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By: Christopher Lee
As economic and social norms have been drastically altered over the course of these last several months in the COVID-19 era, so too has the effect been on civil litigants on both sides and the considerations being made by the parties engaged in litigation. As discussed more fully below, many disputes will see an increased opportunity for early settlement and compromise, while others will simply encounter delays. Nonetheless, it is essential for all litigants to understand the consequences of the altered landscape to effectively navigate this environment in these difficult times.
Considerations are now being made on both sides of the table that simply did not exist prior to the pandemic. Plaintiffs now are acutely aware of the potential for insolvency of their litigation adversaries and are now carefully considering whether to settle their disputes earlier rather than later, taking into account the financial position of their adversary as the pandemic continues to affect the economy. Thus, plaintiffs may consider early settlement terms that would have been less than ideal prior to the pandemic given the uncertainty of the defendant’s financial position later down the road. Further hampering the plaintiff’s bar more so than the defense are the social distancing guidelines and state of judicial emergency orders that have reduced courthouse function and access, tolled filing deadlines, and postponed trials and hearings. In a recent study, case activity in the federal district courts is down approximately 41% from 2019. This environment is considered by many as defense-friendly given the difficulty plaintiffs now have in pushing forward matters in the majority of cases and the inability to leverage inherent pressures created by impending deadlines.
As to the defense, the thought of engaging in multi-year, costly litigation without a certain outcome is changing the litigation approach for some of even the mostly financially healthy corporations who are now placing an emphasis on reducing costs and/or eliminating contingent liabilities as quickly as possible. In these cases, the pressures created by the pandemic may also drive them to settle on terms that simply would not have been acceptable prior to the outset of the pandemic. Also in the purview of defendants settlement considerations is a plaintiff’s liquidity and solvency concerns that may promote early settlement on terms more favorable to the defendants. However, some corporations have decided to take a different approach and are now also looking increasingly to third-party funders to finance litigation costs. “Frankly, we’re drinking from a fire hose,” said Allison Chock, U.S. chief investment officer for litigation funder Omni Bridgeway. “One of the things we’ve been talking about for some time now is the trend in corporations that historically paid for the legal expenses beginning to explore using litigation financing instead. … That is now becoming a more urgent trend.”
Ultimately, the pandemic poses many new challenges and considerations for litigants on both sides of the table. Understanding the changes in litigation leverage, litigation risk, and other trends as they continue to develop will be vital to allow counsel to create strategies and tactics to effectively advocate and represent their clients’ interests in alternative dispute resolution and in the courtroom.
If you have questions or would like more information, please contact Christopher Lee at [email protected].
FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.
You can also contact your FMG relationship partner or email the team with any questions at [email protected].
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