German Federal Court of Justice upholds mass claims collection model in ground-breaking ruling
In a ground-breaking ruling of July 13, 2021, the German Federal Court of Justice, the Bundesgerichtshof (BGH), upheld a mass claims collection or ‘Sammelklage-Inkasso’ model that was primarily directed at enforcing group claims in court, rather than out of court.
What was the case about?
The ruling relates to a case concerning a mass claims structure that was set up in the aftermath of the Air Berlin insolvency in 2017 to help enforce air passenger claims. In this particular case, the claimant, a limited liability company registered as a legal services provider for debt collections, or ‘Inkassodienstleister’, collected claims, by way of assignment, from Air Berlin customers whose flights were cancelled as a result of the insolvency.
Grouping together multiple Air Berlin customer claims, the claimant then sued the former executive director of Air Berlin for repayment of the flight costs on the grounds of the alleged late filing of the insolvency.
Both the German First-Instance District Court and the Court of Appeal dismissed these claims, based namely on an assumed violation of the German Legal Services Act, the Rechtsdienstleistungsgesetz (RDG). On appeal, the BGH overruled the second-instance judgment and sent the case back to the Court of Appeal. In reviewing the disputed mass claim collection model from different legal angles, the BGH found the model set up by the claimant to be in line with the German RDG in all respects.
The BGH decision – mass claims collection model covered by debt collection permit
The BGH ruling held that a debt collector who plans to go to court right away to enforce claims, acts within the boundaries of its debt collection permit under the German RDG regardless of whether individual or group claims are concerned.
Noting that the permissibility of mass claim collection models has been highly debated in German jurisprudence, the BGH followed the more liberal stance, rejecting the prevailing view to date among German first-instance courts that have ruled against such cases. Notably, the BGH ruling placed the freedom to conduct business in Article 12 of the German Basic Law (Grundgesetz) at the center of its reasoning and confirmed that a narrow reading of “out-of-court legal services”, permitted under the collection permit, was not justified as this would have disproportionately curtailed the debt collectors’ fundamental freedom to conduct business.
Importantly, the BGH did not see a considerably heightened risk of unqualified legal services springing from the mass claims collection model, given that any registered legal services provider is required to submit certain professional legal qualifications to the registration authority, and that qualified attorneys-at-law are legally required to be involved when the case goes to court.
The BGH decision – mass claims collection model does not create conflicts of interest
The BGH went on to clarify that the mass claim collection model does not create conflicts of interest. The BGH emphasized that the interests of firstly, the debt collector and its customers, and secondly, the interests of the individual customers within the group claim, are in principle aligned because they all share a common interest in achieving the most effective enforcement possible.
The BGH argued that the advantages of group enforcements outweigh any residual risks related to varying degrees of enforcement chances posed by claims bundled together in a group settlement. The residual risk may be that claims with weaker enforcement chances might negatively impact claims with stronger enforcement chances, however the advantages include the sharing of cost risks and enhanced bargaining power.
The BGH also held that the more parallel the claims, the lower the risk. By contrast, the more diverse the claims, the higher the risk. Nonetheless, these risks may be avoided by forming groups of sufficiently similar claims.
Any remaining differences in this sense would, according to the BGH, be negligible and therefore not justify invalidating the assignment of the customers’ claims to the debt collector.
In conclusion – why is this ruling important?
The importance of the BGH’s ruling cannot be overstated: it is not only a victory for legal services providers, such as debt collectors, but also significantly improves enforcement opportunities for consumers or companies.
 BGH Judgment, July 13, 2021, II ZR 84/20.
 German Legal Services Act (Rechtsdienstleistungsgesetz/RDG), Sections 10 (1), sentence 1 no. 1; 2 (2) sentence 1.
 BGH, Judgment, July 13, 2021, II ZR 84/20, Paras. 12 et seq.
 German Legal Services Act (Rechtsdienstleistungsgesetz/RDG), Section 4; BGH, Judgment, July 13, 2021, II ZR 84/20, paras. 45 et seq.