Eight Key Litigation Trends

December 5, 2005

Following are key findings in the 2005 Fulbright and Jaworski 2005 Litigation Trends Survey.

1) Litigation Dockets
–Eighty-seven percent of American companies are engaged in some form of litigation in the United States. Twenty percent had one to three cases pending, nearly a quarter had between four and 10 cases pending, and another quarter of respondents had up to 50 cases pending. That still left a full 20 percent facing an average caseload of 50 to 100 litigation matters. Given how much of an equalizer litigation is–hitting all companies regardless of size, industry or regional differences–it seems remarkable that as much as 13 percent of U.S. companies surveyed managed to avoid business disputes. Companies most likely to be litigation-free are those with revenues under $100 million. However, 12 percent of $1 billion-plus companies also reported that they are free of litigation, which may be one of the survey’s biggest surprises.

On average across all sectors, U.S. companies carried a U.S. docket of 37 lawsuits.

2) Sector Specific
–The U.S. healthcare industry had the greatest number of pending litigation matters, with an average of 64 cases. Energy companies were second in line with 49 pending litigation cases, followed by technology/communications (with 42 pending cases) and manufacturers (with 40). Tied for fifth place were insurance providers and real estate companies (with 39 pending cases each). Filling the remainder of the field: finance (34 cases) and retail/wholesale (22 cases).

3) Litigation as a Percentage of Overall Legal Spending
–Among counsel who track litigation costs, about a quarter said that litigation accounts for 21 to 50 percent of their legal budgets; an additional 12 percent reported that litigation expenses accounted for more than 50 percent of the total legal budget. Broken out by size, counsel for 15 percent of mid-market companies and 16 percent of businesses in the $1 billion-plus range reported that litigation consumes more than half of their legal budgets. For companies with revenues under $100 million, that figure dropped to only 8 percent. Translated into the bottom line, nearly a quarter of U.S. companies are spending 2 percent or more of their gross revenues on legal fees; 10 percent of them spend more than 5 percent.

By industry sector, 23 percent of insurance company in-house counsel reported that their litigation budgets account for more than half of their total legal budgets. More than a third of manufacturing and energy companies spend between 21 percent and 50 percent of their legal budgets on litigation; the same is true for more than a quarter of retail/wholesale, health care and technology/communication companies. In contrast, 26 percent of real estate and finance company respondents reported spending less than 20 percent of their legal budgets on litigation.

4) Litigation Cost Averaging
–Respondents had difficulty in averaging costs for specific types of litigation matters, with many saying that costs varied too widely to make hard estimates.

5) Is That a New Suit?
–How much of corporate America’s litigation docket is new this year? Two-thirds of the companies surveyed were slapped with a summons and complaint during the past year; almost a third of them were hit with between six to 20 lawsuits, and 18 percent were hit with more than 21. On average, small companies were hit with only three new lawsuits, while mid-market companies were hit with 17. Businesses in the $1 billion-plus club were served with an average of 65 new lawsuits.

6) Shifting Roles as Plaintiffs/Defendants
–More than half of the companies surveyed are comfortable in the role of plaintiff, filing at least one action in the past year. The average U.S. company initiated 11 new lawsuits and two arbitrations during the past year. Larger companies are more litigious in general. The $1 billion-plus group was two times as likely as their under-$100 million counterparts to commence lawsuits or arbitrations. Finance companies are the most proactive in starting litigation.

7) Who’s Minding the Docket?
–Few U.S. companies don’t have an in-house counsel. Only 8 percent of corporate law departments get by without a staff lawyer managing company litigation matters, while 44 percent had at least one staff litigator.

8) Emerging Lit Pressures
–Asked to identify the biggest litigation-related burden that did not exist three years ago, in-house counsel pointed to electronic discovery, followed by “increased regulatory/compliance” issues, which is a certain legacy of the Sarbanes-Oxley Act of 2002.

Topics Lawsuits USA Legislation Trends Numbers

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Insurance Journal West December 5, 2005
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