Corporate Litigation in U.S. Growing Sharply for Large Companies

August 23, 2004

Believe it or not, American businesses may have become a tad less litigious in the past three years.

In a new survey of national litigation trends by law firm Fulbright & Jaworski L.L.P., the average number of cases pending among U.S. companies has dropped from 16 to 15 since 2001, a decrease of 6.3 percent.

But before anyone hands out the friendship bracelets, consider that the docket has meanwhile grown sharply for larger corporations. Companies with gross revenues of $1 billion or more reported that their median number of pending cases was 86, up from 79 cases in 2001. That’s a jump of nearly 9 percent. Moreover, 41 percent of in-house attorneys canvassed believe that the pace of lawsuits will continue to rise.

Fulbright’s study of 300 general counsel found that corporate litigation is hardly just a defensive measure: 88 percent of companies said that they initiate lawsuits at least some of the time. Only 12 percent said they never bring an action as plaintiffs.

This is the first time that Fulbright has surveyed corporate law departments for their views on the state of litigation in the U.S. Of the 300 respondents, 83 percent identified themselves as general counsel or chief legal officer, the rest as staff attorneys.

“Our primary goals with this survey were to identify emerging litigation trends and to assess the current litigation concerns of U.S. corporations,” said Steve Dillard, head of Fulbright’s worldwide litigation practice. “We wanted to understand the primary factors driving corporate caseloads, but also current thinking on litigation economics, technology, the efficacy of mediation and arbitration, and certainly not least, general counsel attitudes toward outside counsel.

Companies from 41 states were represented in the survey, with the heaviest concentrations in the Midwest, Texas, California, and New York, as well as Southern and Atlantic states. The median-sized company had annual gross revenues of $600 million, but that average reflected a broad range of enterprises: 30 percent reported revenues of under $100 million, while another 30 percent had revenues of $1 billion or more, including 18 percent with sales north of $2 billion. Eight primary industries were represented: manufacturing, energy, financial services, health care, technology/ communications, retail/wholesale, real estate, and insurance.

Suffice it to say that U.S. companies are litigation-ready: 89 percent of the in-house counsel surveyed said their companies employ at least one full-time lawyer managing litigation. Almost a third of responding companies have three or more in-house litigation attorneys; among larger companies, 58 percent said they maintain at least three staff litigators. Financial industry companies report maintaining the largest number of staff litigation attorneys, followed by companies in insurance, energy, and manufacturing. Real estate, wholesale/retail, and tech/communications companies employ the least number of in-house itigators. Regionally, the greatest concentration of staff litigators was among companies based in the Northeast, whereas companies in the South had the fewest.

Litigation staffing is unlikely to retreat any time soon: 97 percent of in-house counsel reporting said they expect the number of staff litigators to remain steady or to increase in the near future.

What’s Next?
Companies are bracing themselves for a world of growing disputes. Only 13 percent said they expect their litigation caseload to decrease in the future, while more than three times as many — 41 percent — believe that the number of cases will go up, and 46 percent said the caseload will remain the same.

“Unquestionably, there’s going to be change. Law firms are being asked to break with tradition on hourly fees and become more nimble by consolidating and tightening the litigation process,” said Layne Kruse, who heads a group of Fulbright partners examining emerging issues in litigation.

Fulbright’s report cited a few specific trends on the horizon — more class actions, earlier settlements via arbitration/mediation, more litigation in general, greater use of technology in case management, increased cost in litigation, and more tort reform.

Founded in 1919, Fulbright & Jaworski L.L.P. has approximately 900 attorneys in 11 offices in Houston, New York, Washington, D.C., Austin, Dallas, Los Angeles, Minneapolis, San Antonio, Hong Kong, London and Munich. The firm provides legal services to both domestic and foreign clients worldwide.

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