"Collective Financial Litigation to Be Held in a Single Court"

Published 14 Oct.2024 14:10(KST)

Proposal for Judicial Policy Research Institute Research Report

As class-action lawsuits against commercial banks and securities firms for violations of public disclosure and unfair trade practices regulations, as well as business conduct regulations, surge, there is a call for similar cases filed simultaneously in court to be assigned to a single panel for trial.

Kwon Mi-yeon (41, Judicial Research and Training Institute class 38), a presiding judge at Changwon District Court and author of the recent research report “Improvement Measures for Collective Damage Relief Procedures to Protect Financial Investors” published by the Judicial Policy Research Institute (President Park Hyung-nam), stated, “Because cases subject to the Securities Class Action Act are limited, most financial investment lawsuits are generally conducted individually. However, when multiple lawsuits are filed simultaneously, not only those cases but also other lawsuits may experience delays.”

[Image source=Beomryul Newspaper]

In lawsuits such as those related to the KIKO incident and the Lime and Optimus fund cases, thousands of plaintiffs have filed damages claims against actual violations by banks and securities firms. Consequently, the panels handling these cases have experienced heavy workloads. In the case related to Daewoo Shipbuilding & Marine Engineering, the number of plaintiffs exceeded 1,700. Although the first damages claim was filed around 2015, some cases remained unresolved until last year depending on the panel.

Judge Kwon suggested concentrating on common issue cases as a solution. She proposed methods including △ having one panel represent and proceed with the lead case △ consolidating related lawsuits under one panel △ multiple panels jointly conducting hearing sessions.

Regarding the method where one panel represents and proceeds with the lead case, she explained, “Currently, in court practice, it is common to wait for the outcome of the lead case, so this approach is familiar to both judges and legal representatives. It also has the economic advantage of conducting evidence investigation and related costs only once for common issues.”

Judge Kwon added, “Reassigning or transferring all lawsuits to one panel for consolidation or parallel trial reduces litigation costs, encouraging participation from small-amount victims, and prevents differing conclusions among panels. However, from another perspective, there may be opinions that it is inappropriate for a single panel to handle all collective financial investment lawsuits with significant social impact.”

The method where multiple panels jointly conduct hearing sessions involves not reassigning or consolidating cases but holding joint hearings on identical or similar issues. This is similar to the “Joint Hearing” conducted in November 2022 by the Seoul High Court’s Civil Division 14 (then presiding judge Kim Jong-woo, judges Lee Young-chang and Kim Se-jong) and Civil Division 18 (then presiding judge Jung Joon-young, judges Min Dal-gi and Kim Yong-min) in the Daewoo Shipbuilding & Marine Engineering case.

At that time, the panels stated, “The purpose of joint hearings is that when multiple cases with identical or similar issues are dispersed across multiple panels, while maintaining the independence of each panel, the panels share various legal principles and issues presented during the joint hearing to enhance trial reliability through more thorough proceedings.” They also explained, “Joint hearings are based on Article 57 of the Court Organization Act, which requires trials to be open to the public, allowing participating panels to observe the open proceedings conducted by other panels in real time.” A lawyer who participated as a representative in that trial said, “Even though they were different cases, because they dealt with the same issues, we were able to conduct more focused and efficient arguments.”