What businesses need to know about future litigation risks

Although 2022 saw an overall demand for law services decline on a national level from 2021, one area where midsize firms remained particularly strong was litigation, per Thomson Reuters’ 2023 Report on the State of the Legal Market.

Employment and labor disputes were the most common area for litigation across all industries surveyed by the 2023 Annual Litigation Trends Survey, published by Norton Rose Fulbright. The survey expects litigation in these areas to remain steady or increase in 2023.

What else are local litigators currently seeing as the biggest risks for businesses and what suggestions do they have to help owners avoid or mitigate them? Brittany Lawrence is a partner at Barclay Damon. A broad-based litigator, in the civil context she represents clients in a wide array of commercial disputes, including prosecuting and defending claims involving business contracts, partnership and shareholder agreements, financial disputes, and other business interests.

From her standpoint as a business litigator, Lawrence sees potential contract-related disputes as a major potential risk for companies today. These disputes can stem from many things, including poorly drafted contracts, not following the terms of a contract, or modifying a contract. Many times, companies don’t realize there’s an issue with a contract until an issue arises. In an ideal situation legal counsel can help both parties avoid litigation since it tends to be “distracting, expensive and time-consuming,” Lawrence said.

Her goal as a litigator is to work towards a practical solution for both parties through pre-suit negotiations. When it comes to avoiding contract disputes altogether, Lawrence shared these general tips:

• Do your best to create clear and unambiguous contracts – seek guidance from legal counsel to do so.
• Have a procedure and process in place to make sure contracts are followed as written. If disputes arise try to approach them in a practical way.
• Contact counsel early when a dispute arises and get them involved quickly.

Richard Scherer is a partner with Lippes Mathias and the practice team leader for the firm’s business and commercial litigation practice group. One of the biggest risk factors for litigation he’s seeing for businesses right now is cybersecurity, in part stemming from the increase in the number of employees working at home. “Cyber and data security breaches can be crippling to a business and morph into hairy litigation.”

Another risk factor is a regulatory environment focused heavily on consumer protection, which can lead to civil litigation, including large consumer class actions. Per the Duane Morris Class Action Review, 2022 had the most billion-dollar class action settlements in the history of the United States court system, with a record 15 class actions that resolved cases for $1 billion or more in settlements.

“Mitigation not elimination,” is one of Scherer’s approaches while working with clients in areas of potential ligation risk. His tips include:

• Investing in the infrastructure needed to mitigate data and cybersecurity breaches.
• Adherence to consumer protection via a thorough understanding of privacy policies and procedures.
• Ensuring your company has the proper insurance for its needs and industry, as well as an understanding of coverage limitations.

Ken Africano of Harter Secrest & Emery is a commercial litigator who has been in practice since 1985. He has a special interest in intellectual property litigation and he served as lead litigation counsel for Universal Studios and Imagine Films in the defense of a copyright infringement action regarding Ron Howard’s film Backdraft.

In addition to continued cybersecurity issues (which, he says, “are getting worse not better”), one litigation risk he sees for companies right now is changes on a state level to non-compete clauses and well as pending changes federally. This includes the Federal Trade Commission’s proposed new rule that would ban employers from imposing noncompetes on their workers.

When it comes to mitigating risk for litigation, Africano recommends that larger companies have a corporate compliance officer on staff and that smaller companies retain these services from private law firms. Corporate compliance officers help companies manage risks and avoid litigation by ensuring that business operations are performed in compliance with state and federal laws.