The impact of technology on mass claims

When mass legal procedures emerge — whether due to a claimed product defect, service disruption or other alleged liability — in-house legal teams can find themselves at the centre of one of the most high-risk, high-stakes and complex situations that can threaten a corporation.

Not only does the legal team have to quickly understand and manage the legal issues but they also face the tremendous logistical challenges of dealing with perhaps hundreds or thousands of claims. At the same time, they need to manage communications with a host of stakeholders, including senior management and the board, external advisers, regulators and the media.

Much of this work is far outside an in-house counsel’s day-to-day routine. Handling it efficiently calls for a mix of new skills in areas such as process design and project management. Technology is also increasingly critical, especially as specialized legal firms on the claimant side grow more adept at exploiting automation and standardization for court filings and other documentation. But once an in-house legal team has successfully managed a mass claims event, the experience can produce significant gains for the legal function and the business overall.

Mass litigation can come in different forms. In North American jurisdictions, class action suits can be launched to litigate multiple claims in one proceeding when there are common issues of fact or law that can be decided once on behalf of all. If such a class isn’t certified, a group of individuals with similar claims may pursue their cases separately federally or in state or provincial courts.

In November 2020, the European Union (EU) adopted legislation¹ giving consumers the option of pursuing class-action lawsuits. EU member countries have two years from then to bring the rules into domestic law. Meanwhile, in non-class mass claims in North America, each claimant needs to go to court on their own, and these claims can spread across different levels of courts and jurisdictions.

In-house legal teams can likely manage class actions with only 20 or 30 claimants. But numbers can soar into the hundreds or thousands, especially where the goods or services of international companies, such as automobile manufacturers or financial institutions, are concerned. Defendant companies need to track a huge amount of data about each claimant, from contact details and their claim amount to their documentation and filings with various courts. Data processing and matching might also be needed, for example, to verify extraordinary travel expenses claimed under mass suit against an insolvent travel agency.

In these cases, in-house teams likely need outside help from advisers that specialize in managing mass legal claims. This will give the company access to the project management skills and technological systems needed to manage and defend effectively agaist these claims. In the ideal case, the external firm would have the knowledge base and systems to set up an end-to-end process so that every claim proceeds efficiently and in the same manner, from initiation to the final outcome.

When faced with a new mass action, legal teams need to craft a plan for response in a short amount of time and with limited information. For example, this can involve answering questions such as:

• In what jurisdiction(s) and forum(s) will the case be decided? Will the claim proceed as one class action, through arbitration, or in various courts at the national or subnational level?
• Should the company seek a stay, or would ongoing litigation be a better route for procedural reasons?
• Does the company need to investigate the matter on its own? If so, who should conduct the investigation: a special board committee, external counsel, or someone else?
• Would there be advantages in proactively approaching regulators to self-report the matter to gain credit for cooperation?

Controlling the consistency and flow of information is one of the biggest challenges. Mass claims involve a significant amount of real-time information exchange between the legal team and the business, and with external counsel. These types of claims often touch stakeholders across the business, ranging from employees giving information about what occurred that could be important in the course of discovery to executives who may have to act as witnesses or otherwise provide documents or information.

In this environment, it’s critical to set clear guardrails for protecting attorney-client privilege and work product. Ensuring privilege is not waived accidentally is especially difficult in complex situations like mass claims where different parts of the business and a lot of people are involved. Sometimes other departments, such as internal audit or HR, may launch their own investigation, creating new discovery documents that could create problems down the road. These risks can multiply when different groups in the company have competing interests or take approaches that conflict with the broader legal strategy.

Legal teams also need to manage a claim’s ripple effects beyond the proceeding itself. Because mass claims may have a material effect on the company’s financial statements, the claim could lead to disclosure requirements, accounting implications and reserves, all of which could need to be reported to the board and shareholders. Additionally, the subject of the claim could attract the attention of regulators and the media, raising the risks of a legislative response and reputational harm. Managing these risks through tightly controlled communications and effective stakeholder relations is critical.

A first step in getting control of these risks in a class action or other multiple plaintiff claim is to understand the common core set of facts and circumstances that tie the claims together, which then allows the legal team to define their priorities. At this stage, legal teams can work effectively by quickly partnering with appropriate experts, such as product designers, forensic accountants, technical experts and industry specialists. Objectivity among this group is important to ensure the company has an unbiased view of the issues and its prospects for a successful outcome. Bringing in a mix of in-house and external expertise ensures the legal team can leverage the right range of skill sets and professional distance to inform its investigations and its strategy on how to move forward.

Setting this strategy early is especially important in non-class action claims, which could see the company defending claims in multiple courts — for example, up to 30 or more courts for claimants in continental Europe. Given the number of local legal, paralegal and other professionals working on the actions in various jurisdictions, the strategy can ensure broad understanding of what the company is and is not prepared to admit, and whether and when the company would pursue settlements. The strategy could also clarify whether it is advantageous to have a certain level of court decide on a common issue at stake in all related claims, or to seek settlements to avoid an adverse opinion. Equally important, the strategy can help prevent issues, for instance when an admission in one proceeding is utilized against the company in other proceedings.

Technology can go a long way toward easing many of the challenges of mass claims. For example:

• With many related cases winding their way through different courts at different speeds, technology is essential for monitoring the status of each claim and its monetary risk.
• Reporting tools can summarize this information in ways tailored to suit the needs of different stakeholders, such as senior management and regulators.
• Project management and workflow software can help allocate tasks, track deadlines, and monitor performance and completion.
• The production of some court filings and other documentation can be automated and standardized across hundreds or thousands of claims, boosting efficiency while improving the consistency and quality of the positions they set out.
• Smart document storage systems can store and help teams manage the flow of information between the various courts and parties involved, while process automation can be deployed to automatically digitize and upload submissions from courts or opponents in centrally accessible locations.

As noted earlier, the best-case scenario would see all of these capabilities enabled within a single, end-to-end mass litigation management platform. With legal firms on the claimant side leveraging technology to improve their ability to file more mass claims within shorter timeframes, defendant companies need to meet those capabilities with equally robust technological processes, as well as well-rounded, appropriately diverse expertise.

In-house legal teams that suddenly face a new mass claim will likely need to gain access to the right technology and expertise by relying on an outside counsel that specializes in the area. But once the in-house team gains hands-on experience using a specialized matter management system in a high-pressure situation, the knowledge and processes can translate into better technology usage and improved processes across the ordinary course of business.

This can have salutary effects not only for the company’s in-house legal operations but also for legal team members themselves. The lion’s share of efficiency gains comes from the automation of low-risk, repetitive tasks. Increasing reliance on technology can free in-house counsel’s time for more strategic, challenging work, improving retention while allowing them to focus on issues and activities that are important to preserving and enhancing value.