Rise in class actions and regulatory disputes as bet-the-company litigation persists
Data security remains a concern for corporate legal departments
New York (November 10, 2016) – AlixPartners, the global advisory firm, announced today the findings from its annual Litigation and Corporate Compliance survey, which polled 300 corporate counsel, legal and compliance officers from companies with between $150 million and more than $10 billion in revenues and that represent more than 20 major industries in North America and Europe.
Class-action cases stood out in this year’s survey, with 92 percent of respondents saying that the number of class-action disputes their company has been involved in increased or stayed the same during the past 12 months. Within large-scale or bet-the-company disputes, counsel also saw a rise in these cases: 53 percent say these types of lawsuits were class actions compared with 15 percent in the 2015 survey.
The survey found that the most common disputes companies were engaged in involved employment, contracts and data privacy issues. The importance of data privacy and security was stressed throughout the study, with 60 percent of U.S. respondents and 63 percent of European respondents saying that data security is one of the most important factors in managing risk, while 46 percent of all respondents say information governance is critical.
“Our survey reflects the concern by corporate legal and compliance officers that changing regulations and the threat of data breaches have produced a fertile ground for corporate litigation and high-impact disputes,” said Harvey Kelly, Managing Director and global head of AlixPartners’ Financial Advisory Services practice. “This year, corporate legal departments are increasingly seeking out new technologies and sophisticated tools that meet standards and provide security to not only ensure compliance, but also protect data from the risk of exposure and the litigation that may ensue.”
Among large-scale disputes, other areas that are on the rise: matters involving regulatory issues or investigations and mergers and acquisitions. The survey showed that 27 percent say these types of suits involved regulatory issues or investigations compared with 22 percent in 2015 and 91 percent say the number of M&A disputes increased or stayed the same compared to 2015.
Spending on compliance has also been on the minds of survey respondents. Evolving regulations and increased enforcement is causing companies to focus on risk preparedness by increasing training and strategies aimed at proactively identifying risk. The use of new technology has been one method employed by organizations to reduce risk, with 38 percent of respondents saying they have increased their spending on new technology in this area.
E-discovery tools are increasingly in use as well, with 40 percent of respondents saying they will only work with e-discovery providers that offer the highest level of compliance, and nearly one-third of respondents stating they will pay more for service providers that offer certified data centers.
“Our survey highlights prevailing trends in the marketplace that have companies facing aggressive stances from not only regulators, but also groups such as activist shareholders,” Kelly added. “These forces have produced an uptick in the resources committed by legal departments to dealing with litigation, as well as increases in the steps they are taking and the service providers and technology they are using to identify and address risk.”
Key highlights
Litigation
- Nearly one-in-10 (8 percent) respondents have been involved in a “bet-the-company” lawsuit.
- 53 percent say these lawsuits were class actions, compared with 15 percent in our 2015 survey.
- 27 percent say these suits involved regulatory issues or investigations, compared with 22 percent in 2015 and only 8 percent in 2013.
- 92 percent say the number of class action disputes their company has been involved in increased or stayed the same.
- 23 percent say their companies have been involved in a dispute related to data privacy, up from 13 percent in 2013.
- 44 percent have been involved in an international arbitration in the past 12 months, compared with 30 percent in 2015 and 24 percent in 2013.
Compliance
- According to respondents, to reduce risk, companies have increased compliance program gap identification, education and training and compliance audits.
- 60 percent of U.S. respondents and 63 percent of European respondents say data security is important in managing risk; 46 percent say information governance is critical to managing risk.
- 38 percent have increased implementation of new technologies in their legal departments in order to reduce risk, compared to 41 percent in 2015 and 27 percent in 2014.
Technology (e-discovery)
- 96 percent say implementation of new technologies to mitigate risk has increased or remained the same.
- 40 percent of respondents say they only work with e-discovery providers who provide the highest compliance.
- 30 percent of U.S. respondents and 34 percent of European respondents say they would pay more for certified data centers.
Legal Spending and External Counsel
- 93 percent say the size of their litigation department increased or stayed the same; 22 percent said their use of outside law firms increased, compared with 21 percent in our 2015 survey.
- 94 percent of respondents say they have spent the same amount or more on litigation; only 6 percent say spending decreased, compared with 16 percent in 2015.
About the Survey
The AlixPartners Litigation and Corporate Compliance Survey polled corporate counsel and compliance officers at U.S. and European companies with annual revenues of $150 million or more. Industries represented included financial services, professional services, information technology, energy, retail, consumer products, automotive, health care, life sciences, aerospace, construction, chemicals, agriculture and retail, among others. The focus of the survey included frequency and nature of commercial disputes, retention of outside counsel, types of litigation and approach to settlement, budgetary constraints within corporate legal departments and use of e-discovery and certified data centers.
About AlixPartners
In today’s fast-paced global market, timing is everything. You want to protect, grow or transform your business. To meet these challenges, we offer clients small teams of highly qualified experts with profound sector and operational insight. Our clients include corporate boards and management, law firms, investment banks, investors and others who appreciate the candor, dedication and transformative expertise of our teams. We will ensure insight drives action at that exact moment that is critical for success. When it really matters.
