Litigation as a Growth Industry

A new Fulbright & Jaworski (New York) survey finds U.S. businesses face an average of 305 lawsuits worldwide, while spending 70% of legal budgets on litigation.

Billion-dollar+ companies carry biggest litigation burden, fielding 556 cases on average, almost half facing 50 new suits annually; 40% of large companies expect number of actions to increase in coming year; insurers are the litigation Olympians, confronting an average of 1,696 lawsuits, followed by retailers and energy firms.

Litigation side effects: 63% of U.S. companies launched internal investigations requiring outside counsel in past year; foreign companies cite high legal costs, punitive damages as prime anxieties about litigating in U.S.; despite recent options backdating woes, labor/employment and contract disputes top list of litigation concern.

Businesses give as well as they get—70% of U.S. companies have brought actions as plaintiffs in past year; vast majority of reporting businesses say they are not prepared to handle an e-discovery challenge.

In its third annual survey of corporate litigation trends—pulling data from 422 in-house law departments worldwide—Fulbright found that U.S. companies face an average of 305 pending lawsuits internationally. For large U.S. companies—those with $1 billion or more in annual gross revenue—the number of lawsuits soared to 556 cases, with an average of 50 new disputes emerging each year for close to half of them.

Although the majority of those cases are in U.S. courts, the tide of international disputes is rising, more than one-third of companies said that up to 20% of their dockets originate in foreign venues, proof that U.S.-style litigation is going global.
No segment of the American economy was spared a weighty litigation docket, but the undisputed champion of disputes is the insurance industry, where companies face an average 1,696 lawsuits, spanning product liability and environmental class actions to directors and officers claims, and even coverage fights over hurricanes and terrorist attacks. Retailers and energy firms were also targeted heavily—both sectors reporting average caseloads north of 330 per company.

As lawsuits have multiplied—brought by shareholders, regulators, consumers, employees and competitors—so has another related event: the internal investigation. Nearly two-thirds of the U.S. companies interviewed by Fulbright reported that their companies had launched at least one such probe in the past year necessitating use of outside counsel, a certain byproduct of Sarbanes-Oxley legislation, as well as the recent mega-scandals of Enron and WorldCom.

That litigation is an everyday fact of life for American corporations is borne out by findings from companies of all sizes and industries. Ninety-four percent of U.S. counsel canvassed said that their companies had some form of legal dispute pending in a U.S. venue. For 89%, at least one new suit was filed against their company during the past year. Nor are businesses expecting any let-up. One third of all companies, and nearly 40% of $1 billion-plus firms, project the amount of litigation to increase next year.

With big litigation comes a big price tag. U.S. companies report spending 71% of their overall estimated legal budgets on disputes. Nearly 40% of Fulbright’s U.S. respondents reported at least one $20 million suit commenced against them in the past year. Two percent faced 50 new suits or more involving at least $20 million in claims, or more than $1 billion worth of new disputes on the table for some large companies.

For a direct link to the survey results, go to: www.fulbright.com/litigationfindings.

Source: Fulbright & Jaworski L.L.P.

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