The commercial litigation industry is an enormous area of the legal field.
- 51% of executives increased their litigation budget in the past year
- More companies than before are spending at least $1 million per year on litigation costs.
- Labor/Employment, Contracts, and Personal Injury are the most popular areas in the commercial litigation field.
- Companies continue to be vulnerable to large lawsuits, i.e., over $10 million.
- Large litigation costs are cutting into business’ revenue
Even though the industry has consistently seen the same number of lawsuits filed per year since 2010, the total cost of the lawsuits filed has consistently increased each of the past three years (Norton Rose Fulbright). These growing costs are troubling because they consume an increasing percentage of a company’s revenue (Litigation Cost Survey 2). From the years 2000 to 2008, the average litigation cost as a percentage of revenue increased 78% for companies providing information to this area of the Duke study. Id. at 3.
The rising costs of litigation for companies is attributed to tighter regulations and more regulatory investigations (Alix Partners). For these reasons, 51% of executives said their companies increased their litigation budget in the past year. Id. Additionally, 36% of the executives stated the number of commercial disputes their company has been involved in has risen. Id. Discovery and procedural costs are also drivers of the growing litigation expenses. (Litigation Cost Survey 4). These costs are the affect of the United States’ judicial system and are not as avoidable as perhaps other litigation expenses.
More companies today are allocating at least $1 million for litigation (Norton Rose Fulbright). The Norton Rose Fulbright study found that the percentage of companies spending more than $1 million in litigation expenditures has increased to 71% compared to the previous two surveys which found 53%. Id. The sharp increase in case expenses is attributed to the number of larger companies spending $10 million or more per year in litigation expenditures. Id. Norton Rose Fulbright Litigation Trends Survey Report
Companies are more vulnerable to certain types of lawsuits than others. In the past 12 months, the three most common areas for corporate litigation were labor/employment law, contract law, and personal injury. Id. Looking toward the future, industries are becoming more concerned with regulatory litigation; this particular type of litigation matter increased by 10% in the past year. Id.
Businesses appear to be allocating an enormous amount of capital to legal departments to manage potential litigation disputes, some of which have serious financial affects on a company (Alix Partners). Companies are progressively more vulnerable to lawsuits with more than $20 million dollars at stake (Norton Rose Fulbright). Because of these occurrences, companies are evaluating alternative ways to finance their litigation related expenses.
The Fulbright survey found 26% of companies use the contingent fee system to finance legal case costs (Norton Rose Fulbright)..
Alix Partners. “Litigation and Corporate Compliance Survey.” Alixpartners.com. Web. 5 Aug. 2014.
“Litigation Cost Survey of Major Companies.” Committee on Rules of Practice and Procedure Judicial Conference of the United States, May 10-11, 2010.
Norton Rose Fulbright. 10th Annual Litigation Trends Survey, 2014. Web. 6 Aug. 2014.
In 2008, 36 companies reported an aggregate litigation expense of $4.1 billion. (Litigation Cost Survey 4).