Courts are seeing an explosion of suits against businesses involving M&A litigation, False Claims Act suits, and class actions related to food labeling, according to a new trends report from the U.S. Chamber of Commerce’s Institute for Legal Reform (ILR).
The 160-page report, “The New Lawsuit Ecosystem,” not only points out the trends in abusive litigation, but also offers details from lawsuits, discusses the main industry targets, and names the key players among plaintiffs’ law firms.
“This broad look at the lawsuit ecosystem demonstrates that litigation abuse remains a multi-billion dollar industry with plaintiffs lawyers constantly searching for new profit centers,” IRL president Lisa Rickard said in a statement. “Abusive lawsuits rarely benefit anyone other than the lawyers who file them, and drain millions of dollars from business expansion and the creation of new jobs.”
The report was prepared for the ILR by Victor Schwartz and Cary Silverman of Shook, Hardy & Bacon, and includes sections contributed by various law firms.
It begins by examining six key areas: class actions, mass torts, asbestos, securities/mergers and acquisitions, False Claims Act, and wage-and-hour litigation.
In securities litigation, the report says the number of class actions has dipped—but the suits are settling faster and for more money. The primary targets of this litigation have shifted from the financial industry to the healthcare, biotechnology, and pharmaceutical industries.
Meanwhile M&A actions are becoming the lawsuits of choice, the report notes. Companies eager to close a deal often settle these “extortionate claims” with little to no benefit to shareholders, it adds.
At the same time, it says False Claims Act litigation is at an all-time high—and still rising. And wage-and-hour litigation has increased dramatically, outpacing other types of workplace litigation.
And then the report turns to areas where plaintiffs lawyers have been “prospecting” for new liability, such as suits involving alleged false food labeling, data privacy violations, and so-called patent trolls.
The ILR says a small group of plaintiffs lawyers “is aggressively prospecting the food industry,” filing class action suits. These suits often focus on whether ingredients are really “natural” or provide a real “health benefit,” as labels claim.
Lastly, the report delves into “the troubling trend” of state attorneys general using private plaintiffs lawyers to sue companies. The report alleges that “plaintiffs lawyers often develop the legal theories, decide whom to target, and then ‘recruit’ state attorneys general to retain them on a contingency fee basis.”
It states that this trend has spread from suing tobacco companies in the 1990s to now targeting pharmaceutical corporations, financial institutions, and energy firms.
Also on Wednesday the IRL released a paper calling for class action and multi-district litigation reform. One key element calls on Congress to end so-called cy pres class action settlements, which award money to charitable trusts instead of class members.
The IRL’s Rickard concluded, “Over the last 15 years, we made great progress in stabilizing our broken legal system, but . . . certain problems have persisted and new ones have emerged. From challenges in state legislatures and taking on jackpot jurisdictions, to combating an explosion of arbitrary federal enforcement activity, only by remaining proactive and persistent can we continue to heal the lawsuit system.”
Sue Reisinger is a senior reporter with Corporate Counsel, a Recorder affiliate.
