The eighth annual Carlton Fields Class Action Survey reveals a continuing rise in class action defense spending, driven by more matters per company facing these cases, and, collectively, more complex, high risk, and bet-the-company matters than ever reported in past surveys.
Fourth annual rise
General counsel and senior legal officers from 395 Fortune 1000 companies in the US were interviewed. In total, companies spent $2.46 billion defending class actions in 2018 and spending and the number of class actions defended by company are expected to increase again in 2019. It was the fourth consecutive annual rise in spending after steadily decreasing expenditures from 2010 to 2014. The number of companies that reported facing class actions in 2018 dropped slightly to 54%, but the average number of matters per company increased from 6.3 in 2017 to 7.8 in 2018. The survey found that labor and employment cases remain the most common type of class action, accounting for 28.7% of matters and 26.1% of spending. In the past five years, nearly two-thirds of companies have faced at least one labor and employment class action and, overwhelmingly, companies report that wage and hour matters are their top concern in this category. “As predicted, class action defense spending rose again in 2018 and this is likely to continue through 2019,” said Julianna McCabe, director of the survey and chair of the firm’s national class actions practice group. Ms McCabe explained, “As the resources and financing available to pursue these costly matters have become increasingly available, the volume and complexity of the class actions filed continues to rise. In-house legal departments are dedicating significant resources to these cases and relying on outside counsel for help in making early assessments of their win-loss probabilities, among other factors.”
The next wave
While most companies have not yet faced a data privacy class action, survey results show that they predict these cases as the next wave. The percentage of companies making such a prediction nearly doubled from last year’s survey, increasing from 28.9% to 54.3%. Eighty-six percent of companies have an action plan in place to address and limit the impact of a data breach, including class action exposure. Nearly 9% of companies identified collective actions under the European Union’s new privacy regulation (the GDPR) as a next wave, a significant enough number that it was reported separately in the survey. Approximately two-thirds of companies reported concern stateside, about the impending California Consumer Privacy Act. Companies increased their use of contractual arbitration clauses in 2018, and the percentage of companies that included class action waivers in their arbitration agreements increased to near 50%. More companies now use arbitration clauses that bar class actions than in any previous survey. The full report can be found here.