Carlton Fields Survey Shows First Increase in Class Action Defense Spending Since Inaugural 2011 Report

Corporate Counsel Developing More Innovative Strategies in Response to Increasingly Complex Risk, According to Fifth Annual Class Action Survey
03.21.2016

Tampa, Fla. – The fifth annual Carlton Fields Class Action Survey: Best Practices in Reducing Cost and Managing Risk in Class Action Litigation reveals a marked increase in spending on class actions after four consecutive years of declines. It is an important turning point as legal departments now project further spending increases in 2016 even as they pursue efficient and innovative ways to manage class actions.

Companies across multiple industries spent $2.1 billion defending class action lawsuits in 2015. Total spending is up from $2.03 billion in 2014, and is expected to rise to $2.14 billion this year.

Along with this fundamental trend in total spending, the Carlton Fields data also showed a marked rise in the number of companies facing class actions. From 2014 to 2015, the number of companies facing at least one major class action suit increased by nearly 7 percentage points to more than 60 percent.

The survey also confirms that corporate counsel classify a greater percentage of cases as complex. In fact, respondents to this year’s survey categorized more than 70 percent of their class actions as complex, high-risk, or bet-the-company as opposed to routine.

Not surprisingly, corporate counsel rated potential exposure and the likelihood of resolving matters under exposure as the most important variables in evaluating risk and success. Both findings are in line with what corporate counsel have told Carlton Fields in the last three consecutive annual surveys.

These data should not be construed to mean that corporate counsel have become less cost conscious. In managing all class actions, including the greater number of higher-risk matters, survey respondents report a pragmatic approach to continue defending “at the right cost,” rather than “at all costs.” The percentage of corporate counsel who favor a “defend at all costs” approach actually dropped from 14 to 10 percent, while the percentage committed to “defending at the right cost” rose from 29 to 34.

“This year’s Class Action Survey shows that there are particularly important shifts underway in the class action litigation climate,” said Carlton Fields Shareholder Chris S. Coutroulis, who directs the firm’s annual Class Action Survey.

“Increased spending on class action defense has forced corporate counsel to alter their strategies,” added Coutroulis. “We see counsel approaching class action litigation more holistically — analyzing business impact with more of a strategic approach and less of a sole focus on the dollars and cents that an aggressive defense entails.”

For example, the survey reflects that organizations increasingly hold a single in-house attorney accountable for the outcomes of their class action lawsuits. Since 2014, there has been a 10 percent increase in companies employing this sole-accountability method.

“Single accountability can lower costs and improve results,” said Coutroulis. “It makes decision-making more efficient, and it better ensures a more consistent case strategy and approach throughout.”

The use of early case assessment revealed interesting variations from the prior two years. Nearly all corporate counsel now report that they utilize some form of early case assessment as another effective strategy for managing class action litigation. The percentage of companies involving outside counsel in this process rose from 80 percent in 2013, to 87 percent in 2014, and 96.7 percent in 2015.

“Early case assessment remains a key strategy” said Julianna McCabe, chair of Carlton Fields’ National Class Actions practice group. “The data indicate that companies now recognize this fact almost universally.”

Early assessment seems all the more important in light of the fact that, according to the survey, 75-80 percent of the dollars invested in class action litigation go toward defending against certification. Corporations report that they continue to benefit from recent Supreme Court decisions in opposing class certification. “This makes sense, added McCabe, “because the Court has significantly restricted the reach of Rule 23 in recent years. What remains to be seen is what impact the restructuring of the Court will have on class action jurisprudence moving forward.”

Other survey findings include:

  • Consumer fraud and labor and employment still top the list of class action cases, but financial industry business practices, including those involving securities and insurance, have emerged as another source of class actions. Data privacy class actions, long predicted as a major source of litigation, still remain a small percentage of matters overall.
  • Companies report that nearly 69 percent of class action lawsuits are resolved by some type of settlement, most at the pre-certification stage.

The Carlton Fields Class Action Survey is widely recognized as a powerful resource for in-house counsel who want to manage class actions effectively and efficiently. Results of the 2016 edition were compiled from 391 in-depth interviews with general counsel, chief legal officers, and direct reports to general counsel in more than 25 industries, including banking and financial services, consumer goods, energy, high tech, insurance, manufacturing, pharmaceuticals, professional services, and retail trade. These companies had an average annual revenue of $18.2 billion, and median annual revenue of $4.7 billion.

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About the Carlton Fields National Class Action Practice:Carlton Fields has litigated and counseled clients in hundreds of class actions for more than 30 years in federal and state courts across the nation, and in arbitrations. These cases present unique challenges due to their different rules, enhanced scope, and higher stakes. The firm understands the potential impacts, costs, and risks associated with class actions, and is a leader in developing legal approaches and strategies for handling class action litigation.