Knesset Committee Debates Class Action Reform Exempting Small Businesses
The Knesset Constitution Committee discussed a reform exempting small businesses from class actions and requiring prior notice before court filings.
The Knesset Constitution, Law and Justice Committee held a session on Wednesday to discuss a sweeping reform of the class action lawsuit legislation. The proposed bill aims to exempt small businesses from class actions and mandates prior notice in specific cases before initiating court proceedings.
Proposed Exemptions and Prior Notice
The joint committee of the Constitution Committee and the Economic Affairs Committee discussed the bill initiated by Knesset members Avraham Bezalel, Yonatan Mesريكي (or Mesريكي), Sasson Guetta, and Eliahu Baruch. The discussion focused on a streamlined version of the original proposal, excluding several initial provisions.
Under the updated proposal, class actions cannot be filed against a "small business," defined as an enterprise whose annual turnover does not exceed a statutory threshold. Furthermore, the bill introduces a mandatory prior notice mechanism. Plaintiffs must first approach the business and allow a 60-day window to rectify the legal violation before seeking court approval for a class action.
"This mechanism was cynically exploited by lawyers into an extortion tool, a protection racket under the protection of the law," stated Shahar Turgeman, President of the Federation of Chambers of Commerce.
Financial Adjustments and Legal Fees
The reform also addresses compensation for lead plaintiffs and attorneys' fees. Following judicial determination of these amounts, involved parties may submit written arguments regarding the sums, and the court retains the right to modify its ruling with documented justification.
For non-monetary remedies, the actual cost incurred by the defendant will be factored into the equation. Similar provisions apply to settlement agreements featuring non-monetary relief.
