In-house counsel, law firms seeing a rise in litigation

Litigation, a mainstay for some recession-battered companies, is on the rise as firms battle for economic advantage, and it likely will increase at least through next year. That's the main finding of a large-scale survey of corporate legal departments in the United States and the United Kingdom.

The survey of 403 in-house counsel, including 275 in this country, was conducted for the law firm Fulbright & Jaworski L.L.P. from May through July by Greenwood Associates, a business-research firm based in Houston. Most of the respondents were either general counsel or head of litigation at their companies.

In-house counsel on both sides of the Atlantic said they had seen a spike in litigation last year and expected a further rise in the year ahead, the survey found. In all, 93 percent of the corporate counsel responding in the United States and 97 percent of those in the United Kingdom said they expected legal disputes to increase or remain the same this year.

Eighty-seven percent of the survey respondents said they faced new litigation in the last year, up from 83 percent in the preceding year.

Leaders of several Philadelphia law firms said the survey's results closely paralleled activity at their firms. Clients have sought their help in defending against lawsuits, or have themselves initiated litigation of their own.

"Litigation has been very strong throughout, and it never really dipped like the transactional [deal-making] practice. In fact, it has enabled us to reallocate staff from our transactional practice to litigation," said Mark Silow, administrative partner at Center City-based Fox Rothschild L.L.P., which has been hiring steadily and surpassed the 500-lawyer mark in September.

Silow said many of the legal disputes now handled by his firm emerged from the financial crisis and include defense of lawsuits against officers and directors and litigation related to bankruptcies.

What has dropped off, Silow said, is so-called discretionary litigation in business disputes, where the outcome is not central to the health of the company.

"The cost of litigation being what it is, people are more likely to resolve those differences [outside court] rather than litigate them," he said.

Mark Aronchick, of Hangley, Aronchick, Segal & Pudlin P.C., said the firm had hired several lawyers in recent months to cope with growth in its litigation practice.

"It has gone up across the board," Aronchick said.

To many lawyers, an increase in litigation work wasn't necessarily a given at the start of the recession. Though some planned on a spike, others doubted clients would be willing to take on the huge costs of complex litigation at the same time their businesses were under intense financial pressure.

The survey did find concern about costs among corporate legal departments. Nearly one-third said cost control was their most important management issue. Yet more respondents said their legal budgets were increasing than those who said their costs were going down, 28 percent vs. 16 percent. One in 10 companies said they planned to add more in-house lawyers; one in five said they would add to their roster of outside counsel.

"Since the global economy began languishing in 2007, litigation has climbed steadily for three years," said Stephen C. Dillard, head of Fulbright & Jaworski's global disputes practice. "It is telling that, even as in-house legal departments continue to carefully manage costs, more than one-quarter of this year's respondents say they have increased their litigation budget and one-third say they have increased how much they spend on litigation."

Labor and employment disputes, regulatory actions against companies, and tussles over patents and trademark violations are helping to drive the increase, the survey found. Companies also are hiring outside counsel to help manage internal investigations of fraud, whistle-blower complaints, and other matters, according to the survey.

While alternative fee arrangements are increasingly in demand by outside counsel, the survey found, the traditional hourly billing rate continues to dominate.