More Litigation, More Regulation and More Costs
For litigation professionals, 2012 has already proved to be a year of heightened activity. Not only are we seeing a spike in lawsuit filings, but we are also entering one of the most hyper-vigilant regulatory climates we have seen in decades. This coupled with a reining in of corporate spending means that the next six to 12 months could be one of our most challenging periods yet.
According to the annual Fulbright & Jaworski’s Litigation Trends Survey, 92 percent of U.S. companies predict that litigation will either rise or remain the same over the next 12 months. Of those, one-third of the companies expect a rise in legal disputes. Stricter regulation and company growth topped the reasons cited for the anticipated increase in litigation, as opposed to last year’s survey, when worry over economic conditions was cited as the anticipated cause for increased disputes.
Concern over stricter regulations has not been without cause. Government regulators have tightened their belts across the board, with particular focus on stronger SEC guidelines in the wake of the financial meltdown. For example, the Volcker Rule, which takes effect in July, will restrict U.S. banks from making certain kinds of speculative investments that do not benefit their customers.
JP Morgan Chase’s recent $2 billion trading loss has also had a chilling effect on securities regulations. With the Obama administration using this loss to advocate for further financial reform, securities litigation will likely remain a threat for companies and investors alike.
Not only can we anticipate more litigation, but we can expect a longer and more drawn out process. Technological advancements mean that even the smallest cases now require the use of e-discovery, bringing more complexity and added costs to litigation.
Last year, 42 states cut judicial funding, according to the National Center for State Courts. With fewer resources and more filings, the result can become a vicious cycle: a delay in getting a case to trial, a higher chance of continuance, and an increase in costs at a time when clients lack an appetite for spending.
Since the boom period when litigation spending reached an all-time high, there has been an effort to tighten litigation budgets, with corporations demanding greater accountability and transparent pricing from their outside counsels. In 2012, corporate clients in particular will take greater control than ever before over spending decisions, diverting certain tasks in-house and mandating the use of various time-keeping services by the firms they have retained.
This confluence of factors is creating a “perfect storm.” Clients are tightening budgets at a time when the material costs for electronic e-discovery are only going up. Therefore, lawsuits must include careful advance planning in order to manage the effects of e-discovery, reduce certain of the expenses associated with it, and consider alternatives for billing when appropriate. Such alternatives may include flat charges with bonuses, contingent fees in whole or in part, or services for specific fees rather than having open-ended expenses. Most importantly, it is critical to prepare for an ongoing attorney/client dialogue regarding expenses, fees and ways to achieve more value for the services rendered.
By Andrew C. Hall
Hall, Lamb, Hall, P.A.
2665 S. Bayshore Dr., PH1
Miami, FL 33133
South Florida Legal Guide - Midyear 2012 Edition