Texas companies’ reprieve from litigation due to the Covid-19 pandemic is over.
A new study of corporate general counsel in Texas finds that the number of lawsuits filed against larger businesses jumped 75 percent in 2021 over the previous year and that the fear of additional litigation in 2022 has increased, too.
The good news for lawyers at Texas law firms is that companies returned to pre-Covid levels of hiring outside counsel to handle their litigation battles in 2021.
Norton Rose Fulbright’s 17th Annual Litigation Trends survey found that corporate in-house counsel fear a significant increase in litigation regarding environmental, social and governance (ESG) disputes, cybersecurity and data breaches and government and regulatory investigations.
But the study also found that only a few of those very same Texas companies are actually involved in litigation matters related to any of those concerns.
Instead, most Texas general counsel are busy with the same kind of lawsuits – labor and employment and commercial contract disputes – that they have faced for many years.
“Litigation is up overall, as the median number of lawsuits against the companies surveyed is seven, compared to only four in 2020,” said Norton Rose Fulbright commercial litigation partner Rachel Roosth.
The study found that 26 percent of businesses had no lawsuits pending against them in 2020, but that number dropped to 14 percent in 2021. By contrast, the companies that faced six to 10 lawsuits in 2021 jumped to 15 percent from only nine percent the year before. Eleven percent of corporations were hit with 21 to 50 lawsuits in 2021, up from eight percent in 2020.
Roosth, a Houston lawyer who represented Shell Pipeline Company in obtaining a $14.1 million award in a breach of contract and negligence case against Rosen USA in 2021, said that the litigation decline in 2020 could be attributed to the pandemic restrictions, which kept people from meeting with lawyers about filing complaints.
As more courthouses and law firms opened their doors for business in 2021, the litigation spigot also reopened.
The Texas courts also were flooded with lawsuits stemming from two tragic events: Winter Storm Uri and Astroworld.
More than 2,000 individuals are named plaintiffs in more than 100 personal injury and wrongful lawsuits that have been filed in Houston against more than a dozen companies, including Live Nation and Apple following the Travis Scott rap concert on Nov. 5 that resulted in 10 deaths.
But nothing compares to the civil litigation from Winter Storm Uri, the February 2021 wintery blast that sent temperatures to sub-zero and caused power failures throughout Texas for multiple days.
More than 250 wrongful death lawsuits have been filed against more than a dozen power suppliers. In addition, scores of energy companies and insurance firms have filed massive lawsuits against each other alleging breach of contract, price-gouging and fraud.
The Norton Rose Fulbright survey found that the biggest increase in lawsuits against Texas companies in 2021 involved labor and employment matters, such as disputes over overtime wages and discrimination allegations. The survey found that 54 percent of Texas businesses battled such litigation in 2021 – up from 39 percent in the prior year.
Forty-four percent of Texas companies reported being involved in business-to-business contract disputes, but that was down from 53 percent in 2020.
Roosth noted that two-thirds of corporate general counsel in Texas have a significant concern about litigation related to cybersecurity and data protection despite the fact that litigation tied to those areas had not seen a dramatic increase from the year prior. At the same time, she added, some companies say they were less concerned with cyber and data issues.
“It appears that those organizations generally seem to think they have effectively put in protective measures, but that surprised me to some extent because I think cybersecurity and data protection is a difficult thing to keep up with as hackers get more and more sophisticated and change their scheme,” she said.
The number of Texas general counsel, especially those in the energy and financial sectors, who say they are “more exposed” to litigation related to ESG developments jumped from 24 percent in 2020 to 46 percent last year.
Roosth said the heavy influence of oil and gas companies in Texas as well as the change in presidential administrations and the regulatory enforcement changes that come with those changes are two primary factors.
Class action litigation, after several years of decline, spiked in 2021. Fifteen percent of companies face class actions – most of these related to employment disputes, data breaches and shareholder lawsuits, according to legal experts – compared to only seven percent in the previous two years.