Litigation Trends in the U.S. and U.K.

Domestic and International Arbitration Preferences – Arbitration has been keeping lawyers busy at $1 billion-plus companies this year: over 50% of such respondents reported having arbitrations initiated against their companies in the past year; 18% reported being on the receiving end of least four to 10 new arbitrations. By contrast, only 4% of small companies had four to 10 arbitrations initiated against them during the last year. And while no companies in the small- or mid-market range reported having 100 new arbitrations, 3% of the $1 billion-plus group did. When it comes to drafting international arbitration clauses, American lawyers have a clear preference for AAA/ICDR; two thirds identified that as their tribunal of choice. The second most popular (selected by less than a third) was the International Chamber of Commerce. Roughly 10% each said they prefer the London Court (LCIA) and the CPR Institute. Respondents gave an overwhelming thumbs-up to administered arbitration over non-administered arbitration, with more than half reporting that they liked the process and the rules better and are more “familiar with that type.” Paris may be lovely, but American corporate counsel are not particularly anxious to arbitrate there, citing convenience and cost; far and away the favored spot for Americans to arbitrate international disputes is New York. Close to 30% of U.S. respondents believe they have realized “some savings” from international arbitrations, with a small percentage achieving “large savings.” No companies reported large cost increases from arbitrating international disputes, although 4% reported that their company had experienced some cost increases.

Litigation Dockets – Eighty-seven percent of U.S. companies are engaged in some form of litigation in the U.S. Twenty percent had one to three cases pending, nearly a quarter had between four and 10 cases pending, and another quarter of respondents had up to 50 cases pending. That still left a full 20% facing an average caseload of 50 to 100 litigation matters. Given how much of an equalizer litigation is – hitting all companies regardless of size, industry or regional differences – it seems remarkable that as much as 13% of U.S. companies surveyed managed to avoid business disputes. Companies most likely to be litigation-free: those with revenues under $100 million. However, 12% of $1 billion-plus companies also reported that they are free of litigation, which may be one of the survey’s biggest surprises.

Litigation as a Percentage of Overall Legal Spending – Litigation is not eating up all of the legal costs in corporate America, though it is a significant chunk. Among counsel who track litigation costs, about a quarter said that they account for 21 to 50% of their legal budgets; an additional 12% reported that litigation expenses accounted for more than 50% of the total legal budget. Broken out by size, counsel for 15% of mid-market companies and 16% of businesses in the $1 billion-plus range reported that litigation consumes over half of their legal budgets. For companies with revenues under $100 million, that figure dropped dramatically to only 8%. Translated into the bottom line, nearly a quarter of U.S. companies are spending 2% or more of their gross revenues on legal fees; 10% of them spend more than 5%.

Top Current Litigation Matters – Despite the dramatic headlines about corporate corruption, the top two slots on the in-house litigation docket are contracts claims and labor/employment matters. For mid-market and $1 billion-plus companies, these types of actions accounted for as much as half of their litigation matters. For smaller companies, contract disputes account for more than a quarter of their caseload. Following contracts and labor/employment actions, the third most frequent type of case filling corporate America’s litigation plate is personal injury actions. Rounding out the top five – product liability and IP disputes. A snapshot of each sector reveals more of a spread: the most frequent type of case pending against health care companies was professional services litigation, whereas insurance litigation topped the list for insurance companies. For manufacturers, product liability cases were most commonly pending, while real estate companies face personal injury lawsuits. The most common cases for other industries were: energy and finance (contracts); tech/comm (labor/employment); and retail/wholesale (split equally between contracts and labor/employment).

Class Conscious – The bigger the company, the more likely it is to end up at the receiving end of a class action. While only 5% of smaller companies were targeted with class actions in the past year, nearly 40% of companies with revenues of $1 billion or more were served with class action lawsuits. Manufacturers were the most likely to be named as defendants in class actions; almost a quarter of them had at least one such action pending. Energy, finance and tech/comm companies were the next most likely to have at least one class action filed against them last year, although real estate companies were most likely to have been hit with more than three such actions.

What Litigation Concerns Are On the Horizon? – Reflecting the types of cases in-house counsel currently face, contract and labor/employment actions topped the list of matters that U.S. counsel were most concerned about for the future. Number three was IP disputes, followed by class actions. For counsel at $1 billion-plus companies, however, class actions rose to the number two spot, over concerns about contract-based litigation. Technology companies are far more focused on IP/patent issues then any other industry, whereas real estate and energy companies are understandably more concerned than other sectors about environmental/toxic tort litigation. Professional services litigation naturally was the leading concern for health care companies, but not for others, while insurance litigation was of principal concern only for those in the insurance industry. Only the financial and real estate industries had serious concerns about securities litigation/enforcement in the future.