How Corporate Counsel are Reducing Costs and Managing Risks of Class Actions

“In 2013, corporate counsel expect an onslaught of new consumer fraud class actions related to data security, wireless and other untested technologies, and food safety and labeling. Additionally, 9 percent of companies are newly on the watch for health care class actions, and 6 percent are concerned with class actions related to environmental issues.” (Carlton Fields)

The attorneys at Carlton Fields spoke to more than 360 companies of all sizes and industries to prepare their second annual Class Action Survey. What did they learn? Plenty, writes attorney Chris Coutroulis:

“Across industries, corporate counsel reported they spent $2.1 billion annually on class action lawsuits in 2012. This reflects a modest decline from $2.2 billion in 2011. On average, companies managed 5.1 class actions in 2012, representing a 16 percent increase from 2011, when that number was 4.4. In both years, 1.6 of the matters managed were new, indicating that ongoing matters are taking longer to resolve.

The nature and type of class actions is evolving. Since 2011, there has been an increase of more than 50 percent in spending on high risk/bet-the-company class actions relative to other types. In 2012, these matters represented 10 percent of annual class action spending, up from 6 percent in 2011. During the same time period, spending on the middle rung of risk classifications (‘complex class actions’) also increased, from 51 percent to 55 percent. Correspondingly, annual spending on routine class actions dropped from 43 percent in 2011 to 35 percent in 2012…

On average, companies dedicate three in-house attorneys and three non-attorneys to class actions. In 2012, in-house legal departments added, on average, one full time employee to their class action management teams. This is consistent with the trend toward building more sophisticated, targeted internal legal resources…

Early case assessment, new settlement strategies, and in-sourcing are driving per class action savings. Companies spent $671,100 annually per class action during 2012, a 14 percent decline from 2011, when they spent $776,500. Substantial cost savings are generated by using rigorous case assessment and modeling to calculate financial exposure. Companies that employ this strategy spend 38 percent less per class action and 42 percent less on outside counsel than companies that do not rigorously assess financial exposure.”

Get your own copy of the survey here.

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