Could it be that in-house counsel are tapping into a Murphys Law of sorts when it comes to class action litigation management? According to a report out from Carlton Fields, corporate law departments expect to see an increase in the number of class action lawsuits they handle, but they also expect to decrease the amount of money they spend on those matters.
In 2011, U.S. companies juggled an average of 4.4 class action matters, and total legal spending on these suits stood at $2.17 billion. In 2012, law departments predict an average load of 5.4 class action suits, while the national legal spend is projected to take a 13 percent dip to $1.89 billion, according to the 2012 Carlton Fields Class Action Survey, based on 322 in-depth interviews with general counsel, chief legal officers, and direct reports to general counsel.
Why the rosier view on legal spend? There are a few factors driving the forecast, says Carlton Fields partner Chris Coutroulis. One is that in-house counsel have to do more with less in todays economy, so theyre already focused on managing risks and controlling costs. And given the high-risk potential and protracted nature of class action litigation, it merits the same rigor. Class actions in particular tend to be big-ticket items, says Coutroulis.
Another important factor is that more than half of the companies surveyed said they perceive a general anti-business sentiment in the U.S., so theyre taking proactive risk management steps accordingly, Coutroulis points out.
Fifty-seven percent of companies said they have implemented tools to mitigate the risks and costs of class action suitsincluding enterprise risk management tools (17 percent), document retention/e-discovery/tracking systems (14 percent), better management of outside counsel (nine percent), and increased insurance (six percent), the report states. Although that still leaves a sizeable portion of respondents43 percentwho said they are not implementing any such tools, Coutroulis notes.
One in three respondents recommend enforcing strong compliance in order to reduce class action risk. Companies are trying to engage in some good preventative medicine as a way of doing business, says Coutroulis.
Early case assessment, and spending more time in-house on a case early on, was also correlated with savings. For example, among companies that set a litigation reserve amount, 24 percent said they take a rigorous approach to calculating the potential for financial exposure, based on the particular circumstances of a given suit. For those that did so, they spent considerably less than other companies that didnt adopt the in-depth approach:
. . . companies that engage in such a process and calculate financial exposure on a fact-specific basis to set their class action reserve spend 36 percent less per class action, per year. They save more than 41 percent on outside counsel spending. While they invest 65 percent more in-house attorney time per class action suit, their total savings considerably outweigh this investment. Overall, they save $341,320, devoting only 177 more in-house hours per suit.
Designating one individual in-house to be accountable for the outcomes and defense of litigation also created a positive impact. Law departments that take this approach to managing class action litigation are seeing a reduction in their spend on the defense side, Coutroulis says.
