© 2015 The Texas Lawbook.
By Mark Curriden
(May 18) – Lawsuits over contract disputes and regulatory battles with the government are larger litigation threats to Texas-based businesses – especially oil and gas companies – than are class action litigation from consumers and employees, according to a new study by the law firm Norton Rose Fulbright.
The 2015 Litigation Trends Survey found that corporate general counsel in Texas believe that litigation and regulatory battles are increasingly complex and more expensive, even as other studies show that litigation overall has been plummeting during the past 15 years. While regulatory actions remain a top concern, fewer GCs identify it as their top legal issue.
“Corporate counsel in Texas and across the U.S. see an ever more litigious environment than their peers in other parts of the world,” said Houston lawyer Gerry Pecht, who is the global leader of litigation for Norton Rose Fulbright.
Only 18 percent of U.S. companies reported no lawsuits during the past year, while 42 percent of general counsel in the UK and 36 percent in Australia said they had not been sued during that same period.
The Norton Rose Fulbright survey found that 69 percent of U.S. companies now spend $1 million or more on litigation and regulatory matters – up from 52 percent in 2012. More than 25 percent of businesses in Texas and across the U.S. spent $10 million or more on litigation in 2014 – an increase from 17 percent two years earlier.
The survey does not state whether those companies are the plaintiffs suing other companies or are the defendants in lawsuits.
Nearly half of Texas general counsel surveyed by Norton Rose Fulbright report that they are involved in lawsuits against other companies with which they have business contracts. By comparison, slightly more than one-third of businesses in the rest of the country are involved in contract disputes.
Corporate counsel in the energy sector are most concerned about contract disputes. Given a list of 20 possibilities, 47 percent of them responded that litigation over business contracts is the most numerous type of litigation they faced in 2014, which is well above the overall survey average of 28 percent.
“By definition, drilling oil and gas wells are very expensive and involve so many parties,” said Layne Kruse, a partner at Norton Rose Fulbright in Houston. “Energy companies frequently are part of joint ventures and have partners in a project. They have contracts with vendors, drillers, oilfield service companies and pipeline companies.
Twenty-seven percent of Texas general counsel claim they are worried about environmental litigation and toxic tort challenges, while only 17 percent of chief legal officers outside of Texas say they are concerned about it.
More than one-fourth of general counsel across the U.S. said class action lawsuits brought by consumers, employees or investors are one of their major challenges, but only 17 percent of Texas businesses claimed class actions are a problem for them.
Pecht said that pro-business attitudes among judges on the Texas Supreme Court and the U.S. Court of Appeals for the Fifth Circuit are a key factor for the lower worries about class action litigation in Texas.
While Texas corporate legal departments say that regulatory matters brought by state, local and federal agencies are a serious concern, the Litigation Trends Survey found that fewer general counsel identified them as a major problem.
About 47 percent of health care and life sciences companies told Norton Rose Fulbright surveyors that they were concerned most about regulatory proceedings against their companies – a drop from 52 percent in 2014.
Forty-six percent of financial institutions based in Texas identified regulatory actions as a high concern – down from 57 percent a year ago.
Only one-third of Texas-based technology companies stated that regulatory proceedings were its biggest legal issue – down from 56 percent last year.
Forty-four percent of energy company general counsel in Texas identified disputes with regulators as a top litigation issue – down slightly from 46 percent in 2014.
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