Nov 5, 2020, 07:00am EST |
Four Types Of Investigations Poised To Make A Comeback Post-Pandemic — And How Companies Can Prepare
Steve McNew
Forbes Councils Member
Forbes Business Development Council
Steve McNew is a senior managing director at FTI Technology focused on investigations. He is also an MIT-trained cryptocurrency expert.
Will 2021 bring us any closer to the normal to which we all so desperately long to return? While the world looks forward to closing out a historically difficult year, it's hard to see what's on the other side, or fully understand Covid-19's long-term ramifications.
One area where this uncertainty is being keenly felt is in the world of corporate investigations and litigation. Across the country, state and federal courts are severely backlogged due to court shutdowns, leaving many matters in limbo. At the same time, disputes are on the rise. Findings from legal research company Lex Machina indicate that filings related to Covid-19 are increasing, but case terminations and trial decisions are down 41%.
When the logjam finally breaks free, pending matters will restart, and legal and regulatory activity will begin to pick up. I believe this will bring a flood of new challenges for corporations — particularly around four types of investigations and legal matters that are likely to spike through the remainder of this year and into next. Understanding and preparing for the landscape now will help reduce the costs and risks that will emerge as courts begin returning to their normal pace.
The pandemic has caused countless companies to break or cancel contracts. Across amateur and professional sports teams, ticket sales, travel, higher education, business interruptions, conferences and events, every industry is experiencing breach of contract on a mass scale. Class actions over ticket refunds are already emerging, and more than 100 disputes have been filed against colleges and universities for charging students regular tuition rates while not providing in-person instruction as guaranteed. Lex Machina reported that contract litigation is one of the largest areas of new cases that specifically cite Covid-19 as a reason for the dispute.
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When Covid-19 restrictions ebb, many contracts will resume or be updated to reflect new timing and terms. But others — whether due to financial implications or changes in business strategy or policies — will remain broken. This is likely to spur a further increase in these types of cases, in addition to those already emerging. As a natural result, some corporations may become inundated with contract-related disputes and investigations. Strong in-house and outside counsel will be paramount to dealing with these issues and ensuring contractual agreements and obligations get back on track.
Labor Disputes
Labor and employment disputes are rising as well and will continue to do so. High unemployment, illness, a tense social climate, widespread feelings of fear and anger, unprecedented pressures on working parents and the emotional toll of prolonged isolation are all colliding to create a thorny backdrop for employers.
Health and safety filings by employees will of course be a major driver of these types of cases, as will suits over wrongful termination, insufficient severance packages and claims involving leave of absence. I believe corporations in certain industries — such as health care, assisted living, grocery, manufacturing and other essential services — will be the most at risk for these types of cases. Experts also anticipate an increase in investigations involving whistleblowers who allege employers did not provide adequate protective gear at work or follow appropriate measures to keep employees safe.
Again, like contract litigation, employment litigation often involves in-depth, costly investigations, digital forensics work and e-discovery to uncover key pieces of evidence. Corporations will need to strike the right balance of expert advisers, investigative processes and technology to handle any increases in the volume of these types of investigations without incurring excess costs.
Intellectual Property Misappropriation
IP trade secret theft and misuse is a common type of investigations and litigation. The current environment, with millions of people reeling from furloughs and layoffs, is ripe for former employees to take trade secrets with them to new jobs. Companies are likely to recruit talent from competitive companies, which increases the risk of trade secret theft and/or allegations of improper use of IP.
It will likely be a year or more before we start seeing the extent of the consequences the pandemic will create for IP misappropriation. Looking ahead, once employment starts to significantly recover, corporations should establish response plans to prepare for the possibility of their IP or trade secrets showing up among competitive companies. Dan Roffman, a colleague from FTI Technology's Digital Forensics & Investigations practice who works on many trade secret investigations, encourages corporations and their legal teams to invest time in developing a mindful case strategy, to understand how to secure IP and to stay flexible in how their teams approach forensic investigations.
Cryptocurrency Disputes And Investigations
In July, the Office of the Comptroller of the Currency issued new rules allowing banks in the U.S. to hold keys for cryptocurrency wallets. This is considered by experts in the cryptocurrency space as a step toward mainstream adoption of digital currency, which will ultimately lead to the increasing prevalence of cryptocurrencies within traditional financial services settings. Federal regulations on this front are also maturing. All of these developments will likely drive growing use, as well as more fraud and abuse. Instances of investigations involving cryptocurrency — and the need to track and trace crypto transactions and accounts — have increased in recent years, and will continue to do so into 2021 and beyond. Corporations dealing in cryptocurrencies should prepare by gaining an understanding of the landscape and identifying industry experts and advisors who can help lead investigations and serve as expert witnesses in litigation.
Lately, it's seemed like things will never get back to normal. But legal matters will resume in due course. When that happens, the likely uptick in investigations and litigation will be yet another issue to navigate during an already difficult time. Readiness for what's on the horizon and support from trusted experts who can help alleviate the burden will be key in minimizing the lingering effects and risks of the pandemic.
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