The Big Business of Big Tort | FTI Consulting

The Big Business of Big Tort

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Corporations continue to grapple with tort cases that result in substantial jury awards but may be dubious in origin. Here’s what businesses should know before taking the stand.

Corporations have long been under public scrutiny on issues of product safety, environmental emissions and public nuisance. But for many years now, class-action lawsuits stemming from alleged corporate negligence have not necessarily been driven by remediation alone. Instead, motivation for bringing these tort claims to trial points toward plaintiffs’ attorneys looking to capitalize on the trend of huge jury awards paid to the aggrieved — and a sizable portion paid to their firms.

Business groups like the U.S. Chamber of Commerce and the American Tort Reform Association (ATRA) have long advocated for change. This includes limiting the percentage fee that can be negotiated under a contingency fee arrangement or increasing transparency around private equity investment in litigation to discourage so-called “jackpot justice” schemes.

These responses, however, don’t minimize the legal — and reputational — challenges faced by organizations that find themselves in the defendant’s seat. Understanding the tactics at play in these tort cases can help put the situation into better context.

An Alliance of Adversaries

Plaintiffs’ counsel are increasingly forming coordinated networks that serve to shape a public narrative and condition an environment leading to jury verdicts that can reach into the hundreds of millions and even billions of dollars (sometimes called “nuclear verdicts”).

These parties are expert at harnessing the power of social media and allied reporters to drive a narrative of fear around complex subjects related to the litigation, such as those dealing with science, for example. As seen in the past with cases involving chemical products, this can range from risk-versus-hazard assessments to issues of dosage and exposure.

The ecosystem can range from trial attorneys to selected scientists to financiers to activists — all working together to advance a narrative favorable to the plaintiffs’ position. While not always the circumstance, a number of ongoing tort cases show that these networks not only exist, but have large organizations in their crosshairs.

Ecosystems similar to class actions, often brought on by states’ attorneys general, have sprung up to support public nuisance litigation. In many of these cases, the allegation is not that a law has been broken, but rather that the litigation suggests that a company created a nuisance to the public that must be remedied.

In these cases in particular, local, state and national politics play a dominant role, as do lucrative contingency fee agreements. Headlines are leveraged to drive and reward favorable political decisions, even though a large percentage of any politically-charged outcome never makes it into public coffers.

The Court of Public Opinion

The common denominator in modern class-action and public-nuisance litigation is that sensational headlines are leveraged to drive larger outcomes. These headlines create a powerful feedback loop where potential reputational damage to a company simultaneously increases the likelihood of settlement. At the same time, this tactic also increases the ability to recruit larger class sizes and argue for larger jury verdicts.

Observing these modern trends, The Wall Street Journal recently pointed out that “individual plaintiffs can become commodities that are bought and sold by marketers with prices based on demand. The more lawsuits that get filed, the more pressure companies face to settle.”

While corporate America vigorously defends itself against accusations of wrongdoing inside the courtroom, it also needs to defend its reputation in the court of public opinion. Organizations will be expected to respond to pressures from government bodies, such as Congress and states’ attorneys general, as well as investors, the media and employees. The goal is to leverage these parties is to encourage companies to consider settlling — even when the law is on their side. Failing a coherent and holistic strategy, settlements often occur simply to stop the bleeding even when defendants believe accusations lack merit.

With bet-the-company reputation stakes, companies and their counsel can no longer afford to ignore this new age of legal risk, nor can they expect that damages can be easily sorted. Defense tactics need to be revamped to operate both in the courthouse and in the court of public opinion.

Companies that adopt a holistic outside-the-courtroom strategy will be able to meet the opposition at equal strength on the field. Companies that don’t will lose large sums of money to an abstract adversary whose tactics go unanswered.

© Copyright 2020. The views expressed herein are those of the authors and do not necessarily represent the views of FTI Consulting, Inc. or its other professionals.


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