Oil and gas companies have long worried about where they’ll find the geologists and engineers they’ll need in the future, but there’s another group of professionals whom they apparently also need to recruit-lawyers.
In its third annual survey of corporate litigation trends, Fulbright & Jaworski LLP, Houston, found the average US energy company has 364 separate lawsuits currently pending in US courts. That’s the second most lawsuits of any industry surveyed, with only the insurance industry attracting more litigation.
A check of companies of all sizes and industries suggests litigation is a fact of US corporate life. Of all the US corporate attorneys surveyed, 94% said their companies had some form of legal dispute pending in a US venue. For 89%, at least one new suit was filed against their company during the past year.
‘Deep pockets’
Not surprisingly, companies with the deepest pockets-annual gross revenues of $1 billion or more-carry the biggest litigation burden, fielding 556 cases on average, with nearly half of those firms facing 50 new suits/year. Among those large companies, 40% expect the number of actions to increase in the coming year.
“With big litigation comes a big price tag. US companies report spending 71% of their overall estimated legal budgets on disputes,” the study said. Nearly 40% of all US firms reported at least one $20 million suit against them in the past year, the survey said. Among energy companies, 59% were hit by at least one lawsuit valued at $20 million or more in 2006.
“Large US companies commit an average of $19.8 million to litigation, approximately 58% of total average legal spending of $34.2 million. More than two thirds of large companies surveyed reported at least one new suit involving $20 million or more in claims; 17% faced a minimum of six suits in the $20 million-plus range,” the survey said.
The typical energy company spent an average $13.5 million on litigation in the past year, fourth among the 12 other industries in the survey of 422 corporate attorneys worldwide about their top litigation concerns and attitudes.
While smaller companies are hardly litigation-free, the weight is considerably less. Companies with revenues under $100 million/year reported only nine cases pending on average. Attorneys for those small US companies said their average dispute spending totaled $178,000.
“The high cost of litigation in the US has not been lost on the rest of the world. For more than half of foreign counsel surveyed, ‘high legal costs’ were cited as a top concern about litigating a dispute in US,” the legal firm said.
Among the energy companies polled, 58% said environmental issues, toxic materials, and contract disputes were among their top litigation concerns, followed by labor issues and regulatory matters, securities enforcement, and antitrust and other trade issues. Moreover, 36% of those energy companies expect their US caseloads to increase in 2007.
Fulbright & Jaworski said 46% of the energy companies surveyed have class action suits pending against them in US courts, 10 percentage points above the national average for other industries.
Internal investigations
One of the surprises this year is the large percentage of firms-81% of the energy companies, second only to the pharmaceutical industry and well above the 63% average for all US companies-involved in internal investigations requiring outside counsel. “Partly this is an outgrowth of our modern regulatory and enforcement climate in which companies are put on fast-track notice by government agencies that an action may be forthcoming, which prompts them to conduct a full-scale investigation,” said Stephen C. Dillard, chair of Fulbright & Jaworski’s global litigation practice.
“The surge in investigations is also an inevitable consequence of the big corporate meltdowns that have occurred in recent years,” Dillard said. “Management and corporate boards have become much more proactive at taking the lead in policing themselves for possible wrong-doing and potential liability. Whether borne from the fear of enforcement, litigation, or negative publicity, internal investigations are actually a means of containing future financial or reputational damage.”
The law firm found US companies in general face an average of 305 pending lawsuits internationally. Although most of those cases are in US courts, the study said, “The tide of international disputes is rising; more than one third of the companies said up to 20% of their dockets originate in foreign venues, proof that US-style litigation is going global.”