Litigation and Regulatory Investigation Services in a New World Paradigm and Lessons Learned
“In a world that is constantly changing, there is no one subject or set of subjects that will serve you for the foreseeable future, let alone for the rest of your life. The most important skill to acquire now is learning how to learn.” The legal services industry, and alternative legal service providers (ALSPs) in particular, spent 2020 learning and adapting to an unstable landscape caused by the COVID-19 pandemic. While 2020 opened strong, the COVID pandemic brought litigation, regulatory investigations, and related document review activities to a practical halt. Whatever activities did continue were carried forward with much hesitancy, deliberation, and two eyes towards how to effectively and securely operate in the new “work from home” world. Legal service providers were forced to rethink how to execute their work in a distributed work environment to satisfy industry standards and their clients’ demands. There were trials and tribulations, successes and failures, and, most importantly, as always, lessons learned.
As the calendar pushes further into 2021, however, a new dawn has emerged as the world begins to open up. But the wounds of the COVID pandemic are still fresh and companies are even more focused on cost control and “doing more with less,” given the damage inflicted on many industries. This landscape has exacerbated the push of ALSPs to the front of the minds of companies and law firms looking to increase efficiency. With a strong focus on process, strategic resource allocation, and increased technological innovation, ALSPs are uniquely positioned to generate repeatable results and consistent work product, while controlling costs for clients that are looking for every advantage in this environment.
It is said that necessity is the mother of invention and that was never more true than for legal providers in 2020. While ALSPs are historically known for process rigour and cost adherence, 2020 was truly a year for innovation and creativity – to rethink how to work and how to do business. It was not a year to thrive, but it was a year to adapt and survive. As the world slowly emerges from the pandemic, it is worthwhile to look back at the lessons learned and the pain endured during the global shutdown. The pandemic was truly industry changing. A recent survey by MyCase shows that approximately 70% of law firms agree that COVID-19 will have a lasting impact on how law firms operate and courts function.
Work is now mostly remote. Meetings are virtual. Technological evolution that likely would have happened over the course of the next decade came in 10 months. Most agree the distributed work environment is here to stay in one form or another, depending on the type of work executed. Companies that transitioned well to a distributed work environment did so by focusing on the basics to deliver the core competencies of their business: 1) implementing processes that allowed for the continued execution of high quality work and 2) ensuring a secure work environment for clients and employees. From that starting point, legal service providers could then pivot to focus on innovations and technologies to increase efficiency and lower costs.
While companies continue to improve their distributed work environments and expand their offerings, hurdles and potential long-term ramifications remain. How will this new environment affect company culture? While virtual court proceedings, Zoom meetings, and virtual conferences and happy hours are all effective means of communication, it is possible that company culture and DNA could be compromised over time given the lack of direct contact and connectedness between employees. What is the effect on collaboration? Can the use of chat programs and virtual meetings effectively mimic and replace the collaborative environment and sense of team created in a successful in-person setting? As the world moves forward and the virtual workplace continues in one form or another, all companies must continue to strive to create a collaborative environment in the virtual setting or risk losing identity or culture.
But let us not focus too much on the negative. It is a time for optimism and growth. After a year of stagnation, courts are opening up, litigation is resuming, and regulatory activity is gaining steam. Companies are no longer focused on preservation and have turned their eye towards growth. In doing so, they are re-thinking past strategies and beliefs that were thrown on their collective heads by the pandemic. Historically, some companies were reticent to use ALSPs because work was performed outside of their direct control, beyond their firewalls, and potentially in a different part of the country or world. The pandemic, however, required all companies to operate in some capacity in that specific environment. Furthermore, because of budget pressures and cost constraints due to the pandemic, ALSPs remain an attractive option for all companies looking to reduce the cost of their eDiscovery and litigation and investigations review spend. As such, we expect to see ALSPs making inroads where previous hesitancy had lingered.
We are all very curious to see what the litigation and regulatory landscape will look like as the world continues to re-open and the economy digests the “new normal”. However, there are a number of industries and areas that we believe will see increased activity. As we predicted in the overview last year, we have seen increased litigation arising from plaintiff’s boutiques specializing in areas such as human resources, personal injury, and securities litigation. These litigations typically focus on the efforts of companies to protect their bottom lines during a pandemic versus their efforts to protect their employees or shareholders. We expect the increased activity in this space to continue.
While not pandemic related, we also expect to see an increase in regulatory investigations because of the new administration in the White House. In past presidential transitions, there is typically a “transition lag”, where the new administration takes time to settle in and turn their attention to the business of regulatory scrutiny. There is little indication, however, that this typical lull will occur with the current transition. In fact, the Biden administration has explicitly ruled out any slowdown. Considering the rather lax posture of the previous administration to regulation and regulatory scrutiny of most industries, it is also likely that there is much to investigate. This will include not only areas previously subject to heavy scrutiny, but also investigations into the compliance and ethics regimes modified on the fly during the pandemic.
Early returns indicate that technology companies will be in the regulatory crosshairs of the Biden administration. Tim Wu, a big tech critic and coiner of the term “net neutrality,” has joined Biden’s National Economic Council. Lina Kahn, a tech-focused antitrust icon, has joined the FTC. In the labour space, the administration vocally supported the push to unionize an Amazon facility in Alabama. A group of heavyweights in the industry have come together to “advise” the administration on policy and both Republicans and Democrats in the Senate have introduced bills that would severely restrict M&A activities in the tech space. Considering the furious pace of these developments, the technology industry and big technology, in particular, is primed to experience considerable regulatory activity.
Alongside and, in some ways, hand in hand with this focus on big technology, the new administration is also likely to target cybersecurity and data privacy, as well as increasing punishment for data privacy breaches. Maintaining the privacy of individuals and safeguarding their personal information has become a central focus of federal and state governments as the means of technology grow exponentially. Privacy laws in the coming years will become more stringent at the state and federal level, which will lead to an increase in litigation and more work for the legal services space. As has already been demonstrated by planned executive orders relating to disclosure of data privacy breaches, the breaches that seem to occur on a daily basis in today’s world are unlikely to continue to escape scrutiny in the future. The gatekeepers of data will be under heavy pressure to protect personal data and accept culpability and severe punishment when they do not.
While the healthcare industry was certainly a target for the Trump administration, it will continue to be a focus for the new administration. Rising drug costs and price fixing scandals as well as antitrust issues in the industry will keep the eye of federal and state regulators squarely on healthcare companies. Furthermore, one serious unintended consequence of the pandemic and the subsequent stimulus packages will likely play out over the coming years, as there will be an intense focus on cracking down on the fraud and abuse connected to government aid relating to the COVID pandemic. Because of these myriad issues, it is likely the healthcare industry will continue to be on notice during the Biden administration.
The rise and massive growth of the use of special purpose acquisition companies (SPACs) in the M&A space for companies to go public is likely one new area of potential regulatory scrutiny and litigation. The use of SPACs to date has allowed transactions and changes of control in companies to occur largely behind the scenes, with details hidden from not only regulators, but shareholders as well. The new administration has committed to promulgate regulations to require disclosures and regulate the use of SPACs. These regulations will undoubtedly lead to an increase in investigations and shareholder lawsuits.
Cannabis and cryptocurrencies will be two other areas of increased attention given their explosive growth. As more states continue to legalize cannabis and the federal government leans closer to legalization every day, M&A activity in the space will continue to increase and the overall regulatory framework will need to be analysed closely. Cryptocurrencies are currently all the rage. With companies as mainstream as Mastercard jumping into the cryptocurrency game, the industry is now front and centre and in the government’s crosshairs. The public’s appetite for cryptocurrencies coupled with a general lack of understanding of them, all while governments worldwide grapple with how to regulate and tax them, could lead to a powder keg of regulatory activity, new laws, and litigation.
If 2020 taught us anything, it is that no one has a crystal ball. While 2021 looks to be a year of rebirth, growth, innovation, and a return to a new form of “business as usual” for the legal services industry, it is important that we remember the lessons learned in 2020. We need to be nimble. We need to pivot when necessary. And we need to always adapt in order to survive and prosper. If pent-up demand explodes as we expect, the legal services industry must respond to meet that demand with an intense focus on technological innovation, process rigour, and cost-effective solutions to continue to expand its reach and usefulness for clients across industries. And if 2021 decides to throw us another curveball, let us learn from the past year and apply what we have learned to create new ways to do business and provide value for clients.
By Robert Coppola, Vice President, Legal Solutions and Strategic Growth, and Briana R. Hulet, Director, Legal Solutions at QuisLex, a leading alternative legal services provider.