It’s a common refrain: The U.S. business climate would be more competitive if it weren’t for those lawyers.
U.S. Chamber of Commerce president Thomas Donohue has bemoaned “trial lawyers seeking jackpot justice.” John Castellani, president of the Business Roundtable, has complained, “The skyrocketing cost of litigation has become a significant drain on our economy.”
The problem isn’t lawyers, though. It’s the clients who hire them. And many of these clients are running companies.
More than two-thirds of U.S. companies have filed lawsuits in the past year, according to research released this week by international law firm Fulbright & Jaworski. According to the firm’s survey of 422 in-house legal departments, U.S. companies with more than $1 billion in revenue are involved in 50 new lawsuits a year. They now manage an average caseload of 556 pending actions. And they spend an average of $12 million a year on litigation, not including settlements.
“Litigation is woven deeply into the fabric of the way we do business in this country,” said Jeff Dykes of Fulbright & Jaworski’s Houston office.
Companies frequently turn to courts to enforce contracts, protect trademarks, challenge the monopolistic or illegal behavior of competitors, or simply to bury someone alive in legal papers.
“We live in a culture that revels in competition,” said Sam Cassidy, who teaches law and ethics at the University of Denver’s Daniels School of Business and formerly served as Colorado lieutenant governor as well as CEO of the Colorado Association of Commerce and Industry.
“It’s kind of like the Broncos on Sunday,” Cassidy said. “People like a good fight, and they are having it in court.”
And why not?
“If you are running a corporation, you can decide to litigate, and it’s not coming our of your pocket, it’s coming out of shareholders’ pockets,” Cassidy said.
The Top 10 legal concerns reported by the companies surveyed:
1) Labor and employment issues; 2) contract disputes; 3) class actions, where groups of shareholders, employees or customers sue; 4) intellectual property and patent disputes; 5) personal injury; 6) regulatory proceedings; 7) product liability; 8) environmental problems; 9) securities litigation or enforcement; and 10) antitrust and trade issues.
Corporations are often focused on profits instead of people, so it’s no surprise that their top legal concerns involve claims that they’ve mistreated employees, vendors, customers or shareholders.
It’s also no surprise that the business sector most often sued is the insurance industry. The average insurer is now involved in 1,700 cases, more than five times the next-highest sectors – energy, retail and financial services.
How else do you get an insurance company to pay a claim but to sue? For instance, since Hurricane Katrina, insurance companies have been arguing with customers over whether their property was destroyed by wind or rain – and if it was rain, the response is often, sorry, pal, but you don’t have flood insurance.
Companies also face litigation because of new regulations following corporate scandals. The new rules often force companies to investigate themselves, which is why 63 percent of U.S. companies surveyed reported at least one in-house probe requiring outside counsel in the past year.
When it comes to suing, the survey shows manufacturers and retailers as the most litigious. The survey said 90 percent of companies in these sectors filed at least one lawsuit during the past year. Real estate firms and insurers proved the next most litigious on the list.
Jim Lewis, a patent attorney for Patton Boggs in Denver, said one reason there’s more litigation is because so much of business today revolves around technology. “More patents are issued, so there’s more fruit for litigation,” he said.
So thanks to contentious companies, corporate law is a growth profession.
“Corporate America loves suing but hates being sued,” said Phil Feigin, formerly Colorado’s securities commissioner and now an attorney with Rothgerber Johnson & Lyons in Denver. “The new golden rule is, ‘Do unto others and hope you have a better lawyer … when they try to do unto you.”‘
Al Lewis’ column appears Sundays, Tuesdays and Fridays. Respond to Lewis at denverpostbloghouse.com/lewis, 303-954-1967 or alewis@denverpost.com.
