Legal Market Overview
After years of speculation and heightened expectations, 2020 marked the year in which once-untouchable big-tech corporations faced an antitrust reckoning. Unsurprisingly, a flurry of lawsuits, deemed the biggest and most smoothly bipartisan antitrust actions since the 1970s, started with Google and Facebook, with more expected to be announced over the next several years.
Bearing in mind the potential for these actions to accumulate and become a political leviathan that roars on for decades, there are two main schools of thought which prevail: on the one hand, some believe tech giants routinely breach already-existing antitrust laws; while on the other, some believe the legal framework needs to be revised or expanded. It remains to be seen which direction the antitrust winds blow. There is also a sense that the scope of this scrutiny may be broadened: “big data” corporations and e-commerce companies which make use of data may also come under the authorities’ radar, alongside digital platforms such as Google and Amazon.
In other news, after years of foreshadowing and expectations of enforcement, the Department of Justice (DOJ) made true on its promise to criminally prosecute “no-poach agreements,” announcing in early 2021 that a grand jury indicted Surgical Care Affiliates LLC for allegedly entering into agreements with two other healthcare companies to not poach senior-level employees. This major development reinforces what many antitrust lawyers have been predicting for years: that no-poach agreement cases are becoming more commonplace from both the private sector and the government.
Covid-19 altered the world of work for most in the world in 2020, and the legal industry is no different. Digital hearings, depositions and meetings may be the new normal—senseless travel, sky-high expenses and the laborious haulage of files can, some say, be avoided in part or in full. That said, many firms also stress the indispensability of developing, building and sustaining client relationships through face-to-face meetings, while others cited the early pandemic travails of Zoom depositions and the virtual impossibility of conducting trials successfully via digital platforms as examples of why we should not read too much into the much-touted work revolution.
The pandemic gave rise to other legal changes as well—even if only on a temporary basis. To confront the novel coronavirus, special allowances were given to healthcare companies to facilitate and expedite cooperation and informational exchange between companies, especially medical suppliers and distributors. For example, in response to the public health crisis which was unfolding, antitrust authorities allowed for otherwise illegal joint ventures to develop vaccines. However, despite the guidance, such leeway in no way grants blanket immunity from antitrust action during the pandemic; federal and state governments have made it clear they remain on the hunt for anti-competitive behavior that is excessive.
As was the case in the aftermath of previous economic meltdowns, there is an expectation that so-called ‘crisis cartels’ may emerge from the looming economic crisis, as firms cooperate and coordinate more in an attempt to battle through decreased demand. At the same time, clients in other adjacent and non-adjacent sectors were in constant contact with firms, seeking advice regarding what constitutes anti-competitive activity and what doesn’t. During the pandemic, one of the main questions lawyers fielded was some variation of: “what can we talk and not talk to competitors about?”.
Last year, we reported that both federal antitrust enforcement bodies in the US, the Federal Trade Commission (FTC) and the DOJ, are perceived to be increasingly politicized. The authorities’ respective antitrust strategies continue to appear divergent and unpredictable. The election of Joe Biden is expected by some to be the catalyst which reverses this trend, following a Democratic Party primary race in which antitrust enforcement became, against all odds, a hot-button issue. Despite these early signs, it is too early in the administration’s life-cycle to make accurate predictions. In the interim, State Attorney Generals have, according to many antitrust groups, really stepped up, filling the void left by the various authorities’ lack of convergence and relative inactivity.
Corporate and M&A:
In the M&A space, 2020 started strong, but the month of March ushered in a three-month pause in deals when initial pandemic closures hit. Deals started up again in June, followed by a surge in the debt markets. To close the year, practitioners reported an unprecedented volume of deals in Q4, attributed in part to uncertainty over the US election results and wanting to get ahead of potential changes in corporate tax rates (now expected with the Democratic victory), as well as pent-up desire to complete some stalled deals and seek new opportunities after months of downtime.
The JustEat/GrubHub merger was the first public M&A deal done after the initial shutdown, and reflects quite accurately the direction the market went—mega-deals were less common, while a number of more modest deals in areas such as tech, gaming, and particularly healthcare were closed. Lawyers are very bullish about 2021, even with potential shifts to a less pro-business approach by Congress and the Biden Administration.
Private equity transactions have followed a trend similar to company M&A. There was a significant slowdown from March to June, then deals picked up again alongside debt markets, and now firms are reporting record deal flows. The explanation lies in a combination of the “dry powder” effect and the possibility of Congress targeting private equity firms with new regulations. Tech and healthcare investments have been bigger than ever throughout the pandemic, and private investment in public equity (PIPE) and special purpose acquisition company (SPAC)-driven deals are way up.
There is much more to say about SPACs, and activity in this space is a common theme in numerous market segments. In particular, SPAC listings have been a newly favored route to market for many emerging companies, and have kept the venture capital community, and its lawyers, extremely busy throughout 2020. Indeed, most lawyers will admit that the year was a good one, with the appetite for certain technology and healthcare assets only sharpened by the Covid-19 pandemic. Sources of investment are also growing, with an increase in family offices, corporate venture funds and sovereign funds, all taking an increasing interest.
The capital markets remained active throughout the pandemic as businesses sought additional liquidity to ride out the crisis. This included strong activity in investment grade, high-yield and convertible debt offerings. Some segments performed particularly well, as 2020 was one of the most active years for high-yield in the last 20 years. Active as a way of increasing liquidity during the first half of the year, high-yield offerings were also a popular way of raising finance for acquisitions in the second half of 2020, particularly in the private equity space.
The commercial lending market saw a slowdown in spring and early summer, though by mid- to late-summer 2020 things were picking up to the extent that the second half of the year was very busy. Much of the legal work over this period involved helping simply survive the pandemic. For many firms, this activity was driven in part by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law in March 2020. However, for many more firms, activity has focused on normal financing deals and amendments done with the same purpose in mind: keeping clients afloat and operating during the downturn.
As one might expect, the recent review period was extremely demanding for corporate restructuring lawyers. The Covid-19 pandemic hit industries such as travel, retail and entertainment particularly hard, and these have consequently been generating a lot of work since March 2020, and are predicted to continue doing so well into 2021 and beyond. The energy sector had already been experiencing difficulties for some time, and these challenges were further exacerbated by the pandemic. Practitioners are predicting that real estate will be the next big industry to go into difficulties, and are anticipating a lot of work in that space in the upcoming research period. As busy as 2020 has been, there is a widespread expectation that the real restructuring peak is yet to come, and firms are anticipating a second wave of work as stimulus decreases and businesses are left to face the reckoning.
Partly as a result of the high volumes of work currently being generated, the use of pre-packaged restructuring arrangements is increasing, and international work also continues to be on the rise. Texas and Houston are well on their way to becoming bankruptcy hubs, with an ever-growing number of cases finding their way there.
In terms of municipal restructuring, the picture is rather different; the research period has been rather quiet with Puerto Rico continuing to dominate the headlines. There were some suggestions from the market that this area was expected to see an uptick in work in 2021 (potentially as a result of the pandemic) but for now this area remains very stable and relatively static. There are, however, set to be some concrete developments in the Puerto Rico matter in the next year, so firms are being kept busy with preparations on this front.
The financial regulatory market is perhaps set to be one of the most affected by the recent presidential election. Across the market, firms expect to see significantly increased activity from regulators, especially the Consumer Financial Protection Bureau (CFPB). Lawyers also noted an expectation of increased enforcement at the Securities and Exchange Commission (SEC). However, despite the Democratic takeover of the Senate, the small size of its majority and the pressure to address other priorities, such as Covid-19 relief, means that new legislation is not expected by most firms. One possible exception is an expansion of anti-terrorism financing regulations to cover domestic terrorism, as a part of the Biden administration’s focus on far-right extremists.
In line with the rest of the transactional market, the challenges presented by the Covid-19 pandemic resulted in a major immediate slowdown for most tax lawyers, with deals eventually picking up in Q4 2020. As one would imagine, reorganizations and restructurings (both bankruptcy and non-bankruptcy related) formed the cornerstone of many practices this year, especially in the retail sector.
While certain industries have understandably been hit harder than others (hospitality, aviation, commercial real estate), private equity capital commitments continue, and new fund formations and public offerings have largely remained strong during this period. In particular, SPAC activity exploded during the recent review period: more than half of all the companies that went public in 2020 did so via a SPAC transaction—a 400% increase from 2019.
The change in administration signals at least some key tax changes on the horizon for corporations and high-net-worth individuals. Biden’s desire to roll back many of the concessions introduced by 2017’s Tax Cuts and Jobs Act would greatly impact the current individual income, capital gains, and payroll tax rates. Corporations would also be subject to a minimum book tax, in addition to a revised headline rate. Also of note, as this edition went to publish, G7 nations agreed to pursue a plan to tackle international tax abuses; another move that has the potential to greatly affect multinational corporates.
In the tax controversy space, transfer pricing disputes continue their upward trajectory, predominantly at the state level, impelled by cash-strapped jurisdictions that see it as a viable and fairly untapped funding pool. The digital economy is also emerging as a highly contentious space, particularly regarding jurisdictional questions of consumer-facing activity. Reflecting on the recent administration change, common wisdom has it that a reinforced and revitalised Internal Revenue Service (IRS) (and other regulators) will only increase the rate of tax controversy engagements at the federal and state level.
Despite the “law and order” posturing of President Donald Trump, the DOJ oversaw a dramatic decline in white-collar crime investigations and convictions during his tenure. According to statistics collated by Syracuse University’s Transactional Records Access Clearinghouse (TRAC), during October 2020 the government reported 282 new white-collar crime convictions, representing a 54.6% drop compared to 2015. Under Trump, the Justice Department pivoted its focus toward immigration, corporate espionage—particularly in relation to China—and drug offenses.
The drop in white-collar crime convictions was further highlighted by the Covid-19 pandemic. In March 2020 federal courts suspended jury trials and grand jury proceedings; in-person appearances were limited; social distancing was mandated; and the courts began remote proceedings. DOJ trials were hit particularly hard due to the difficulties getting suspects and witnesses into court. On the civil side, however, enforcement agencies such as the SEC were able to adapt more easily, switching to WebEx and Zoom for remote hearings relatively quickly. As with most economic crises, a resulting uptick in fraud and financial crime and related investigations is expected by the legal market.
According to some practitioners, President Joe Biden’s Attorney General, Merrick Garland, has a huge task ahead of him: to restore faith in the justice department’s non-partisan enforcement of the law. Speculation is rife in legal circles that Garland will oversee a sharp uptick in prosecutions in the white-collar sphere. With the courts expected to return to some sense of normality later in 2021 and a pipeline of Covid-19 relief-related fraud cases, white-collar defense attorneys in the US await with bated breath the impact of the new administration and the focus of its new Attorney General.
Looking at commercial and civil litigation more broadly, class actions are on the rise across various sectors, driving a lot of activity in the market, especially at the highest level. In particular, environmental mass torts have become increasingly active and product liability cases prove to be a consistent source of complex litigation. While some residential mortgage-backed securities (RMBS) cases remain active, they have become less prevalent, generally speaking. Business interruption disputes have also started to trickle through as a result of the pandemic, and lawyers anticipate that this line of work will become more substantial over the next few years.
The market has seen dozens of truly standout highlights over the review period. Pacific Gas & Electric Company’s ongoing litigation related to wildfires in California starting in 2017 is extremely significant; as are Johnson & Johnson’s product liability cases related to its talcum powder (which allegedly contains asbestos leading consumers to develop cancer) and pelvic mesh products. In addition, PFOA-related litigation is starting to emerge, driven in large part by Robert Bilott’s 20-year battle against DuPont for its use of this chemical in various consumer products, and its subsequent pollution of public water sources.
In February 2020 the Secretary of the Department of Health and Human Services invoked the 2005 Public Readiness and Emergency Preparedness (PREP) act, which protects certain actors, for example vaccine manufacturers, from liability. However, Covid-19 related product liability and workplace exposure litigation has taken place in the past year. In the long run, some defense attorneys have suggested that the role pharmaceutical companies have played in the Covid-19 crisis may result in a shift in public perception, leading to a more positive public image for pharmaceutical companies.
The product liability space could be uniquely affected by the dearth of trials in the past year due to Covid-19. Some firms have taken part in virtual trials, but, as previously mentioned, these have received mixed reviews at best. There have also been mixed insights into how this will affect product liability litigation in the future. Some defense attorneys expect that it may put pressure on the plaintiffs to accept settlements, though others believe it may give the plaintiff bar the opportunity to come up with new strategies.
Following the trend in transactional activity, firms noted that they expect to see more securities litigation related to IPOs, SPACs, and commercial mortgages in 2021. The LIBOR transition is also anticipated to drive work. On the consumer finance litigation side, in 2020 California passed a law creating the Department of Financial Protection and Innovation, a “mini-CFPB” at the state level. This is expected to significantly increase consumer protection litigation in California, which is important as many law firms focused on consumer finance have a solid presence on the West Coast.
Labor and Employment:
Labor and employment is yet another legal market that has seen unique Covid-related challenges. At the beginning of the year, the pandemic paralyzed the disputes space as court proceedings came to a standstill, creating a notable backlog in cases. This has been partly resolved by hearings going ahead virtually but then consensus between the market participants is that this is not sustainable in the longterm.
Lawyers have also been approached to advise on a wide range of work-from-home, layoff, furlough and sick leave policies and regulations. Going forward, some of the most pressing issues in this space will relate to employers’ policies concerning employee vaccinations. Elsewhere, topics relating to the Occupational Safety and Health Administration (OSHA) are more than ever on the forefront of employer’s minds, which requires cross-departmental collaboration between employment lawyers and their OSHA specialists.
Beyond the pandemic, a lot of eyes are on the new administration and the changes it might bring. President Biden made it very clear that there would be more legislative activity on the federal level moving forward, so employers and their legal counsel are gearing up for increased enforcement from the government. In his first day in office, President Biden fired the Trump-appointed National Labor Relations Board General Counsel and is preparing for a pro-union majority. Many expect changes to the union election rules to be one of his priorities.
The immigration landscape has also undergone some significant changes with the election of President Biden. Many welcomed the President’s executive orders which including ending the travel ban, and reunifying families separated at the US/Mexico border. Though there are still obvious fissures in the party, as many in the so-called progressive wings of the Democratic Party believe that the Biden administration has not gone far enough to address the situation on the southern border.
Patent litigators, prosecution specialists and licensing experts across the US reported the outbreak of the Covid crisis in the country as the biggest event in 2020. Like elsewhere, the pandemic forced firms and their clients to quickly move to remote working and caused serious cause for concern in the first weeks of the outbreak, with many of the professional concerns eventually proving unjustified later in the year.
The initial trial delays in district courts and at the International Trade Commission (ITC) stopped growing by the summer, with the ITC in particular doing very well thanks to the absence of jury trials at the commission. Virtually prepared and conducted trials brought a set of challenges with them, but firms have by and large reported a successful adaptation to remote trials, with a few pointing out the advantage that virtual trials can have for younger talent. With technology at their fingertips, a team’s more experienced trial lawyers were and are able to assist their junior colleagues better as the trial is conducted, which allowed the next generation of litigators to take the spotlight in a trial, an option clients are often not comfortable with in traditional trial settings.
The country’s busiest venues have remained largely the same in comparison to 2019, with the Western District of Texas further on the rise thanks to judge Albright’s entrepreneurial spirit and reputation. At the Patent Trial and Appeal Board, firms noted a shift in the success rates of inter partes reviews, with significantly fewer petitions getting instituted.
In the country’s prosecution outfits, vaccine-related matters quickly became a priority in what otherwise remained a busy caseload across the most economically important sectors, with the life sciences, pharmaceutical, technology and electronics industries at the forefront.
The licensing market also remained very active as the appetite for transactions in the US and indeed globally proved robust throughout the Covid-19 crisis. Research and development agreements in the life sciences and in particular regarding medical devices and vaccines saw an unsurprising uptick. Given the successful 2020 that firms across the US were able to close, the number of senior partner moves has not differed much from previous years in spite of the unique circumstances brought on by Covid-19.
This year’s industry focus section saw the introduction of three new ranking tables: Cannabis, Education and Native American law, the first of which has, for several years, been the most requested area of inclusion in this guide.
The US cannabis industry still exists in a legal grey area. Some form of legal recreational and/or medicinal cannabis is now legal in the majority of US states (five more states legalized recreational marijuana in the 2020 elections) though marijuana still remains illegal at the federal level.
As the industry becomes more mainstream and more acceptable, M&A and equity investing has markedly increased, as has the litigation that comes with legitimate consumer businesses on a large scale, namely consumer class actions. Though many institutional investors have not yet given in, many others have jumped at the opportunity to get involved in this potentially lucrative market. For lawyers, this has given rise not only to transactional activity, but also to compliance and risk assessment work as investors and companies are looking to cover themselves in light of the industry’s placement in regulatory limbo. Murmurs of federal legalization have been going on for a while (even during the previous presidential administration) but with so many other legislative and regulatory priorities at present, legalization is certainly not imminent, though may be on the horizon.
One last note on the cannabis industry was its performance throughout pandemic. Indeed, it was an industry that skirted some of the Covid-induced hardships. At the beginning of the pandemic medicinal Cannabis was deemed an essential service, which was a boon to the industry as it meant it could continue to function at full force. Sales and revenue in the industry set records, particularly in the edibles market.
The second new industry ranking is Native American law. In an ever complicated legal and political climate produced by the aftermath of the Trump presidency, firms and native tribes alike have breathed a sigh of relief after Biden’s victory. The Democratic president has re-affirmed the government’s allegiance to tribal sovereignty and rolled back several Trump administration policies which were unfavorable to the sovereignty of Natives.
Finally, in education, the industry has witnessed an impactful shift to online learning bought on by the global pandemic. Partly as a result of digital learning, lawyers in this space are increasingly dealing with significant data breaches and cyber security matters, and thus, in addition to more traditional education sector expertise, firms with strong cyber security and privacy practices will be in a strong position to meet the emerging trends in the market.
Pandemic-related challenges aside, the core work of most firms continues to be civil litigation and investigations pertaining to sexual harassment, historical #MeToo issues with staff, and Title IX and anti-discrimination work. Foreign influence in higher education—particularly influence from China—is also a simmering area of activity.
Looking now to the healthcare market, 2020 was an exceptionally busy year for healthcare attorneys across the board. Regulatory attorneys in particular were faced with an enormous flood of work driven by the onset of Covid-19, with many advising large-scale companies on Covid protocols, testing regimens, and ways to best take advantage of Paycheck Protection Program.
For service providers, 2020 was a difficult year. Many hospital systems were unable to reach sufficient revenues due to a collapse of elective procedures (i.e. dental, certain surgeries, cosmetic procedures). This, in combination with the need to reallocate resources to respond to the pandemic, led to service providers needing cash infusions from whatever sources were available. Attorneys advised provider networks on ways to access federal provider support, with certain attorneys advising specialist hospitals (academic medical centres and children’s hospitals) on ways to navigate the written regulation.
On the transactional front, the medical industry followed the same path as many other industries. The period from March until mid- to late-summer saw a massive downturn in transactions due to dipped revenues and a general focus on the immediate lockdown environment. That said, there was a slight return to the market in the aftermath, with lawyers working on new deals arising from new opportunities, as well as on transactions that were interrupted by lockdown. In general, consolidation continued, with large providers continuing to create larger networks. Vertical consolidations (i.e. payer/provider combos) also continued, with attorneys expecting the appetite in this regard to persist.
Looking to the future, the rise of telemedicine was rapidly accelerated over the review period. This has led to firms investing heavily in skill sets relating to technology and healthcare regulation. Most believe that the major issues facing telehealth are threefold: first, the question of the reimbursement scale; second, whether or not the current regulatory environment, which permits cross-state telehealth and is secured by state waivers, will persist; and third, determining which forms of care best suit the medium. Most of these issues will not be addressed in regulation until the latter half of 2021 or early 2022. Reimbursement scaling—which payers primarily base on the Medicare Side B scale—will be laid in place during the new administration’s reforms to federal healthcare plans, but those will not occur until the effects of the pandemic have further subsided. This goes doubly for state regulatory changes, which will not shift until the need for telehealth due to the pandemic is sorted. Expect firms to continue to bulk up here, with regulatory work over the next two years and potentially litigation in the later end.
The pandemic has also had a tremendous (and rather obvious) effect on the insurance industry. Lawyers have reported a litany of business interruption claims, and have also seen an uptick in cyber-related claims and ransomware attacks due to people spending more time on computers. As for historical work, environmental claims have kept pace as have natural disaster and hurricane-related insurance claims, and opioid crisis-related litigation. In particular, there has been an acceleration in the legacy market, and insurance companies are increasingly passing off the work to professionals who manage long-term liabilities.
While the oil and gas industry is notoriously susceptible to external influences, including geo-political ones, and has had many ups and downs over the past few decades, 2020 was, by any measure, an annus horribilis for the sector. The Covid-19 pandemic sent shockwaves through the industry, hugely affecting the delicate equilibrium between supply and demand, and in turn oil prices. Almost overnight global demand was reduced to an unprecedented low, with air travel coming to a virtual standstill and indeed automotive travel also hugely reduced, as many countries initiated a “stay at home” order. While the global pandemic was primarily responsible for the huge downward pressure on oil prices, an already deteriorating situation was made worse, and ultimately reached its nadir, in April 2020 when the price for West Texas Intermediate turned deeply negative—falling as low as -$37.63 per barrel—as a result of the price war between Saudi Arabia and Russia that broke out on March 4 2020 due to the collapse of the OPEC+ agreement. And although oil prices have since rebounded considerably, hovering in recent months around the $55 mark, demand looks set to be significantly reduced for some time yet, despite the optimistic news of viable vaccines.
As a result of the downward pricing pressure, as well as the general uncertainty in the market, there has been a distinct lack of major M&A activity in the sector. And while there have been distressed opportunities to be had, as well as in the context of companies disposing of non-core assets, the misalignment between buyer and seller expectations has considerably dampened transactional activity, particularly in the upstream space. Indeed, to some extent, the law firms that have been most active over the past 12 months have been those which have effectively been able to leverage their broader insolvency capabilities to provide counseling to industry side participants, as well as private equity portfolio companies, on balance sheet restructurings, as well as in the context of formal insolvencies.
The economic pressures on the sector have also continued to accelerate the pivot of many traditional fossil fuels clients towards more sustainable energy sources and a commitment to a reduction in their carbon footprint. Consequently, many law firms with traditional oil and gas focused clientele have increasingly been handling transactional and commercial work outside of their core business areas of focus, and have followed these clients as they have become necessarily mindful of losing their investor base. This change in mindset was already established prior to the pandemic; however, it has undoubtedly accelerated and coalesced opinion behind a “greener economy”, in part, at a fairly basic but important level due to the respiratory impact of Covid-19. There now seems to be a global collective will to utilize renewable energy sources and to attempt to limit carbon emissions. Environmental, social and governance (ESG) funds are growing in popularity, with retail investors increasingly eager to deploy their capital into investments which align, not only with their own personal values, but which are also currently, in general, providing a decent yield.
Following four years under the Trump administration where renewable energy growth in the US occurred, in spite of, rather because of federal policy decisions, Joe Biden’s inauguration as the 46th President of the US is likely to further galvanize the sector (indeed the US has already rejoined the Paris Agreement) given his commitment to climate change and his pledge to focus on solar and wind energy projects and jobs. And while it is clear that his policies will not perhaps be as “radical” as some of those proposed by factions within the party (for example, the much vaunted and controversial “Green New Deal”), the Democratic control of both the House of Representatives and Senate will ultimately allow him to pass legislation without too much opposition from the GOP.
The effects of the pandemic were also significant in the energy and infrastructure projects space. A number of big projects were paused, although by the time of our research the vast majority had picked up again. There is certainly money out there though and lots of firms reported a very busy second half of the year. In terms of work types, the Trump administration put a heavy focus on conventional power, as so there is a lot of that activity ongoing. However, the general consensus is that market forces are a much bigger driver than government intervention in projects, and so there was a fairly significant market share of renewables activity as well. Most expect the market to shift even more heavily toward renewables under the Biden administration.
Save for cargo airlines, the pandemic’s grounding of fleets around the world impacted heavily on nearly every airline in the world. With airlines sorely in need of liquidity, aviation attorneys have been busy assisting with the negotiating and drawing down of loans; postponing and canceling aircraft orders; rescheduling aircraft leasing commitments; and realizing the value of fleets through sales and leasebacks.
Specialist aviation lawyers also remained busy in relation to aviation finance disputes. High-profile examples include the March 2015 crash landing of an Air Canada A320 aircraft, as well as claims arising out of a 2019 accident at Russia’s Sheremetyevo Airport in Moscow. In addition to their work on high-profile airline disasters and personal injury and wrongful death lawsuits, aviation litigators were additionally active in relation to Covid-19 issues, such as the recovery of unpaid rent and maintenance reserves.
As courts were greatly affected by the consequential social changes of the pandemic, US law firms likewise adjusted their operating procedures to become fully remote; while clients moved ahead with litigation, legal practices successfully transitioned alongside their aviation and aerospace clients to fully digital platforms, continuing to file motions, hold depositions and create productions during trial.
Distress was also inflicted by the pandemic on both US railroads and trucking companies. As volumes at ports fell, so did intermodal volumes (containers that move between transportation modes, such as from trains to trucks).
Meanwhile, the rail and road transportation market remained buoyant in relation to catastrophic injury cases, dealership litigation, diesel-related issues, franchising disputes and product liability litigation. High-profile examples include automakers facing diesel-related disputes, as well as airbag technology-related litigation.
On the regulatory side, the rail transportation industry is in a state of significant transition, with the Surface Transportation Board (an independent federal agency charged with the economic regulation of various modes of surface transportation, primarily freight rail) considering a multitude of regulatory reforms that could redefine the regulatory landscape. Major litigation in the regulatory space has included Brotherhood of Maintenance of Way Employees v. Federal Railroad Administration, which cleared the way for railroads to implement new automated track-inspection technologies.
Even before the arrival of Covid-19, the shipping industry was in the midst of its worst recession in modern times; naturally, this was further deepened by the global pandemic. As a result, firms have seen an increased focus on extension, restructuring and enforcement options, particularly as asset values gradually rose to a level that enabled lenders to recover a more substantial proportion of their loans.
Media, Technology and Telecoms:
Telecoms was one of the few industries that actually underwent growth during the Covid-19 pandemic. As mentioned above, telemedicine has seen a meteoric rise as a product of the pandemic. Lawyers have also reported a pointed focus on rural connectivity. Both areas are viewed politically as fairly non-partisan and are expected to continue under the Biden administration.
On the regulatory front, lawyers expect some of the tech-driven tensions between China and the US to calm. They are also gearing up for a reversal of Trump’s emphasis on deregulation in the telecoms sector. Transactions lawyers in this space were busiest with spectrum and infrastructure asset transactions, though the Sprint and T-Mobile merger dominated the headlines in the market.
A bit of an outlier in this section, though the area media and entertainment was indeed heavily impacted by the pandemic, it has been #MeToo claims that have drawn the most attention to the sector. Harvey Weinstein’s abusive behavior alone gave rise to numerous issues concerning the ownership of his assets and the liability of his colleagues. Cases are also arising from production companies and associations distancing themselves from people such as Woody Allen and Roman Polanksi, whose names have fallen into greater disrepute due to the movement.
Despite a brief pause as the implications of the Covid-19 pandemic were fully digested, technology transactions lawyers had a busy year. As reflected in booming stock market valuations, the technology and life sciences industries were deemed as likely beneficiaries of the crisis. This fed into the work of lawyers, not only in providing M&A support, but also in terms of technology collaborations, joint ventures, outsourcing deals, and IP commercialization agreements, particularly in areas such as fintech, healthtech, and (following the US Presidential elections) cleantech.
Fintech was a rapidly growing sector before 2020, and the Covid-19 pandemic only helped accelerate the uptake of digital payments and investments. “Five years of advances in the space of one year”, was a common refrain throughout the market. The overlap between regulations and technology was also on display with the $2.2trn CARES Act. The roll-out of the Act’s $1,200 cash payment to US taxpayers, as well as other measures, demonstrated the importance of the country’s existing fintech infrastructure. Further advances will surely follow. Unlike many other emerging technologies, the interplay with regulation is a key consideration, a fact not lost on the top fintech legal practices, who combine a potent mix of regulatory and transactional expertise. The increasing mainstream acceptance of cryptocurrencies, and an anticipated growth in regulations from President Biden’s administration, will only add to the demand for specialized fintech expertise
Tied up in any overview of technology and advertising is a growing emphasis on cyber security and privacy. There has been a fair bit of movement between firms in recent years, as most practices are trying to bolster teams in this area, as it is of increasing importance to clients. Firms have been hiring lawyers with data privacy class action litigation expertise as they are expecting an increase in this on the back of the California Consumer Privacy Act (CCPA).
The CCPA was referred to by some as a landmark in privacy legislation, if for no other reason, because it is expected to set the stage for other states to introduce similar legislation. A federal law concerning data privacy is looking unlikely to materialize in the near future, though, there is demand for this from companies as having to comply with fragmented regulations across the country.
As was said approximately 14 times by different attorneys in interviews, in Real Estate, 2020 was a tale of two cities. Both dirt and finance lawyers report that the previously buoyant transactional market came to a very sudden standstill around March, the point at which the pandemic began to take hold in the West.
The market was faced with unprecedented levels of uncertainty as acceptance of the new reality began to set in; though firms report that some degree of normality returned during the second half of the year. Indeed, many enjoyed a particularly fruitful November and December owing to simmering demand, an abundance of unspent capital and excess reserves for lenders.
Many real estate lawyers anticipate that 2021 will be a return to normal and have enjoyed a strong start to the year. Nevertheless, both the short and long-term impacts will, of course, continue to be felt. In particular, real estate teams expect a significant uptick in workouts and distressed debt matters, especially in the retail space which has seen its long-term, gradual decline accelerated due to the pandemic.
The office and hospitality sub-sectors have also been significantly impacted though the expectation is that—unlike retail which already had one foot in the grave—both markets will inevitably bounce back to some extent. Whether they are able to return to their pre-Covid levels of prosperity is uncertain given that recent strides in online conferencing adoption have presumably ushered in a long-term rise in home working and a decline in the necessity of business travel.
Given the shift towards online shopping, a trend significantly bolstered by pandemic, the desirability of industrial and distribution assets continues to be at an all-time high. Elsewhere, residential assets have understandably been more resilient to market conditions than those in the commercial space; the overall market has been relatively unaffected and by all accounts, the recent trend towards multifamily projects has continued to gain momentum.
The ability of a REIT to succeed in this past year was centered primarily on the strength of potential tenants as well as the quality and status of the underlying real estate assets. As such, the businesses that succeeded over the past year tended to be those unaffected by the pandemic. As mentioned above, industrial and logistics had a banner year, as did healthcare and data centre REITs; however, office, hotels and entertainment struggled with closed businesses. The general consensus with these battered asset classes is, although there is uncertainty with what comes next, they are still structurally strong, with only certain sub-classes (i.e business hotels) that will be forever lost.
Going forward, potential hotbeds for investment and legal work may be mortgage REITs, single-family home, entertainment and a few unexpected classes such as cold storage. Also, cannabis REITs, while not a well-ingrained class, are becoming more prominent and may see growth alongside the US cannabis legal market.
In the construction market, the impact of Covid-19 was mitigated in most states by construction being deemed an essential business and outdoor work being able to continue through the shutdown. However, a number of lawyers reported that projects saw delays due to the decreased availability of materials and labor. For projects whose construction was already well underway this was not too disruptive but delayed the start of some small- and mid-size work.
On the contentious side, a lot of clients are asking for advice on potential issues stemming from project delays and assessing whether Covid-19 is to blame or not, but most of these are at an early stage. Courts were operating at extremely limited capacity, so there is a backlog of cases, some of which are now being seen remotely.