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Article Excerpt
Companies are seeing a litigation wave that corporate counsel expect to swell in the coming year, according to respondents of the 2009 Fulbright & Jaworski L.L.P. Litigation Trends Survey. Corporate counsel say they are steeling themselves for a big year of litigation with 42% of U.S. respondents anticipating an increase in legal disputes their companies will face in the next 12 months. That is up from 34% of last year's respondents. The expectation comes during a year when 83% of U.S. respondents reported that new litigation has been commenced against their companies in the past year, up from 79% last year (see also Fulbright & Jaworski L.L.P.).
In the year to come, respondents from large-cap companies reported the highest expectation of litigation, with 52% forecasting an increase in legal disputes, while 47% of public company respondents foresee a jump in disputes. The economy was cited as the primary reason for these expectations by 38% of U.S. respondents and 34% of U.K. respondents.
More than one-third of companies say the economic downturn has resulted not only in an increase in their litigation caseloads, but also their use of alternative fees. Tighter cost control, more than anything else, is the most important way in which the economic crisis has affected litigation management, respondents say.
"Generally, litigation rises in an economic downturn as regulators tend to step up enforcement, laid-off workers head to court and companies need to file more suits in order to collect on money owed," said Stephen C. Dillard, head of Fulbright's global litigation practice. "Perhaps most telling about this year's results is that companies across the spectrum expect no substantial decreases in any area of litigation."
This is the sixth year that Fulbright has polled corporate law departments in the U.S. and U.K. on the state of global litigation. The survey, initially launched by Fulbright in 2004, is the largest canvas of corporate counsel on litigation issues and trends. Litigation: Where Has it Gone? Where is it Going? Companies agree on what is bothering them most. From small-cap to large-cap, from private to public, from the U.S. to the U.K., the main problems are the same: In light of the downturn, companies face big increases in bankruptcy, contracts and labor/employment litigation. More modest increases have been cited in intellectual property, insurance and regulatory actions.
Yet, while contracts and labor/employment actions affect companies across industries, the bankruptcy ground swell has left one industry - healthcare - relatively untouched, with only 6% of healthcare respondents reporting a rise in bankruptcy and reorganization litigation.
What may lie ahead? Regulatory investigations and whistleblower allegations are expected to eat up litigation resources in the year ahead. Looking to 2010, 16% of all respondents (and 23% of large-caps) say they expect the number of internal investigations involving their company to increase. Industry-wise, approximately 20% each of financial services, insurance and technology companies expect internal investigations to rise in the coming year. This tracks expected increases in whistleblower cases: 24% of all respondents and 31% of large-cap companies expect the number of claims brought by whistleblowers in their industries to go up. A Brief Look Back In both Fulbright's 2006 and 2007 surveys respondents reported declines in actual litigation filings. Then, in last year's survey, corporate counsel anticipated an uptick in new actions and government probes.
Last year's predictions were right. Large-cap companies took the brunt of big cases during the past 12 months, with 39% reporting having faced one or more $20 million-plus suit last year, and a striking 54% of large-caps reporting having a case go to trial in the past 12 months. (In fact, large portions of companies across industries faced trial last year, with the exception being real estate companies, of which 13% went to trial.)
With bigger size sometimes comes bigger payouts: Of the 97 large-cap companies that had a case go to trial last year, 15% report higher damage awards than prior periods versus 2% of large-caps reporting lower awards.
On the regulatory front, one-third of respondents report increases in external regulatory inquiries in the past three years. However, nearly half of U.S. companies (47%), report having retained outside counsel for assistance in government and regulatory investigations. When broken down by size and industry, 50% of large-cap companies and a notable 62% of healthcare companies report retaining outside counsel for assistance in government and regulatory investigations. The rate of regulatory actions and investigations was far lower on the other side of...
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