NEW YORK, July 16, 2013 (GLOBE NEWSWIRE) -- More than half of U.S. companies have seen increases in litigation spending of late, according to a new survey by AlixPartners, the global business advisory firm. One in 10 have been involved in "bet-the-company" lawsuits, many of which have stemmed from the global financial crisis, which yielded increases in the number of both regulatory and corporate investigations. Companies are responding to the threat of litigation by evaluating their compliance programs, monitoring policies, and implementing new tools and procedures to reduce risk, according to the survey.
Meanwhile, the stakes in these disputes are high, underscoring both the potential threat and distraction they represent for senior management and general counsel. Thirty-six percent of respondents said that the number of commercial disputes their companies had been involved in has risen over the past 12 months. Contract disputes led the way, followed by intellectual-property, product and class-action disputes. Of the companies reporting an increase in disputes, 83% said that their litigation costs rose during this period.
"Litigation and the threats associated with commercial disputes remain a critical issue facing companies and their executives today," said Louis Dudney, managing director at AlixPartners. "While a number of these cases are the product of stricter regulations and the lingering effects of the financial crisis, companies have also been exposed to litigation arising from product-liability and intellectual-property issues as well as disputes that arise during M &A and other transactions. No matter their origin, commercial disputes can have far-reaching implications for companies and their long-term business objectives."
Dealing with Litigation: Legal Costs, Alternative Dispute Resolution and Risk Management
In the face of the growing threat of lawsuits, legal departments are trying to keep costs under control while establishing more predictability in their expenditures, mostly by pursuing out-of-court settlements and handling more work internally, says the survey. More than half (52%) of respondents said that retaining work in-house is important, while 27% reported an increase in the size of their legal departments in the previous 12 months. By the same token, companies are turning to alternative dispute resolution and alternative fee structures -- 59% and 55%, respectively, said they believe these techniques are important in reining in legal costs.
However, while companies may be closely managing their legal spending, they continue to lean heavily on outside law firms -- 25% of respondents said their usage of outside firms had risen. In particular, companies are relying on law firms in specialized matters, such as M &A transactions and investigations, the survey found.
Litigation concerns appear to be influencing the ways in which companies approach risk-management techniques and procedures, as well. Specifically, companies seem to be adopting systems and strategies aimed not only at reducing the risk of being sued but that may also allow them to be more proactive in identifying and reporting concerns. A wide majority of respondents – 84% – said that their companies are increasingly reviewing their compliance programs and implementing new tools and processes to reduce litigation-related risks.
"General counsel must deal with not only the potential damage that litigation may inflict but also with defending these lawsuits, which can be costly and detract from day-to-day activities," said Dudney. "At the same time, companies are becoming more inclined to re-evaluate their compliance programs, particularly when it comes to policies related to data and documentation. This may in part be due to the regulatory scrutiny amid concerns about attacks on computer networks."
To address these concerns, companies are also implementing new tools, such as technological ones, and placing greater emphasis on enforcing document-retention policies to ensure that electronic and other important data are handled properly, according to the survey.
About the Survey
AlixPartners' Litigation and Corporate Compliance Survey polled general counsel at U.S. companies with annual revenues of $250 million or more. Industries represented included financial services, information technology, energy, retail, telecommunications, consumer products, automotive, healthcare, life sciences, aerospace, construction, chemicals, agriculture and retail, among others.
AlixPartners, LLP is a global business advisory firm offering comprehensive services in four major areas: enterprise improvement, turnaround and restructuring, financial advisory services and information management services. Founded in 1981, the firm has offices around the world, and can be found on the Web at www.alixpartners.com.
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