The fifth annual edition of the Carlton Fields Class Action Survey has just been released, and in this year’s survey corporate counsel report that class action spending has increased after four consecutive years of decline. Spending is also projected to increase in 2016. This marks a key turning point.
Across industries, the companies surveyed report that they spent $2.1 billion on class action lawsuits in 2015. The number of companies facing at least one major class action suit rose from 53.8 to 60.6 percent in 2015.
Their class action dockets increased on average by one new case in 2015, bringing the average number of class actions managed to six. This total is expected to increase to seven in 2016.
Matter Types, by Practice
Consumer fraud and labor and employment remain the most prevalent class action matters. They account for 48.7 percent of all class actions, down slightly from 2014. This year, financial services industry business practices emerged as an expected source of increased class action activity.
In this connection, the proposed Consumer Financial Protection Bureau rule that will ban class action waivers in certain consumer contracts with arbitration clauses is expected to generate new class action suits. On the other hand, while data privacy class actions have been highly anticipated for several years, they remain a small percentage of matters overall.
Higher-Risk Matters on the Rise
The percentage of class actions identified by companies as routine is falling, as higher-risk matters become the norm. Complex matters now account for 62.5 percent of all class actions, up from 46.8 percent last year.
When evaluating the risks class actions present, exposure is still deemed the most important variable, and corporate counsel increasingly report that “coming in under estimated exposure” is a key determinant of success.
Faced with a greater number of class actions—and higher-risk matters—companies are taking a pragmatic approach. While the percentage of corporate counsel who favor a “defend at all costs” approach dropped from 13.6 to 9.7, the percentage committed to defending “at the right cost” rose from 28.8 to 33.9. In addition, 68.7 percent of companies settle their class action lawsuits, most at the precertification stage.
To view the complete survey, visit ClassActionSurvey.com.