Contracting-Out of Class Action Litigation: Lessons from the United States

Abstract

The area of class action litigation has been relatively dormant in New Zealand. As a result, the procedural regime for managing class action litigation is developing in an ad hoc manner through judicial discretion. However, recent developments suggest that class action litigation is on the rise in New Zealand. In contrast, class action litigation is declining in the United States. In the face of procedural and substantive uncertainty, New Zealand corporate defendants, like their American counterparts, are likely to pursue other avenues such as class action litigation waivers in arbitration agreements to control management of legal disputes. However, New Zealand should not follow in the footsteps of the United States by enforcing waivers in arbitration agreements to curtail class action litigation. This article explains why corporate defendants are likely to pursue class action litigation waivers in arbitration agreements, the undesirable outcome if class action litigation is prohibited by contractual waivers, and how the judiciary can prevent the enforcement of those contractual waivers. This article also addresses why class action legislative reform is required to provide corporate defendants with a certain and transparent procedural alternative to arbitration in resolving disputes. Civil procedure provides the framework which enables substantive rights to be vindicated. New Zealand class action litigation procedure needs legislative reform so that procedure does not impinge on parties’ substantive rights.