Businesses just aren’t suing each other as much anymore.
The economy is stronger, the stock market is rising, and the big crackdown on rampant corporate fraud is winding down, so there’s not quite as much to complain about these days.
This trend is reflected in the latest Litigation Trends Survey released Monday by law firm Fulbright & Jaworski. The survey is based on interviews with the in-house lawyers of 250 major U.S. corporations.
Of those surveyed, 17 percent said their company had escaped the past year without having to defend itself against a single new lawsuit. That’s up from 11 percent in last year’s survey.
Companies also reported fewer regulatory actions against them.
“When the economy is good, litigation falls off,” said Jeff Dykes, a lawyer who heads Fulbright & Jaworski’s Denver office.
But it’s not exactly falling off a cliff. The fact that 17 percent escaped a lawsuit last year means that 83 percent did not.
Also, 65 percent of corporate lawyers surveyed said their company had filed at least one lawsuit in the past year. That’s, of course, an improvement since it’s down from 70 percent last year and 88 percent in 2004.
“While the numbers are down year-over-year, litigation is still close to an all-time high in terms of the number of companies suing each other and the money that they spend on litigation,” said Stephen Martin, a professor at the University of Denver’s Daniels College of Business who once worked as in-house counsel for Qwest and Adelphia.
Litigation has become “a cost of doing business,” Martin said. “Whatever profits or margins you are thinking about, there’s going to be a litigation cost involved.”
Four out of every 10 corporate lawsuits involve claims of more than $20 million.
To keep up the fight, more than half of U.S. companies spend $1 million or more each year on outside legal counsel, according to Fulbright & Jaworski. And 15 percent spend $15 million or more.
Labor and employment claims are the most frequent claims companies face, followed by contract disputes and personal-injury cases.
You fired me. You burned me. You hurt me on the job. Now pay.
Other claims just come with the territory.
Financial-services companies are plagued with securities litigation; energy companies get hit the most with environmental cases; technology firms draw the most intellectual-property claims; and retailers (not manufacturers) get the most product-liability claims.
Insurance companies get hit with the most class-action lawsuits, typically from customers who’ve been denied claims. But how else does one get an insurance company to pay?
Just doing business
Many companies use the court system to bully, harass, squeeze, impede or exact revenge on their competitors.
The courts are often dealing with knock-down drag-outs that usually get resolved before they come down to a judge or jury decision.
“It’s another weapon in your arsenal,” said Martin, “to slow down the competition, to make it more expensive. … It’s another method for doing business – especially big competitors going after smaller ones.”
Earlier this year, CKE Restaurants Inc., operator of Carl’s Jr., sued Jack in the Box for suggesting that its burgers are made from, well …
In a TV commercial, good old “Jack” is thinking out of his box. He is asked in a meeting with executives to point to a diagram of a cow and show where competitors get their Angus meat.
“I’d rather not,” the big, bulb-headed Jack replies.
In another spot, Jack in the Box executives laugh over the word “Angus” like third-graders.
CKE does not see the humor. It claims the ads mislead consumers into believing that its Angus burgers are actually made from “rear-end and/or anus of beef cattle.”
In July, a judge in Santa Ana, Calif., denied CKE’s motion for a preliminary injunction to stop the ads. The suit is still pending.
Apparently, this is a fairly common experience in the business world. It’s what’s known as getting your Angus sued.
Al Lewis’ column appears Sundays, Tuesdays and Fridays. Respond to him at , 303-954-1967 or alewis@denverpost.com.
