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Lawsuits weigh on U.S. companies

In-house lawyers at U.S. companies have plenty to keep them busy, with the average large corporation facing well over 100 lawsuits at any one time, a new study has found.
/ Source: Reuters

In-house lawyers at U.S. companies have plenty to keep them busy, with the average large corporation facing well over 100 lawsuits at any one time, a new study has found.

U.S. companies with at least $1 billion in annual revenue are engaged in 147 lawsuits simultaneously, a sizable number although down from 159 lawsuits a year ago, according to the survey of in-house corporate counsel commissioned by law firm Fulbright & Jaworski LLP.

Including smaller companies, the average corporation balances a docket of 37 lawsuits, down from 47 last year, according to the survey, which is expected to be released in full on Monday morning.

Despite the small decline, companies still are facing “a big number” of lawsuits, said Stephen Dillard, head of Fulbright & Jaworski’s worldwide litigation practice.

“If you look at the resources that are being devoted to beef up in-house legal staffs, they are increasing the number of attorneys” handling legal matters, he said.

This is the second year of the survey, so it is unclear if the decline in lawsuits is a trend, Dillard said.

But he said that after a large spike upward in litigation in the 1990s, recent tort reforms may be discouraging plaintiffs’ attorneys from bringing some suits that are unlikely to succeed, triggering an overall decline in corporate lawsuits.

The survey, conducted in June and July, was based on responses from 354 general counsel and chief legal officers, including 50 in the UK. The median size of companies in the survey had annual revenue of $484 million.

About half of the respondents said their companies track legal spending, with the average legal budget coming in at $20.1 million annually. Ten percent of the participants said legal spending accounts for 5 percent or more of their company’s total annual revenue, which translates into about $50 million for a company with $1 billion in annual sales.

The biggest new legal worry at larger companies involves issues of electronic data discovery, such as the duty to preserve e-mails and other potential electronic evidence, the survey found.

Eighty-one percent of U.S. companies now have written policies on records retention, and about 75 percent have so-called litigation hold policies, which require the retention of documents once a lawsuit is underway, the survey found.

Retention of e-mails and other electronic data has played key roles in several high-profile corporate trials recently.

In one case, a Florida jury recently ordered Morgan Stanley to pay large punitive damages to billionaire Ronald Perelman over a business deal. Frustrated by Morgan Stanley’s repeated failure to provide Perelman’s attorneys with e-mails, the judge in the case issued a pre-trial ruling that took the rare step of switching the burden of proof to the bank.

Many companies are still hammering out their document retention policies. Nearly two-thirds of companies with these polices revised them during the past year, the survey found.

For smaller companies, the top new legal concern is compliance with the Sarbanes-Oxley corporate reform act, the survey found.

Bowing to these worries, the Securities and Exchange Commission recently gave publicly traded U.S. companies with stock market values of less than $75 million an extra year to deal with a new rule requiring more disclosure of internal financial controls.