4 Developing Trends In Corporate Litigation

Posted on: 31 October 2022

Corporate litigation is as old as the formal structures surrounding businesses. Legal issues within the corporate world, though, are far from static. Businesses need to keep an eye on these four developing trends that are leading to lawsuits involving corporations.

Data Breaches

Especially with the rise of government regulations regarding privacy rights and data, the model for suing companies for breaches is rapidly solidifying. Not only do private individuals and privacy rights groups bring civil cases against companies, but governments are increasingly pursuing such suits, too.

These lawsuits also frequently cross international boundaries due to the primacy of laws like the GDPR in the European Union and HIPAA in the United States. It is hard to transmit and store data in the modern era without crossing a jurisdictional boundary. Consequently, these forms of corporate litigation can stay tangled up for years just in sorting out where the venue should be and what the applicable laws are.

Shareholder Revolts

Corporate structures have always provided fodder for civil litigation. However, the modern trend of shareholder activism has spawned a new drive for corporate lawsuits. Minority shareholders can use the threat of corporate litigation to demand change at a company. Desired outcomes may range from removing corporate officers to outright changes in ownership. Likewise, the litigious nature of these shareholder revolts often creates adjacent public relations problems and even difficulties in dealing with financial institutions, other shareholders, and investors.

Claims Based on Fiduciary Obligations

Some figures within a corporation have fiduciary duties and others do not. This can create some hazy areas where one party thinks the obligation goes one way and another party thinks it goes the other. A plaintiff might be a shareholder seeking damages based on the belief that a C-suite officer was negligent in handling corporate assets, for example. This sort of corporate litigation often requires deep dives into business charters and their amendments, state laws, and federal regulations just to determine whether one person is or isn't a fiduciary.

Financial Representation and Statements

The rise of new financial technologies has created undefined domains in the law. Companies dealing with cryptocurrencies, in-game and program assets, digital agreements, and blockchain contracts often encounter a new breed of investor that plays fast and loose. Some businesses also indulge in these tendencies, and that can create problems regarding financial representations and statements.

Likewise, even if a company's process for handling statements is tight, fluctuations in asset valuations can render statements inaccurate by the time they go to publication. These misunderstandings often lead to litigation.

For more information about corporate litigation, contact a professional.