Survey Projects A Surge In Corporate Lawsuits

In its survey, the law firm said it asked companies to consider, among other things, what types of cases they fear most, where they are spending their budgets and how they are adjusting their approaches to litigation management in light of the downturn.

According to the survey which included firms in the United Kingdom as well, 83 percent of U.S. respondents reported that new litigation was commenced against their companies in the past year, up from 79 percent last year.

In the year to come, respondents from large-cap companies reported the highest expectation of litigation, with 52 percent forecasting an increase in legal disputes, while 47 percent of public company respondents foresee a jump in disputes.

The economy was cited as the primary reason for these expectations by 38 percent of U.S. respondents and 34 percent of U.K. respondents.

More than one-third of companies said the economic downturn not only caused an increase in their litigation caseloads, but also their use of alternative fees. Tighter cost control, more than anything else, is the most important way in which the economic crisis has affected litigation management, respondents said.

"Generally, litigation rises in an economic downturn as regulators tend to step up enforcement, laid-off workers head to court and companies need to file more suits in order to collect on money owed," Stephen C. Dillard, head of Fulbright's global litigation practice explained in a statement.

He noted that the survey found "companies across the spectrum expect no substantial decreases in any area of litigation."

Companies surveyed said they faced the biggest increases in bankruptcy, contracts and labor/employment litigation.

However, the bankruptcy increases were found to have left the health care industry – relatively untouched, with only 6 percent of healthcare respondents reporting a rise in bankruptcy and reorganization litigation.

Looking to 2010, 16 percent of all respondents (and 23 percent of large-caps) said they expect the number of internal investigations involving their company to increase. Industry-wise, approximately 20 percent each of financial services, insurance and technology companies expect internal investigations to rise in the coming year.

The law firm said this tracks expected increases in whistleblower cases: 24 percent of all respondents and 31 percent of large-cap companies expect the number of claims brought by whistleblowers in their industries to go up.

Concerning the cost of suits, the survey report said of 97 large-cap companies that had a case go to trial last year, 15 percent reported higher damage awards than prior periods versus 2 percent of large-caps reporting lower awards.

The report said the number of class actions brought against companies had gone way down from 2007 levels.

In 2007, 51 percent of survey respondents reported one or more class actions having been brought against their company in the prior year. In 2008, that number dipped to 23 percent, and this year it also is at 23 percent.

However, the law firm said that number escalates to 36 percent when confining the inquiry to large-cap companies and to 41 percent when looking only at the retail and wholesale industries.

Fulbright & Jaworski has post a litigation trends "white paper" online at http://www.fulbright.com/litigationtrends05.