Please note that log in for BLAW products will be unavailable for scheduled maintenance on Sunday, February 5th from approximately 4 AM to 5 AM EST.
Bloomberg Law
Free Newsletter Sign Up
Login
BROWSE
Bloomberg Law
Welcome
Login
Advanced Search Go
Free Newsletter Sign Up

Be Proactive Now to Avoid Costly Courtroom Clashes in New Year

Jan. 5, 2023, 9:00 AM

Buckle up, because 2023 is going to be a bumpy year for litigation.

With every plaintiff victory comes another litigant that companies must fend off. Being prepared today will help fix issues in the future.

From lawsuits over data privacy and data breaches to climate change, trade secrets, and education, companies and institutions will face mounting and expensive courtroom challenges to their policies and practices in 2023.

Data Privacy

Regulators’ concerns over big tech has led to a patchwork of federal and state privacy laws, and more laws are coming.

Meanwhile, plaintiffs will continue to pursue businesses, schools, and other institutions for procedural violations, which can add up to millions and billions of dollars in liability exposure.

Even sophisticated companies have left themselves open to massive liability.

For example, a court recently approved a $90 million settlement with Facebook over use of browser cookies. Another set of plaintiffs recently announced that they have settled their claims against Facebook for its role in the Cambridge Analytica data privacy scandal for $725 million. And Google agreed to pay $391.5 million to settle an investigation into its location tracking practices. And a jury returned a $228 million verdict for violation of Illinois’ Biometric Information Privacy Act.

These types of outcomes will only incentivize more litigants and cases. Such cases often come in waves, where state attorneys general and plaintiffs’ attorneys focus on a single statute or business sector.

General counsel should take steps now to ensure compliance with these laws, wherever their companies do business, and prepare for the next wave of cases.

Data Breaches

Large-scale data breaches continue to occur, and increasingly from sophisticated ransomware cybercriminals.

In November 2022, the Financial Crimes Enforcement Network reported that in 2021, there were 1,489 ransomware-related filings involving nearly $1.2 billion, a 188% increase over 2020. In 2022, the average cost of a data breach for US companies reached a new high of $9.44 million.

Data breach litigation, often in the form of multiple consumer class action lawsuits over the same breach, almost always follows. In 2021, these lawsuits increased by 44%, and large settlements are common.

Recent settlements include those involving T-Mobile ($350 million), Equifax ($380.5 million), and Capital One ($190 million).

Companies will increasingly seek to blunt data breach litigation by requiring consumers, employees, or patients to consent to privacy policies with arbitration and class action waiver provisions. But that can spur additional disputes.

Education

Colleges and universities will likely see significant changes in the law concerning operations and finances, which will lead to additional litigation.

The US Supreme Court is expected to rule on the legality of affirmative action in college admissions practices that seek to enhance student diversity.

If the court reverses its prior decisions, hundreds of schools across the country could see their practices challenged in court, regarding past admission decisions and going-forward policies.

The Supreme Court will also rule on whether President Joe Biden’s order forgiving up to $20,000 in federal student loans is lawful. Those who stand to benefit from the relief, and those who did not borrow or who have paid off their debt, could file additional litigation.

Seventeen universities face claims that they violated federal antitrust law by failing to maintain need-blind admissions policies, which overlook financial need while collaborating with other elite colleges.

And Covid-19 shutdowns spawned a massive wave of class-action litigation, with hundreds of suits filed against more than 200 colleges and universities.

Finally, more lawsuits are expected over campus safety following tragic incidents, the rights of transgender athletes to compete on school teams, and the tension between free speech and anti-discrimination policies.

Climate Change

Since 2017, more than 24 state and local governments have filed climate change-related claims against fossil-fuel companies in state court. The legal theories include nuisance and trespass, design defect, negligence, failure to warn, and consumer protection.

The defendants have consistently removed these cases to federal court, which they perceive as more friendly. But many federal judges have sent the cases back to state court.

In 2023, the Supreme Court will decide whether to review the law concerning the proper forum for these cases. That will have significant implications for climate litigation.

In 2011, the court unanimously held that the Clean Air Act displaces any federal common law right to seek abatement of carbon dioxide emissions—suggesting that suits under other statutes could be similarly preempted.

But if the court declines to review the issue, the existing cases will proceed in state courts, which are perceived to be more plaintiff-friendly.

Lawsuits against other industries, including the automotive and agricultural sectors, are likely to follow.

Trade Secrets

Employers often contractually restrict their employees, especially scientists and engineers, from departing to work for competitors and from soliciting their colleagues to go with them.

California took one of the earliest and most aggressive stances against such restrictions on employee mobility, and more states have enacted similar employee protection restrictions.

Faced with the revolving door of departing employees who possess a company’s valuable, non-public information, companies will increasingly use trade secret litigation to protect their proprietary information. Meanwhile, recent developments in patent law have created more hurdles and risks for holders of such rights.

As a result, trade secret litigation often provides a preferable alternative for protecting some IP rights. And in fast-moving industries where technology may be obsolete before it can be patented (or those patents enforced), trade secret litigation may be the only option, especially where injunctive relief is critical.

With fiercer competition for venture capital, more deals may fall through after founders have shared their confidential information with prospective investors.

Where the investor eventually partners with a different company in the same space, trade secret claims about misuse of information shared during due diligence are more and more likely.

Meanwhile, there’s been a recent spate of eye-popping verdicts, such as Appian’s $2 billion award against Pegasystems Inc., which have made such suits even more attractive.

The coming year will pose new challenges for companies to stave off litigation involving climate change, data breaches, noncompete agreements, and university policies.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Write for Us: Author Guidelines

Author Information

Anthony P. Alden is a partner at Quinn Emanuel Urquhart & Sullivan who focuses on complex financial and commercial disputes. He chairs the firm’s climate change practice.

Crystal Nix-Hines is a partner at Quinn Emanuel Urquhart & Sullivan who specializes in class action litigation, internal investigations, crisis management and business disputes. She is a former US ambassador to UNESCO and Supreme Court clerk.

John B. Quinn is a founder of Quinn Emanuel Urquhart & Sullivan and chairman of the firm.