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U.S. Companies Preparing for Rise in Litigation, Study Says
Nov 10, 2008
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Following two straight years of reporting declines in the number of new lawsuits and regulatory proceedings—including a drop in large-dollar cases—U.S. companies now anticipate an increase in new actions and government probes, as well as the need to hire more in-house litigation staff to help manage the expected rise in disputes, according to the 2008 Litigation Trends Survey by international law firm Fulbright & Jaworski L.L.P.

“This year’s survey appears to mark an inflection point for American business, between the end of a prolonged period of prosperity and the start of a period of economic challenge that is likely to fuel litigation over who is to blame and who should pay for the consequences,” said Stephen C. Dillard, who chairs Fulbright’s global litigation practice. “Given that we were polling in-house counsel on the cusp of that transition, it’s no wonder that this year’s findings highlight both the evident calm before the storm, as well as the sense that disputes are on the rise.”

The study found that 75% of manufacturing companies faced at least one new lawsuit last year, with 53% facing 6 or more new suits in the past year. And 25% of the manufacturing companies surveyed reported facing at least one $20 million action.

Litigation has also become a major line item in manufacturing company budgets, the study said. Nearly a quarter (26%) of the manufacturing firms reporting in the study said that they spent at least $5 million on litigation, excluding costs of settlements and judgments, while 51% reported spending over $1 million per year on business disputes.

By several key indices, the overall pace of fresh litigation indeed trended downward in 2007-08, with 21% of U.S. companies reporting no new lawsuits filed against them in the past year. That’s an improvement from 17% having stayed litigation-free in 2006-07 and nearly double the number from 2005-06, when 11% of companies reported enjoying a year without any new lawsuits to defend.

Even more pronounced was the drop-off in plaintiff filings: Fulbright found that 56% of U.S. companies brought at least one action against another party in the past year—no small portion, but still a 10% decline from the number of firms commencing new plaintiff filings in 2007 and a larger dip from 2004, when 88% of businesses said they had filed one or more lawsuits.

Only 26% of U.S. firms were tagged with one or ore new lawsuits with claims above $20 million in the year past, a decline of 14% from 2007. While 37% of billion-dollar companies had to defend at least one new $20 million suit, that was a 25% drop from the number reporting a year ago.

While overall case filings may have slowed this year, the litigation landscape is by no means shrinking, the study says. Findings show that most U.S. companies still face a challenging web of litigation exposures, with certain industries prone to particular types of actions—intellectual property/patent infringement, product liability, environmental/toxic tort—even as nearly all businesses contend with disputes involving employment, contracts, and personal injury.

Companies also detect a spike in specific types of actions—nearly a third (32%) of respondents reported a jump in multi-plaintiff suits stemming from wage-and-hour claims by employees in the past year, with 29% notching an increase in discrimination cases, including age claims. Companies also cited a noticeable rise in privacy lawsuits, whether class or collective actions.

Regulatory proceedings may have ebbed in absolute terms, but American companies report having to contend with investigations by more than a dozen different agencies in 2007-08, including growing scrutiny from state Attorneys General and even the European Union.

By any measure, the sheer volume of U.S. litigation remains very large indeed, including the steady churn of new cases nationally. The survey found that 79% of U.S. companies still reported fielding at least one new lawsuit in the past year—with 27% fending off more than 20 new suits, including 18% coping with more than 50 new actions. The pace of new litigation is especially marked for larger companies and as Fulbright notes this year, among public companies, which were twice as likely as private firms to be on the receiving end of a new filing.

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