You can’t ignore business litigation.
If you own or manage a company, you need to understand what’s going on in the legal world right now. Contract disputes are up. Cybersecurity lawsuits are skyrocketing. And companies that don’t adapt to these changes are getting caught completely off guard.
The good news?
Arming yourself with knowledge about what business litigation is and the most important trends right now is one of the best ways to protect your company against a costly lawsuit. Here’s what you need to know…
What You’ll Learn:
- What Is Business Litigation?
- Why Litigation Rates Are Increasing
- The Top Business Litigation Trends Right Now
- How To Protect Your Company
What Is Business Litigation?
Business litigation involves resolving legal disputes related to a business, company, or other legal entity through the court system.
In other words, business litigation is the formal legal process of handling business-related legal issues in court.
This includes everything from a breach of contract to a partnership dispute to a fraud accusation. Working with a qualified Tennessee business litigation attorney can help you understand what business litigation means for your specific situation and how to navigate these complex legal waters.
The key takeaway…
Business litigation involves disputes between commercial entities that can no longer be resolved outside of the courts.
And while business litigation once was an issue that large corporations faced, small and mid-sized companies are being dragged into the legal system at rates that have never before been seen.
Business litigation can take many forms, including:
- Contractual disputes between vendors, suppliers, and/or business partners
- Fraud claims alleging misrepresentation or other deceptive business practices
- Violations of trade secret protections and non-compete agreements
- Partnership and shareholder conflicts
- Intellectual property lawsuits
The stakes are high in business litigation. A major loss in business litigation can result in financial ruin for a company.
Why Litigation Rates Are Increasing
Don’t just take our word for it…
Look at the numbers. Breach of contract disputes experienced a 15% increase in cases in 2023 alone as businesses recovered from pandemic-induced lulls in activity. Breach of contract cases are the lawsuits most commonly filed in business litigation, and they can involve one or more parties that fail to pay, perform, or “hold up their end of the bargain.”
But wait…
There’s more. Cybersecurity-based disputes are also on the rise.
Cybersecurity-related litigation was cited as the litigation topic with the most potential for increase in 2024 in Norton Rose Fulbright’s 2024 Annual Litigation Survey. 40% of organizations surveyed reported that their cybersecurity-related dispute exposure increased.
Gone are the days when disputes between companies were worked out without the courts. The litigation environment is getting more aggressive.
Why? Digital transformation has created new vulnerabilities and legal risks. Remote work arrangements have made contract enforcement more challenging. Economic pressures are driving more disputes into court. And, regulatory changes are creating new compliance headaches.
Businesses that may have resolved disputes informally in the past are now going straight to court.
The Top Business Litigation Trends Right Now
Knowing what’s hot right now will clue you into what’s coming. Here are the biggest current trends in business litigation.
Contract Disputes Remain King
Contract cases are still at the center of most commercial litigation, and they will likely remain so for the foreseeable future.
Contracts are the lifeblood of most business operations, so it should come as no surprise that contract-based lawsuits take center stage. Contracts are the foundation for nearly every type of commercial legal dispute.
Three times as many claimants have been successful as defendants when breach of contract issues arose during the litigation process between 2022-2023. That’s an interesting statistic.
To be more exact, successful cases based on contract were more than three times those in which a judgment or order went against a claimant (favoring a defendant). Contract cases where the court found in favor of both claimant and defendant were almost nonexistent, at just 1%.
Claimants were most likely to win where they had a clear written contract that precisely specified every term.
What does this mean for your business?
A strong contract isn’t just a best practice…
It’s a legal safeguard.
Cybersecurity Claims Are Exploding
Data breaches and cybersecurity issues are a new and growing category of business litigation.
Cybersecurity incidents, data breaches, and failure to protect customer data are at the center of lawsuits against companies. The risk is not limited to tech companies or businesses that explicitly deal with data. Any company that handles customer information is at risk of cybersecurity litigation.
Customers, regulatory agencies, and third-party businesses are taking action against companies that don’t protect their data properly.
AI and Technology Risks Are Emerging
Artificial intelligence (AI) is already a major new legal frontier.
AI will “grow their organizations’ exposure to cybersecurity and intellectual property vulnerabilities the most,” according to a 50% to 50% ratio of those surveyed in one study of data compiled in 2023. This represents a trend that will only get more intense as the use of AI tools increases.
Companies using AI in their operations should consider legal implications such as:
- Ownership rights of AI-generated content
- Liability for AI-driven decisions or errors
- Privacy concerns with AI data collection
- Regulatory compliance related to AI use
Fraud Cases Are Getting Harder to Win
Fraud and misrepresentation claims can be a major headache for businesses, and yet they are surprisingly difficult to prove in a court of law.
Judges ruled in more than 640 cases with a “No Fraud” finding between 2021 and 2023, more than double the number of times a finding of fraud was actually made during this period. Again, this is a noteworthy statistic.
The takeaway for your company?
If you’re on the side of bringing a fraud claim, you better have a mountain of evidence. If you’re on the side of defending against a fraud claim, you may actually have the better odds.
ESG Litigation Is Growing Fast
Environmental, social, and governance (ESG) issues are increasingly the subject of litigation.
One in 10 companies experienced an ESG-related lawsuit recently. This is a sharp uptick from the 2% that faced an ESG-related legal dispute in the prior year. Companies facing ESG-related litigation have increased by more than four times in just two years.
Greenwashing claims have been among the most active areas of ESG litigation, involving cases where companies made environmental claims that they either did not honor or were not able to back up.
How To Protect Your Company
There are some common-sense steps you can take to avoid litigation in the first place. Here’s how to protect your company from costly business lawsuits.
Review contracts regularly. Outdated or ambiguous contracts are practically begging for litigation. Be sure to have every contract be as specific as possible, and update them often.
Strengthen cybersecurity. Data breaches lead to litigation, so investing in the right security infrastructure now is far less expensive than defending a class action lawsuit later.
Document everything. Keep records of all business communications, decisions, and agreements.
Consult legal counsel early. Hire an attorney before things go too far, so that you can catch things before they become issues.
Train employees on compliance. Make sure employees understand all compliance requirements, proper business practices, and what to do in the case of a potential dispute.
Wrapping Things Up
Business litigation isn’t standing still.
Contract disputes are on the rise. Cybersecurity is leading to a new class of business litigation. New risks around AI and ESG issues are emerging. And companies that do not take these trends seriously put their businesses at great risk.
The best way to protect your business?
Know the current trends in litigation. Strengthen your contracts and documentation. Bolster your security and compliance infrastructure. And work with qualified legal counsel before problems become lawsuits.
Knowledge about what business litigation is and an understanding of current trends that could impact your business is no longer simply smart business…
It’s survival 101.
