Recoveries Can Turn Legal Departments Into Profit Centers

Traditionally, corporate legal departments play defense, not offense. However, there is a recent trend that is turning tradition on its head and turning legal departments into profit centers. This trend does not suggest that legal departments should chase dollars indiscriminately. Rather, legal departments should be selective in the recoveries they choose to pursue, and resort to litigation only when necessary and cost-effective. Here’s how to effectively structure a thriving recovery program.

The Trend: Origin and Success

The plaintiff-recovery strategy started with technology and pharmaceutical companies becoming plaintiffs to protect their intellectual property and expanded to a broad range of companies pursuing claims to recoup money from insurers, suppliers, and business partners. This trend was first noted in 2006, and by 2008 companies began reporting the financial success of their recovery initiatives. DuPont has reported that it brought in over $500 million between 2005 and 2008.

The recession accelerated this trend as companies trimmed legal budgets and asked their legal departments to seek recoveries. Tyco International and Michelin have pursued actions against their insurers, intellectual property infringers, suppliers engaged in price fixing, and partners that failed to live up to their contractual obligations. In one recent quarter, Ford recovered enough revenue to more than offset all of its legal costs.

U.S. companies are also pursuing international recovery efforts. DuPont has expanded its recovery efforts in China and Russia, and Ford has begun to seek recoveries in India, China, and Europe.

Answering Critics