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The pandemic has ignited a spike in class action lawsuits nationwide, according to a new report from law firm Carlton Fields.
Class action spending in the U.S .is growing at more than twice the rate of other litigation spending, the report finds, reaching a new high of $2.9 billion in 2020. The number of companies facing class actions is the highest in a decade, adds the report, and corporate counsel report an increasing number of complex class action matters. Carlton Fields has more than 330 attorneys and government and financial services consultants who work out of six states and Washington, D.C. It has a big presence in the Tampa market.
This is the 10th year of the Carlton Fields Class Action Survey, which is based on interviews with general counsel or senior legal officers at more than 400 Fortune 1000 and other large companies. The number of ongoing class actions managed by survey respondents has more than doubled to 9.3 matters per company in 2020, compared to 4.4 matters per company in 2011.
Class action matters have become increasingly high-risk for corporations: in 2020, for example, officials say 34.3% of the class actions their companies faced were high-risk or bet-the-company — up from 6.2% in 2011. Class action spending has increased for six consecutive years, and companies project spending will hit nearly $3.3 billion in 2021 — another new record.
“With the pandemic, we’ve seen a groundswell of new litigation, and even those companies that have not yet faced a COVID-19 class action have considered or adopted new business practices in an attempt to address related issues and minimize risk,” Carlton Fields National Class Actions Practice Group Chair Julianna Thomas McCabe says in the statement. McCabe oversees the Class Action Survey with Shareholder Michael Wolgin.
Other nuggets from the survey include:
• In 2020, more than 25% of companies surveyed had already faced at least one class action as a result of the pandemic. By April 2021, more than 1,600 COVID-19-related class actions were filed.
• The three largest categories of COVID-19 class actions relate to insurance coverage for business interruption; higher education refunds; and demands for entertainment, ticket, and travel refunds.
• Six out of 10 companies changed one or more business practices during the pandemic to limit class action risk. An in-house counsel for an industrial manufacturer says: “We’ve had to change the entire health and safety landscape to mitigate risk to employees. On the data side, we’ve had to create protocols and training for employees using personal computers to work remotely.”
• Labor and employment matters are the leading category of class actions, accounting for 22.5% of matters and 22.7% of spending. Consumer fraud follows closely at 21.1% of matters and 20.1% of spending.
• Companies predict data privacy and cybersecurity matters as the greatest future class action threat. “We are just beginning to see the tip of the iceberg with privacy class actions,” an in-house counsel for a life insurance company says.
• Nearly eight of 10 companies now include mandatory arbitration clauses in contracts, the highest percentage since the inception of the survey. Companies also reported an increase in use of arbitration clauses with class action waivers — 74.4% up from 55% reported last year.
• For the second consecutive year, settlement rates for class actions declined and were down to 58.5% in 2020.
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