Litigators from both sides of the bar are anticipating that government enforcement actions will generate significant work in the next year. President Joe Biden’s agencies have had two years to install personnel and announce policies.
As the administration heads into its third year, said corporate litigators from S&C, Davis Polk & Wardwell and Simpson Thacher & Bartlett, we should expect a quicker pace of regulatory actions from agencies like the U.S. Federal Trade Commission, the U.S. Securities and Exchange Commission, the U.S. Commodity Futures Trading Commission and the U.S. Consumer Financial Protection Bureau, as well as from the U.S. Justice Department.
That’s especially true because the administration’s legislative agenda will likely be stymied with Republicans in control of the House of Representatives. Regulatory enforcement is an alternative way to set policy and make headlines.
As federal enforcement ramps up, so too will follow-on actions by state attorneys general and class action lawyers. State AGs are increasingly adept at organizing group actions – and increasingly aware of the political value of litigation.
Plaintiffs lawyer Jay Edelson predicted that AGs and class action lawyers will step up consumer privacy litigation in 2023. In particular, he’s anticipating suits arising from violations of geolocation privacy and exposure of confidential women’s health information. Privacy cases, Edelson said, have become increasingly attractive for plaintiffs firms after a pair of consumer class action settlements in which Facebook parent Meta Platforms Inc agreed to pay out a combined $1.375 billion.
A drooping stock market may inspire more securities fraud class actions. Stock price drops aren’t an automatic trigger for shareholder suits, of course. But you can’t win a securities class action without showing a decline in share price. And economic downturns have a way of exposing – or prompting — corporate misconduct. Laid off employees, for instance, can be a fertile source of information for shareholder lawyers. (If an economic downturn leads to widespread layoffs and movement in the labor market, we may see increased litigation over trade secrets, non-disclosure and non-compete clauses, in another example of litigation’s as a countercyclical practice area.)
Chapter 11 bankruptcies are also a boon for litigators. A corporate debacle like the collapse of crypto exchange FTX can lead to work on behalf of defendants accused of enabling the scheme. It’s too early to know who might be targeted in the FTX bankruptcy, but creditors in alleged Ponzi schemes typically investigate banks, accounting firms and insurance companies. And even less explosive corporate bankruptcies and restructurings, said Dana Seshens of Davis Polk, can feature high-stakes disputes among lenders.
Next year could be a crucible for big tech companies, depending on what the U.S. Supreme Court decides in a pair of cases testing their immunity under Section 230 of the Communications Decency Act. If the justices rule that websites can be liable for recommending or promoting content, you can expect a barrage of lawsuits.
In mass torts, the next big thing is litigation over so-called forever chemicals, per- and polyfluoroalkyl substances, of PFAS, that are extremely slow to break down. As a trio of Reed Smith lawyers recently explained in a Reuters column, PFAS litigation has expanded beyond the first wave of suits alleging water contamination from the manufacturing process for these chemicals.
We’re now seeing, in addition to toxic tort cases, environmental claims by state and local governments and consumer lawsuits alleging that defendants failed to provide warnings about PFAS in their products. Reed Smith predicted that the next wave of cases will be shareholder suits by investors who blame companies for mishandling PFAS fallout.
If those suits materialize, they’ll be the vanguard of an anticipated flurry of litigation over corporate ESG — or environmental, social and governance – policies. The SEC has proposed ESG disclosure rules for public companies, but the agency already has in place a task force within the enforcement division to police corporate compliance with companies’ own announced ESG policies. Private shareholder litigation, probably in the form of derivative suits, seems likely to follow SEC enforcement actions as they ramp up.
Other litigation areas that were already busy, such as IP and international antitrust and securities cases, will stay hot. Firms that have developed expertise in crypto will continue to be in demand as that industry evolves. As always, some unforeseen crisis will emerge to spawn lawsuits no one has predicted.