Riding on Anti-Corporate Sentiment for Public Trials... Winning is Not Really Winning for Companies

Class action lawsuits have the advantage of raising legal issues at relatively low costs. However, the low threshold for lawsuits has consistently raised concerns about abuse. Therefore, if a balance is not found in the process of promoting the class action system, there are concerns that 'black consumer lawsuits' aiming for large settlements may follow. The United States, where class actions are active, is a representative precedent.

According to the legal community on the 29th, cases where the plaintiff's claims or demands in class actions are evaluated as excessively excessive can be confirmed through precedents.

In April last year, the class action lawsuit against Dongyang Securities (now Yuanta Securities), known as the 'Dongyang Incident', also saw the court reject the claims of the class action participants demanding compensation and sided with the company. This lawsuit was triggered by suspicions that Dongyang Group sold bonds despite lacking repayment ability, causing significant damage to investors in 2013. Although 1,200 victims filed for damages against Dongyang Securities, the court did not recognize responsibility, stating, "It cannot be seen that there was false information or omission of important matters in Dongyang Securities' securities report." The court's judgment was that 'a reasonable investor could have recognized the risk.' This ruling was finalized with the Supreme Court's dismissal of the appeal. However, the 10-year legal battle resulted in losses for both the class action parties and the company.

The hacking incident of Nate and Cyworld servers is similar. At that time, Chinese hackers stole the personal information of 34.9 million people, and among them, over 20,000 filed a lawsuit against SK Communications, claiming 300,000 won per person in damages. However, in 2018, the Supreme Court ruled in favor of the defendant, considering that the company was operating an intrusion prevention system at the time, stating, "It cannot be seen that they failed to take protective measures that could be reasonably expected by social norms."

The lawsuit filed by 299 iPhone users against Apple for unauthorized collection of location information also lasted for seven years, but the Supreme Court confirmed the plaintiff's loss in 2018. The Supreme Court viewed that the collected information could not identify specific devices or users, and the information collection bug was considered a 'trial and error' occurring in the process of technological establishment.

A judge from a large law firm pointed out, "If class actions are abused, even those who do not wish to can be dragged into lawsuits," and "It has been perceived as an anti-corporate system for a long time."

The United States, where consumer protection laws are evaluated as strong, has a well-developed class action system. As a result, class actions where many consumers sue companies are common. Banks, retailers, and tech companies are their main targets, and it is known that lawsuits amount to tens of thousands annually. However, there are always side effects of excessive 'black consumer lawsuits' or indiscriminate lawsuits over trivial issues. Litigation costs and settlements lead to financial burdens on companies, and there is criticism that this could eventually be passed on to consumer price increases. A lawyer from a large law firm said, "The more plaintiffs there are, the greater the burden on companies," and "Currently, the plaintiffs' claims are also varied, making it difficult for the judiciary to proceed with trials."

However, there is also a counterargument that the possibility of frivolous lawsuits is not high. Ji Min-hee, a lawyer at Law Firm Daeryun, refuted, "It is difficult to see 'proliferation' of lawsuits as necessarily harmful, and excessive lawsuits that may occur in the early stages of system introduction can be seen as a process of refining legitimacy and limits through judicial review."

The Korea Federation of SMEs argued at the Ministry of Justice's public hearing on the class action system in December 2020, "There is a high possibility that SMEs will be included as targets of class actions, and 'black consumer lawsuits' may also increase," and "Even if they win the trial, consumer trust will weaken just by being sued."


scottchoi15@fnnews.com Choi Eun-sol Reporter