Tampa, Fla. – Across industries and practice areas, corporate counsel report that class action lawsuits are pervasive and costly. This year, corporate legal departments expect to handle 5.4 class action matters per company, up from 4.4 in 2011. At the same time, they plan to decrease their per suit costs in class actions by 17 percent this year. Overall, legal spending on class actions in the U.S. in 2012 is expected to dip by 13 percent (to $1.89 billion) — the lowest since 2006. To accomplish this, 57 percent of corporate legal departments are implementing better and more innovative risk management tools to reduce the cost and exposure of class actions.
These results and more are in the inaugural annual class action survey from the law firm of Carlton Fields. This survey presents important opinions of more than 300 general counsel, chief legal officers and direct reports to general counsel at major corporations (Fortune 100-1000) with average annual revenues of $13 billion.
“This cutting-edge national survey is a powerful resource for in-house counsel who want to manage class actions effectively and efficiently,” said Chris Coutroulis, chair of Carlton Fields’ Class Action team and chair of the firm’s Litigation Council. “The findings show how leading corporate legal departments identify and manage class action risk and cost control — information that clients say they want and need.”
The survey, which discusses findings on topics ranging from risk mitigation tools, the impact of recent case law, cost control approaches and alternative fee arrangements, presents two particularly noteworthy findings:
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Thirty-eight percent of companies designate a single individual as accountable for all class action outcomes. These companies spend an average of almost 10 percent less defending and managing class action suits, and they devote 25 percent fewer hours in-house to managing class actions.
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When setting a litigation reserve, 24 percent of corporate counsel undertake a rigorous case assessment that calculates the potential for financial exposure for each individual suit based on the particular circumstances of that suit. This approach is associated with a 36 percent reduction in class action spending per year (a 41 percent reduction in outside counsel spending on such cases).
Other key findings include:
- Companies spend $2.2 billion on class actions annually; 90 percent of that sum goes to outside counsel, making class action litigation one of the most outsourced types of legal work.
- Forty-four percent of corporate counsel listed management of outside counsel as a preferred cost control strategy.
- Fewer than one in four corporate counsel report using alternative fee arrangements for class actions, but they plan to double their use of alternative fee arrangements for class actions this year.
- Corporate counsel consider early case assessment key to effective resolution.
- Labor and employment suits are the most common case type accounting for 27 percent of both matters and spending; consumer fraud was second at 24 percent, followed by securities (13 percent matters/15 percent spending).
- One in three companies is implementing changes as a result of the recent rulings in Wal-Mart v. Dukes and AT&T v. Concepcion.
- Thirty percent of corporate counsel suggested stricter policies, expanded compliance training and more internal controls will improve their management of class action lawsuits.
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