I have been litigating more in the past year and a couple of months. Why? What does this mean for me, my clients, my friends, and the business world at large?
Stepping back for a minute led to the following conclusions all businesspeople need to consider when thinking about their business and legal strategies going forward.
Declining Volume vs. Escalating Severity For The Fortune 1000 But Not For SMBs
Businesspeople need to grasp the nature of modern risk. For larger companies, we are witnessing a fundamental shift where a decreasing number of filings masks a sharp increase in the financial magnitude of individual claims. Therefore, businesspeople need to avoid complacency because defending a single high-stakes matter can destabilize a company’s financial condition.
The ability to distinguish between the frequency of litigation and the escalating severity of exposure is imperative. When the percentage of corporate counsel leaders feeling “very prepared” for litigation drops from 46% to 29%, there is a problem. Tightening budgets is a lame excuse for a lack of preparation. On the other hand, the refusal of larger companies to hire small to mid sized firms that need to be more proactive and engaged is a self-inflicted wound.
But much of the business world does not live in this lofty space. SMBs will continue to face the same litigation issues they always have with a greater mixture of breach of contract/collections matters with economic certainty the “new normal.”
The Technological Risk Frontier: AI Integration and Evidentiary Challenges
Artificial Intelligence is an operational engine that carries significant legal weight. AI offers unprecedented efficiencies and novel liabilities. High-level internal and external “guardrails” are mandatory. Failure to address how AI impacts a business of any size is not acceptable.
For business owners, the strategic risk lies in the gap between the speed of AI adoption and the maturity of the legal frameworks designed to govern it. Put a little differently, tension between utility and liability will continue to persist. Although companies want their legal counsel and their employees to use AI as cost reduction measures, they are unable to manage the risks emerging from AI deployment.
Businesspeople need to understand why their attorneys are always warning them about AI. Here is an example businesspeople need to appreciate. New evidentiary standards are now being developed. Attorneys must explain complex issues succinctly to their clients (and judges) in ways they did not need to do so a decade ago. Here are four generic issues that can be explained easily to clients:
- Absence of Human Authorship: AI-generated materials lack a human creator, complicating testimony regarding intent and the application of traditional legal standards.
- Opacity of Provenance: AI outputs often lack a clear audit trail, raising hurdles for admissibility and authentication in federal and state courts.
- Proprietary Exposure: Discovery requests targeting AI processes can expose sensitive algorithms or violate third-party non-disclosure agreements.
- Fictional Citations and Hallucinations: The phenomenon of “hallucinations”—where AI generates plausible but false data—has led to fictional citations in filings, resulting in judicial sanctions and severe reputational damage.
Attorneys need to be sympathetic when explaining how AI impacts them. Clients do not need more legal issues to worry about.
Data Sovereignty and Privacy: The Primary Driver of High-Cost Litigation
Data breaches and privacy violations represent the single largest category of high-cost litigation. Total class action settlements reached $21 billion in 2025. This concern is troubling to businesses of all sizes although only the larger companies are generally subject to the dramatic rise in data privacy class action lawsuits.
Businessowners must also be aware of a newer wave of privacy litigation. Plaintiffs are leveraging the federal Video Privacy Protection Act to target web analytics pixels and replay code. Additionally, state-level biometric laws (particularly in Illinois) and the Genetic Information Privacy Act (GIPA)—which saw over 25 cases filed in early 2025—represent a growing frontier of liability with steep statutory penalties.
Regulatory Realignment: The State-Level Surge Is Real
The Supreme Court’s decision to overturn the “Chevron doctrine”, which granted deference to federal regulatory bodies when performing their particular tasks, has fundamentally shifted the balance of power. On the federal level, by removing mandatory deference to federal agency interpretations, the Supreme Court provided a “green light” for private litigants. All litigants now have a significant incentive to challenge agency rules in court, which will lead to a more litigated regulatory environment.
But the real shift is a corresponding increase in state regulation in all states. With the federal government under attack from both itself and private litigants, all states now have additional regulatory and cost burdens placed on them. While each state will prioritize its own issues, the rise of state regulation as a general proposition is inevitable.
For companies with operations and customers in multiple states, the difficult task of complying with multiple regulatory regimes just became that much harder.
Intellectual Capital: The Strategic Pivot to Trade Secrets
As non-compete agreements become a “relic of the past”, the protection of a company’s “secret sauce” or “crown jewels” has shifted dramatically toward trade secrets. Companies are increasingly moving away from patents because they require public disclosure.
The federal 2016 Defend Trade Secrets Act (DTSA) has accelerated this trend by providing a federal cause of action for trade secret theft with a heavy hammer for plaintiffs: seizure of goods.
As a quick reminder, trade secrets offer three distinct strategic advantages:
- Confidentiality: No public disclosure is required, preserving the competitive advantage indefinitely.
- Unlimited Duration: Unlike patents, trade secrets have no expiration, allowing perpetual protection for formulas, customer lists, and algorithms.
- Economic Breadth: They protect the underlying “business methods” and proprietary technology that are now central to a firm’s valuation.
Intellectual property has been primary battlefield for competition for more than a decade now. Businessowners must implement a framework to manage this and other emerging risks.
Effective Risk Mitigation: Do Something!
A reactive legal posture is a threat to capital. Leadership must move from passive monitoring to risk mitigation.
Let’s be also real. This is the same mantra recited by attorneys around the world on an annual basis. 2026, however, appears to be an unusual year in that we live in (A) an era of profound regulatory unpredictability and (B) the AI wave. One of the best books addressing the intersection of AI and regulatory necessities is The Coming Wave by Mustafa Suleyman, a co-founder of DeepMind (acquired by Google) and the CEO of Microsoft AI. Read it.
David Seidman is the principal and founder of Seidman Law Group, LLC. He serves as outside general counsel for companies, which requires him to consider a diverse range of corporate, dispute resolution and avoidance, contract drafting and negotiation, and other issues. He can be reached at david@seidmanlawgroup.com or 312-399-7390.
This blog post is not legal advice. Please consult an experienced attorney to assist with your legal issues.
Photo credit: Picture created using Gemini
