USA – ILLINOIS Trends and Developments Contributed by: Steven P. Blonder, Much Shelist
which has led to the current trend in new suits being filed. New types of ERISA-related cases include how retirement plans use forfeiture provisions when an employee departs and whether balances that remain can be used to pay for plan expenses or other costs. Likewise, healthcare plans are an increasing target for claims related to excessive administrative fees and how they account for and obtain prescription drug rebates. ESG and shareholder lawsuits Many businesses, both public and private, have embarked on ESG initiatives in recent years. Some of these plans were large and audacious, whereas others were more modest in scope. Either way, even though companies have traversed through increasing scrutiny from consumers, investors and government agencies in terms of ESG issues, the risk of litigation related to these efforts has never been higher. The rise in these types of suits resulted from: • increased awareness and heightened scrutiny sur- rounding ESG issues; • non-profit organisations using local consumer protection laws (eg, in Washington, DC) that afford standing to sue; and • increased litigation funding that has made the costs of such litigation more palatable on the plain- tiff side. Companies are also being challenged over their ESG initiatives as a whole. As a result, companies may be taking a new approach to laying out their environmen- tal goals – namely, they are not doing so, demonstrat- ing an increasing trend towards “greenhushing” (or being radio silent regarding their approach to envi- ronmental goals). This most certainly does not mean that companies have eschewed setting environmental goals for their businesses. On the contrary, they con- tinue to set goals but are simply not discussing those goals publicly, so as to avoid fomenting litigation. Although engaging in greenhushing may be one anti- dote to the problem of increasing ESG litigation, it also deprives companies of the inherent value under- lying public pronouncements of an ESG programme.
Whether as investors or consumers, many are look- ing to engage with companies that are deemed to be advancing ESG initiatives. By staying silent, compa- nies miss out on these associations and any attendant benefits that may accrue. One path that some companies have engaged in as part of a litigation avoidance programme is to make their environmental statements aspirational rather than definitive. These statements are made in the vein of “we hope to achieve” or “we expect that we will improve” rather than definitive statements espousing concrete, measurable goals. Properly substantiated aspirational claims may prove to be a path to success. However, companies should be forewarned that mere- ly transforming goals into “aims” or putting “want” or “should” in front of a stated goal may not suffice to render that goal aspirational. And, even if the goal is aspirational, is it still definite enough for investors or consumers to rely upon it? If so, it may still be action- able, even if properly substantiated. But what does it mean for a claim to be “properly substantiated”? How much substantiation is needed? Can the substantiation be from an industry group or does it need to be “independent”? These are just a few of the questions that need to be considered in substantiating claims. Best practices would suggest that independence and scientific rigour go a long way in providing a safe harbour for aspirational pronounce- ments. Green marketing has also been a hot source of claims recently. While companies have responded to increas- ing calls for environmentally and ethically sustainable products by marketing their new offerings as “green”, private lawsuits alleging that these efforts are mis- leading or deceptive have multiplied exponentially – a trend that will most probably continue its upwards trajectory. As a result, companies should engage in heightened efforts to avoid making environmental claims that may be overstated, inaccurate, or mis- leading in any way. But with no real defined standards as to what those terms mean, many companies find themselves under attack as a result. This is particularly true with regard
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