AI-Driven Legal Tech: The Untapped Opportunity in Class Action Lawsuits

The legal landscape is undergoing a seismic shift, fueled by soaring class action settlements and the rapid adoption of AI tools that are transforming how disputes are managed. With class action settlements surpassing $40 billion annually since 2022—peaking at $66 billion in 2023—law firms, corporations, and investors are racing to leverage AI-driven legal tech to gain an edge in this high-stakes arena. Nowhere is this more critical than in identifying and capitalizing on emerging trends like PFAS litigation, reverse discrimination claims, and data privacy disputes. For investors, the question isn’t whether to bet on this space—it’s how to do it before the mainstream catches on.

The Perfect Storm: Class Actions and AI Converge

Class actions are no longer niche legal battles. They’ve become a multi-billion-dollar battleground, with settlements hitting $42 billion in 2024 alone. The Duane Morris Class Action Review 2025 identifies three megatrends driving this boom:
1. PFAS Litigation: “Forever chemicals” are fueling billion-dollar lawsuits, with 2024’s largest settlement allocating over $1 billion to attorneys’ fees alone.
2. Reverse Discrimination Claims: Post-Students for Fair Admission, plaintiffs are targeting corporate DEI programs, with jury verdicts already favoring majority-group plaintiffs.
3. Data Privacy Lawsuits: Website tracking and biometric data cases are surging, as amended laws like Illinois’ BIPA shift focus to internet-era privacy violations.

These trends aren’t just legal headaches—they’re goldmines for AI innovators. Consider how AI tools are already reshaping the game:
- Predictive Analytics: Platforms like CoCounsel analyze historical case data to predict outcomes, enabling firms to settle cases early or litigate with precision.
- Document Automation: AI reviews millions of contracts, compliance records, or PFAS-related supply chain data in seconds, identifying vulnerabilities before they become lawsuits.
- Risk Mitigation: Companies like NetDocuments use AI-powered DMS 2.0 systems to flag non-compliant clauses or impending PAGA penalties, reducing exposure.

Why This Is an Investor’s Dream

The marriage of AI and class action litigation creates a compounding value cycle:
1. Cost Efficiency: Law firms using AI cut costs by 30-40%, allowing them to take on riskier cases (e.g., PFAS) that offer higher rewards.
2. Early Detection: AI identifies emerging trends (e.g., reverse discrimination claims) before they hit headlines, giving investors a first-mover advantage.
3. Scalability: As data privacy and ESG-related class actions grow, AI tools can handle the volume, turning legal tech companies into indispensable partners for corporations and plaintiffs alike.

The Winners—and Losers—to Watch

The firms thriving here aren’t just tech startups. They’re integrating deep legal expertise with cutting-edge AI:
- CoCounsel (Thomson Reuters): Its AI-driven research and drafting tools are now used by 67% of Am Law 100 firms.
- NetDocuments: Its DMS 2.0 platform, with semantic search and compliance automation, has seen a 40% YoY revenue jump.
- Reverse Discrimination Analytics (RDA): A nascent player using AI to map DEI policies and predict liability risks for corporations.

Meanwhile, companies lagging in AI adoption—like traditional law firms or manufacturers still using PFAS—are prime targets for lawsuits. Investors should short stocks in sectors with PFAS exposure (e.g., ) and long the tech enablers.

Risks? Yes—but They’re Manageable

Critics cite ethical concerns, data security, and the “black box” nature of AI. But the American Bar Association’s 2025 guidelines on AI use—and the 96% of lawyers who insist on human oversight—are mitigating these risks. The real threat? Failing to act.

Act Now—or Get Left Behind

The writing is on the wall: Class actions are here to stay, and AI is the only way to navigate their complexity. Investors who bet on AI-driven legal tech now will profit from settlements, corporate risk management fees, and the inevitable consolidation in this space.

The time to act is now—before the mainstream realizes this is the next trillion-dollar frontier.

Ben Levisohn
Investment Strategist