Filing a Lawsuit? Being Sued? Your Company Is Not Alone.

Posted on April 21, 2008

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Over the past couple of months, some of my business clients have gotten
their first taste of legal disputes and the legal process—either
through threatening to sue another business or individual, being
threatened with a lawsuit, filing a lawsuit, or getting sued.  These
legal imbroglios are never pleasant experiences for a business.  My
clients often joke that I must love it when they get into these
situations, because it often results in an increase in their monthly
legal bills.  I can assure you, however, that I do not enjoy these
situations any more than they do.  In my opinion, it is almost always
the case that parties to a dispute can, if acting reasonably, negotiate
a better, more mutually satisfactory, and less costly (i.e., legal
fees, court costs, lost time, etc.) outcome than a court.  Good
lawyering should help in this settlement process.

All of this dealing with lawsuits and threatening to sue prompted me to pull this year’s Litigation Trends Survey. The Survey is published annually by the large Texas-based law firm of Fulbright & Jaworski, L.L.P.  In compiling their data, the in-house counsel 253 U.S. corporations and 50 United Kingdom corporations were interviewed in 10 key industries:  financial services, manufacturing, energy, technology, communications, retail, insurance, education, engineering/construction insurance, and real estate.  Forty-two percent (42%) of the in-house counsel surveyed worked for companies with revenues of $1 billion or higher.  Thirty-six percent (36%) of participants worked for companies with $100 million to $999 million in revenue.  Accordingly, the surveyed in-house counsel work primarily for companies that are—by most standards—large, with 65% being publicly traded.  The following are a few facts and statistics that I found interesting:

  • Eighty-three percent (83%) of in-house counsel reported new lawsuits being filed against their companies during 2006-2007—down from 89% of respondents in the 2005-2006 Survey.  At least 25% of respondents reported twenty or more new cases filed against their companies.
  • With respect to companies with $1 billion or more in revenues, 97% of respondents reported new lawsuits being filed against their companies during 2006-2007.  Fifty percent (50%) of these companies had 20 or more new actions filed against them and one-third reported 50 or more new actions filed.  In stark contrast, 44% of companies with less than $100 million in revenue reported no new lawsuits for 2006-2007 and only 2% of these companies reported 20 or more new lawsuits.
  • Forty percent (40%) of respondents stated that their company was hit with at least one lawsuit involving more than $20 million in claims. Among companies in the survey with $1 billion or more in revenue, 62% of respondents reported at least one lawsuit with claims exceeding $20 million.  Only 17% of companies with less than $100 million faced one or more lawsuits with claims of $20 million or more.
  • In-house counsel identified labor and employment matters as the most frequent source of lawsuits, with contract disputes and personal injury cases being the second and third most frequent.
  • Industry groups in the Survey appeared to attract particular types of dispute:  financial services—securities litigation; energy companies—environmental/toxic tort cases; technology—intellectual property/patent cases; health care providers—malpractice lawsuits; insurers—class action lawsuits; and retailers—product liability actions.
  • Two-thirds of surveyed companies initiated at least one lawsuit.  Almost 40% of companies with $1 billion or more in revenue initiated five (5) or more lawsuits.  Engineering and real estate companies brought the most lawsuits, followed by insurance companies, manufacturers, and energy companies.  On a positive note, this year’s Survey did see an overall five percent (5%) drop in offensive litigation by participating companies.
  • Despite the apparent willingness to initiate litigation, 56% of in-house counsel said they settled cases their plaintiff cases prior to trial.  However, companies with less than $100 million in revenue were less likely to settle than larger companies, with only one-third settling their plaintiff cases prior to trial.
  • Sixty percent (60%) of in-house counsel report their companies being defendants of class action lawsuits.  Forty-five percent (45%) of smaller companies are facing class-action lawsuits while 69% of companies with $1 billion or more in revenue are facing such lawsuits.
  • Forty-four percent (44%) of U.S. companies said their annual spending on litigation is $1 million or more—while only 28% of U.K. companies reporting that level of spending.  Only 4% of smaller U.S. companies spent $1 million or more on litigation.  In contrast, 75% of billion dollar companies reported litigation expenses in excess of $1 million.  Manufacturers, insurance firms, and energy companies spent the most in legal fees with 43%, 31% and 21%, respectively, having a litigation budget of at least $5 million.

The Litigation Trends Survey is full of other interesting litigation-related facts and statistics.  For example, the Survey discusses the rise of intellectual property litigation, the costs of the new electronic discovery rules, records retention issues, privacy and data storage and recovery issues related to employee use of company computers and communication devices, alternative forms of law firm billing, and litigation issues particular to international companies.  These other current and future litigation related issues are of interest to companies of various sizes and industries.  I highly recommend reviewing the full Survey to anyone who sets the litigation budget of and/or manages the litigation of a larger company with tens of millions of dollars or more in revenue. 

Russell M. Cunningham, IV, Cunningham Firm, LLC

    

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