Class Action Update (Israel): No Change Yet – but Israel’s Supreme Court Signals a Shift on Class Action Costs
No doctrinal shift yet. But the Court now appears to be acknowledging that cost orders in Israeli class actions may need recalibration.
The Israeli Supreme Court dismissed Renault S.A.S.’s appeal seeking higher costs after a class certification motion against Renault and its Israeli importer was withdrawn. The bottom line: No formal change to the existing “moderation rule,” under which courts generally exercise restraint when ordering class-action applicants to pay defendants’ costs, except in bad-faith or clearly baseless cases. Yet the judgment’s more important message may be prospective: a majority of the panel appears to recognize that Israeli class-action cost orders may need to become more meaningful where claims are weak, withdrawn too late, duplicative, or impose disproportionate burdens on defendants.
Background
The case arose from a consumer class action alleging that certain Renault vehicle safety systems did not comply with Israeli Ministry of Transport Procedure 3/13. The motion was withdrawn after two preliminary hearings and after the Ministry’s position was obtained. The District Court nevertheless ordered the applicant to pay NIS 80,000 ($27,000; €23,500) in costs, split between Renault and the importer, finding that the motion rested on weak foundations and should have been withdrawn earlier.
Legal Questions
Renault argued that the award represented only a small fraction of its actual costs and asked the Supreme Court to revisit the moderation rule in light of the growth of class-action filings in Israel. Renault proposed a more flexible test focusing on whether the motion was facially unsubstantiated, how the applicant and counsel conducted the case, and whether class counsel was a repeat player.
The Court’s Decision
Justice Grosskopf, writing the lead opinion, rejected the appeal and declined to abandon the moderation rule, emphasizing applicants’ financial risks, information asymmetries, and the risk of chilling meritorious claims. Justice Ronen, while concurring in the result, framed costs as a tool for calibrating incentives: modest or no costs may leave weak class actions with too much upside and too little downside, while more substantial costs may discourage claims that should not have been filed, or should have been withdrawn earlier. Justice Kasher placed greater emphasis on the defendant’s side of the equation, noting that courts should consider not only the applicant’s conduct and the need to preserve meritorious class actions, but also the real burden imposed on respondents—financial exposure, reputational harm, operational disruption, and proportionate defence costs.
Implications for Class Actions in Israel
For repeat defendants, the ruling is a meaningful signal, even if not yet a doctrinal break. The Supreme Court did not create a new entitlement to full cost recovery, even where a certification motion fails. However, the concurring opinions create practical ammunition for arguing that the time has come for more substantial cost orders in weak, speculative, or strategically prolonged class actions – especially where the defendant can show that the proceeding created real operational, reputational, or financial burden. For aviation businesses, that may matter in consumer, accessibility, pricing, cancellation, baggage, and regulatory-compliance claims, where even low-value passenger allegations can aggregate into high-stakes exposure.