Litigation as Corporate Reality
Key Findings in the 2005 Fulbright & Jaworski 2005 Litigation Trends Survey:
Litigation Dockets
Eighty-seven percent of U.S. companies are engaged in some form of litigation in the U.S. Twenty percent had one to three cases pending, nearly a quarter had between four and 10 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. Companies most likely to be litigation-free: those with revenues under $100 million. On average, U.S. companies faced 37 lawsuits.
Sector Specific
The U.S. health care 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 pending cases) in third and fourth. Tied for fifth were insurance providers and real estate companies (with 39 pending cases each). By a large margin, companies in the technology/communications sector were the most likely to escape the reality of litigation.
Overall Legal Spending
Litigation is not eating up all of the legal costs in corporate America, though it is a significant chunk. 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 over half of their total legal budgets. Over 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/communications companies. In contrast, 26 percent of real estate and finance companies spend less than 20 percent of their legal budgets on litigation.
Litigation Cost Averaging
Personal injury actions are the most expensive cases on average to litigate, followed by intellectual property cases, regulatory matters, contracts claims, and employment actions.
Is That a New Suit?
Two-thirds of the companies were slapped with a summons and complaint during the past year; almost a third of them were hit with between six to 20 suits, and 18 percent were hit with more than 21. Size seemed to matter: on average, small companies were hit with only three new suits, while mid-market companies were hit with 17. Businesses in the $1 billion-plus club were served with an average of 65 new suits.
Leading Litigation Subjects
Despite the dramatic headlines about corporate corruption, the top two slots on the in-house litigation docket are contracts claims and labor/employment matters. The third most frequent is personal injury actions. Rounding out the top five: product liability and intellectual property disputes.
A snapshot of each sector reveals more of a spread: the most frequent type of case pending against health care companies was professional services litigation, whereas insurance litigation topped the list for insurance companies. For manufacturers, product liability cases were most commonly pending, while real estate companies face personal injury lawsuits. The most common cases for other industries were: energy and finance (contracts); technology/communications (labor/employment); and retail/wholesale (split equally between contracts and labor/employment).
Emerging Litigation
Asked to identify the biggest litigation-related burden that did not exist three years ago, in-house counsel pointed to electronic discovery as the number one headache, followed by “increased regulatory/compliance” issues, which is a certain legacy of the Sarbanes-Oxley Act of 2002.
Counting the Days
Nearly half of U.S. corporate counsel reported that they track the time it takes to resolve a legal matter. Personal injury cases had the highest average (358 days), followed by intellectual property claims, which took 225 days on average. Next in line were labor/employment claims (161), regulatory actions (146) and contract disputes (138).
Shifting Roles
More than half of the companies surveyed are comfortable as plaintiffs, filing at least one action in the last year; the average U.S. company initiated 11 new suits and two arbitrations during the past year. Finance companies are the most proactive in starting litigation.
Results Matter Most
A successful finish is more important than how fast they get there. Asked how their success is measured, more than 50 percent identified good results as the number one benchmark. Following in the distance were cost efficiency (36%) and avoiding trials (14%).
Fulbright & Jaworski’s 2005 Litigation Trends Survey was conducted during June and July of 2005 by Greenwood Surveys. Companies from 45 states were represented in the survey, with the heaviest concentrations from the Midwest, New York-New England and the South. For more information, visit www.fulbright.com.