The past four years have brought many changes to businesses — both in how they operate and the legal challenges they now face post-COVID. Business litigators and in-house counsel are tracking newer legal challenges like the use of artificial intelligence, the vast amount of time and money spent on discovery and rapidly increasing cost and risk for businesses.
Other legal issues like copyright infringement, business dissolutions, data privacy and employment-related disputes continue to be concerns for businesses. Local legal experts think those problems are here to stay but may be increasingly difficult for attorneys to address in courts with a number of recent regulatory changes in these areas.
Business litigators who told Law Week they were recognized by Super Lawyers this year weighed in on the current challenges of the practice area and what they think the future will hold for local businesses.
Hefty Digital Discovery
High caseloads and court backlogs are something state and local court systems have been battling for the past few years.
Some courts have been addressing lengthy digital discovery issues and high caseloads by implementing stricter pretrial filing limitations. Eric Hobbs, a partner at Shook, Hardy & Bacon, noted to Law Week “the increased caseloads of judges, both state and federal, has led many courts to institute strict time limitations on civil trials, as well as similar limits on pretrial filings.”
Hobbs noted federal courts have also been increasingly authorizing consolidated actions at pretrial and trial stages to address heavy caseloads. “Nearly every court we have been before wants to streamline cases to be tried quicker and more efficiently than ever before,” explained Hobbs. “And there seems to be a heightened emphasis on nudging cases toward resolution short of trial.”
Christian Hendrickson, a member at Sherman & Howard, said media coverage, social media and digital communication is constantly changing, which impacts the legal landscape. “One practical consideration impacting the mechanics of litigation is there being more data than ever, which can bog down disputes and lawsuits, making them more expensive,” he noted.
In a somewhat similar vein, Adam O’Brien, a member at Wells, Anderson & Race, noted lengths of cases continue to heavily impact businesses in the state. “Cases and appeals often take years to resolve. Prejudgment interest can be a significant concern for business[es] defending claims in Colorado,” he explained.
Sometimes backlogs and drawn out cases can relate to the vast amount of digital discovery. “The proportion of legal spend on discovery has accelerated, because of the proliferation of ESI sources beyond email, such as WhatsApp, Slack, and other messaging apps,” Holland & Hart Partner Kevin McAdam said.
“In Colorado, we’re filing more frequently in state court, because of the extreme backlog in our federal court,” McAdam continued. “Clients understand that justice delayed often really does mean justice denied.”
Noncompetes and Employment Disputes
Recent guidelines and court decisions about noncompetes have also complicated employment disputes, which have been on the rise.
Sherman & Howard Member Mark Williams said businesses and parties of noncompete disagreements may get more clarity about the issue through litigation as the legal challenge in this area has become more thorny in the state in recent years. “Businesses are facing more legal challenges related to covenants not to compete — from executives to sellers of businesses,” he explained. “Litigation in this area is often short-lived as almost all involve preliminary injunction proceedings, which I have had a dozen or more over the last four years.”
Messner Reeves Partner Bruce Montoya noted a key issue his firm has been tracking is how the arbitration clauses included in a lot of standard corporate operating agreements can impact litigation. “The costs associated with litigating through arbitration can often exceed the amount in controversy in small- to medium-sized business divorces,” he explained. “This has added another issue for litigators to navigate when advising clients on cost-effective options and early resolution of their dispute.”
Partnership and employment disputes have dominated Mike Laszlo’s practice in the past year. Laszlo, a member at Clark Hill, said the disputes are often wide-ranging but they’ve been made even more complicated by recent changes and interpretations to noncompete and nondisclosure agreements in the state. “There’s also a fair amount of uncertainty in this area — with the 2022 revision to our non-compete statute that hasn’t had any clarity in the courts yet,” he added.
“In startup hotspots like Boulder and Denver, business divorce and standard breach of contract cases are on the rise with emerging growth companies often being unwilling or unable to pay counsel to properly document the business’s formation,” McAdam said.
He foresees more clients being open to litigation financing in the future but added unless courts address the enforcement of proportionality principles, the cost of document discovery will dissuade companies from pursuing litigation options.
Cybersecurity and AI
Montoya told Law Week there’s been an increase in cyberattacks and noted data breach-centered lawsuits are becoming a concerning trend in business litigation. “Criminals are becoming more sophisticated with their methods, and corporations need to increase their preventative methods,” Montoya explained.
Data privacy claims have been on the rise, noted Hobbs, and many of the claims in this area are class actions. “According to one recent survey, nearly 62% of U.S. companies with $1 billion or more in revenue faced class action claims in the past year, the most of any year since the data began being tracked nearly a dozen years ago,” clarified Hobbs. “Consumer protection and labor and employment claims constitute over half of these claims.”
AI can only compound the complexity of intellectual property and copyright claims, Hobbs said. “With the rise of artificial intelligence, especially generative AI, many in the industry are expecting a groundswell of copyright and intellectual property claims.” He noted the first wave of these cases is rising through the courts now.
Montoya told Law Week a lot of the cases stem from business use of AI to serve customers and clients. “Large and well-known AI platforms are said to be misappropriating private content and copyrighted material when incorporating this data into their platforms. There are already several high-profile lawsuits brought by artists, including authors and comedians, pushing back against the unauthorized use of their art to feed or train AI software.”
AI issues have also been cropping up in the legal industry in recent years. Last year, a Colorado attorney used AI program ChatGPT to assist in writing a motion and the program cited fake cases, which the attorney didn’t catch before the motion was filed.
Montoya also noted an AI software called Do Not Pay AI “is meant to dispense legal advice to users through an app, triggering disputes related to the legality of use and the unauthorized practice of law.”
Also on the practice side, Holland & Hart Partner Jonathan Bender said the legal industry could use AI to research and analyze complex issues more efficiently. “The near future will surely involve using AI to analyze the strength of arguments and courtroom presentations,” he added.
Bills Impacting Businesses
Williams noted the bills from the recent legislative session that may impact businesses the most involve limitations on damages, construction defects, transit-oriented development, requirements to retrofit buildings for environmental, social and governance reasons and property tax relief.
Hendrickson asserted pain points for businesses from this past session stem from bills that may incentivize litigation against perceived regulatory missteps. “These can bog down the system, make goods and services more expensive, and further divide people with different perspectives,” he noted. “While some business perspectives and impacts have been considered, others are not, and that can have some problematic outcomes.”
Some of the bills from this past session could help businesses in the hospitality, food and beverage industries, according to Laszlo. House Bill 24-231 will create a catering class of liquor license, Laszlo said, which is something he noted many have sought over the years.
Tom Werge of Werge & Corbin Law Group said he was happy to see changes to the Colorado Consumer Protection Act failed this past session. “HB24-1014 would have removed the requirement under the CCPA to show a ‘significant public impact.’ Although I regularly litigate on the plaintiff’s side, and have litigated CCPA claims, such a change would have led to a vast increase in the number of CCPA claims brought within small business litigation matters, due to the ability to recover attorney fees and treble damages under CCPA,” he clarified.
HB24-1014 was postponed indefinitely by the Senate Judiciary Committee on May 3, just before the end of the session.
Attorneys who also notified Law Week they were recognized in business litigation by Super Lawyers this year include Henry Baskerville at Fortis Law Partners; Peter Koclanes and David Wilson at Sherman & Howard; Michael Carrigan, Craig Stewart and Christopher Toll at Holland & Hart; Scott Barker, Hugh Gottschalk, Craig May, Habib Nasrullah, Joel Neckers, Marissa Ronk and David Schaller at Wheeler Trigg O’Donnell; Frederick Baumann, Scott Browning, Jessica Fuller, James Lyons, Caitlin McHugh, Michael Plachy, Kenneth Rossman and Doug Tumminello at Lewis Roca; Brett Payton at CP2; Justin Cohen at Brownstein; Ross Pulkrabek at Keating Wagner Polidori Free; Betsy Hyatt, Susie Hardie Jacks, Mike Ogborn and Nicole Quintana at Ogborn Mihm; and Tracy Ashmore and Anthony Leffert at Robinson Waters & O’Dorisio.