Percentage of Companies Managing Class Actions Returns to Historic Levels
After hitting a high of 60.6 percent in 2015, the percentage of companies managing class actions normalized to 53.8 percent in 2016.
Labor and Employment Actions Displace Consumer Fraud as Most Common Class Action Type
Labor and employment class actions have become the most common type of class action, making up 37.7 percent of matters and 38.9 percent of spending. Consumer fraud class actions, which represented the bulk of class actions in 2015, are now second, accounting for 19 percent of matters and 17.8 percent of spending. These practice areas are followed by product liability, securities, intellectual property, and antitrust. Data privacy class actions make up less than five percent of matters and spending.
Labor and Employment Class Actions Surge
The volume of labor and employment class actions increased by more than half, from 24.1 percent in 2015 to 37.7 percent. This upsurge occurred as wage and hour class action filings increased substantially — many in California. Consumer fraud class actions are down as a percentage of class actions for the second straight year, while companies reported a notable rise in the volume of intellectual property class actions.
Wage and Hour and TCPA Class Actions Are the Predicted Next Wave
When corporate counsel were asked to predict the next wave of class actions, they most often named wage and hour, and TCPA compliance cases. Their emphasis on wage and hour issues is consistent with the rise in existing labor and employment matters, suggesting that companies do not expect any immediate relief from this type of litigation. These responses reflect a substantial change from 2014 and 2015 when companies predicted that more data privacy and security class actions were on the horizon.
Although data privacy and security cases have been slow to gain traction, they remain a concern. Many organizations have taken strong, preemptive measures to reduce their exposure to data breach litigation.
Few Companies Have Actually Faced Data Privacy and Security Class Actions
Most companies have never faced a data privacy and security class action. Concern over the possibility of such litigation varies greatly among companies, and is largely industry driven. Businesses that retain personally identifiable consumer information are more likely to view data privacy and security class actions as a threat. They include health care providers, large retailers, financial institutions, and insurance companies.
In Their Own Words: Corporate Counsel Weigh in on Data Privacy and Security
Class Actions Remain a Part of Everyday Life for Many Organizations
Of the companies surveyed that reported handling class actions, the percentage indicating they had one or more open class actions on an ongoing basis was 69.1 percent, a slight increase from 68.5 percent last year. More companies, 17.6 percent, reported facing a class action “every year or two” compared to the 11.9 percent that provided the same response in 2015. The number of companies reporting that class actions are a rare occurrence was down more than six percentage points, to 13.2 percent.
Number of Class Actions Per Company is Projected to Rise
On average, companies managed 5.9 class actions in 2016, comparable to the number they managed in 2015. Companies averaged two new class actions in 2016. This number is projected to rise in 2017.
Most Companies Defend Class Actions in the United States Only
Of the companies that reported defending class actions in the past 12 months, nearly 86 percent said they are defending matters filed in the United States only. Companies that indicated they were defending class actions outside the United States reported that these matters were filed in Canada, the United Kingdom, Israel, Australia, the Netherlands, France, and Brazil.
Class Action Exposure Becomes More Polarized
The volume of both routine and high-risk or bet-the-company class actions has risen, making class action exposure more polarized than in past years.
High-risk and bet-the-company class actions rose dramatically, from 9.5 percent to 25.3 percent, and the percentage of “routine” class actions also increased, by more than 10 percentage points to 38.7 percent.
The Number of Companies Facing Bet-the-Company Class Actions Doubles
Compared to 2015, twice as many companies are facing bet-the-company class actions in which the exposure is deemed potentially devastating to the company. Fewer companies report facing complex or high-risk class actions.
Exposure and Cost of Class Actions
Exposure levels vary greatly from company to company within each level of risk but are high across all categories. In the bet-the-company category, 75 percent of cases have exposure of $15 billion or more.