Background
Hava Mazor applied to certify a class action against Freshmarket Ltd., alleging that the supermarket chain violated consumer-protection law by failing to display prices for tobacco products. She sought an order requiring price publication, compensation for nonpecuniary harm, and reimbursement of certain alleged price differences. Freshmarket maintained that openly displaying tobacco prices was prohibited by Israel’s tobacco-advertising legislation.
Before Freshmarket answered the certification application, the parties sought approval of a compensated withdrawal. Freshmarket agreed to display tobacco prices on a prominently placed price list and to price tobacco products below an identical product sold by at least one competing chain for up to 24 months or until the aggregate difference reached NIS 600,000. The parties also recommended NIS 120,000 plus VAT in compensation and attorney fees for Mazor and class counsel.
The Haifa District Court accepted the withdrawal but rejected the substantive arrangements and the proposed compensation. Adopting the Attorney General’s position, it held that a publicly displayed tobacco-price list would conflict with the prohibition on tobacco advertising, while a price catalog could be made available only to customers seeking to buy tobacco products. It also found that the proposed discount could encourage tobacco purchases. Although the certification application was legally unfounded and produced no material benefit attributable to the class representatives, the District Court ordered Freshmarket to pay the proposed NIS 120,000 to the statutory class-action fund. Freshmarket appealed only that payment order.
The Court’s Holding
The Supreme Court unanimously allowed the appeal and canceled the NIS 120,000 payment. It reasoned that payments to the statutory fund are not charitable donations; they compensate the public for a defendant’s improper conduct. Here, the District Court had rejected all claims in the certification application, found that the application was “destined to fail from the outset,” and concluded that the class proceeding produced no meaningful benefit for the class or the public.
Freshmarket’s willingness to pay NIS 120,000 as part of a proposed risk-resolving withdrawal agreement did not justify imposing that payment after the court rejected the agreement and instead disposed of the case on the Attorney General’s position. The Supreme Court therefore directed that, if the money had already been transferred, it be returned to Freshmarket together with any return earned by the fund.
The Court expressly declined to decide the broader question whether courts possess authority, in a compensated-withdrawal proceeding, to redirect proposed representative compensation and attorney fees to the statutory fund. It held only that the redirection was unjustified in this case. No appellate costs were awarded because Mazor and the Attorney General left the result to the Court’s discretion.
Key Takeaways
- A defendant’s conditional willingness to fund compensation and fees in a proposed class-action withdrawal does not, by itself, support ordering the same amount paid to the statutory fund after the proposal is rejected.
- A payment to the class-action fund requires a justified remedial basis; it is not charity and should reflect improper conduct by the defendant.
- The Court left unresolved whether Israeli courts have general authority to redirect proposed compensation and fees to the fund in compensated-withdrawal proceedings.
Why It Matters
The decision limits the use of proposed settlement economics once a compensated-withdrawal arrangement has been rejected. Where the underlying certification claims fail and the proceeding creates no attributable public or class benefit, a court cannot treat the defendant’s abandoned risk-payment offer as an independent basis for a payment to the statutory fund.
The ruling is deliberately narrow. It resolves Freshmarket’s case without settling the larger jurisdictional question concerning judicial authority to redirect compensation and fee amounts in other compensated-withdrawal proceedings.