Voices: The View from the Trenches
Litigators tell us how the recession has changed their jobs.
The American Lawyer
By Priti Patnaik and David Levine
November 01, 2009
A lot has changed in the world of litigation since the markets tanked in September 2008. This fall we asked leading litigators to tell us how the past 12 months have treated them. Their answers varied widely, but taken as a whole, they suggested that the recession's impact on litigation has dramatically affected how litigators work as much as the volume of work they do.
Several lawyers reported that alternative fee arrangements are becoming more common — and one crowed a bit at how his firm (Bartlit Beck Herman Palenchar & Scott) has benefited from the trend. Others reported changes in litigation strategy. Sullivan & Cromwell's Sharon Nelles told us "the scorched-earth approach" that might have worked a couple of years ago isn't necessarily best for clients these days. Marshall Grossman of Bingham McCutchen had a different take: Nowadays, he said, clients are more reluctant to sue — but if they're hit with a lawsuit, they're more willing to fight it out in court instead of paying good money to settle.
While overall litigation may not be rising dramatically ["Don't Count on It"], some areas are busier than others. Labor and employment lawyers have plenty to do. White-collar criminal defense specialists reported steady work, although, as Gibson, Dunn & Crutcher's Debra Wong Yang pointed out, some clients are finding it harder to drum up the big bucks for top-tier lawyers.
Overall, what we noticed most was the optimistic note that the majority of these litigators struck. Litigation may not be the cure-all for law firms' recession woes, but it's not a bad place to be these days.
It is naive to think the paradigms from two or three years ago apply to the issues clients are facing today. The kind of scorched-earth approach to litigation that one may have taken to an issue just a few years ago is not necessarily in the best interest of the client in the current economic scenario.
Sharon Nelles, Sullivan & Cromwell
Because our clients are institutional investors, I think that in the fourth quarter of last year and the first quarter of this year, they were so focused on redesigning their portfolios to recover from the shock of the financial crisis that they were not focused on litigation at all. And because of that I think our pipeline business dried up during that period, just because we could not get our clients to focus. The markets have now stabilized, their portfolios have stabilized, and now they are far more likely to say, "Okay, now who is responsible for it?"
Stuart Grant, Grant & Eisenhofer
With Wyeth v. Levine being decided against the pharmaceutical industry, you are going to continue to see a fairly large amount of tort litigation around the United States. I think in the last administration there was a fair amount of confidence on the industry side that you [would] have a decision that would effectively preempt a lot of tort litigation based on failure-to-warn claims on pharmaceutical drugs around the United States. I think with [Wyeth] going against the industry, it is much more difficult to get these cases dismissed or resolved as a matter of law before trial.
Loren Brown, DLA Piper
Going forward, in the near term, it is going to be difficult. A lot of the cases that should have been settled are going to trial because the defendants do not have the money to settle them. A lot of cases are being tried, and that takes a lot of time and effort but does not produce any immediate cash flow. There is a cash-flow drain on firms that are doing commercial litigation. But I think after a few years that will change. When they recover, that cash will begin flowing again, settlements will be occurring, and there will be more trials.
Texas Instruments is suing Citibank, the American Association for Justice is suing Wachovia. People are suing banks when they never did in the past. There are a lot of suits against Goldman. Those are some examples that I am handling. [People] will be distrustful about bankers and insurers forever.
Stephen Susman, Susman Godfrey
We have long-standing relationships with firms that have been quite willing to work with us on everything from alternative fees to creative staffing.
Donald Lough, assistant general counsel, Ford Motor Company
Our litigation is at its highest peak ever. It is a significant profits center. However, I see two trends. The first is that clients are much more reluctant to initiate litigation because of the expense in doing so. The second is that once they are sued, they are much more anxious to litigate and defer settlement consideration until the last minute. That's because they generally believe that it is more cost-effective . . . to litigate rather than use their resources to settle the case.
Marshall Grossman, Bingham McCutchen
We have seen an expansion on the number of disputes from, frankly, unlikely sources. What I mean by that is that our [international arbitration] work for U.S. – based companies and U.K. – based companies has remained about the same [as it was] before the recession started, but our work for companies . . . that are located outside those two major markets has increased greatly. And that's both cases against governments under bilateral investment treaties and regular commercial arbitration. I think the reason is that the financial crisis in the United States and the United Kingdom, and all of the government assistance that's been pumped into those programs, has made people very reluctant to sort of kick over the can until they know where everything has happened. But in other parts of the world, where there hasn't been all of that tremendous government stimulus, there is no choice. So when projects are in trouble, or when the government changed the rules of the game for the investor, then there is no alternative but to start the dispute to protect the company's rights.
C. Mark Baker, Fulbright & Jaworski
We have to distinguish between a boom in international arbitration business that has been going on for the last five years as opposed to the increase in such cases because of the downturn. I do not think there has been any significant impact of the recession on international arbitration.
Gabrielle Kaufmann-Kohler, Levy Kaufmann-Kohler
There has been a large-scale displacement in the workforce due to the economic downturn, and inevitably some percentage of the displaced employees will turn to litigation to resolve real or perceived injustices. All of this makes for more work for the labor and employment bar.
Lorie Almon, Seyfarth Shaw
In the white-collar world, unfortunately, a downturn in the economy has very little effect on the pace of prosecutions. . . . What it does do is, it puts an acute hardship on individuals who are trying to defend themselves. They just don't have as much money available, and it may be more difficult for them to get indemnified.
Debra Wong Yang, Gibson, Dunn & Cruther
Certainly we have seen an impact [on contract attorney recruiting] as a result of the downturn. I think that our clients have always been very interested in cost savings, and we've only seen that motivation become even more important to them. So as they've become more and more conscious of their litigation budget, and not wanting to spend the money, there's been less litigation, and as a result it has driven the demand for our services down.
Andrew Jewel, senior vice president, Hudson Legal
When you charge flat fees [as we do], clients know what they're going to pay, and that's what they really need right now. So for us, business has been interestingly good.
Adam Mortara, Bartlit Beck Herman Palenchar & Scott
There is one school of thought [that] because of the collapse of financial institutions and uncertainty, a lot of jurors are mad at corporate America, more likely to [award] big verdicts. I hear people saying that. But I think it is a minority view. I think the majority view, no real data here, is [that] everybody is becoming financially cautious, and juries are more reluctant to give away money. They don't want to put corporations [into] bankruptcy because jobs would be lost.
Paul "Mickey" Pohl, Jones Day
What tends to happen when you have cataclysmic events like the financial crisis is [that] there are many political pressures that create competition among law enforcement agencies and tend to make those agencies more aggressive at how they look at cases. . . . What happens is [that] law enforcement agencies are looking at the harm [that] has obviously been caused, backward, to see if it can be attributed to any criminal conduct. This runs the risk of becoming some kind of a fishing expedition. Though it certainly creates more work for the white-collar bar, it's not a positive development for our clients.
Barry Berke, Kramer Levin Naftalis & Frankel
For eight years, there has been little government regulation of our commercial and financial markets. We're now beginning to see the consequences, which were predictable. Put bluntly, if there is no policeman on the beat, there will be more burglaries. I thus expect more questionable conduct to come to light as stricter government scrutiny continues.
Eugene Crew, Townsend and Townsend and Crew
Plaintiffs lawyers are bringing fewer actions — perhaps more closely evaluating mass torts or class actions before making any investment. They are settling cases for much lower dollar numbers compared with before the recession. More companies are asking their outside lawyers for alternative fee arrangements — that is, fixed fees or a discounted fee with success premium, etc.
Diane Sullivan, Dechert
As a general litigator with a specialization in employment, I would say that the recession makes for lots of job dislocations, so there has been an uptick in activities around economic layoffs. We've also seen an increase in whistle-blower claims, though it's difficult to say whether that's recession-related or not. The federal stimulus law that was enacted in February 2009 contains a broad whistle-blower provision, so that trend is expected to continue.
Mary Beth Hogan, Debevoise & Plimpton
Many of our Forture 500 clients are using flat fee and success fee tranching arrangements now. Some of our structured finance clients, however, have decided they prefer hourly rates, because if we take a piece of the action, and recover the enormous sums lost by them in the recent financial collapse, that amounts to too much for them to leave on the table as a fee for us.
Faith Gay, Quinn Emanuel Urquhart Oliver & Hedges
We've got a fair amount of intellectual property litigation — primarily patent, but also trademark and the rest of that. And there I don't see much of an impact. I think companies in this environment are very protective of their intellectual property rights and assert those rights.
Silvio DeCarli, associate general counsel, chief litigation counsel for E.I. du Pont de Nemours and Company
