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LITIGATION

The pandemic, climate change and cyber risks are behind many of today’s trends in law.

Driven by natural disasters, cyber risks and pandemic-related changes such as more employees working remotely, many areas of law have experienced shifts in their growth trajectories in recent years. These trends have led to new challenges and opportunities for law firms, businesses and consumers alike. A panel of local attorneys spoke with Crain’s Content Studio to share their insights on the state of litigation today and what has led up to this moment.

Are there certain areas of law that have seen increased activity since the pandemic?

PAUL A. DEL AGUILA

Partner Benesch pdelaguila@beneschlaw.com 312-212-4938

Paul A. Del Aguila is an accomplished litigator and has extensive experience litigating product liability and complex commercial matters. Over the past 20 years, he has protected the interests of local, regional, national and international clients in high-stakes disputes. He also provides pre-dispute counseling and risk management advice to clients in the pharmaceutical, medical device, automotive, food and beverage, construction and real estate industries. Del Aguila has served as coordinating and national counsel for some of the world’s largest companies, litigating high-profile product liability matters. He also defends manufacturers of consumer and industrial products against claims of product defects. He has advocated for clients in putative class actions and multidistrict litigations involving hundreds of cases, including against the most prominent mass tort plaintiff attorneys and firms in the United States.

Paul A. Del Aguila: Initially, we saw an increase in contract, insurance coverage and securities case filings. Now we are seeing more employment-related litigation as remote-work environments and evolving government regulations have given rise to a variety of legal issues for both employees and employers. We are also seeing an increase in complex commercial litigation, especially trade secret disputes and class actions touching on various regulatory schemes and industries. In the consumer product realm, there has been a noticeable uptick in litigation involving ventilation and air purification products and smart technology, as well as litigation alleging misleading labeling practices.

Lastly, companies are bracing for a surge in environmental, social and governance (ESG)-related litigation and are developing risk management practices to minimize the risk of ESG-related litigation.

“DEFAMATION IS ANOTHER EMERGING PRACTICE AREA AS OUR FRACTIOUS POLITICAL CULTURE AND INCREASING USE OF SOCIAL MEDIA HAS SEEN A CORRESPONDING INCREASE IN DEFAMATION CASES.” — PAUL A. DEL AGUILA, BENESCH

increasing use of social media has seen a corresponding increase in defamation cases. Lastly, cannabis law is a quickly emerging area of law given the rapidly changing political and regulatory climate.

What is a recent development that may impact the demand for legal services?

Del Aguila: The increase of litigation funding has provided plaintiffs’ firms with significant resources. Sophisticated firms

are using these resources to better investigate claims prior to filing suit, craft stronger complaints able to withstand initial motion practice, and file more high-profile and high-stakes lawsuits, all the while pursuing innovative approaches to litigation. Businesses should therefore develop short and longterm strategies from the onset of litigation.

Is there any recent legislation that may impact the demand for legal services?

Del Aguila: In 2021, the Biden Administration issued an Executive Order on Promoting Competition in the American Economy, highlighting the “whole of government” approach and focus on non-competes and on perceived anti-competitive activities and conditions generally. Employers should continue assessing their postemployment agreements to ensure they contain adequate protections related to confidentiality and intellectual property, and continue keeping track of any federal action on these types of agreements.

Which practice areas, if any, have seen a decrease in activity since the pandemic?

Del Aguila: For the most part, litigation has not seen much of a downturn since the pandemic—other than the general stay applying to all litigation during the early stages of the pandemic—but we have noticed that a few practice areas, such as commodities, soft intellectual property, and environmental, have not been as active as years past.

“Benesch was able to look at the litigation as a whole, provide expertise within a fixed budget, and then provide great results. The team they assembled was second to none.”

ERIC BROXTERMAN Vice President and General Counsel of Intellectual Property Vertiv

What are the emerging areas of practice and why have these areas grown over the past few years?

Del Aguila: The rapid increase of worldwide data protection regulations, such as the European Union’s General Data Protection Regulation; the ever-evolving data protection regulations in the United States; the storage of significant volumes of client and nonpublic data; and remote work practices have created significant data privacy and cybersecurity litigation risks for companies. Defamation is another emerging practice area as our fractious political culture and

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LITIGATION

The pandemic, climate change and cyber risks are behind many of today’s trends in law.

KATHELEEN EHRHART is a litigator and has tried cases and arbitrations in federal and state courts throughout the United States. Ehrhart represents a variety of individuals, corporations, business and professional firms. She has extensive experience working with executives, senior management and in-house counsel of corporations in managing litigation as well as advising on litigation risks and strategy. Clients also rely on Ehrhart for her talent in working with experts, in particular with damages modeling and connecting mathematics and the law.

KATHELEEN EHRHART Partner Freeborn & Peters LLP kehrhart@freeborn.com 312-360-6460

Recent data shows that insurance litigation increased nearly 50% between 2017 and 2021. What long-term trends are behind this significant uptick in litigation?

Katheleen Ehrhart: The biggest driver for the increased amount of litigation has been COVID. Business interruption and supply chain shortages impacted business and individuals alike, and the resulting

insurance claims led the way to the sharp uptick in the amount of litigation. There has also been a steady increase of litigation surrounding hurricanes, with over a quarter of federal court cases related to insurance resulting from a hurricane-related claim. While the early reports are that a large number of those impacted by Hurricane Ian were without flood coverage, given the losses incurred

Is litigation risk insurance changing the cost/benefit analysis of businesses in terms of managing their legal risks? And what litigation can we expect as a result of adverse judgment insurance?

Ehrhart: Litigation risk insurance is relatively new and offers businesses a chance to manage legal risk that

type of insurance can offer a defendant a counterbalance to the strategic asymmetry of large class actions (in particular litigation financed plaintiffs) where the plaintiffs’ risk is distributed across multiple entities or individuals but an uninsured defendant is burdened with the entire risk. This can decrease the pressure on defendants to consider an early and unattractive settlement offer instead, in particular with lawsuits with questionable merit.

Where is COVID having the most impact on litigation besides the insurance industry?

Ehrhart: While various decisions by employers to put into place vaccination and other COVID-related

“THERE HAS ALSO BEEN A STEADY INCREASE OF LITIGATION SURROUNDING HURRICANES, WITH OVER A QUARTER OF FEDERAL COURT CASES RELATED TO INSURANCE RESULTING FROM A HURRICANE-RELATED CLAIM.” —KATHELEEN EHRHART, FREEBORN & PETERS LLP

by Florida residents as well as other states, the amount of weather-related coverage disputes is likely to grow over the next year or two.

might stem from litigation. Policies cover different aspects of litigation risk such as adverse judgment insurance, providing coverage for a defendant in the event of an adverse judgment. This

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requirements have been the most evident drivers of litigation, some less obvious COVID-related labor and employment issues have begun to surface, as well. Employers have to determine how to navigate remote or hybrid work, as well as what tools can be used to monitor productivity. The law is not clear about whether monitoring is a privacy or confidentiality issue.

Another issue is the status of mental health days and whether companies who started providing them due to the stressful effects of the pandemic will continue to do so.

Should employees be compensated for these and, if so, do policy initiatives need to be updated? Employment issues such as these continue to arise, necessitating legal counsel, as well as the anticipation of whether decisions surrounding these issues will open up the company to potential challenges regarding new policies.

What will be the next “asbestos-claims” type issue to hit the insurance industry and drive litigation?

Ehrhart: It’s unclear whether either will rise to the level of asbestos-type claim litigation, but two of the biggest risks insurers are keeping their eyes on are climate change and cyber-risk.

With extreme weather events brought by climate change expected to keep rising, insurance professionals expect rising claims and related challenges.

These go beyond just the destruction of homes and businesses, as seen by the recent Hurricane Ian, but can put entire supply chain, food and power systems at risk.

Cyber risk has already been on the forefront of insurers minds but with the COVID pandemic and the increased use of digital technology by remote employees, blurring the lines between office and home, companies and individuals are further open to cyber risks and attacks. With the increase in use and companies’ maintenance of cyber risk policies, insurers have tightened terms and conditions to reduce unexpected losses. With this tightening coverage, coverage challenges and litigation are sure to follow.

For years the reinsurance/ insurance industry has resolved disputes through the arbitration process. Is arbitration still a viable route? Does it bring any real time or cost efficiencies as compared to litigation?

Ehrhart: Arbitration is still alive and well in the reinsurance/insurance industry. It gives companies a forum that provides, and in fact invites, issues to be decided by arbitrators generally steeped in industry knowledge and with a good handle on custom and practice. Understanding how the industry and its participants work together can be critical in deciding issues between reinsurers and insurance companies which more often than not require specialized knowledge and understanding related to complicated insurance concepts.

While the size of any arbitration (amount of discovery, motion practice, etc.) is naturally driven by the size of monetary value at issue, more often than not, arbitrations still provide the participants a faster and more cost-efficient result than they may get if they were to litigate those issues in court. Arbitrations can often be completed within 12 to 18 months.

What is the most important consideration an insurance or reinsurance company should analyze before agreeing to an arbitration clause in their contracts?

Ehrhart: Companies should consider whether the arbitration selection clause should include requirements for the arbitrator’s experience to ensure the preferred in-depth industry knowledge while being cautious to not narrow the number of eligible arbitrators to serve. In addition, the company should consider if it wants a single arbitrator deciding its issues or an arbitration panel, including potentially party arbitrators. While one arbitrator can be less expensive and easier to schedule hearing time, a three-person panel may offer a more balanced view with different experiences and perspectives.

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CASEY STALTER is President of Thompson Flanagan’s Legal Practice Group. An expert in identifying and managing liability risks, he has the perspective, experience and market access to help law firms address their most significant liability challenges effectively and efficiently. He is the principal negotiator for many accounts in the AMLAW 200, specializing in errors and omissions coverage for mid-size and specialty law firms nationwide. Stalter also works with firms on the placement of their directors and officers, employment practices liability, cyber, crime and fiduciary liability policies.

CASEY STALTER

President, Lawyers Professional Liability Thompson Flanagan, an NFP Company cstalter@thompsonflanagan.com 312-239-2800

What recent trends are you seeing in the litigation space?

Casey Stalter: Environmental, social and governance (ESG) issues have been thrust into the spotlight within the last 12 months. Increased scrutiny and disclosure obligations for ESG compliance are requiring board members and senior management to focus their efforts on minimizing the risk of potential litigation. Supply chain challenges, climate change, activist investors and shareholder litigation are threats corporations have to address as ESG issues continue to emerge and evolve.

Cybersecurity litigation is another area of concern. No organization is immune to a cyber attack and an event can be devastating for a business. The ever-changing legal and regulatory landscape, the vulnerabilities created with employees working remotely and

proactive and creative in their efforts.

Law firms that empower employee ownership of their work experience, offering more flexible work schedules and work locations, are the employers of choice. They are also elevating inoffice experiences as more attorneys and staff return to their offices, redesigning workspaces to be more collaborative and purposeful. People are attracted to office spaces conducive to the connections and mentoring that drive career development, so firms are investing in refining work environments that make being in an office more engaging.

Regardless of the trends, a successful attract-and-retain strategy always has to go beyond salary and bonus increases. Flexibility, connection, culture, opportunity — including paths to explore different practice areas within a firm and cultivate new expertise — are elements that make a firm a destination for top talent.

of emerging technologies, government regulation, response plans and employee training, but if you fall short, the impact can be devastating.

Mitigating threats and their potential impact is definitely not something to take on without the support of specialized experts.

What are clients looking for from law firms and what factors are influencing their decisions?

Stalter: The demand for legal services has never been greater. But client expectations are also at an alltime high. Clients are looking for law firm partners to go above and beyond traditional legal services and deliver an experience that not all firms can provide. They also want it done costeffectively, which creates additional pressure.

Clients want more responsiveness, better communication and an experience that aligns with what they’ve come to expect in other areas of their lives. Technology is key. Firms are innovating to meet expectations and manage costs. Using data more effectively and automating elements of the practice have helped law firms evolve with efficiency and be attractive to prospective clients.

Law firms that prioritize integrating technology that enhances process and client experience will be best suited to deliver on what clients want and need.

Are there any takeaways from navigating the COVID environment that will be valuable going forward?

Stalter: COVID-19 has been negative in many ways, but some positives have emerged. Law firms have seen increased demand for legal services, which has driven revenue growth. They’ve become more flexible in terms of the work experience they provide to attorneys and staff, whether it’s getting comfortable with remote work or allowing nontraditional schedules, which has elevated overall job satisfaction.

Law firms are becoming much more intentional in supporting attorney and staff well-being, investing in

internal and external strategies to help attorneys navigate various challenges, from wellness apps to engagement programs to encouraging (or requiring) attorneys to take PTO and wellness days. Most of all, many firms have discovered a new level of resilience and creativity that will be critical to their growth and success over the long term.

How are economic conditions, inflation in particular, affecting strategy?

Stalter: Due to current economic conditions, law firms are putting strategic plans in place that will outpace their peers. Firms need to consider implementing both shortand long-term strategies to combat a shifting economic and inflationary environment. Fee structure adjustments are one change firms are making. They are considering offering clients a blended rate between work done by both partners and associates on a related matter. Other strategies include marking changes to hourly rates, moving towards monthly retainers and performing certain work on a contingency fee basis. As clients tighten their belts ahead of a recession or look to bring potential work inhouse, law firms need to reinvent and reimagine their offerings to their client base.

Are there emerging risks that firms should be aware of and working to mitigate, and how do the risks differ by firm size?

Stalter: Cybersecurity is a daunting challenge for every firm and it’s not going away anytime soon. The technology that firms (both large and small) need to implement seems to

“SUPPLY CHAIN CHALLENGES, CLIMATE CHANGE, ACTIVIST INVESTORS AND SHAREHOLDER LITIGATION ARE THREATS CORPORATIONS HAVE TO ADDRESS AS ESG ISSUES CONTINUE TO EMERGE AND EVOLVE.” — CASEY STALTER, THOMPSON FLANAGAN,

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AN NFP COMPANY the increased sophistication of bad actors have fueled a new wave of cyber related litigation.

What are firms doing well to enhance their competitiveness in recruiting and retaining attorneys/staff?

Stalter: The current landscape is as competitive as it has ever been. This is motivating law firms to be more

grow on a quarterly basis, yet there’s still no guarantee you’ll prevent a cyber event. Ransomware attacks are still a major cause for concern for firms, and while the attacks on larger firms receive most of the press, firms of all sizes are vulnerable. Firms are placing an emphasis on updating and auditing their systems and processes internally and externally. It can be overwhelming to establish and maintain procedures and stay on top

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