Israel Advances Bill to Protect Small Businesses from Lawsuit Abuse
Translated & summarized from Bizportal by baba
Israel's Knesset is nearing the passage of an amendment to the Class Action Law designed to protect small businesses from excessive litigation. The bill requires plaintiffs to first contact businesses about alleged minor infractions before filing a lawsuit, aiming to resolve issues outside of court. It sets turnover limits for corporations and excludes certain business structures from class actions, while not absolving them of legal responsibilities.
The story in 5 lines · by baba
- Israel's Knesset is advancing an amendment to the Class Action Law to protect small businesses.
- The bill requires plaintiffs to contact businesses first before filing certain class action lawsuits.
- Businesses with annual turnover under 9 million shekels will be largely exempt from class actions.
- The amendment aims to prevent "Cofix lawsuits" that burden businesses with defense costs.
- The legislation seeks to encourage quicker resolutions and reduce unnecessary legal expenses for businesses.
The Israeli Knesset is poised to pass a significant amendment to the Class Action Law, aiming to shield small businesses from potentially crippling lawsuits. The proposed legislation, which could be finalized before the upcoming elections, seeks to prevent frivolous or minor infractions from escalating into costly legal battles.
The amendment introduces a preliminary step for certain types of claims, requiring plaintiffs to first contact the business in writing to seek a resolution. If the issue is not rectified within 60 days, a class action lawsuit may then be filed. This mechanism is intended to give businesses an opportunity to correct errors without immediate legal repercussions, thereby saving time and resources.
Under the proposed law, class actions will generally not be filed against licensed sole proprietors or partnerships, or against corporations with an annual turnover of less than 9 million shekels. For certain accessibility violations, this threshold is raised to 50 million shekels for businesses meeting specific criteria. The bill emphasizes that this does not exempt businesses from legal compliance or other enforcement channels.
Critics have pointed to a pattern of "Cofix lawsuits," where serial class action filings, often ending in settlements with fees for the filer and their lawyer, burden businesses. The high cost of defense, rather than the merit of the claims, can pressure businesses into settling, even when they believe the allegations are unfounded. This amendment aims to shift the starting point, making it harder to initiate such suits.
Proponents argue that the change benefits the public by allowing for quicker fixes to issues like incorrect packaging weights or misleading advertising, without the delay of protracted legal proceedings. Businesses can then allocate resources to improvements rather than litigation. The goal is to foster practical public protection while minimizing unnecessary costs for businesses, encouraging swift and substantive solutions over prolonged disputes.
