Litigation Trends

Law firm Norton Rose Fulbright recently released their 10th annual survey of corporate litigation trends.  Using a sample size of 401 companies, the majority of which had annual gross revenues of $1 billion or more (66%) and were headquartered in the United States (94%), Norton Rose surveyed (primarily) their General Counsel or Head of Litigation (76%) about the litigation that they faced in 2013 and what they expected in the future.  Of industries covered, Energy (21%), Healthcare (17%) and Financial Services (15%) were the top three.

The results revealed a much more active regulatory landscape than that experienced in prior years.  19% of reported litigation for 2013 was of a regulatory or investigative nature, up sharply from just 9% in 2012.  In fact, regulatory/investigations were listed as the primary area of concern (41%) after only labor and employment disputes (44%).  Once again, this is a sharp increase from 2012 when only 23% of respondents listed regulatory/investigations as a primary area of concern.  The only other category to experience such a dramatic year-over-year rise was securities litigation/enforcement, which climbed from 9% in 2012 to 15% in 2013.  Technology, energy and financial services companies all reported the greatest increase in regulatory/investigations as an area of concern (see chart below). 

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The majority of companies facing a regulatory investigation in 2013 retained outside counsel to respond (59%).  89% of regulatory investigations reported involved one of three agencies: DOJ (34%), SEC (23%) or the EPA (22%).  Beyond outside regulatory activity, internal investigations that required the assistance of outside counsel were also up in 2013, with 55% of respondents reporting one or more.  Only 42% reported hiring outside counsel for an internal investigation in 2012.  Despite hiring outside counsel to assist, in-house counsel also reported spending more time addressing investigative requests, with 52% reporting that they had spent more time in that area in 2013, compared with 43% who reported spending more time on requests in 2012. 

Confirming a larger trend that we have blogged about previously, 71% of companies that reported 2013 litigation expenses spent more than $1 million.  This is up substantially from only slightly less than half of respondents reporting spending of more than $1 million in both 2012 and 2011.  Looking at a detailed breakdown of the last three years, it becomes clear that companies are increasingly facing a landscape of high litigation expenses; the number of companies spending less than $1 million has dropped, while the number spending $10 million or more has climbed (see chart below).

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It will be interesting to see what impact this has on corporate profitability as we work our way through 2014, and whether the trends of more active investigations and higher expenses continue.