Key themes in litigation
From “event-driven” claims to the rise of third-party funding
We expect several trends to color the litigation landscape for public companies based – and doing business – in the US in 2020.
More “event-driven” litigation
In recent years we have seen a rise in the volume and seriousness of litigation driven by bad news. Cyber attacks, “#metoo” scandals, bribery, product claims – all are on the radar screens of companies. Now, PR problems more frequently generate litigation risk for both businesses and their directors. In response, boards are becoming more focused on their preparation for event-driven crises. We have long seen directors insist on incident response plans, and some have done “table-top” exercises to practice how they would work with management in the wake of a serious problem. Now, some are even conducting unannounced drills to see just how robust their planning has been.
Cyber attacks, “#metoo” scandals, bribery, product claims… PR problems are more frequently generating litigation risks for both businesses and their directors.
The globalization of litigation
With the US plaintiffs’ firms expanding into Europe and Asia, we are increasingly seeing plaintiffs’ counsel engaging in litigation arbitrage – that is, bringing global cases in the jurisdiction that offers the most procedural and substantive advantages (often the United Kingdom). For example, Hausfeld, a US-based plaintiffs’ firm with several European offices, brought class actions in both the US and the UK alleging that certain financial institutions rigged foreign exchange benchmarks. Notwithstanding that some defendants settled the US claims, they are now faced with litigating substantively similar claims in Europe. And where foreign plaintiffs bring a claim outside the United States against a US defendant (or an affiliate), they can further enhance their position by seeking discovery from the US entity under Section 1782 of the US Code. At the same time, the ever-evolving jurisprudence concerning the extraterritorial reach of US law has resulted in certain US courts entertaining claims arising out of non-US conduct.
More class action risk globally
Over the past decade, more and more countries have begun to implement class and mass claim mechanisms that borrow in varying degrees from the US class action system. In the coming year we expect countries, particularly in Europe, to use these new rules more aggressively.
More third party-funded cases
Third-party funding has been on the rise for some time and continues to proliferate. With increasingly sophisticated investors working as (and with) third-party funders, the landscape of commercial disputes is changing around the world. Under-capitalized and sometimes unsophisticated parties – both individuals and companies alike – are now being assisted by funders who provide much more than capital. They are becoming more heavily involved in strategy and the resolution of disputes, making commercial disagreements more threatening and increasing the care with which companies must handle previously straightforward challenges. At the same time, third-party funding may provide a corporation (including significant global businesses) with a new source of (relatively) cheap financing or a way to reduce its legal spend.
More climate change and sustainability-related litigation
As explained in our chapter on ESG there have been close to 1,400 climate-related lawsuits launched around the world. More than 130 of these involve companies as defendants, and it should come as little surprise that we expect this number to increase in 2020.
Thus far, companies facing claims for purportedly contributing to global warming have been successful in court. However, this does not mean there is no litigation risk. In the short term, the biggest challenge to companies relates to disclosure; are they doing what they say they are doing? Consumers, activists, investors, regulators and attorneys general all will be keeping a close eye on this area, and in the longer term companies should expect plaintiffs to pursue a variety of avenues to try to hold them liable for contributing to climate change.
Practical guidance for boards
Directors of corporations with global operations need to recognize the global risk of litigation to which their companies may be exposed and actively take steps to manage it. They would be well-served to:
analyse their global litigation risk and consider whether their corporate structures and data handling policies protect them from litigation in key global jurisdictions in which they operate;
ensure that the board is educated on key cross-border litigation risk issues, so that it is in position to appropriately evaluate and direct litigation strategy when confronted with global litigation; and
when confronted with litigation in one jurisdiction arising out of multijurisdictional conduct, consider whether a global resolution is possible in one jurisdiction, and if not, take steps to appropriately cabin the scope of the proceedings in that jurisdiction.
Increasingly sophisticated investors are becoming more heavily involved in strategy and the resolution of disputes, making commercial disagreements more threatening.
Leveraging talent for growth
Emphasizing the "human" in human capital management
What sustainability means for business
ESG, climate change and litigation risk
Reforming the US corporation
Can boards serve more than their shareholders?
Employee benefits: the forward view
Say on Pay, activism and compensation deductibility
A renewed focus on process
Proxy advisers: the essentials
Dealing with the proxy advisory firms
Trends in Delaware litigation
Managing the threat of stockholder action
Key themes in litigation
From "event-driven" claims to the rise of third-party funding
Priority areas for global enforcers
What's on the agenda for regulators and prosecutors?
Trends in stockholder activism
Where will campaigns focus next?
Deal-making in 2020
M&A drivers for the year ahead
Corporate minority investments
Managing the risks of non-controlling stakes
The shifting antitrust landscape
Themes in tech, merger control, consortium bids and innovation
Navigating foreign investment rules
CFIUS and other international frameworks
Technology and business
Cybersecurity, data and regulatory risk
SEC disclosure obligations
Technology, IP and cybersecurity risks
Taxing the digital economy
What shifting rules mean for global businesses
Libor transition, creditor risk and flexible covenants