When the courts closed in March 2020 due to COVID-19, few would have foreseen the impact on so many aspects of the mass tort landscape. Judges, attorneys, defendants, and plaintiffs alike are all feeling the ripple effects of a system that was paralyzed for nearly half a year and only slowly, and under conditions that few were really prepared to deal with, started to move into low gear in late summer.
The short- and long-term financial effects of lockdown
With the courts closed, no cases were being set for trial; no juries deliberated and many settlement negotiations slowed to a drawl. In August, when the courts reopened, the judicial system started to experiment with ways to operate in the new environment and move forward. Most notably, courts began scheduling trials via zoom and in-person trials—a necessary step forward but one that may move at a glacial pace for some time, as judges have only so much bandwidth and must give priority to a backlog of criminal cases accumulated during the shutdown. This prioritization of criminal dockets further aggravated the slowdown for many mass torts, and in turn, created the perfect storm for conditions that would directly impact all parties to a mass tort.
- Law firms. The plaintiff’s bar operates on a contingency fees basis; when it came to a standstill for so many months, so too, did the money needed to maintain firm operations. As a result of the halted cash flow:
- Some firms were running their operations on the monies they had borrowed to manage actual cases.
- Many paralegals and administrative professionals lost their jobs and firms became cash-strapped just trying to pay rent, payroll, and other operating expenses as they waited for the courts to open, matters to be decided, and cases to be resolved.
- In the process, some law firms have modified their business models and began to outsource more to third-party providers that could perform the work as needed, rather than paying full-time staff to work intermittently during and after the “shutdown.” Because of this shift, many firms are now considering the cost-benefit of outsourcing some operations more frequently going forward. Firms are uneasy about recommitting to expenses in the present given the unknowns of the future, with the goal of surviving now so that they can thrive later.
- Plaintiffs. While it is typical of group settlements that claims are settled for less than what individual claimants may have been awarded by a jury if each case were tried, the economic crisis triggered by the pandemic left many claimants with a Hobson’s choice: accept lower settlement values today to at least generate some income, or hold out for the possibility of a higher settlement at an uncertain time in the future while trying to make ends meet with reduced wages or short-term unemployment benefits.
COVID-19 was a wake-up call for the mass tort bar in 2020; law firms learned how to operate remotely and given the financial pressures of the long court shutdown, have reengineered their business models following a “survive to thrive” strategy. Many firms will emerge from this crisis stronger than before, by adopting new technologies, practices, and strategic alliances that improve their financial strength while continuing to provide excellent service to their clients. We believe the firms who have quickly adapted to working remotely will continue to do so once the pandemic has passed, reducing their spending on real estate and investing those savings into more technology and talent enabling them to expand their practice and serve more clients without necessarily increasing total expenditures.