Class action lawsuits are on the rise

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The number of class action lawsuits is increasing both nationally and in the Carolinas, according to recent research and law firms in both states.

Jim Werner of Parker Poe in Columbia said his firm has seen “more than four years of steady increase in the number of purported class actions that get filed.”

But Werner said he doesn’t think that means there is necessarily an increase in meritorious class action suits, just that more people are seeking class action certifications “that maybe aren’t legitimate.”

“People believe they can get a lot more traction or leverage with the threat of extra cost and exposure from class actions,” Werner said.

Nationally, the trend of increasing numbers of class action lawsuits being filed has been building for years, according to data from BTI Consulting, a legal industry research group that named class action suits one of six trends “shaping litigation in 2019.”  The industries most affected so far include health care, banking, consumer goods, chemicals, and food products.

“Top legal decision makers see the nature of the claims becoming broader and driving ever bigger exposure. Higher risk and broader assertions translate into a willingness to pay higher rates,” the group found.

Increased complexity is also slowing settlement rates in some cases, BTI reported, which means client spending is going up. Companies nationwide are planning to add $2.5 billion to litigation budgets in 2019, BTI reported. Attorneys say they’re seeing similar trends play out at the state and local levels.

“Businesses across a variety of sectors are having to handle time-consuming, expensive litigation to a greater degree than before,” said Katie Iams of Parker Poe in Charlotte.

A spokesperson for the firm said while there isn’t statewide data for the Carolinas on the precise number of class action suits, the firm is seeing a significant increase based on its own practice and what it’s hearing from clients.

The trend of more class action suits could be a bit of “monkey see, monkey do,” Werner said.

“It’s become the cool, or in-vogue, thing to do,” he said. “These class actions are being filed and sometimes it’s with no real understanding of what a real class action is supposed to look like.

“If judges would be more circumspect about them, I think many would be disposed of quickly. The truth of the matter is that the reason class actions were created is very rarely present in the claims that get filed these days.”

Going vogue

Hunter Bryson of Whitfield, Bryson and Mason in Raleigh, who deals exclusively with class action suits, said while there may be more class action cases, it’s not because such cases are getting any easier to pursue.

“It’s becoming harder and harder to bring these cases,” he said. “They’re being sent to arbitration more often than they were even a few years ago.”

Bryson said there’s been a trend of companies putting arbitration clauses in as many contracts as they can and signatories “either never read or are given the opportunity to read” those contracts, but judges often uphold them.

“The difficulties plaintiffs face is very steep,” he said.

While there may be more class actions on file, not all of those see a courtroom, and Bryson said it may be simplistic to just look at the number of cases filed because corporate defendants are increasingly pushing for arbitration.

“In arbitration, there’s no right to appeal, so if [defendants] win, it’s over,” he said. “And if something goes poorly for the defendant, there’s no state or federal decision to hurt them down the line. Defendants also often get to choose the arbitrator.”

Other factors, then, are likely in play. For one, an economy in good shape means more litigation in general, Iams said.

“You’ve also got some economies of scale achieved in pursuing class actions,” she said. “People are bound together, so the expense is often better than pursuing individually.”

High stakes all around

If one million people buy the same car with the same defect, Werner said, that is a class action suit that makes sense. But he said most class actions aren’t so straightforward nowadays. And class actions are much more labor intensive and expensive for his clients.

“It certainly creates more work and on the discovery side, it raises the stakes of what needs to be done and what it will cost to deal with it,” Werner said. “Clients fret about it more and take it more cautiously. They’re pouring more resources into the cases.”

Werner predicted that the trend of more class actions likely will continue for a while, but he expects it to eventually taper off.

“Like so many things, it’s cyclical,” he said. “One day the novelty and the sexiness of it will wear off, assuming something weird or wild doesn’t happen with the way the courts treat class actions. But it could stay around longer if bad decisions are issued and it looks like a more fruitful avenue.

“To some extent I really believe what you’re seeing is lawyers who get clients and want to roll the dice in Vegas on a class action suit that could pay off big.”

Bryson said that while class actions may have the potential for a big payoff, they’re also a high-stakes risk for plaintiffs’ attorneys, who bear the brunt of the cost of the litigation on top of the investment of attorneys’ time and firm resources.

“Awful things happen, and companies would do nothing about it,” he said. “But for class action, a lot of these people harmed would see nothing. Someone has to front all the cost. We do all the risk and we eat all of our own bills if it doesn’t work out.

“Class actions are always under attack. Just because there are more filed doesn’t mean there are more in court, or settling or more remedies for these people who have been hurt.”

This article first appeared in the April 22 print edition of the Columbia Regional Business Report.