Class action caseloads at record high as labour and employment claims rise, study finds
Corporate legal departments spent $3.37bn on defending and assessing class actions last year
US companies are facing record class action caseloads, increasing their reliance on outside counsel to assess and defend cases, according to a new study by Carlton Fields.
The top 200 US law firm’s 11th annual Class Action Survey found that a typical large US company faces a 27% increase in class action caseload this year, a record high. Against that backdrop, companies are also spending a record amount defending class action cases – the seventh straight year spending has increased. The amount of legal budget set aside for class actions rose to 14.2% from 13% last year, with overall spend on class actions hitting $3.37bn. That is expected to rise to $3.64bn this year.
Much of that caseload is being driven by labour and employment cases, which increased to 25.6% of all cases in 2021, up from 22.5% a year earlier. Carlton Fields said the rise in such cases is due to regulatory agencies becoming more aggressive and workforce safety claims growing.
Consumer fraud class actions saw the second highest caseload, though they fell to 19.6% of all cases from 21.1% in 2020. Insurance-related class actions were the third highest at 13.5% of all cases, up from 6.7%. Those were mostly tied to financial products or claims relating to disasters, the survey data showed. Meantime, Covid-19-related class actions fell to 6.1% of all cases, down from 10.7% in 2020.
Companies expect labour and employment cases to continue driving the class action caseload in the year ahead (27.4% of respondents), followed by consumer fraud (26%) and data privacy and security (23.6%). The latter was down from 42.9% of respondents last year, with companies believing they have improved business practices, Carlton Fields said.
Consumer fraud topped the type of class action cases that respondents believe will potentially pose the biggest business risk (26.8%), followed by employment (14.3%) and data privacy and security (12.5%).
One chief counsel at a leading US insurance company said: “All of our claims are complex in my area of consumer fraud, so we try to settle as early as possible and reach a mutually viable solution. We only fight when we know 100% we will win. We need to protect the company’s reputation, which is always first and foremost.”
Fewer companies faced ‘bet-the-company’ class actions last year, falling to 3.3% of respondents from 21.9% a year earlier.
Companies also settled more class actions in 2021, settling 73.1% of cases on average compared to 58.5% in 2020. That jump was driven by in-house counsel seeking to resolve older cases, Carlton Fields said.
The survey was based on 411 interviews with general counsel, chief legal officers and direct reports to GCs.