Given their level of responsibility, corporate counsel are a nervous lot as a rule. But according to recent survey, corporate litigators might spend the coming year feeling jumpier than usual.
Houston-based law firm Norton Rose Fulbright reached out to 287 corporate counsel nationwide to find out what issues are causing them the most sleepless nights. A notable number of them have an eye on the potential for an economic downturn this year, and the litigation that might trail it.
“A rise in disputes typically accompanies an economic downturn,” said Gerry Pecht, Norton Rose Fulbright’s Global Head of Dispute Resolution and Litigation. “If the economy goes sour, more deals may fail, more contracts will fall through and employees will be laid off.”
Pecht added that a rise in employment and labor litigation has already begun. When asked for the three most common disputes that their companies face, nearly half of the firm’s survey respondents included employment/labor and contract disputes.
Norton’s survey is the firm’s 15th annual attempt to take the temperature of corporate counsel. Among the survey’s findings is that 44 percent of corporate counsel foresee cybersecurity and data protection as a new source of disputes.
A strong majority of companies conduct third-party or in-house assessments of cybersecurity and data protection risks. The respondents’ employers spent on average $1.5 million on disputes and employed 2.5 disputes lawyers per $1 billion of revenue.
The number of in-house counsel who rated cybersecurity and data privacy as the most important litigation issue facing them doubled from 2018 to 2019. A majority of those surveyed said they felt more exposed than previously to such disputes.
Respondents said worries about cybersecurity and data protection risks have to do with the volume of such threats, the creativity of cyber criminals, the sensitive nature of some data content and how some jurisdictions have put data privacy laws into place.
“Concerns over cybersecurity and data privacy are a little bit newer, mostly as those areas have become global concerns,” said Norton partner Saul Perloff.
As recently as 10 years ago, he said, general counsel weren’t that concerned about issues such as data breaches or the differences between European and American data privacy laws.
“Now those things are very much at the fore,” Perloff said. “Part of the anxiety on the part of corporate counsel is precisely because part of their role is to identify, understand and manage risk. A new type of risk will always create concern because it’s harder to understand.”
Perloff said corporate counsel might do well to become familiar with the California Consumer Products Act, which took effect this year. The new law creates new consumer rights having to do with to the access to, deletion of and sharing of personal information that is collected by businesses.
“It should affect companies in any state . . . if they do business in California,” he said.
He pointed out that California’s law is the closest thing any U.S. state has to the European Union law on data privacy, which regulates how companies protect EU citizens’ personal data.
“Seeing what’s happened in California might make GCs feel a little exposed,” he said.
Ready for battle
The most eye-opening finding of the Norton survey might be that 35 percent of corporate counsel expect to see disputes increase this year. That’s 8 percent more than in the Norton firm’s previous survey, and a significant jump from corporate counsel’s standard response.
“Over time, we’ve found that you always have a group of respondents who make that prediction,” said Perloff. “I wouldn’t call them worry warts, but there’s a segment — about a quarter — that consistently has that on their minds. Then 10-15 percent predict a decrease. Both groups usually are against a majority that predicts it will remain the same.
“But this year, we saw a relatively significant increase.”
Another area of concern for in-house counsel, according to the Norton firm, is regulatory intervention. The survey found that a couple of primary ways to prevent litigation haven’t yet gained widespread acceptance, those being embedding lawyers within business operations and early case evaluation or resolution.
“Investigations in particular became a concern maybe 10 years ago,” said Perloff. “It has leveled out, but it remains one of those things that’s pretty much always on the minds of corporate counsel, especially at larger, publicly traded companies.”
The Norton Rose Fulbright survey, conducted by legal research firm Acritas, is available here.