Brazil – fluid recovery in consumer class actions

Fernando Dantas Motta Neustein
Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados, São Paulo
fdantas@mattosfilho.com.br

Ligia Lima Godoy
Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados, São Paulo
ligia.godoy@mattosfilho.com.br

Ivo Bedini Wernecke
Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados, São Paulo
ivo.wernecke@mattosfilho.com.br

Homogenous individual rights class actions may be filed by several entities, including the Public Prosecutor Office and civil associations.^[1] In consumer cases, homogeneous individual rights are those of common origin,^[2] such as death or injuries caused by a defective product.

The award of a homogenous individual rights class action must be generic: it should not establish a specific monetary amount, but rather the findings of liability.^[3] Individuals of the class should then file separate lawsuits to liquidate the general award, by means of proving specific causation and specific damages. These individual cases may be filed by members of the class with: (1) the court where the judgment of the class action has been rendered; or (2) the court closest to where they are domiciled.

Once the judgment of the class action is rendered, defendants must publicise it in newspapers to give members of the class the opportunity to file their liquidation lawsuits.^[4]

According to Article 100 of the Brazilian Consumer Defence Code – the only provision on the matter – if no liquidation is filed, or if the number of liquidation lawsuits effectively filed is not significant within a year, the plaintiff of the class action may proceed with the liquidation phase to enforce residual indemnities through fluid recovery, with the allocation of amounts to the Diffuse Rights Fund.^[5] The main purpose of fluid recovery is therefore to honour the principle of full compensation for collective damages and to avoid unjust enrichment of the defendants.

The law provides insufficient criteria about how fluid recovery should work; it leaves many unanswered questions especially regarding statute of limitations, how to calculate the award and proceedings that should be observed when applying fluid recovery in the context of homogeneous individual rights class actions.

Because of this, the Superior Court of Justice, the highest court in Brazil with jurisdiction over federal law disputes, has filled in the gaps and established a few guidelines to be followed by trial and appellate courts when analysing how to apply fluid recovery in homogeneous individual rights class action.

The first guideline is that the liability found in the class actions judgment must be: (1) individually insignificant to the point of not encouraging the members of the class to file individual liquidation claims; and (2) globally relevant, so that the sum of the individual damages be meaningful enough to justify the application of fluid recovery.^[6] According to scholars, an example of damage individually insignificant and globally relevant would be the one arising from the marketing of low cost food products tagged with wrong weight information.

The second guideline is that the award calculation should be based on an expert examination to assess the residual indemnities and to accurately reflect the content of the final decision without any alteration or extensive interpretation of its exact terms.^[7] As a rule, the estimation of a random indemnity amount is prohibited.

The third guideline is that plaintiffs interested in pursuing the fluid recovery must observe a five-year statute of limitations, which should be counted from the date the judgment of the class action becomes final and unappealable.^[8]

The application of fluid recovery in individual homogeneous rights claims is yet vague and the Superior Court of Justice case law has been filling in with guidelines for its practical application and to prevent its indiscriminate use.