Corporate counsel faced an increased number of disputes in 2022, according to Norton Rose Fulbright’s Annual Litigation Trends Survey, with labor and employment, cybersecurity and environmental, social and governance (ESG) issues dominating the current litigation landscape and generating cause for future concern. There has also been an uptick in regulatory disputes and class actions across various industries.
Now in its 18th year, Norton Rose Fulbright’s Annual Litigation Trends Survey tracks changes and trends in litigation by surveying legal professionals in key industries such as financial services, energy, healthcare and technology. Last fall, the firm surveyed more than 430 general counsel and in-house litigation leaders based in North America.
The survey findings indicate that the most common area for litigation in 2022 across all industries surveyed was employment and labor, and it also ranked as the most common area of concern for organizations in the year ahead. Companies are experiencing rising tensions over unionization efforts and return-to-work policies as effects of the pandemic linger. Other factors contributing to the increase in this type of litigation include increased regulatory scrutiny, pay equity issues and a sharpened focus on social justice and DEI, which is prompting more people to raise workplace complaints that turn into lawsuits.
Cybersecurity remains an area of concern with claims of negligence and fraud on the rise, as data breaches, ransomware and other cyberattacks are providing ample fodder for disputes. Companies are also seeing an increased number of criminal prosecutions over efforts to conceal cyberattacks. Survey respondents emphasized their concern over the growing sophistication of these attacks, particularly in the retail and technology industries, and noted it as one of the leading factors contributing to increased disputes. Companies are trying to protect themselves against litigation brought by the rapidly evolving cyber landscape by updating their policies and data protection infrastructure as they track changes in cyber requirements across various jurisdictions.
Businesses are also busy preparing for an onslaught ESG-related litigation, as the pressure from customers, shareholders and regulators to increase disclosures mounts. Examples of current ESG-related disputes are lawsuits over issues such as greenwashing or the alleged use of slave labor in supply chains, as well as false or misleading reporting. The food and beverage industry, in particular, could also face lawsuits tied to recycling and single-use plastics.
Survey respondents cited several factors that are causing increased litigation concern, including the current lack of established ESG metrics and requirements, heightened regulatory focus on the importance of ESG, increased policing of ESG-related claims by the plaintiff’s bar, breaches of contractual obligations related to climate change, evolving climate tax regulations and regulatory, investor and private party focus on corporate governance.
Heightened regulatory scrutiny is also driving litigation concerns as companies grapple with everchanging regulations. The Securities and Exchange Commission (SEC), Department of Justice (DOJ), Federal Trade Commission (FTC) and other regulatory agencies are cracking down on enforcement as they implement new rules and policies. Half of respondents were involved in at least one regulatory dispute in 2022, noting that uncertainty over recent rules from the SEC and other regulatory entities is adding to litigation risk.
Corporate counsel in the retail, transportation and healthcare and life sciences sectors are especially concerned about increasing regulatory litigation, as well as those in the technology industry who are dealing with the fallout of cryptocurrency and the increased focus on legal compliance in the metaverse.
Class action activity remains high, especially in regard to cybersecurity and employment and labor issues, with the latter making up more than half of the class actions reported by respondents in this year’s survey and the former responsible for more than a third. The number of cyber-related class actions is likely attributed to factors such as increased sophistication in data breaches and ransomware attacks, along with tightening regulations like the Biometric Information Privacy Act in Illinois and the California Consumer Privacy Act. Class actions driven by employment and labor matters could be driven by pay equity issues and new legislation such as California’s AB5 law, which limits the ability to use independent contractors.
Looking ahead, ESG-related class actions are expected to become much more prevalent. While less than 10% of survey respondents said they were involved in ESG-related class actions last year, more than a third now view it as an area of future concern.
The majority of respondents expect litigation activity to stay the same or increase in 2023 based on workplace matters, product liability issues and an increasingly aggressive plaintiffs’ bar. Economic concerns also loom, with companies expressing concern over an impending recession, rising interest rates, heightened inflation, a tight labor market and overall market volatility. In the face of these pressures, legal departments are strengthening their in-house capabilities by shifting budgets to prioritize internal litigation spend.
In summary, this year’s survey shows that regulatory proceedings continue to be on the rise, with even more of this activity expected this year as agency enforcement likely increases. The litigation spotlight also revealed that cybersecurity and data protection concerns continue to grow, while diversity, equity and inclusion are emerging at a rapid rate.