Articles Posted in Productivity

An article in Law Firm Inc. (Vol. 3, Sept./Oct. 2005 at 18) by the General Counsel of ACC (Susan Hackett) dropped in a provocative sentence.

“Our surveys suggest that in-house counsel are increasingly concerned about the amount of time they spend on their management duties (relative to the time they are able to spend cultivating their own substantive practice experience.”) (See my post of Sept. 25, 2005 on presumed 1,850 chargeable hours per year.)

I have not heard this complaint, nor seen any support for it in surveys. More fundamentally, I doubt it is true.

In the press, the bugaboo of litigation expense, class action lawsuits, looms all the time, yet how often do companies of $1 billion in revenue or larger face them? Fulbright & Jaworski’s Second Annual Litigation Trends Survey offers some data (at 24, 25, and 27).

In the previous year, “nearly 40% of companies with revenues of $1 billion or more [around 100 companies] were served” with a class action complaint. In the past three years, however, 83 percent of those companies had zero class actions certified against them. Of that size bracket, 62 percent faced none. It sounds like the bugaboo is exaggerated; many are called but few are chosen.

“Each US corporate counsel handles an average of 10.2 litigation matters,” proclaims Fulbright & Jaworski’s Second Annual Litigation Trends Survey (at 19). lawsuits a year. The F&J report claims that “companies with revenues of $1 billion-plus have an average of over [litigation management] 10 lawyers.” (id). That may be the average in their group of 103 large companies, but 75 percent had five or fewer litigation management lawyers, so the median was closer to four (Full data at 55).

Other surveys show a typical staff of around five lawyers per billion of revenue, and typically less than one of them – on a full-time basis – manages litigation. Hence, if four litigation matters per lawyer according to the estimated median, that would work out to a median of around 20 lawsuits a year (and perhaps half that number at any one time – see my earlier post.)

For six types of matters, Fulbright & Jaworski’s Second Annual Litigation Trends Survey provides estimated “median average number of days to resolution (2005 at 11; but note that 45% of the respondents never track resolution time). Listed in increasing duration for US matters, they were contracts (138 days to resolution), regulatory and “other civil” (tied at 146 days), labor/employment (161 days), IP (225) and PI (358).

The business-to-business cases had the fastest resolution time (contracts), whereas two of the three slowest were individual-to-business cases (employment and personal injury).

Mostly, these seem like rocket-docket speeds of resolution, where five of the six matter types concluded within five to seven months. Perhaps rapid settlements account for part of this expedition.

From about 103 companies with revenues greater than $1 billion, as reported in Fulbright & Jaworski’s Second Annual Litigation Trends Survey (2005, full report at 30-35), the average number of lawsuits brought against them in the last year was 64.6 (median 20, which probably means no asbestos defendants), arbitrations started against them averaged 10.6 (median 1.1), and regulatory proceedings against them averaged 9.9 (median 0.9).

The report does not state whether EEOC-type actions are included, nor whether workers comp claims are included in these numbers. Taking the figures as given, these medians for 100 billion dollar plus companies belie a litigation explosion. (See my post of today on proceedings brought by this set of companies.)

From a group of about 103 companies with revenues greater than $1 billion (of which 20 or so were based in the UK), 26 percent did not file a single lawsuit in the previous year. This astonishing metric came from Fulbright & Jaworski’s Second Annual Litigation Trends Survey (2005 at 9). In the revenue range from $100 million to $999 million, the comparable figure was 41 percent.

For the companies in that revenue group, the median was 2.8 lawsuits (average 10.2) commenced as plaintiff. With a median of 20 lawsuits filed against them in the past year, the ratio was about 7 cases as defendant to 1 case as plaintiff; using averages, the ratio was 6 to 1.

Many people estimate that 90 percent or more of the typical large company’s litigation load falls on them as defendants, not these lower ratios. (See my post of today on proceedings against this set of companies.) Presumably, collections litigation is not included in these statistics.

Fulbright & Jaworski’s Second Annual Litigation Trends Survey states (2005 at 3): “The average $1 billion-per-year company faces more than 140 cases in the US at one time.” To be more precise, the underlying data is for companies with $1.5 billion or more of revenue and the average was 142 matters, a term that includes lawsuits, regulatory proceedings, and arbitrations. The set of companies includes about 20 UK-based companies. Additionally, 72 percent had less than 100 matters pending, 34 percent had less than 10, so the median would be considerably below the average, likely less than 50 matters pending, of which more than 90 percent (using medians from the report) are law suits

Later (at 11), from data on median average time to resolution (very roughly a half year) and using a median of 50 matters pending, it follows that that approximately 100 matters a year involve that typical revenue size company. Beware that this may be extrapolating too far. (Compare, in my post of May 31, 2005, about 58 cases per year in 1995 for Canadian corporations and my post of April 8, 2005 concluding from the first Fulbright survey about 50 cases pending per litigator.)

I have not heard of a law department that sent a paralegal to work in a law firm for a period so that the paralegal picks up enough to carry on back in the department. We might call that practice a “reverse secondment.”

An investment by the law department, an acceptance by the law firm that training the paralegal might lessen their fees but strengthen their ties, and a general increase in flexibility and capability in the law department, all make such an idea worth considering.

Describing his “legal team structure,” at ACCA’s 2001 Annual Meeting, the General Counsel of FMC Technologies (Jeffrey Carr) put up a slide that reads “4 lawyers currently working in non-legal capacities as contract managers will be more closely aligned with legal function.”

Having 7-8 lawyers in the law department at the time, the company had half as many more serving as “contract managers” outside the department (See my posts of March 26, 2005 on second-class citizens.) It is not explained on the slide what Carr had in mind for closer alignment, but obviously the law department and a contracts group should coordinate on complex contracts.

LaVern Pritchard, in a post dated Sept. 12, 2005 at Minnesota Lawyer, referred to Fair Isaac Corporation and its 20-lawyer department. A senior lawyer in that department explained that they are currently considering “enterprise contract management software.”

In his words, “Contract automation has the potential to positively affect this business more than just about anything else.” To that department, it has the potential to improve the quality of contracts, increase efficiency, and make lawyers’ jobs more interesting as they can focus on contracting issues and challenges rather than the pedestrian aspects of document creation and administration.

More details on contract management software as they come to light. Meanwhile, see my posts of March 18, 2005 about law departments managing contracts, April 18, 2005 on abolishing mandatory contract review, Aug. 31, 2005 on setting standard terms, and Sept. 17, 2005 on setting minimum requirements for legal department review.