrated by the high cost of these vehicles.
Mr. Kobernuss wasn’t exactly surprised when the EU Commission discovered in 2011 that Daimler (Mercedes’ parent company), Iveco, Volvo Renault, DAF and MAN had been colluding for 14 years to fix truck prices. But the scale shocked him: “I wouldn’t have thought that almost all manufacturers were involved.” The logistics trade association BGL estimated that truck prices were inflated by 10 percent. The EU Commission ultimately imposed a record fine of €3 billion against the truck manufacturers (except MAN, which disclosed the cartel to the Commission).
These antitrust proceedings also drew Mr. Hausfeld into the German market. Seeing the potential of large-scale damage claims, he opened an office in Berlin two years ago, and later another in Düsseldorf. “We will file a lawsuit before the District Court of Munich by the end of December,” announced Christopher Rother, head of the German Hausfeld office. The firm represents the cases of well over 3,000 companies, which had collectively overpaid for about 120,000 trucks.
Mr. Hausfeld is an expert in cartel law. His firm, Hausfeld LLP, which he founded in 2008, has nine offices worldwide. Over the last four decades, he has sued giant corporations – from chemical firms, pharmaceutical companies to airlines – on behalf of consumers and smaller companies hurt by price-fixing. “It’s about abuse of power, about companies that are at the mercy of others,” he explained. About one-third of the damages won in the US go to his firm, because it bears the financial risk, should Hausfeld lose the cases.
The German legal system is different from the American. Small plaintiffs often shy away from bringing a lawsuit due to the cost, which can seem prohibitive. But Hausfeld may have found a solution. In November, it filed a complaint at the Regional Court of Braunschweig on behalf of more than 15,000 Volkswagen customers allegedly affected by the diesel-emissions scandal.
Hausfeld is using a back door in the so-called Code of Civil Procedure (ZPO), according to which the bundling of similar damage claims is permissible. Hausfeld also has the support of “litigation financiers” (investors who pay the cost of promising class actions). So far, Hausfeld has been able to convince about 35,000 VW customers who allege damages in the diesel case, and, separately, 100,000 owners of trucks in the cartel case.
These clients transfer their claims to a collection agency called Financialright. If a lawsuit succeeds, the plaintiffs receive about two-thirds of the sum. Hausfeld gets the usual fees according to German regulations. The rest goes to the litigation financier and Financialright. If the lawsuit fails, the litigation financier is left with the costs.
Through class-action suits, even small and medium-sized businesses like the Kobernuss company can get justice, which would otherwise not be able to go up against large corporations, Mr. Hausfeld believes. European businesses, however, warn that he could bring American-style litigiousness to the continent. Law firms could soon inundate companies with more or less legitimate multi-billion suits to extort damages.
“Hausfeld is an American lawyer as you’d imagine: incredibly money-oriented and tough,” criticized Gerhart Baum, a lawyer at Baum Reiter & Colleagues and former Federal Interior Minister. The German Chamber of Commerce and Industry (DIHK) warned that the legal system should not become the playing field of major investors that are only focused on returns. If Mr. Hausfeld succeeds, other US law firms may indeed follow him across the Atlantic, causing legal upheaval in all Europe.
Mr. Hausfeld has heard this sort of talk during his whole career, and won’t be deterred. “I can’t stand the great divide between the powerful and the powerless,” he said, “between those who take and those who are being taken from.”
A version of this artically originally appeared in Handelsblatt’s sister publication Wirtschafts Woche. Martin Seiwert wrote this article and Christian Schlesiger, Claudia Tödtmann and Cornelius Welp contributed. To contact the author: email@example.com