The 2017 Litigation Trends Annual Survey. (Photo: Norton Rose Fulbright)

Contract problems and labor and employment disputes generate the most corporate litigation, while regulatory and class actions are the “most concerning” legal matters for general counsel, according to a new survey released Wednesday.

The 2017 Litigation Trends Annual Survey from Norton Rose Fulbright polled some 318 corporate counsel, primarily general counsel, representing U.S. organizations. Litigation partner Saul Perloff, of Norton Rose Fulbright's San Antonio office, said the word “litigation” is used broadly in the survey and includes arbitration as well as internal investigations due to regulatory scrutiny.

The report shows a slight reduction in the overall number of disputes this year. Mean disputes per $100 million in revenue fell to 11.5 in 2017 from 11.8 in 2016. Perloff said in an interview that he thinks it is too early to call that dip a trend. “But it is certainly heading in the right direction,” he noted.

“What I find most interesting in the survey,” Perloff said, “was the focus on the risk that's presented by data security breaches.” Some two-thirds of respondents cited cybersecurity issues as the greatest emerging threat to business.

“All of us have seen the news reports of high-profile data breaches, but it's interesting to see how quickly the respondents internalized that and recognized it as an issue they need to address,” Perloff added.

One other finding that may intrigue general counsel involves a first-ever analysis of internal legal spend on disputes vs. external spend. On average, according to the survey, a legal department spends about 30 percent of its litigation budget in-house and the rest on outside counsel and consultants.

The survey found companies that spent between 41 and 60 percent of their litigation budget in-house actually spent less overall on disputes as a proportion of their organizations' revenue. In other words, spending on disputes as a proportion of a company's revenue is lower when internal spend is higher than average, and the external spend is lower.

It's an interesting observation, Perloff noted, “but not necessarily a recipe” for lowering dispute costs. He suggested it could be a starting point for discussions about bringing down litigation costs.

He said the numbers might have picked up spending on prophylactic measures, such as more training on writing better contracts or on early case assessments being done internally.

The survey showed the most effective factors in preventing litigation are training, early case resolution, lawyers embedded in the business and proactive contract review.

Here are some other high points from the 44-page report:

  • The use of alternative fee arrangements remained fairly flat despite  reported plans to increase them in last year's survey.
  • About 74 percent said regulators have become more interventionist; that number is down from 97 percent in 2016.
  • Both legal team size and the typical legal spend relative to revenue have increased since 2016.
  • In contrast to other areas of legal spend outside of disputes, as organizations get larger and become more of a target, the proportion of disputes rises dramatically.

 

 

 

The 2017 Litigation Trends Annual Survey. (Photo: Norton Rose Fulbright)

Contract problems and labor and employment disputes generate the most corporate litigation, while regulatory and class actions are the “most concerning” legal matters for general counsel, according to a new survey released Wednesday.

The 2017 Litigation Trends Annual Survey from Norton Rose Fulbright polled some 318 corporate counsel, primarily general counsel, representing U.S. organizations. Litigation partner Saul Perloff, of Norton Rose Fulbright's San Antonio office, said the word “litigation” is used broadly in the survey and includes arbitration as well as internal investigations due to regulatory scrutiny.

The report shows a slight reduction in the overall number of disputes this year. Mean disputes per $100 million in revenue fell to 11.5 in 2017 from 11.8 in 2016. Perloff said in an interview that he thinks it is too early to call that dip a trend. “But it is certainly heading in the right direction,” he noted.

“What I find most interesting in the survey,” Perloff said, “was the focus on the risk that's presented by data security breaches.” Some two-thirds of respondents cited cybersecurity issues as the greatest emerging threat to business.

“All of us have seen the news reports of high-profile data breaches, but it's interesting to see how quickly the respondents internalized that and recognized it as an issue they need to address,” Perloff added.

One other finding that may intrigue general counsel involves a first-ever analysis of internal legal spend on disputes vs. external spend. On average, according to the survey, a legal department spends about 30 percent of its litigation budget in-house and the rest on outside counsel and consultants.

The survey found companies that spent between 41 and 60 percent of their litigation budget in-house actually spent less overall on disputes as a proportion of their organizations' revenue. In other words, spending on disputes as a proportion of a company's revenue is lower when internal spend is higher than average, and the external spend is lower.

It's an interesting observation, Perloff noted, “but not necessarily a recipe” for lowering dispute costs. He suggested it could be a starting point for discussions about bringing down litigation costs.

He said the numbers might have picked up spending on prophylactic measures, such as more training on writing better contracts or on early case assessments being done internally.

The survey showed the most effective factors in preventing litigation are training, early case resolution, lawyers embedded in the business and proactive contract review.

Here are some other high points from the 44-page report:

  • The use of alternative fee arrangements remained fairly flat despite  reported plans to increase them in last year's survey.
  • About 74 percent said regulators have become more interventionist; that number is down from 97 percent in 2016.
  • Both legal team size and the typical legal spend relative to revenue have increased since 2016.
  • In contrast to other areas of legal spend outside of disputes, as organizations get larger and become more of a target, the proportion of disputes rises dramatically.