Shifts in Class Action Trends

by Caroline McDonald | December 1, 2013 at 6:00 am

Even with recent favorable Supreme Court rulings on class action litigation, employers should not rest easy. Organizations need to be on the lookout for emerging threats, including suits targeting the food industry, data privacy litigation, patent trolls and product lawsuits where no injury exists.

In the 2011 case Wal-Mart v. Dukes, the court decertified a class action of up to 1.5 million female Wal-Mart employees who accused the company of bias in pay and promotions. The ruling focused on Rule 23 of the Federal Rules of Civil Procedure, which establishes that claims must be appropriately similar to be certified as class actions.

Despite rulings that aid corporate defendants on class action issues, “The plaintiffs’ bar has adapted quickly and adjusted their litigation strategies to fit the new Rule 23 landscape,” said Gerald L. Maatman Jr., a partner of Seyfarth Shaw LLP and co-chair of its class action defense group. “Recent defense-oriented class action rulings­—like Wal-Mart v. Dukes and Comcast v. Behrend—have forced the plaintiffs’ bar to adapt or perish. The result is some out-of-the-box litigation strategies that have upped the ante for corporate defendants facing evolving and morphing class action exposures.”

A recent study by the U.S. Chamber Institute for Legal Reform, “The New Lawsuit Ecosystem: Trends, Targets and Players,” reported growth in mass tort litigation over the past year. The number of consumer fraud class actions brought into federal court against food and beverage companies shot up from around 19 cases in 2008 to more than 102 in 2012. These cases generally centered around allegations that companies  misled consumers by incorrectly advertising products as “all natural” or by including unsubstantiated claims about a product’s health benefits or its content.

Other potential areas of increased class action activity include data privacy suits against businesses for releasing or misusing customer information; claims against brand-name drug manufacturers for alleged injuries from generic products they did not make or sell; “patent troll” litigation from companies formed solely to sue innovators and their customers over claims of patent infringement; and liability claims seeking recovery for risks of harm or economic loss, but not actual injuries.

Some recent targets, the report said, include energy drink manufacturers, a company that designed technology for minimally invasive surgery, the NFL and football helmet manufacturers for concussion-related issues and auto manufacturers for sudden acceleration claims.

On the other hand, the study found some mass tort threats are losing steam, including welding fume litigation and suits seeking to impose damages on manufacturers and energy providers for the effects of climate change. This slowdown has caused plaintiffs’ lawyers to seek new areas for prospective litigation. Securities class actions have also slowed, with their focus now shifting to healthcare, pharmaceuticals and biotechnology.

Meanwhile, the number of mergers and acquisitions lawsuits has skyrocketed. Plaintiffs’ firms generally file multiple lawsuits in state courts within days of major corporate announcements. “Most of these suits provide no benefit to shareholders, but require businesses to make small—often irrelevant—additional disclosures. Companies, eager to close a deal, settle the extortionate claims,” the study said.

Asbestos remains “a massive lawsuit machine,” simply shifting with an upward trend in claims that asbestos  caused a plaintiff’s lung cancer. Courts are also looking at the lack of coordination and transparency between trusts established to pay asbestos claims and the court system, the report found. This  is in response to the high number of attempts to file inconsistent and sometimes fraudulent claims.