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As the business side of the practice of law has grown more competitive, law firms must ask the question, What do corporate counsel look for in their outside litigators? In Fulbright & Jaworski’s annual survey of litigation trends, corporate counsel answered the question loud and clear: expertise coupled with responsive communications and controlled litigation costs. The survey received responses from 304 corporate litigation managers in 45 states as well as 50 corporate counsel from the United Kingdom. Not surprisingly, knowledge, ability, and expertise are by far the top attributes of a successful lawyer, and 63 percent of the U.S. in-house counsel who participated in this year’s survey named these characteristics as their top criteria. These attributes were closely followed by responsiveness and the issue of controlling cost. Asked to identify the most distinguishing attributes of the outside attorneys they consider most successful, close to half of the respondents specified responsiveness and promptness, followed by cost efficiency. Conversely, these corporate counsel mentioned high cost, incompetence or lack of knowledge, and poor communications as the top three characteristics that most distinguished their least-successful outside counsel. The success of American corporate counsel is judged on a similar metric. More than half of the respondents cited “good results” as the most important factor upon which the success or failure of their legal department is evaluated by their superiors. Cost efficiency was the second-most-significant factor in the measurement of corporate legal department success, with more than a third of corporate counsel identifying it as the key criterion their company uses. Good results and cost efficiency were also the top two criteria used by company management to measure the success of individual in-house attorneys. Along with conveying the characteristics that make for a successful relationship between corporate America and its advocates, the survey also provides insight into the prevalence of litigation, how companies handle the workloads, and the litigation-related issues that most concern them. THE BROAD SCOPE OF LITIGATION According to the survey, few American companies manage to avoid litigation. Almost 90 percent are engaged in some form of litigation, and on average, they oversee a U.S. docket of 37 lawsuits. Almost half of the companies surveyed had more than 10 cases pending, and 20 percent were facing upward of 50 to 100 litigation matters at once. Many of these actions were new: 77 percent of the responding companies were subjected to at least one new lawsuit during the past year. Of these 234 companies, more than half had more than six suits filed against them. Close to a third were served with more than 21 complaints. But corporations are doing their fair share of suing, as well. During the past year more than half of the companies surveyed had filed at least one lawsuit, and 36 of them had filed 11 or more cases. Given the ubiquity of litigation, it is not surprising that almost all corporate law departments have at least one attorney who manages litigation. These in-house lawyers are quite busy, juggling an average of 10.2 litigation matters each. At companies with gross revenues of $1 billion or more, the average workload increases to 14.8 matters per attorney. Only 5 percent of the companies surveyed did not employ any outside law firms to handle litigation for them. For the rest, the average number of law firms hired to handle company litigation is 11, a number that counsel reported is unlikely to decrease except for the very largest of companies. Consistent with this view, an overwhelming majority of in-house counsel expect the number of outside firms they retain for litigation to increase or remain the same. Although this clearly means the litigation business is strong, respondents are still focused on issues of service in that litigation. THE COST FACTOR Prevalent throughout the survey responses was a concern about costs. Litigation expenses are top-of-mind for a large number of corporate counsel. For almost 20 percent of the respondents, the overall costs of litigation, rather than any specific category of lawsuit, was the leading concern. Controlling unpredictable litigation expenses poses a challenge for in-house lawyers, so much so that 43 percent don’t operate under a set litigation budget. The responses from the 146 counsel who were able to report the amount of their companies’ litigation budgets, however, demonstrate the significant price of litigation. Of the average legal budget of $20.1 million, more than a third � $8 million � is directed toward litigation-related expenses. About a quarter of the companies surveyed said that litigation spending accounts for 21 percent to 50 percent of their legal budget. An additional 12 percent reported that litigation expenses accounted for more than 50 percent of their total legal budget. How does all of this translate into real dollars? Of the $1 billion-plus companies with legal budgets that demand more than 5 percent of gross revenues (8 percent of the category respondents), 32 percent spend anywhere from a quarter to one-half of their legal budget on litigation. That’s between $12.5 million and $25 million annually. For an additional 16 percent of the largest companies, their litigation budget is more than half of their legal budget, which is the equivalent of $10 million to $25 million a year. The amount of money corporate America spends annually on lawsuits goes a long way toward explaining the desire of in-house counsel to reduce expenditures. For a third of the respondents, the message they most wanted to deliver to outside counsel was “control costs.” That took precedence over results-oriented messages like “win cases” or “get results.” Many corporate counsel, however, are satisfied with the jobs that their outside law firms are doing, with nearly a quarter of those surveyed responding with some variation of “keep up the good work.” LITIGATION BURDENS Aside from general cost concerns, the survey reveals a number of issues that are affecting the way in-house counsel handle litigation. Companies have gotten the message about maintaining strong document-retention programs and have made significant efforts to implement them. At least three-quarters of U.S. companies in the survey now have written policies mandating the retention of documents once a lawsuit is in motion. Ensuring compliance undoubtedly adds to the workload of in-house counsel, as does their constant revision. Another area having a major effect on corporate counsel is electronic discovery. For U.S. companies with gross revenues of above $100 million, the biggest litigation burden that did not exist two or three years ago is electronic discovery. Several in-house attorneys described its impact as follows: “Electronic discovery is going to be a burden” and “Litigation continues to get more expensive because discovery is not limited enough.” For companies with revenues under $100 million, increased regulatory compliance was the biggest new burden, with some corporate counsel seeing increased “litigation surrounding compliance with Sarbanes-Oxley” in the future. LOOKING DOWN THE ROAD Although the survey did not expressly ask in-house counsel for their views on how costs might be reduced, the findings indicate some areas where this might be accomplished. For instance, using a multistep process to try to resolve disputes appears to offer significant cost savings. A little more than half of the U.S. respondents had tried a process whereby a dispute is first addressed by senior executives in direct client-to-client negotiations, followed by mediation, and then, if necessary, arbitration. Of these companies, 69 percent said they had achieved at least some savings using this type of process, and 16 percent reported achieving large savings. With respect to class actions, which were the fourth-ranked type of litigation matter of most concern to corporate counsel in the future, the impact of 2005′s Class Action Fairness Act has yet to be felt. While half believe the act will have no effect on U.S. litigation costs, more than a quarter believe it will lead to a decrease in costs. Harnessing technology to assist with electronic discovery, compliance issues, or document-retention programs may offer other ways of achieving cost savings. With comments highlighting concerns about these areas, in-house attorneys are clearly looking for ways to reduce these burdens. The bottom line, as one respondent put it, is “all about getting the best outcome by the most efficient means.” Law firms that truly help companies address these concerns will set themselves up for long and mutually beneficial relationships.
Stephen C. Dillard is chair of the global litigation department in Fulbright & Jaworski‘s Houston office. John M. Simpson heads the litigation department in Fulbright’s Washington, D.C., office.

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