Study: Class action caseloads at record high

Study: Class action caseloads at record high

Companies spent $3.37 billion on defending and assessing class actions in 2021, according to their legal departments

A new study by Carlton Fields estimates that US companies are relying more on outside counsel to defend and assess class action lawsuits, owing to a record number of cases.

According to the top 200 US law firms' 11th annual Class Action Survey, the number of class action cases against large US companies has increased by 27 percent, marking a record high for this year.

Furthermore, companies have also been investing a record amount in defending class action cases - a seventh straight year of increased spending. Class actions accounted for 14.2 percent of legal budgets for the year, up from 13 percent in 2021, with an overall expenditure of $3.37bn. Estimates expected that this figure will rise to $3.64bn in 2022.

A large percentage of those cases are labour and employment-related, which has risen from 22.5 percent to 25.6 percent a year earlier. A rise in such cases can be attributed to regulation agencies becoming more aggressive and growing number of workplace safety claims.

Although cases involving consumer fraud fell to 19.6 percent of all cases from 21.1 percent in 2020, they still made up the second-highest volume of cases. Class actions involving insurance were the third most common by a margin of 13.5 percent, up from 6.7 percent in 2021. The survey data indicates that most of these cases were linked to financial products or disaster claims. Class actions related to Covid-19 fell from 10.7 percent of all cases in 2020 to 6.1 percent in 2020.

In the year ahead, companies expect the workload for class actions to be led by labour and employment cases (27.4 percent of respondents), consumer fraud (26 percent) and data privacy and security (23.6 percent). In this category, information technology companies said that they have made improvements to their business practices, Carlton Fields said. That number was down from 42.9 percent in 2021.

According to the respondents, consumer fraud posed the biggest threat to business (26.8 percent), followed by employment (14.3 percent) and data protection and privacy (12.5 percent).

The chief counsel at one of the nation's largest insurers said: "All of our consumer fraud cases are complex, hence we work to settle them as soon as possible while finding a solution that works for both the sides. Fighting only takes place when we are 100 percent certain of victory. Our reputation is always the company's most important asset.

It was 3.3 percent of respondents in 2021 who faced 'bet-the-company' class actions, down from 21.9 percent a year earlier.

Furthermore, companies settled more class actions in 2021, with an average of 73.1 percent of cases settled in comparison to 58.5 percent in 2020. Carlton Fields said that in-house counsel resolved older cases as a result of this jump.

Around 411 legal professionals were interviewed, including general counsels, chief legal officers and direct reports to general counsels.