Lawsuit Increase Forecasted Due to Economic Recession
Litigation will increase during the coming year, according to more than one-third of U.S. in-house counsel members from 10 industries, including financial services, energy, health care, technology and real estate. Offshore outsourcing may be one solution.
CIO — Whenever there is economic turmoil, tempers flair and lawsuits fly.
Stephen C. Dillard, chair of Fulbright's global litigation practice says that the U.S. is coping with an "inflection point 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."
The fifth annual Litigation Trends Survey, issued by the law firm Fulbright & Jaworski, reveals that though new case filings and enforcement actions were down in the past two years—17 percent stayed litigation free in 2006-07 and 21 percent stayed litigation free in 2007-08—this trend will turn around in the coming year, due to the nation's faltering economy.
The ever popular saying from the 90s "mo money mo problems", remains true today. Between 2007 and 2008, 29 percent of billion-dollar firms were served with more than 50 new lawsuits. Forty-three percent of those in the same bracket anticipate that in the coming year, there will be a rise in litigation.
Only 8 percent of U.S. in-house counsel anticipate a decrease in legal disputes involving their companies next year, but they're outnumbered four to one.
Money Spent on Litigation
In the past year alone, suits with claims above $20 million dropped from 2007. Yet, the obviously sputtering U.S. economy has darkened the mood of many, resulting in banking crisis, corporate bankruptcies, layoffs and government investigation—all of which can lead to lawsuits. Of the almost 360 U.S. and U.K. in-house counsel members who took the survey, 251 were from the U.S. In contrast to the U.K.'s in-house counsel, of whom 21 percent predict a rise in new lawsuits against their companies, 34 percent predict that their U.S.-based companies will face new lawsuits.
Forty-five percent of U.S. companies spend $1 million or more on litigation, not including judgments or settlements, each year, while only 34 percent of U.K.-based firms spend this amount. The survey found that insurers were the biggest spenders. Over half of the insurance companies that took the survey, 53 percent, budgeted at least $1 million for litigation. Between 51 percent and 52 percent of energy providers, manufacturers and financial services firms budgeted for the same amount.
Common Ways Companies Get Hit
Why are companies spending upwards of $1 million on litigation per year? Lawsuits can come from any angle. The most common lawsuits that face U.S. companies are labor/employment, contracts and personal injury. Nearly one third of respondents said that there was a rise in multi-plaintiff suits to do with wage-and-hour claims within the past year. Twenty-nine percent noticed an increase in discrimination cases, including age related claims—although, with all the discussion about the generation gap, is this really that surprising? Many companies also noted a rise in privacy suits.
