Study: Businesses Spending More on Litigation, Arbitration & Investigations

© 2014 The Texas Lawbook.

By Mark Curriden, JD
Senior Writer for The Texas Lawbook
HOUSTON (April 15) – Businesses in Texas and across the U.S. continue to spend more and more money on legal fees to fight high-stakes litigation and to deal with a growing number of regulatory enforcement actions from state, local and federal government agencies, according to a new survey scheduled to be released Tuesday.
The survey of more than 400 corporate general counsel, including 125 in Texas, found that companies are hiring more lawyers – both internally in their corporate legal departments and externally at law firms – and are paying those lawyers more money than ever before.
Norton Rose Fulbright’s 10th Annual Litigation Trends Survey found that 71 percent of corporations spent $1 million or more on litigation costs in 2013 – up from 53 percent the two previous years.
More than 26 percent of companies saw their litigation costs exceed $10 million last year – an increase from 11 percent in 2011, according to the study.
The survey found that the median litigation costs for Texas businesses in 2013 exceeded $2 million and that 20 percent of the energy company general counsel polled said they spend $10 million or more on litigation costs.
“While the amount of lawsuits being filed has stabilized, the cases that are brought tend to be the larger commercial cases where more money is at stake,” says Karl Dial, a commercial and securities litigation partner at Norton Rose Fulbright in Dallas.
Dial says an increasing amount of discovery in business-to-business litigation now focuses on communications made from mobile devices and on social media.

“People are using social media and their mobile devices to comment on business-related matters,” he says.
More than 36 percent of Texas companies reported that they are involved, either as the plaintiff or the defendant, in one or more lawsuits in which damages exceed $20 million – an increase from 20 percent in 2011.
General counsel at healthcare and energy companies reported the highest litigation costs.
Twenty percent of the companies say they are facing one or more investigations by government regulators, which is more than double the number just a year ago, according to the Norton Rose Fulbright study. More than 41 percent of the general counsel, especially those in the healthcare and technology sectors, say that government inquiries are their top legal concern for 2014.

“When I first worked on this survey nearly 10 years ago, no one had really focused on how government inquiries and investigations impact corporations,” says Layne Kruse, a Fulbright partner in Houston. “It was not simply a matter of counting lawsuits filed against the company.
“Government regulatory matters increase costs regardless of whether any lawsuit is actually filed,” says Kruse. “I don’t expect this problem to go away any time soon.”
More than one-third of the companies say that they now employ five full-time lawyers in-house to work exclusively on litigation matters. Sixteen percent of the Texas corporations report that they will add more litigators to their legal department staffs in 2014, while less than one percent said they plan to decrease the number of lawyers they have working on litigation matters.

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