Editor's note: This article has been revised to correct an error from an earlier version which incorrectly stated the total dollar amount estimated by Carlton Fields to have been spent in 2018 by businesses defending against class action litigation.
Businesses in Illinois and elsewhere in the U.S. faced a growing challenge from class action lawsuits in 2018, and that number is only expected to grow, as plaintiffs’ lawyers continue to open new avenues to bring potentially massive legal actions, two recent surveys have found.
Across the U.S., more than half of all companies defended itself against at least one class action lawsuit in 2018, according to a new report from defense firm Carlton Fields.
Gerald Maatman
| Seyfarth Shaw
That level of litigation activity forced businesses to spend $2.46 billion on class action litigation defense in 2018, a record amount.
In 2017, businesses spent $2.24 billion defending themselves against class action lawsuits, Carlton Fields said.
Class and collective actions continued to populate the dockets in federal courts in Chicago and elsewhere in Illinois, as well.
According to data supplied by the Chicago-based firm of Seyfarth Shaw, as part of the rollout of its 15th annual Workplace Class Action Report, federal courts in Illinois were the destination for more than 1,600 class and collective actions against employers alone. These included claims for violations of federal pensions and retirement laws; so-called wage and hour litigation, such as disputes over worker job classifications and overtime pay; and employment discrimination.
However, even as the amount of class action activity continues to grow, both in Illinois and elsewhere in the U.S., plaintiffs’ lawyers appeared to also experience an even greater rate of success at winning court approval to press their claims as class actions.
According to the Seyfarth Shaw report, judges granted plaintiffs’ requests to certify many of these kinds of lawsuits as class actions 65-80 percent of the time.
Class certification effectively allows plaintiffs to to massively expand lawsuits from actions involving one or a handful of plaintiffs, to those involving hundreds or even thousands, transforming the case from an action involving relatively small amounts of money to actions that can bring in judgments or settlements worth millions, or in some cases, even hundreds of millions of dollars.
The uptick in successful class certifications continues a general trend in that direction since 2014, when 70 percent of class actions were certified, according to the Workplace Class Action report.
The Seyfarth Shaw report said, at the same time, employers also witnessed a steady decrease in their rate of success at later undoing those class certifications. In 2017, employers were able to decertify 63 percent of so-called “wage and hour” cases, which typically involve disputes over employee job classifications and overtime pay. In 2018, however, that number dropped to just 52 percent, a decline of 11 percentage points.
The success at moving class action lawsuits forward also continued to translate to big results for many class action plaintiffs and their lawyers.
Overall, the Seyfarth Shaw report showed plaintiffs brought in $1.32 billion in settlements in 2018.
Some of the biggest settlements also came out of Chicago’s federal courts, ranging from $4.4 million for a federal employment discrimination action against Amsted Rail Co. from a lawsuit filed in 2014, to a $62.5 million settlement of a pension dispute with Hospital Sisters Health System, dating to 2016.
However, while settlement amounts remained large, the overall total of settlements actually declined nearly $1 billion last year.
Gerald Maatman, partner at Seyfarth Shaw and editor of the Workplace Class Action Report, attributed the decline to several factors.
He noted a series of U.S. Supreme Court decisions have helped even the playing field a bit more between plaintiffs and the companies from whom they are often demanding millions of dollars. He particularly credited the 2018 decision in Epic Systems Corp. v Lewis, which gave greater leeway to employers to sidestep class action lawsuits from their workers by inserting arbitration clauses in employment contracts.
Maatman said the impact of Epic Systems is still being felt.
According to the Carlton Fields report, by the end of 2018, nearly half of all companies surveyed indicated they had included class action waivers in their workplace arbitration clauses.
“Clearly, those Supreme Court rulings and the success of defendants at blocking and fracturing those sorts of class actions has led to settlements at a lower level of success than they may have enjoyed in previous years,” Maatman said.
Looking ahead to 2019, both Carlton Fields and Maatman at Seyfarth Shaw predicted private class action activity will again edge up.
Carlton Fields predicted businesses would spend more than $2.5 billion defending against class actions this year.
And while businesses may gain an edge defending against workplace actions, Carlton Fields said businesses surveyed indicated they feared a larger number of class actions under digital privacy laws. They particularly worried over a new California privacy law set to take effect in 2020, and the copycat laws the California statute could inspire elsewhere in the U.S.
In Illinois, Maatman said such privacy suits are already hitting businesses of all sizes, as plaintiffs have mounted hundreds of class actions under the Illinois Biometric Information Privacy Act. While not classified as workplace class actions, such lawsuits regularly target businesses that rely on so-called biometric time clocks – punch clocks that require workers to scan a fingerprint or other biometric identifier to verify their identity when punching in and out of a work shift.
Maatman said such BIPA-related lawsuits already are the most common of all new class action lawsuits filed in Cook County Circuit Court. Depending on the defendant, many BIPA lawsuits have also been removed to Chicago federal court.
“There is already a surge,” Maatman said.
The Seyfarth Shaw report involved analysis of filings, rulings and settlements in federal courts in Chicago and across the country.
The Carlton Fields report generated its data from interviews with general counsels, chief legal officers and other legal representatives of 415 companies across 25 industries. The report said the companies had median annual revenue of $6.7 billion.
The report does not list the companies that were surveyed.
The companies, however, are not among the largest in American industries. For example, a company reporting the median of $6.7 billion in annual revenue would rate around 417th among Fortune magazine’s Fortune 500 companies, around the spots occupied in 2018 by Kindred Healthcare, Insight Enterprises and Dr. Pepper Snapple Group.
For comparison purposes, Walmart ranked No. 1 again, with more than $500 billion in revenue.