Fifty-two percent of major companies are currently engaged in class action litigation. This percentage has remained fairly consistent since 2011. On average, companies managed four class actions in 2013, one less than they did in 2012. The number of new and ongoing class action matters is expected to stay virtually the same in 2014.
The nature and type of class actions continue to evolve. In 2013, 11 percent of class action spending went toward high-risk/bet-the-company matters, an increase of five percentage points since 2011. The growing number of these matters increases corporate counsel spending on class actions and makes winning – as opposed to defense costs – the primary measure of success. Consumer fraud and labor and employment remain the most prevalent class action matters. Together, they account for more than half of all class actions, as they did in 2012. They are followed by product liability, securities, and antitrust matters, which have increased since 2012 and now collectively account for another third of class actions.
In 2014, corporate counsel expect an onslaught of new class actions related to data privacy and security. Twenty-four percent believe these areas will present the greatest class action threat. Additionally, corporate counsel are concerned about class action lawsuits in the areas of consumer fraud, labor and employment, health care, debt collection, and intellectual property. Companies added one attorney to their class action management teams in 2013, bringing the average number of legal department attorneys handling class actions to four, up from three in 2012. Additionally, each attorney that handles class actions is spending more time on them per week. In 2013, in-house class action attorneys spent 11 hours per week per case, up from six hours in 2011. This is consistent with the trend toward building internal legal resources.
While spending on outside law firms decreased from $2.9 million to $2.8 million from 2012 to 2013, the number of law firms used to handle class actions increased from three to four during this same period. This is consistent with the increasing complexity of class action cases, and contrasts with a decline in the total number of law firms used between 2012 and 2013.
The use of alternative fee arrangements in class actions continues to rise. More than 44 percent of companies now rely on them, up from nearly one-third in 2012. Projections indicate that almost 50 percent of companies will use AFAs in 2014. Fixed fees, chosen by nearly 65 percent of these companies, remain the most commonly used form of AFA.
A growing number of companies – 47 percent, up from 38 percent in 2011 – are making a single individual accountable for class action outcomes. As a result, these companies cut both overall and outside counsel spending, and reduce the amount of time spent on class action management. They spend 25 percent less on outside counsel, and save almost $800,000 annually. As in past years, companies that rigorously assess financial exposure also realize savings. They save nearly $400,000 per suit, which translates into $1.6 million per company annually.
The 2011 Supreme Court cases, Wal-Mart v. Dukes and AT&T v. Concepcion, continue to influence class action management. Additionally, corporate counsel reported that the 2013 Supreme Court case, Comcast v. Behrend, impacted their management of class actions.
To read the full 2014 Class Action Survey report, please visit ClassActionSurvey.com.