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General counsel from 300 companies who responded to a Fulbright & Jaworski litigation survey are most fearful of labor and employment litigation and contract disputes, but at the same time the in-house lawyers aren’t shy about taking their own gripes to the courthouse. A high 88 percent of the in-house lawyers who responded to the client survey conducted by the Houston-based firm report their companies initiate litigation. Only 12 percent of the in-house lawyers say their companies never file suit. That finding � that the vast majority of the in-house lawyers say their companies are plaintiffs in litigation � was somewhat surprising to Stephen Dillard, the Fulbright partner who heads the firm’s worldwide litigation practice. He notes that many of the other findings, such as those that define why in-house lawyers hire particular firms for litigation over and over again, mesh with his expectations. In addition to labor and employment suits and contract disputes, the in-house lawyers who responded to the survey say they also are concerned about intellectual property and technology litigation, products liability suits and class actions. On the other hand, the in-house lawyers say they are not very concerned about Racketeer Influenced and Corrupt Organization Act suits, tax suits, government contract suits, franchise/distribution suits, admiralty/aviation litigation or international arbitration. According to the survey, conducted during the first quarter of this year, litigation is down overall at the 300 companies in the survey, with the total median number of suits in the United States declining slightly in 2004, compared to 2001. But at companies with more than $1 billion in annual revenue, the median number of suits increased by 8.7 percent, to 86.2 suits in 2004 from 79.3 suits three years earlier. And 41 percent of the 300 in-house lawyers who responded to questions in Fulbright’s U.S. Corporate Counsel Litigation Trends Survey believe the number of suits involving corporations will increase in the future. An outside research firm from Houston, Greenwood Inc., conducted the survey for Fulbright, which recently announced the results. The 300 lawyers who responded to the survey are largely general counsel � 83 percent of them say they are either general counsel or chief legal officers � and they work at companies in 41 states. Twenty percent of them work at companies in Texas, Dillard says. The survey went out to in-house lawyers who are current or former Fulbright clients, he says. More details of the survey results are available on the firm’s Web site at www.fulbright.com . Dillard says the study grew out of a brainstorming session in 2003 of the litigation section’s emerging issues group. He says the trial lawyers in the group get together on occasion to look at big-picture issues, and talk a year ago centered on ways to make sure the firm has the resources in place to meet the litigation needs of clients. “People said we ought not to be sitting around waiting for the phone to ring,” Dillard says, in explaining why the firm commissioned the survey. “We look at ourselves as a large service business . . . and we have clients who all the time are doing forecasting and we said, “Why wouldn’t we do that, to find out what the trends are in the marketplace,’ ” he says. The firm’s litigation lawyers are still digesting the information from the survey, Dillard says. Fulbright will share copies of the report with its clients and plans a breakfast briefing on Sept. 15 in Houston. Dillard says he hopes in-house lawyers will use the survey results to inform executives at their companies about litigation trends. “In the case of general counsel, something like this may very well help them with forecasting with their management as to what they can expect. They can say, “This is what our peers are experiencing,’ ” he says. Dillard says the firm announced results of the survey, instead of keeping it private, because the information was destined to get out anyway once it was sent to the in-house lawyers who participated in the survey. “Why not announce these results and let people see what we found, and if it has a contribution that it makes, then that would be fine,” he says. “I don’t think there’s any real trade secret information in there. “ Dillard says the firm hasn’t tabulated the cost of the survey, but he says much of the cost involves the time of the lawyers and staff who helped to develop it. COMMUNICATE AND LISTEN More than two-thirds of the in-house lawyers who responded to the survey say their most pressing concern about litigation is the unpredictability of costs. The in-house lawyers suggested ways to keep costs down, such as alternative billing and strategies to avoid litigation. But responses from some of the in-house lawyers indicate they want their outside lawyers to provide them as early as possible with detailed assessments of the potential exposure from the litigation, to establish budgets based on that assessment, and to keep communicating. [See "Talk to Me," this page.] “Communicate at regular intervals even if there is no action,” one of the survey respondents said in a section where they were asked to suggest ways outside firms could improve service. “Return my calls,” another wrote. “Listen to the client,” wrote yet another. The most popular methods for controlling the costs of litigation, according to survey results, call for hiring a single outside firm to handle all of a certain type of litigation either nationally or regionally, negotiating volume discounts and using scanned document databases. More than half of all the attorneys surveyed, 56 percent, say they use only hourly fees to compensate their outside counsel, and 80 percent say they use hourly fees 90 percent of the time. Thirty percent of the in-house lawyers say they use fixed fees and 16 percent say they use contingent fees. “We will go with the most efficient provider of services, taking rates into consideration,” one in-house lawyer wrote. Some of the in-house lawyers look with favor on arbitration clauses, while others don’t. According to the survey, 43 percent favor domestic arbitration, 36 percent don’t favor it and the rest are neutral. The survey respondents don’t believe arbitration reduces the cost of litigation � 47 percent of the in-house lawyers say they expect some savings or a large savings from arbitration, while 53 percent say arbitration either provides their company with no savings, or costs more money than traditional litigation. Mediation, however, got more support, with 60 percent of the in-house lawyers saying they favor mediation and only 15 percent saying they don’t favor it. Another 25 percent say their thoughts about mediation are neutral. A full 70 percent of the in-house lawyers say mediation saves some money or a large amount of money, and only 6 percent say it leads to some increase or a large increase in costs. According to the survey, 32 percent of the in-house lawyers from Texas who responded to the survey say their companies don’t have an in-house lawyer assigned to managing litigation, while 26 percent of the Texas lawyers say their companies have one in-house lawyer managing litigation, and 42 percent of them have two or more lawyers managing litigation from inside the company. Fulbright partner Peggy Heeg, who was general counsel at Houston’s El Paso Corp. before joining Fulbright in March, says she was shocked that a third of the in-house lawyers from Texas say their legal departments don’t have a single lawyer managing litigation. “I firmly believe you need to have some level of in-house management of litigation to keep your costs down,” Heeg says, adding that the in-house lawyer understands the business and can “push back” on the outside counsel to manage costs. Heeg also says she was somewhat surprised that in-house lawyers are so concerned about labor and employment litigation, but she says suits such as the highly publicized class action against Wal-Mart, which alleges the company discriminates against women by paying them less, probably contributes to that perception. “Once you have those type of large cases that get notoriety, you tend to have add-on litigation,” Heeg says. Nearly all of the companies surveyed, 99 percent of them, report they retain at least one outside firm. The median number of outside firms is nine, although the average increases to 22 at companies with annual revenue of $1 billion or more. Companies in Texas and in the Midwest hire the most outside firms � more than 11 on average � while companies in California and in the South average fewer than nine firms on retainer at any one time, according to the survey. Dillard says some of the survey results are surprising, such as the finding that almost all of the in-house lawyers report their employer sues other companies. But other results were more “confirmatory” to Dillard, including the fact that companies are likely to come back to prior litigation counsel when they have new litigation needs. According to the survey, in-house lawyers rely most often on specific litigation experience when deciding which firm to hire for a suit, followed by general knowledge, reputation, past experience with the company and cost-effectiveness. “It’s confirmation of what we thought, the age old of responsiveness . . . and experience in the particular matter,” Dillard says. “No firm can just expect some client to come back to them automatically. “ Dillard says the firm will use the survey results to organize its trial department, and as a factor when considering lateral hires. For instance, he says, it’s helpful to know that in-house lawyers remain concerned about class-action litigation and to know that employment litigation is likely to increase. Heeg, the former general counsel, notes the information would be useful for staffing on the in-house side as well.
Talk to Me The 300 in-house lawyers who responded to Fulbright & Jaworski’s U.S. Corporate Counsel Litigation Trends Survey were asked to talk about ways outside firms could improve service to their clients and identify frustrations in dealing with outside litigation counsel. Some of the suggestions provided anonymously by the in-house lawyers are fundamental, such as always return calls and e-mails and be truthful about fee arrangements. But the in-house lawyers also want a firm’s outside trial lawyers to take the time to understand the company’s business and to worry about their client’s bottom line. Some of their comments follow: “Understand � really understand � needs of company and people managing it.” “Don’t let paralegals and young associates run amok.” “Firms shouldn’t take cases they can’t handle.” “Define terms of realistic win rather than what client wants to hear.” “Make sure everyone is on the same page up front as to exposure, strategy and cost of litigation.” “View expenses as though they were counsel’s own funds.” “Don’t bill me for every 1/10 of a second spent on our matters; don’t double-bill for in-house meetings.” “Explain (and prove) value of services. Justify why lawyers deserve outrageous fees.” “Take feedback seriously (we have more experience with our issues).” “Avoid unnecessary discovery.” “Don’t charge to re-invent the wheel or to train associates.” “Don’t view other side as an enemy that must be destroyed, no matter what the cost.” “Give a bonus to law firms that deliver on time and under budget � penalize firms that don’t” Source: Fulbright & Jaworski’s U.S. Corporate Counsel Litigation Trends Survey

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