2005 Litigation Trends Survey Shows High Rate of Disputes

Business Credit, January 2006 | Go to article overview

2005 Litigation Trends Survey Shows High Rate of Disputes


Fulbright & Jaworski L.L.P.

In its latest annual 2005 Litigation Trends Survey, the international law firm Fulbright & Jaworski L.L.P. has found that litigation has become the great equalizer of the modern corporation. Regardless of size, industry or location, there is certain to be a sizeable number of disputes diverting the resources of American businesses. Nearly 90 percent of U.S. corporations are engaged in some type of litigation, and the average company balances a docket of 37 U.S. lawsuits. For $1 billion-plus companies in the U.S., the average number of cases being juggled at home soars to 147.

This year's Fulbright survey is one of the largest samplings of in-house counsel in the United States and the United Kingdom on Litigation concerns and trends. Fulbright drew responses from 354 corporate counsel (50 from the U.K.), the majority of who held the title of general counsel or chief legal officer. The median-sized U.S. company surveyed reported annual gross revenues of $484 million; companies from 45 states were represented.

Accepting the reality that litigation is a constant in their business lives, close to 90 percent of U.S. corporate counsel have no plans to reduce the number of outside lawyers that handle their cases. The ubiquity of litigation in American business goes a long way toward explaining the overriding concern corporate counsel have with controlling litigation expenses. Indeed, respondents expressed more concern about what they perceived as the high costs of litigation than they did about winning or losing the underlying lawsuits.

Ironically, despite the certainty that litigation expenses will continually accrue, the inherent unpredictability of their pace or size makes budgeting for litigation a difficult task for many corporate counsel.

Even as companies have figured out how to predict spending for other strategic areas such as R&D, technology, or sales and marketing, just under 40 percent of U.S. corporate counsel are still unable to predetermine the costs of managing business disputes, reporting that they could not quantify their litigation budgets in relation to their overall legal budgets. In companies with revenues under $100 million, 17 percent of all counsel surveyed said they had no budget at all for litigation costs. More surprising, over a quarter of corporate counsel in companies with revenues of $1 billion or more did not know their litigation budgets.

To be sure, a great many companies are acutely aware of the extent of their overall legal spending. Of the companies that did track spending (half of the respondents), their average legal, budget was $20.1 million, of which $8 million was directed toward litigation. However, 10 percent of counsel reported that their legal spending accounts for 5 percent or more of their company's overall gross revenues, which for a $1 billion business, would translate into $50 million.

The concern about costs manifests itself across the survey, whether respondents were ranking their five leading litigation concerns or describing their ideal outside counsel. When asked what message they would most like to deliver to their outside lawyers, the number one directive was "control costs." That message took precedence over "win cases," "get results" or an array of other results-driven choices.

"A key value of such a broad survey of in-house counsel is that it gives the legal community an opportunity to step back from the trenches and tap into the mindset of corporate America, for whom litigation can play a key role in an overall business strategy," said Stephen C. Dillard, head of Fulbright's worldwide Litigation practice. "The findings remind us that for our clients, Litigation can be a challenging and costly part of doing business. Litigation is also a risk-reward decision in which costs can be as important as outcomes. Given the emphasis that survey respondents placed on expenses, professional litigators need to work harder with their clients to anticipate, budget and control costs. …

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