A survey conducted for the Fulbright & Jaworski LLP law firm found that real estate companies ranked fifth for the greatest number of pending litigation matters, tied with insurance providers. About 26 percent of real estate and finance company respondents reported spending less than 20 percent of their legal budgets on litigation.
Across all business sectors, U.S. companies carried a docket of 37 lawsuits, on average, according to the survey. U.S. companies with revenues under $100 million had an average 15 lawsuits pending, mid-market companies had 30 cases, and companies with $1 billion or more in revenues had 147 cases to litigate, according to the survey results.
There were 354 respondents to the survey, representing companies in 45 states. Respondents in manufacturing, finance/banking, energy, health care, retail/wholesale, technology/communications, engineering/construction, insurance, real estate, trade associations/nonprofit and education made up 87 percent of the sample.
Fulbright & Jaworski’s corporate counsel 2005 Litigation Trends Survey was conducted during June and July of 2005 by Greenwood Surveys, an independent research firm in Houston, Texas. This is the second survey conducted by Fulbright in what the firm anticipates will become an annual series, according to a company announcement today. Full survey results are available online at http://www.fulbright.com/media/litigation.
The U.S. healthcare industry had the greatest number of pending litigation, with an average of 64 cases, followed by energy companies with 49 pending cases. Separated 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.
Companies in the technology/communications sector were the most likely to escape the reality of litigation, with 41 percent reporting that they had no matters pending against them, according to the survey results.
The average U.S. company initiated 11 new suits 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 turn out to be the most proactive in starting litigation, filing 30 cases on average last year. This is nearly triple the number filed by technology companies, which filed only 11 suits on average. Energy was a close third (10 suits filed), followed by manufacturing (nine), real estate (five), insurance (five), retail/wholesale (four) and healthcare (three), according to the survey results.
The technology sector has the most staff lawyers who manage litigation, employing an average of nine lawyers in this role. The next highest were energy and finance companies, who each had six in-house litigation counsel on average, followed by retail/wholesale and health care (each with five lawyers), insurance (four lawyers), manufacturing (three lawyers) and real estate (two lawyers).
Despite the dramatic headlines about corporate corruption, the top two slots on the in-house litigation docket are contracts claims and labor/employment matters. For mid-market and $1 billion-plus companies, these types of actions accounted for as much as half of their litigation matters. For smaller companies, contract disputes account for more than a quarter of their caseload. Following contracts and labor/employment actions, the third most frequent type of case filling corporate America’s litigation plate is personal injury actions. Rounding out the top five – product liability and IP disputes.
A snapshot of each sector reveals more of a spread: the most frequent type of case pending against healthcare 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).
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 federal Sarbanes-Oxley Act of 2002. Compliance with Sarbanes-Oxley seems to be particularly onerous for smaller companies; they cited regulatory compliance as their top new “litigation-related burden associated with (their) job.” Compliance and regulatory issues hit home especially hard in the finance, energy and real estate sectors, according to the survey results.
In finance, bankruptcy was one of the top three concerns last year; this year, it has been replaced by securities actions. Real estate companies are now troubled by personal injury suits instead of real estate disputes, while the insurance industry sees less of a threat from class actions than from insurance coverage matters.
Contract and labor/employment actions topped the list of matters that U.S. counsel were most concerned about for the future. Number three was intellectual property disputes, followed by class actions. For counsel at $1 billion-plus companies, however, class actions rose to the number two spot, over concerns about contract-based litigation. Technology companies are far more focused on intellectual property/patent issues then any other industry, whereas real estate and energy companies are more concerned than other sectors about environmental/toxic tort litigation, according to the survey results. Professional services litigation was the leading concern for health care companies, but not for others, while insurance litigation was of principal concern only for those in the insurance industry. Only the financial and real estate industries had serious concerns about securities litigation/enforcement in the future.
The bigger the company, the more likely it is to end up at the receiving end of a class action. While only 5 percent of smaller companies were targeted with class actions in the past year, nearly 40 percent of companies with revenues of $1 billion or more were served with class action lawsuits. Manufacturers were the most likely to be named as defendants in class actions; almost a quarter of them had at least one such action pending. Energy, finance and technology/communications companies were the next most likely to have at least one class action filed against them last year, although real estate companies were most likely to have been hit with more than three such actions.
Three-quarters of U.S. companies now have written policies mandating the retention of documents once a lawsuit is commenced, known as a litigation hold policy, although smaller companies are markedly less likely than their larger counterparts to have them. The most likely to have litigation hold policies were energy (89 percent) and real estate companies (81 percent). Finance companies appeared to be the least cautious: only 66 percent of corporate counsel in that industry reported having a litigation hold policy.
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