© 2016 The Texas Lawbook.
By Mark Curriden
(Sept. 19) – Corporate general counsel in Texas and across the U.S. predict they will face an increase in lawsuits and government regulatory actions that will cost their businesses more money, according to a new survey by Texas-based law firm Norton Rose Fulbright.
The study, however, shows that significantly fewer companies face lawsuits seeking $20 million or more in damages than in previous years and that the actual litigation budgets of the businesses in the survey have been essentially flat for the past few years.
In fact, the Norton Rose Fulbright survey found that companies spend less than one-tenth of one percent of their annual revenues fighting legal disputes.
If there is an increase in business litigation, corporate general counsel should point at each other as the culprits. More than 56 percent of the companies surveyed admitted that they initiated lawsuits against other businesses during the past year, according to the Norton Rose Fulbright survey.
The study’s bottom line is good news for lawyers in Texas: companies predict they will hire more trial attorneys employed both internally by the businesses and externally by law firms during the year ahead.
“Generally speaking, litigation is countercyclical,” says Norton Rose Fulbright litigation partner Saul Perloff, who offices in San Antonio. “When times are good, we see more transactions, mergers and acquisitions. When times are not so good, there’s more litigation.”
The survey found that corporate general counsel in Texas were less likely than their counterparts across the U.S. and around the world to use arbitration as a method of deciding disputes, but they are more likely to use alternative fee arrangements in paying their outside counsel.
Forty-three percent of Texas companies reported that labor and employment lawsuits are their primary litigation concern, followed by contract disputes with other businesses (36 percent).
“Even very careful companies face lawsuits related to hour-and-wage laws,” Perloff says. “Employment litigation is a fact of doing business.”
A stunning 97 percent of the companies in the survey said government regulators are more aggressive, but only 35 percent said they currently face some sort of regulatory action by state or federal authorities.
“Regulatory activity continues to be on the minds of GCs everywhere, as reflected by the results of the survey,” says Richard Krumholz, a partner in the Dallas office of Norton Rose Fulbright. “With major sanctions and penalties in the headlines regularly, it’s understandable that regulatory compliance continues as a top concern.”
One of every six corporate general counsel said they plan to add lawyers with litigation experience to their corporate legal team, while 5 percent predict they will reduce the number of in-house litigators. About 20 percent of the businesses said they plan to expand the number of litigation law firms they employ, while 13 percent expect to reduce their employment of outside counsel.
While companies predict more litigation, the Norton Rose Fulbright survey found that just 15 percent of businesses in the U.S. and Texas are currently facing lawsuits in which damages being sought are $20 million or more – down from 26 percent in 2015.
The study also found that companies with annual revenues of $100 million or less spent about $350,000 last year on litigation. Corporations with revenues exceeding $1 billion a year had about $10 million in litigation expenses.
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