Class Action Defense Spending Increases for Second Consecutive Year

Spike in Highest-Risk Cases Drives Increase in Defense Expenditures,
According to the 2017 Carlton Fields Class Action Survey

TAMPA, Fla.–(BUSINESS WIRE)–The sixth annual Carlton Fields Class Action Survey confirms that the
increase in class action defense spending reported in last year’s survey
was no anomaly. After steadily decreasing expenditures from 2010 to
2014, spending rose in 2016 for the second consecutive year.

Companies across multiple industries spent $2.17 billion defending class
action lawsuits in 2016, accounting for 11.2 percent of all litigation
spending in the United States. These spending increases occurred even as
the percentage of companies that reported facing class actions on an
on-going basis normalized to 53.8 percent.

“There appears to be a trending increase in the magnitude of class
actions, with companies facing increasingly higher risk and exposure,”
said Julianna McCabe, director of Carlton Fields’ Class Action Survey
and chair of the firm’s National Class Actions practice group.
“Understandably, companies are spending more to manage that increased
exposure.”

Respondents to the Carlton Fields class action survey reported the
highest increase in “bet-the-company” and “high-risk” cases, from 9.5
percent in 2015 to 25.3 percent in 2016.

Additional key survey findings include:

• As the percentage of bet-the-company and high-risk class actions rose
  from 9.5 percent of matters in 2015 to 25.3 percent in 2016, the
  number of companies facing bet-the-company class actions doubled, from
  8.3 percent in 2015 to 16.7 percent in 2016. Routine class actions
  also increased from 28 percent in 2015 to 38.7 percent in 2016. In
  response to this increased activity at both ends of the spectrum,
  fewer companies reported a “defend at the right cost” philosophy, and
  more companies reported that they favor a philosophy of defending at
  “all costs” or by “going low.”
• Even as spending rose, corporate legal departments continued to use
  fewer in-house attorneys to manage their caseloads. As a result,
  in-house lawyers spent more time managing these cases and companies
  increased their use of outside counsel.
• Labor and employment matters displaced consumer fraud as the most
  common type of class action in 2016. Labor and employment now accounts
  for 37.7 percent of class actions and 38.9 percent of spending. Wage
  and hour claims surged, particularly in California. Consumer fraud
  class actions, however, remain a prominent part of the overall class
  action landscape.
• Consistent with the caseloads they are currently defending, companies
  report that wage and hour cases top the list as the most anticipated
  next wave of class actions (25.9 percent of respondents), followed
  closely by Telephone Consumer Protection Act (TCPA) cases (22.2
  percent).
• Early case assessment has increased every year since the survey was
  first conducted and is now the common practice of 98.1 percent of all
  companies surveyed. Each year there is also an increase in the number
  of companies that make a single individual accountable for class
  action outcomes, from 38 percent in 2011 to 62.2 percent in 2016.
• For the second straight year, fewer companies report using alternative
  fee arrangements (AFAs) for class actions. Companies are less likely
  to use AFAs for their high exposure cases as 13.2 percent use them for
  bet-the-company matters compared to 32.1 percent for routine cases.

Chris Coutroulis, a shareholder in the firm’s National Class Action
practice, added: “Each year we see how the companies in the class action
survey evolve more sophisticated practices to manage their cases.”

The Carlton Fields Class Action Survey is widely recognized as a
powerful resource for in-house counsel who want to manage class actions
effectively and efficiently. Results of the 2017 edition were compiled
from 387 in-depth interviews with general counsel, chief legal officers,
and direct reports to general counsel of 373 companies. Participating
companies had average annual revenue of $13.8 billion and median annual
revenue of $4.9 billion. The surveyed companies operate in more than 25
industries, including banking and financial services, consumer goods,
energy, high tech, insurance, manufacturing, pharmaceuticals,
professional services, and retail.

DOWNLOAD
THE REPORT NOW TO LEARN MORE.

Read the Carlton
Fields Class Action Blog.

Follow Carlton Fields on Twitter @CarltonFields.

About the Carlton Fields National Class Action Practice: Carlton
Fields has litigated and counseled clients in hundreds of class actions
for more than 30 years in federal and state courts across the nation,
and in arbitrations. These cases present unique challenges due to their
different rules, enhanced scope, and higher stakes. The firm understands
the potential impacts, costs, and risks associated with class actions,
and is a leader in developing legal approaches and strategies for
handling class action litigation.

Contacts

Carlton Fields
Kate Barth, 813-229-4154
kbarth@carltonfields.com