Businesses across the United States spent more than $2 billion last year defending themselves against a slew of class-action lawsuits, and most companies anticipate this year will bring even heftier legal bills, according to a report published this month.
Potential liability associated with class-action disputes is much higher today than in recent years, said Chris Coutroulis, a partner at Carlton Fields Jorden Burt who authored the report.
“When you see the trend in higher-risk cases, your spending is going to go up,” he said. “The stakes are much higher.”
More than 16 percent of class-action cases were dubbed high-risk or bet-the-company last year, meaning the financial exposure topped several million dollars. In 2011, merely 4.5 percent of such disputes were placed in those risk categories.
But for L.A. businesses, the threats are even greater, said Mark Neubauer, managing partner of the firm’s Century City office.
“Historically, California – and especially Los Angeles – has more class actions,” Neubauer said. “It doesn’t just affect companies that are based here, but it’s any company that does business in Los Angeles and in California. Because of our size and unique laws, we invite additional claims.”
Class-action matters involving alleged consumer fraud and labor and employment violations account for the largest portion of claims, but 29 percent of corporate lawyers anticipate data privacy disputes will pose the biggest threat this year.
The highly publicized data security breaches at Target Corp. and Culver City’s Sony Pictures Entertainment have companies of all sizes fearing the potential risks and anticipating litigation.
“Every executive in L.A. is looking at what happened to Sony and Amy Pascal,” Neubauer said. “They’re going back to their e-mails and thinking twice about sending them.”
Irell & Manella, much like its clients, is also preparing for an uptick in cybersecurity litigation. The firm launched a cyberliability and -privacy practice earlier this month.
“The demand is increasing because clients are, I believe, looking to be proactive,” said Marc Maister, partner in the firm’s Century City office and co-head of the new practice group. “Cyber and privacy matters are mainstream. It’s out there and people realize the risk of the Internet.”
As a Super Bowl champion, Willie Gault is no stranger to monumental victories. But the former Chicago Bears wide receiver’s latest win wasn’t on the football field.
Instead, a federal jury cleared Gault last week of charges from the Securities and Exchange Commission alleging he intentionally defrauded investors in a scheme to pump up the stock price of heart-monitoring device company Heart Tronics Inc.
George Newhouse Jr., a partner in the downtown L.A. office of Dentons who represented Gault, said the win was nearly four years in the making, as the SEC filed its charges in 2011.
“I was thrilled,” he said. “I’m always amazed by how effectively the judicial system works. It takes a lot of effort but the jury generally gets it right. And (on this case) they completely nailed it.”
Gault was co-chief executive at Heart Tronics for about three years, starting in 2008. But the SEC’s case focused primarily on the company’s outside counsel, Mitchell Stein, who was convicted of securities fraud in 2013 in a parallel criminal case. The lawyer is now serving a 17-year sentence after the court determined he orchestrated fake sales of Heart Tronics’ products to inflate its stock price, then sold shares to investors.
Now that this case has finally come to a close, Newhouse said he’s looking forward to the next trial.
“The great news about being a lawyer is you always have other clients,” he said, noting that he typically takes cases to trial at least twice a year. “It keeps me young. When you’re in trial you’re definitely thinking on your feet.”
News & Notes
U.S. News & World Report released its annual ranking of law schools this month. UCLA School of Law and USC Gould School of Law, ranked Nos. 16 and 20 respectively, did not move from their places on last year’s list of 194 schools. Malibu’s Pepperdine University School of Law moved up two spots, to No. 52, and Loyola Law School in downtown Los Angeles climbed 12 spots, to No. 75. … Philadelphia law firm Fox Rothschild hired attorneys David Aronoff and Lincoln Bandlow as partners in the entertainment practice in the firm’s Century City office. … Richard M. Jones, partner in the downtown L.A. office of Nixon Peabody, was tapped this month to head the firm’s public-finance practice. … Lewis Brisbois Bisgaard & Smith hired labor and employment lawyer Victoria Lin this month as an associate in its downtown L.A. office.
Staff reporter Cale Ottens can be reached at firstname.lastname@example.org or (323) 549-5225, ext. 221.
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