Who’s Who Legal’s research into the product liability defence market for this edition comes amid shifting political attitudes, a burgeoning opioid crisis and the emergence of new innovative technologies that raise as yet unanswered questions about the future of this diverse field of law. The practice area’s dominant jurisdiction, the US, has seen a consolidation of the market, with the recent closure of Sedgwick coming as a surprise to many. Across the Atlantic, scandals in the products field have caused governments to strengthen the hand of consumers. Overall, this year looks likely to provide rough waters to navigate, with large gains to be made for those who best adapt to the changes.
Our research this year has seen growing discussion around a number of market trends that could prove troublesome for manufacturers. The pharmaceutical sector is one of the dominant sources of work for practitioners in the field and 2018 is not likely to be an exception to this. In past years, opioid-based medication “was oversubscribed without warning” and has given rise to an epidemic of overdoses. At present the US accounts for 80 per cent of the consumption of opioids. However, this should not lead one to ignore the significant damage to public health in other parts of the world. In Europe, according to a 2017 report, 0.4% of the EU adult population (aged 15-64) are deemed high-risk opioid users, while in Lebanon, Saudi Arabia and China, similarly high levels of abuse have been observed among young people. In the legal sphere, discussion has turned to the ramifications of this over-subscription. One practitioner in the pharmaceutical sphere notes that “litigation has just exploded in the last 12 months”. Class actions in this space continue to grow and their multi-district nature is likely to benefit larger firms with greater national or regional integration.
In the technology space, the continued rise of AI is leading to what will likely be one of the most profound changes to the transport sector this century. Driverless cars have seen massive investment from companies around the globe, making their proliferation an issue for product liability lawyers in a number of jurisdictions. Automated machines are in themselves nothing new, but machines such as this are almost unprecedented in their exposure to the public and ground-breaking in their decision-making capacity. Questions about culpability in a driverless crash are only beginning to be addressed, with few legal precedents available to guide lawyers. While for consumers driverless cars may seem to be just out of reach, sources explain that “for our clients, these questions are no longer horizon issues”. Already there have been a number of fatal crashes involving driverless cars and as their roll-out continues, the potential for damages claims can only increase. Firms are now positioning themselves to advise clients on product safety and liability limitation in advance of driverless cars’ introduction to the market.
Markets have for many years been globally integrated. In the field of product liability, however, legal cultures have remained remarkably dissimilar. This is something that looks set to change as norms from the US market begin to take hold in a number of other jurisdictions.
The prevalence of advertising in product liability claims is a topic highlighted by a number of respondents in our research this year. Advertising has been of importance to the US market for some time with one practitioner noting that “you can trace where will get most claims based on where has the most advertising”. Its spread to Europe has been noted by a number of sources as a trend that has accelerated in recent months. Consumer targeting has led to a rise in claims based on misrepresentation, particularly in the drug industry and consumer authorities are reacting to this by tightening regulations in the industry. The European Medicines Agency (EMA) has recommended suspending drugs that they say were misrepresented in clinical trials. In the US, the Food and Drug Administration (FDA) is now conducting research into industry practices with the possibility of a new avenue for litigation opening up should fresh guidelines be produced. For practitioners close to this industry, it is likely to lead to a rise in work across all jurisdictions as clients prepare themselves for potential claims.
Another impact of globalisation is that clients no longer sell to a single region as often. As borders become increasingly porous sources note that clients increasingly look for firms who can handle their work across jurisdictions. This is having profound effects on the legal market as firms with the resources and the global presence to handle the increasingly numerous class actions are prioritised over smaller firms. A number of smaller firms have been acquired or absorbed by larger outfits in recent months and sources expect such moves to continue as client demands for streamlined services increase.
There is some respite, however, for smaller practices in the reinsurance space. Rates have been noticeably falling in recent months and the high fees demanded by larger firms have seen them unable to compete with more agile firms. As such, we are likely to see the legal market diverge into two cohorts. One of large multinational law firms with high fees but a capability of handling increasingly global cases. The other of more flexible boutiques who devote themselves to specialist areas and provide local knowledge.
In the face of homogenising legal cultures and emerging global market trends, regulation is one area where divergence appears to be taking place. Industry observers have noted that in light of the Republican administration in the US, there is likely to be a slower adoption of new consumer regulations. This lighter approach may benefit producers at the expense of consumers. Practitioners meanwhile are not likely to see an immediate uptick in workload as the number of claims is unlikely to rise when lawmaking at the federal level is more placid.
Conversely, the diesel-gate scandal has in Europe had profound effects on the psyche of politicians and consumers in the region. The European Commission has proposed revisions to the consumer directives in its “New Deal for Consumers” announcement. It aims to strengthen consumers’ ability to bring class actions and to enable member states to have greater sanctioning power over companies that break the rules.
In the UK, the aftermath of the Whirlpool fire-risk scandal and the tragedy of the Grenfell Tower fire has prompted the government to introduce the Office for Product Safety and Standards (OPSS). It remains unclear, however, just how far this consumer authority’s powers will extend. One source laments that “the problem all the regulators have is that they lack the funding and manpower to be more aggressive”. There is certainly a political climate for increased product regulation, but with so much else happening in Whitehall, there is a risk that consumer protection reforms may fall by the wayside. It remains a possibility that the regulator’s lack of bite in the UK may continue for the foreseeable future.
From a legal perspective, what emerges is diverging trends with the US (under the current administration at least) poised to move towards regulatory inaction, and Europe acting strongly against major producers that break the rules.
There has been a great deal of consolidation in the legal marketplace over the past year. The fall of Sedgwick from its position as one of the leading firms in the field across the North American region to non-existence in the space of a year has taken many by surprise. This development is symptomatic of changes in the legal market that stretch far beyond product liability defence. In the aftermath of the financial crash many manufacturers have brought work in-house. Additionally, the soaring rate of mergers and acquisitions among manufacturers has reduced the number of potential clients for firms. This in turn has caused a drop in demand, putting downward pressure on wages. At the same time as demand has fallen, these same clients are also looking to cut costs as they adapt to a post-recession market. Fixed-rate fees may only compound downward wage pressure and are noted by sources to be “compatible in the product liability market, where you have repetitive lawsuits over the same products”.
The outcome of the above trends is that medium-sized law firms may find themselves exposed to market changes. Without the mammoth revenues of the largest firms, or the flexible approach of the boutiques, medium-sized outfits will likely be forced to adapt in the coming years. The shift towards a big law/boutique split looks likely for now.
The silver lining for firms is that there is expected to be a significant growth in cases in the coming months. The shift in the automotive industry in recent years towards mutual responsibility for warranties relating to specific components has created “a huge increase in work”. The opioid crisis is likely to grow, with sources thinking it likely it will transform into a product liability issue. As state agencies begin to flex their muscles in light of a chain of manufacturer scandals, the related class actions and regulatory changes will also likely lead to a larger caseload for practitioners in the field.
Many see 2018 as a time of divergence in regulatory approaches between the US and other jurisdictions, and as a time of great opportunity for those who successfully adapt to market changes. Although demand remains elastic, the quantity of cases will keep many firms busy for the coming years. Emerging technology and new pharmaceutical claims will provide a fresh revenue stream as well as heat up discussion in the regulatory sphere about how best to deal with such changes. Consolidation remains a key theme and will likely continue as firms adapt to the changing structure of the legal marketplace.