The GP said the quiet part out loud. They are so worried about lawsuits that they'd rather make the job market worse for everyone (including themselves) than risk a lawsuit over the most basic feedback. The product of a low-trust society.
These lawsuits aren't a myth, if you hire a lot of people it'll eventually happen, even if you're not violating any laws. The lawsuits, even when you win, waste time and money. Giving reasons, especially customized "human" responses is absolutely going to increase your chances of being sued.
As you said, lawsuits take a lot of time and money. Individuals don't have that and would prefer to settle things privately. But if they don't trust institutions to do that, then the only thing to trust is the contract of a lawyer.
It did not take long for one of them to try to turn it against me with threats. We would have easily won the case, but having a lawsuit hanging over my head and a target on my back as a liability for the company was not a good feeling.
I no longer give specific feedback.