LegalVIEW Data Shows Litigation Up, Legal Spend Down
Note: This article has been updated to clarify Craig Raeburn's analysis of litigation data trends.
The two hottest litigation areas these days are wage-and-hour and regulatory/compliance cases, according to legal data expert Craig Raeburn and general counsel Robert Ingato. But that isn't translating into more legal spending by corporate law departments.
Raeburn, vice president of legal analytics at TyMetrix Inc., said thats the trend showing up in the companys massive database. He explained that the database, called LegalVIEW, holds information from actual invoices from over 17,000 law firms worldwide, totaling $42 billion in legal expenses.
And what the data show is that from 2010 through 2012, regulatory/compliance litigation more than doubled in terms of corporate legal spend, while employment cases nearly doubled.
Ingato, general counsel at CIT Group Inc., a Fortune 500 bank holding company, said the increase makes sense.
Theres an oversupply of lawyers in the marketplace . . . and an incredible volume of new regulations and whistleblower activity all over the place, he noted. On top of that are the very active [state] attorneys general who are much more activist.
Ingato said he projects a higher level of litigation, especially in government investigations and enforcement actions. He also expects continued increases in cases involving employment issues, consumer and mortgage complaints, the False Claims (whistleblower) Act, and cybersecurity and privacy.
Raeburn said whats interesting about the data he sees is that while the total litigation numbers from 2010 to 2012 are up, there was a dip in litigation from 2011 to 2012.
Both Ingato and Raeburn credit the decreases to more legal departments using data to manage their costs and pinpoint their problems. Ingatos company, for example, is a client of Hartford-based TyMetrix for that reason.
For the longest time we have been sitting on a pile of data and underutilized it, Ingato explained. He said the analytics give CIT a better window into the data, offer benchmarks to use, and create a meaningful way to measure legal spend.
Litigation is one area that will be handled by outside counsel for the foreseeable future, Ingato said. So it is a big budget item. We need a finer look [at costs] to determine where and what changes to make in our processes to avoid litigation going forward.
The best way to control outside counsel cost is to reduce the amount of litigation, he explained. But when you do have to litigate, make sure your outside counsel is aligned with what your objectives are internally.
The GC said that often means rewarding your outside counsel when they achieve a goal such as early resolution to a case.
Its not usually in a law firms interest to reach a fairly quick settlement before a lot of discovery, so you need to design an alternative fee arrangement that would provide them incentive for achieving that, he said. And you also can reward good behavior and good results with your repeat business.
While TyMetrix keeps the sources of its data anonymous, it culls the information to create profiles of anyone who bills a corporation. The profiles are based on type of office, legal specialty, AmLaw ranking, years of experience, location, and so on.
Were saying someone who fits this profile has this type of rate and this approach, Raeburn explained. Then general counsel like Robert [Ingato] can use that information to see what similar law departments are doing, how law firms stack up, and how their companies can save.
Even with all the numbers help, companies are still going to suffer through legal problems, such as hacked computers, and need outside litigating help. In fact, hacking was the top cause of data breaches in 2012, according to the just released Verizon 2013 Data Breach Investigations Report. And 38 percent of the victims were larger organizations.
Hacking is universal, Ingato conceded. One government official recently told me that there are two types of companiesthose that have been hacked and know it, and those that have been hacked and dont know it.