Beyond the usual substantive advice—maintaining effective compliance and document management systems, for example—our class action defense team suggests that companies implement the following relatively straightforward procedural tips to avoid class actions.
- Include an arbitration clause with a class action waiver in consumer contracts, website terms and conditions, and product literature. Although the Supreme Court has repeatedly upheld their enforceability—e.g., AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011);American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013)—some courts continue to apply state law doctrines that disfavor arbitration. Sheppard Mullin’s class action defense team can help draft the clause to maximize the chances it will be enforced.
- Settle risky individual lawsuits. Discovery in an individual case can allow it to be transformed into a class action. Make sure you know what is being produced by your outside counsel and consider whether fighting the individual claim is worth the risk. Pay especially close attention to individual cases brought by counsel whose firms are known also to pursue class actions.
- Implement a system to flag unusual customer requests or complaints. Too often companies bend over backward to send customers extra copies of documents they were already provided, reply with detailed written responses to complaints, or offer other information that is not legally required. Such requests can indicate that the customer is working with a plaintiff lawyer to set up a lawsuit. Counsel should be informed of such requests so that the company can consider carefully whether or how to respond.
- Have counsel monitor class actions pending against others in the industry. Many companies in the same industry have similar business practices. Plaintiff class action lawyers frequently test a theory of liability against one company, and later sue others in the industry if the theory proves fruitful. Make process changes, if necessary, before they get around to your company.
- Monitor cases being defended by others under an indemnity, joint defense agreement, or insurance policy. Counsel handling such cases may not have class action risk in mind. If you do not agree with the strategy, consider your contractual options.