Across industries, corporate counsel reported that class action lawsuits are pervasive and costly. In 2012, corporate legal departments expect to handle slightly more of them—on average, 5.4 matters per company, up from 4.4 in 2011. At the same time, they plan to decrease their per suit costs, which average $776,500, by 17 percent this year.
Fifty-seven percent of legal departments have implemented various tools and programs to help mitigate risk and lower exposure costs. Significantly, making one person accountable for all class actions has proven valuable and cost-effective for the 38 percent of corporations that have taken this step. On average, these companies spent 10 percent less defending class action lawsuits and devoted 25 percent fewer hours to their management.
Surveyed corporate counsel agreed that early case assessment is key to effective resolution. “Learn a case quickly,” said one surveyed chief litigation counsel of a leading regional bank. “Being first is being best.”
Rigorous early case assessment is also associated with a substantial reduction in class action costs. Companies that calculated their financial exposure to set their class action reserves spent 36 percent less, per class action, per year compared to their peers who did not. And while they invested more in-house attorney time—65 percent more hours per suit—the payoff was significant. Annually, these companies saved approximately $341,000 while investing an additional 177 in-house attorney hours.
More than 50 percent of corporate counsel perceived an anti-business sentiment that heightens their exposure and increases the amount of potential financial loss. At the same time, the rulings by the Supreme Court in Wal-Mart v. Dukes and AT&T Mobility v. Concepcion are influencing corporate counsel to dispute class certification more aggressively and to implement and enforce class action waivers.
As the following range of opinions demonstrates, counsel were split on whether to fight or settle these lawsuits.
I don’t settle cases; they are dismissed or I win them.
—Chief Litigation Counsel
Fortune 500 Financial Services Company
We only settle when the cost of settlement is less than the cost of proceedings of a trial.
—Special Litigation Counsel
Global Manufacturing Company
Settle. It’s next to impossible to fight these things and it’s not favorable for the business to do so.
Global Business Services Firm
Develop a good reputation with the opposing lawyers and look at alternative dispute resolution early on.
—Assistant General Counsel
Fortune 1000 Energy Company
Although fewer than one in four corporate counsel reported using alternative fee arrangements (AFAs) for class actions, that number is expected to increase despite obstacles that include measuring the unknown, defining scope and budget, resistance on the part of outside counsel, and scarce examples of successful implementation.