Second Annual Litigation Trends Survey Findings

LITIGATION EXPERIENCE pg 8

LITIGATION COSTS pg 12

CLASS/GROUP ACTIONS pg 25

INTERNATIONAL ARBITRATIONpg 32

Second Annual Litigation Trends Survey

Findingsd

When Complexity Demands Perspective, Think Fulbright.™

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Fulbright & Jaworski L.L.P. com-

missioned an independent research

firm to survey Legal Directors and heads

of legal departments regarding a wide

range of litigation trends. The 2005 survey

follows a Fulbright survey conducted in

2004 amongst US General Counsel and

senior lawyers in which 300 provided

detailed information about their company’s

litigation profiles, needs and expectations.

d

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W h e n C O M P L E X I T Y D E M A N D S P E R S P E C T I V E , T h i n k F u l b r i g h t .™ 1

Table of Contents

A View Inside 2-3

Survey Details 4-5

Litigation Risk & Exposure 6-7

Litigation Experience 8-11

Litigation Costs 12-17

Measuring Success 18-20

Litigation Management 21-24

Class/Group Actions 25-29

Litigation Hold Policies 30-31

International Arbitration 32-34

Future Trends 35

What We’ve Learned 36

Bar and Pie Chart Legend

US Stat

UK Stat

Combined US and UK

IMPORTANT

Ins ight s

One of the Largest Surveys on Litigation Trends

For the second year in a row, Fulbright &

Jaworski commissioned an independent survey

of corporate General Counsel, in both the UK

and US, regarding a wide range of litigation

trends. The 354 conducted interviews, including

50 participants in the UK, again made this a

statistically significant survey sample and likely

the largest survey of corporate litigation trends

ever conducted.

The findings were compared in several ways,

including UK to US respondents, company

revenues and industries. The results achieved are

presented in an informative and, hopefully, helpful

manner designed to assist corporate lawyers in

responding to foreseeable trends in the industry.

For further breakdowns of information by industry

or company size, or to request additional data

or analyses of specific topics, please contact

Graham Simkin at Fulbright & Jaworski at

[email protected].

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The Fulbright & Jaworski 2005 Litigation Trends Survey of Legal

Directors and other senior-level legal advisors was broadened this

year to include 50 participants from the UK. Different issues and

focuses were brought to light, including some major disparities

between the two sides of the Atlantic. Included in the survey were

the major topics from the 2004 US survey and some new ones

suggested by last year’s respondents. Among them: measurements

of success for legal departments, managing class/group actions

and international arbitration and litigation hold policies (for

safeguarding documents that may be needed for potential

litigation from scheduled destruction).

Among the differences between the UK and US were:

D Almost half of UK companies

expect to face more litigation next year.

D Product liability cases were

cited most often by UK companies for

having increased risk. For US companies,

it was contract disputes and employment.

D UK companies initiated half as many court actions and arbitrations

in the past year as US companies: 4.4 cases

compared with 10.8.

Electronic discovery is a

growing concern in the

US and although less of

a concern in the UK,

in-house lawyers are

aware that it is only a

question of time before

it becomes a major issue

in the UK.

F U L B R I G H T J a w o r s k i L . L . P.2

w w w . f u l b r i g h t . c o m

A VIEW

Ins ide


D UK companies were almost twice as likely as US companies to settle

all their matters before proceedings began.

D 56% of UK companies required a budget from outside litigation lawyers compared

with 35% of the US companies.

D “Help us control costs”

was the one message US and UK

respondents most wanted to deliver to

their outside lawyers.

D It takes an average of 98 days in the

UK to resolve a contract claim compared

with 138 days in the US.

D UK corporate lawyers were more favourably disposed towards

international arbitration: 38% of UK

respondents had seen cost savings.


A corporation

with $1.5

billion in

revenues

averages

more than

$8 million

per year in

corporate

litigation costs.




SURVEY

Detai l s

A View from the Top

More than 90% of the respondents held the title of Legal Director,

General Counsel or other corporate senior legal advisor in the UK

and US. The survey responses are divided into three groups to

better reflect the effect of company size on the data.

Publicly held companies made up 40% of the total sample and

of those, 59% are listed on the New York Stock Exchange, 22%

on NASDAQ and 11% on the London Stock Exchange. Of the

companies with $1 billion or more in revenues, 70% are publicly

held, and 17% of the total sample are non-profit organizations.

The median size for

the UK companies was

$833 million, and

in the US the median size

was $484 million in gross revenues.

Total Sample by Company Revenues

29%

46%

Under $100 Million

$100 - $999 Million

$1 Billion or More 25%

D Small Companies Less than $100 million gross revenues

D Mid-sized Companies $100 million to $999 million gross revenues

D Large Companies $1 billion or more gross revenues



In the UK, there was a greater percentage of companies with gross

revenues over $1 billion than in the US sample.

The total sample included a broad range of industries. More than

half of the UK participants represented manufacturing, finance or

technology/communications.

UK Sample by Company Revenues

41% 40%

19%

$100 - $999 Million

Under $100 Million

$1 Billion or More

Total Sample Industry Representation

8% Retail/Wholesale

7% Engineering/Construction

6% Insurance

6% Public Sector/Education

5% Property

10% Energy

8% Technology/Communications

16% Manufacturing

13% All Others

11% Finance/Banking

10% Healthcare


Product Liability: A Growing Concern in the UK

The major concern in the UK was the potential for the growth in

product liability litigation and the growth in IP and contract disputes.

When looking at the entire sample of respondents from the UK and

the US, the type of litigation seen as posing the greatest risk obviously

depended on the industry sector. Technology/communication

companies saw the greatest increase in risk from employment cases

and personal injury; the insurance, energy and healthcare industries

were concerned about the rising trend in class/group actions.

Types of Cases Most Often Pending

Not surprisingly, contract disputes and employment cases were at

the top of this year’s list as they were in the US survey last year.

The growth in personal injury cases for the total sample was reflected

in this year’s survey and was ranked third, whereas last year in the

US-only survey it did not even rank within the top five. In terms

of the number of pending cases, insurance and regulatory matters

also showed a significant percentage increase in 2005 over the

previous year.


LITIGATION RISK

& Exposure


Percentage of Most Numerous Types of Litigation Last Year

Contracts

42%28%

38%30%

Labor/Employment

Personal Injury

19%14%

14%26%

Product Liability

13%16%

IP/Patents

US

UK

0 10 20 30 40 50 60 70 80 90 100


E-merging Burdens: Electronic Discovery and Regulatory Compliance

Of the current litigation-related

burdens that did not exist two

or three years ago, electronic

discovery was mentioned most

often by US General Counsel.

So far, its impact appears to

have been felt far less in the UK

than in the US. For the smaller

companies, complying with

increased regulations was their

largest growing burden.

Class/group actions was a top five concern last year, but did not

make the top five ranking in 2005. Although IP and product

liability cases were still in the top five, the number of actual cases

pending fell below that of 2004.

Fulbright has

wide expertise

in e-discovery.


LITIGATION

Experience

US Companies Sued More Often

More than three-quarters of the US companies in the survey had

at least one court action filed against them in the last year, versus

two-thirds of the UK companies. The US median number of suits

per company was more than double the UK median.

Most Frequent Industry Targets: Property,

Insurance and Healthcare

During the last year, companies with $1 billion or more in

revenues averaged more than 20 times the number of court actions

compared to the smallest companies in the survey and nearly four

times the average for mid-sized companies. Technology/communi-

cations companies were the most frequent subjects of arbitration

filings followed by healthcare, insurance and manufacturing.

UK Companies Less Litigious

On average, US companies filed two-and-a-half times as many

court actions as UK companies within the last year. The US

companies also initiated eight times as many arbitrations as

UK companies. The larger the company, the more likely it was

to initiate a court action or arbitration.

0 10 20 30 40 50 60 70 80 90 100

Percentage of Companies Initiating Actions

Court Actions

32%59%

74%

6%18%

33%

Arbitrations

Under $100 Million

$100 - $999 Million

$1 Billion or More

8



Larger Companies Use Mediation More Often

Of the 90% of the total sample that had at least some matters settled

prior to trial or arbitration, two-thirds said that some were settled

through mediation. Companies with a high volume of disputes

inevitably have more experience in managing them and are frequent

users of mediation but not in the finance industry, where they were

less likely to mediate than any other industry sector.

Higher Settlement Rate in the UK

In the UK, companies were more likely to settle all their matters

before proceedings began than in the US (23% vs. 13%). This may

reflect the effect of the Woolf Reforms in the UK, which impact

proceedings before they even begin and encourage mediation to

facilitate dispute settlement as part of the effort to streamline

England’s judicial process. Ninety-five per cent of companies with

$1 billion or more in revenues settled half or more of all matters

before trial or arbitration.


33% of

UK companies

used mediation

in half or more

of matters that

settled.

0 10 20 30 40 50 60 70 80 90 100

Percentage of Matters Settled by Mediation

Under $100 Million

59%25%

23%37%

$100 - $999 Million

None

50% or More

$1 Billion or More

13%39%


Despite the fact that most matters are settled prior to trial or

arbitration proceedings, 10% of the US survey sample and 9%

in the UK reported that none of their matters is settled in advance,

and 25% of the small companies settled none of their matters

in advance.

Opening Arguments

In the last year, more than half of all pending matters in companies

in the US have now reached or started trial or arbitration hearings,

compared with one-third in the UK. The large company sector

was more likely to proceed to trial than the mid-sized or smaller

companies. Insurance and energy companies had generally a high

caseload of pending matters, and inevitably they were amongst

the industry sectors with the highest number of trials or

arbitration hearings.


� LITIGATION EXPERIENCE

0 10 20 30 40 50 60 70 80 90 100

Half or More of All Matters Settled in Advance

Under $100 Million

73%

94%

$1 Billion or More

95%

$100 - $999 Million


In the US, of the matters that started trial, 40% went to

judgment; in the UK, the figure was only 20%. Larger companies

had an average of 10.7 cases go to judgment; finance led all

industries by a wide margin in the average number of judgments,

followed by technology/communications and energy.

Average Number of Matters in Trial or Arbitration in the Past Year

Und

er $

100

Mill

ion

2.8

7.1

$1 B

illio

n or

Mor

e

14

$100

- $

999

Mill

ion

50

40

30

20

10

0

Percentage of Matters That Went to Judgment

None

60%80%

26%12%

1 to 3

4 to 10

10%2%

4%6%

Over 10

US

UK

0 10 20 30 40 50 60 70 80 90 100


12% of $1 billion-

plus companies reported

being litigation-free.


LITIGATION

Costs

12

Winning Isn’t the Only Game—Fees Matter Too Respondents who track their legal costs and have an

established legal budget most frequently answered that

their budgets for all types of legal work averaged 1.34%

of their companies’ gross revenues. That figure goes a

long way towards explaining corporate lawyers’ overriding

concern about controlling litigation expenses. In fact,

some respondents expressed more concern over the costs

of litigation than they did over winning or losing court

actions. Mid-sized companies appeared most concerned

about it, which may reflect their point in the business

growth cycle: large enough to be increasingly involved

in litigation but not large enough to have a history of

managing a large volume of litigation.

Despite the growing concern over costs, many corporate

lawyers are having a difficult time budgeting for litigation

expenses. Even as companies have figured out how

to predict spending for other strategic areas such as

technology, sales, marketing and R&D, 43% of corporate

lawyers are still unable to predetermine the costs of

managing business disputes, reporting that they could not

quantify their litigation budgets in relation to their overall

legal budget.

c


13

EFFICIENCY

ACCOUNTABILITY

PREDICTABILITY

The findings also showed that:

D Legal budgets of 2% or above were most prevalent in the property

and technology/communications industries.

D 10% of US companies had legal budgets of more than 5% of their

gross revenues. No UK respondents were in that category.

D 29% was the median amount of the total legal budget allotted for

litigation for the total sample.

D Cost was the single most cited concern about litigation, in general,

far more than any specific type of litigation.

D A corporation with $1.5 billion in revenues averages more than $8

million per year in corporate litigation costs.

D 56% of UK companies always required a budget from outside

lawyers versus 35% of their US counterparts.

D The average $1 billion-per-year company in the total sample faces

more than 140 cases in the US at any one time.

0 10 20 30 40 50 60 70 80 90 100

Cost as a Top Concern

Under $100 Million

6%

26%

$1 Billion or More

18%

$100 - $999 Million

PERSPECTIVE




Litigation Weighs Less Heavily in UK

Legal Budgets

Litigation may be seen as an inevitable cost of doing business,

but those costs are not always predictable. Of those that tracked

litigation as a percentage of the overall legal budget, the median

was approximately 29%. Litigation was a significantly lower

portion of legal costs in the UK, but for mid-sized and large

companies across the entire sample, it comprised almost half of

the entire legal budget. The highest litigation allocations were in

the insurance and property industries.

14


� LITIGATION COSTS

0 10 20 30 40 50 60 70 80 90 100

Legal Budget as a Percentage of Gross Revenues Reported by Company Size

Under $100 Million

42%24%

54%23%

$100 - $999 Million

Legal Budget Is 0 - 1% of Gross Revenues

Legal Budget Is 2% or More of Gross Revenues

$1 Billion or More

52%18%

“No client has legal

problems. They

have business

problems with

legal issues.”

General CounselMid-sized

Non-profit Organization


Percentage of Matters Where Budgets Are Required

Under $100 Million

4% 51 - 99% 12% Don’t Know

42% 100%

42% 0 - 50%


$100 - $999 Million

16% 51 - 99%

14% Don’t Know

36% 100%

34% 0 - 50%


$1 Billion or More

14% 51 - 99%

10% Don’t Know

40% 100%

36% 0 - 50%

Majority in UK Require Outside Budgets

UK companies (56%) were more likely to always require a budget

from outside lawyers than their US counterparts (35%). Energy

companies (45%), followed by manufacturing and technology/

communications (42% each) led other industries in requiring

budgets for all matters assigned outside.


0 10 20 30 40 50 60 70 80 90 100

Litigation Budget as a Percentage of Legal Budget Reported by Company Size

Under $100 Million

27%30%

20%49%

$100 - $999 Million

Litigation Budget Is 0 - 20% of Legal Budget

Litigation Budget Is 21% or More of Legal Budget

$1 Billion or More

19%48%

“Spend my legal budget as if it were

your own.”Chief Operating Officer

Wholesale Business


Personal Injury and Employment Less Costly in UK

In ranking six types of litigation matters, personal injury and

employment matters were rated far less costly in the UK than

in the US. Mid-sized companies rated IP matters as their most

expensive on average, while regulatory was the highest cost area

on average for the largest companies.

Companies in the manufacturing, energy, retail/wholesale and

technology/communications industries all ranked IP litigation as

the most expensive. Personal injury and regulatory matters were

rated second and third by the energy industry.



� LITIGATION COSTS

Most Costly Types of Litigation by Industry

Energy Intellectual Property

Finance Employment

Healthcare Contracts

Insurance Employment

Manufacturing Intellectual Property

Property Personal Injury

Retail/Wholesale Intellectual Property

Technology/Communications Intellectual Property


17

Effects of Woolf Reforms in the UK

Respondents in the UK were evenly divided on the cost

implications of the Woolf Reforms; 39% considered that costs had

increased prior to the issue of proceeding or the filing of a defence

whereas 27% thought there had been no difference, with only 12%

seeing a reduction in costs. When asked about the impact on total

costs of litigation, only 18% had experienced a reduction in costs;

27% had seen an increase and 29% had seen no effect on costs.

The results suggest that the reforms have not had the impact that

was hoped for, but a longer period of experience may be required

before firm conclusions can be drawn. Further evidence for this

view is that the ability of the courts to issue interim cost awards

as a means of improving the efficiency of case management was

accepted by 39% but rejected by 26% of respondents, and 35%

had no opinion on the issue. The success of the reforms is still

clearly in the balance.

Have Interim Cost Awards Improved

Case Management?

39% 35%

26%

Don’t Know

No

Yes

Impact of Woolf Reforms on Costs Prior to Proceeding

22% Don’t Know

12% Decrease in Costs

39% Increase in Costs

27% No Effect

Impact of Woolf Reforms on Total Cost of Action

26% Don’t Know

18% Decrease in Costs

29% No Effect

27% Increase in Costs


How Do You Measure Up?

Respondents were asked how the success of the legal department is

measured, as well as that of individual lawyers. Companies in both

countries used results most often in evaluating the department

as a whole, but differed after that in their lists of most important

criteria. Avoiding trials was more important in the US, no doubt

reflecting the influence of juries there.

How Management Measures Legal

Department Success

D Results: 52% in the US, 50% in the UK

D Cost-efficiency: 36% in the US, just 5% in the UK

D Meeting goals was listed twice as often in the UK as in the US

D In the UK, client feedback, avoiding trials and performance

reviews also received more mentions than cost-efficiency

D Avoiding trials was more important in the US

How Management Measures the Success of

In-house Lawyers

D Results: 38% in the US, 28% in the UK

D Cost-efficiency: 29% in the US, 3% in the UK

D Meeting goals: 39% in the UK, 16% in the US

D Client feedback: 11% in the UK, 7% in the US


“It’s how I perform my role as chief legal strategist to the board and the company, including protecting the assets and cost- effective delivery of appropriate legal services.”

General Counsel$1 Billion-plus Manufacturer

“It’s how well the legal department helps the company advance in its desired direction as well as implementing cost-effective solutions.”

Head of Legal$1 Billion-plus Technology

Company


MEASURING

Succe s s


Small and mid-sized companies were more concerned with

avoiding trials than large companies. Larger companies with more

litigation emphasised cost-efficiency more than smaller companies.

0 10 20 30 40 50 60 70 80 90 100

Top Measures of Legal Department Success by Company Size

Results

57%42%

50%

18%36%

39%

Cost-Efficiency

Avoid Trials

20%18%

9%

0%12%

17%

Meet Goals

Performance Reviews

7%7%

6%

0%4%

9%

Client Feedback

Under $100 Million

$100 - $999 Million

$1 Billion or More



0 10 20 30 40 50 60 70 80 90 100

Top Six Measures of Individual Lawyer Success

Results

37%38%

28%

26%29%

3%

Cost-Efficiency

Perfomance Reviews

22%21%

28%

19%16%

39%

Meet Goals

Avoid Trial

10%11%

3%

7%7%

11%

Client Feedback

Total

US

UK

20

Larger companies stressed

results and meeting goals

for individual lawyers.

Mid-sized companies put

more responsibility for cost-

efficiency on individuals.

� MEASURING SUCCESS

“I’m measured by keeping matters that go to litigation to a very low number, plus mentoring the next generation of lawyers and business leaders.”

General Counsel$1 Billion-plus Financial Institution


W h e n C O M P L E X I T Y D E M A N D S P E R S P E C T I V E , T h i n k F u l b r i g h t .™

Each UK in-house

lawyer handles

an average of

3.9 litigation

matters.

Each US in-house

lawyer handles an

average of 10.2

litigation matters.

Who’s Managing Litigation?

According to the survey, there are very few UK companies which do

not have in-house lawyers dedicated to managing litigation. Only 6%

of company law departments manage to get by without a staff lawyer

managing company litigation matters, while 32% had at least one staff

litigator. UK companies employed more than twice as many in-house

lawyers to manage litigation than US companies: 8.3 lawyers per

company in the UK compared with 3.7 for American respondents.

On average, smaller companies were the most likely to have only

one in-house litigation manager; mid-market companies employ an

average of three in-house lawyers to oversee outside litigators, while

companies with revenues of $1 billion-plus have an average of over

10 lawyers.

The technology sector has the highest number of staff lawyers

managing litigation, employing an average of nine lawyers in this

role. The next highest were energy and finance companies, each of

which had six in-house litigation lawyers on average, followed by

retail/wholesale and healthcare (each with five lawyers), insurance (four

lawyers), manufacturing (three lawyers) and property (two lawyers).

Number of In-House Lawyers Managing Litigation

Response US UKUnder $100

Million$100 - $999

Million$1 Billion

None 8% 6% 14% 6% 0%

1 44% 32% 66% 43% 26%

2 19% 20% 15% 21% 19%

3 - 5 20% 18% 5% 25% 30%

Over 5 9% 24% 0% 5% 25%

21


LITIGATION

Management




Job Security for In-house Lawyers

The number of in-house lawyers managing litigation is not likely

to decline anytime soon: no one surveyed believes that the number

of lawyers managing litigation in UK companies will decrease in

the coming years. Not surprisingly, the overwhelming majority of

companies plan to keep the number of in-house lawyers the same

in the future, and over 20% intend to increase the number.

Outside Help

Companies of all sizes and types rely heavily on outside lawyers for

litigation. In fact, 62% of the survey respondents outsource all of

their litigation to law firms. Manufacturing, retail/wholesale and

property companies were most likely to turn to outside lawyers for

all of their litigation.

US companies were more likely to assign more than half of their

litigation outside than UK companies (86% and 74%, respectively).

There was little difference amongst size of companies, with more than

80% in all three categories assigning more than half of their litigation

matters to outside lawyers.

In-House Lawyers Managing Litigation in the Future


Million$100 - $999

Million$1 Billion

Increase 22% 26% 10% 22% 31%

Stay the Same 76% 74% 88% 76% 69%

Decrease 2% 0% 2% 2% 0%

� LITIGATION MANAGEMENT



Average Number of Outside Litigation Firms Used


Million$100 - $999

Million$1 Billion

None 5% 0% 8% 2% 1%

1 8% 13% 22% 5% 3%

2 13% 21% 24% 13% 4%

3 15% 22% 15% 18% 4%

4 - 5 16% 19% 15% 22% 12%

6 - 10 19% 13% 12% 20% 16%

11 - 20 11% 4% 2% 11% 21%

Over 20 13% 8% 2% 9% 39%

Average 11.1 8.3 3.8 9.0 25.3

Diversity Is Clearly a Growing Issue

The survey results suggest that diversity issues are on the rise in

corporate decision-making about which outside lawyers they should

retain. Thirty-eight per cent of UK in-house lawyers reported that

diversity was an important factor in the selection of their outside

litigation counsel. Twenty-eight per cent of UK companies reported

having written diversity policies in place. Diversity concerns are

plainly on the radar of the largest corporations: 40% of all of the

$1 billion-plus companies considered diversity important in selecting

outside lawyers, 30% reported having had a dialogue with outside

firms regarding diversity, and 16% had written diversity policies to

which outside lawyers were required to adhere. By industry, insurance

and healthcare companies were by far the most likely to have written

diversity policies in place (20% and 19%, respectively).

The average $1 billion- per-year company faces more than 140 cases in the US at one time.


Keeping Track of Time

Only 46% of all the companies surveyed tracked the time it takes

to resolve matters, although UK companies were slightly more

likely to do this.

D 52% in the UK sometimes track time to resolution versus

45% in the US

D 36% in the UK always track time to resolution versus 20% in the US

D Industries most likely to track time to resolution: manufacturing,

energy and finance

When asked to estimate the average number of days to resolve

matters in six litigation areas, the median estimates of US

respondents were higher across the board than their counterparts in

the UK, reflecting again the more litigious environment in the US.

Time-to-Resolution by Type of Matter

Con

trac

ts

Labo

r/E

mpl

oym

ent

Reg

ulat

ory

Inte

llect

ual P

rope

rty

Pers

onal

Inj

ury

Oth

er C

ivil

US

UK

400

350

300

250

200

150

100

50

0

138

98

161

75

146

124

225

151

358

284

146

30

Med

ian

Ave

rage

Num

ber

of D

ays

24


� LITIGATION MANAGEMENT

“It’s all about getting the best outcome by the most efficient means.”

General CounselSmall Technology/

Communications Company


Number of Future Class/Group Actions Expected

Increase

Decrease

Same

75%

16%

9%

Group Action Worries Not Realised

Group actions are not nearly as prevalent in the UK as they are

in the US. Last year, 25% of the total US survey sample ranked

class/group actions as one of their top five concerns, but in fact

only 16% of this year’s total survey sample had this type of action

filed against their companies in the past year. Only 6% of the UK

sample reported class/group actions. The substantial liabilities that

are inherent in just one class/group action, however, make class/

group actions a constant concern for companies far beyond what

the frequency of this type of litigation might indicate.

As would be expected, the largest companies were the most

frequent targets of class/group actions (38%) compared with

just 5% of the smallest companies. Industries with the highest

expectations of an increase in class/group actions in the future were

energy (27%), retail/wholesale (19%) and insurance (19%).

0 10 20 30 40 50 60 70 80 90 100

Highest Incidence of Class/Group Actions Three Years Ago

Healthcare

37%

28%

Energy

One or More Class/Group Actions Filed

Manufacturing

24%

19%

Insurance

Technology/Communications

19%

25


CLASS/GROUP

Actions


Has the Upward Trend in Finance Class/Group

Actions Peaked?

There was a significant increase in class/group actions in the

finance industry within the past year versus three years ago,

which confirms the intensified focus on corporate governance in

recent years. However, a smaller percentage of finance respondents

expected an increase in class/group actions than those who had

already experienced them during the past three years. This may

indicate a belief that the upward trend in that industry has peaked.

0 10 20 30 40 50 60 70 80 90 100

Highest Incidence of Class/Group Actions Last Year

Manufacturing

30%

20%

Property

One or More Class Actions Filed

Energy

19%

19%

Finance

Technology/Communications

17%


� CLASS/GROUP ACTIONS


12% in the US Settled All Their Class/Group Actions

Clearly class/group actions are more prevalent and potentially more

costly in the US, which may account for more settlements there

before court consideration of class certification. None of the UK

companies in the sample had settled all of their group actions,

and only 3% had settled some of their group actions. Energy

companies were most likely to have settled all of their cases (29%).

When asked how many class/group actions filed against their

companies had been certified in the last three years, 12% of the

largest companies answered “all” and in some industries, such as

property and energy, the percentage answering “all” was far higher.

0 10 20 30 40 50 60 70 80 90 100

Percentage of Class/Group Actions Settled Before Certification

Under $100 Million

5%0%

11%2%

$100 - $999 Million

All

Some

$1 Billion or More

18%5%



0 10 20 30 40 50 60 70 80 90 100

Percentage of Class/Group Actions Certified in Last Three Years

Energy

18%0%

Manufacturing

9%0%

13%0%

Finance

All

Some

Property

25%12%

Leading Types of Class/Group Actions

Response Past Three Years Future

Labor/Employment 38% 29%

Securities Litigation/Enforcement 31% 10%

Product Liability 17% 13%

Environmental/Toxic Tort 15% 12%

Contracts 10% 6%

Personal Injury 10% 4%

Insurance 10% 4%

28

� CLASS/GROUP ACTIONS



Impact of the Class Action Fairness Act in the US

A large percentage of US corporate counsel predicts little impact

from the Class Action Fairness Act of 2005. Nearly half believe

the Act will have no impact on US litigation costs; 13% believe it

will actually increase such expenses. Over a quarter of respondents,

however, believe the Act will lead to a decrease in US litigation

costs. Most optimistic were energy companies: 47% of industry

respondents believe the Act will reduce litigation costs. The greatest

pessimists were finance, retail/wholesale and healthcare companies,

25% of whom said the Act will increase litigation costs.

As for liability, 69% of US corporate counsel predict that the

Act will have no impact on the liability their company faces;

although 16% felt it would have a beneficial effect, only 6%

said that its impact would be to increase their company’s liability.

Energy companies were again the greatest optimists, with 42%

of respondents predicting a decrease in liability faced by their

companies. Almost a quarter of healthcare companies agreed.

Classic Targets

The bigger the company, the more likely it is to end up at the

receiving end of a class/group action. While only 5% of smaller

companies were targeted with class actions in the past year, nearly

40% of companies with revenues of $1 billion or more were served

with class action court actions last year. Manufacturers were the most

likely to be named as defendants in class actions; almost a quarter of

them had at least one such action pending, and 6% had more than

three pending. Energy, finance and property companies were the

next most likely to have at least one class/group action filed against

them last year, with the latter being the most likely to have been hit

with more than three such actions.

Is the UK Next?

UK companies doing business

in the US closely follow US

trends in class/group actions.

The number of UK respondents

reporting one or more class/

group actions has increased

significantly from three years ago.




Litigation Hold Procedures Less Common in UK

The explosion of electronic data has converged with the long-

established principle of pre-trial, full disclosure in the US to create

liabilities and potential discovery costs that are unprecedented. The

survey findings showed that UK companies had the highest level of

records retention policies but were less likely than US companies

to have a litigation hold policy. This may be another indication of

the higher incidence of litigation in the US, where litigation hold

policies are used to ensure that relevant records are not destroyed

when litigation or regulatory proceedings are anticipated.

The findings showed that 74% of all the companies surveyed

have litigation hold policies, and 82% have written records

retention policies. Yet more than a third of the smaller companies

have no written litigation hold policy, and one quarter have no

records retention policy, which leaves them vulnerable. Regularly

scheduled destruction of records, if not suspended when litigation

is expected, can leave a company open to a charge of spoliation in

the US (the wilful or negligent destruction of evidence).

Over 80% of mid-sized and large companies had litigation hold

procedures in place, and almost half of the companies with

litigation hold policies have revised them in the past year. This

indicates a strong awareness of the increasing liabilities from

this fast-changing area of the law where new rules and judicial

decisions continually impact the records companies may be

expected to produce.

LITIGATION

Hold Policies



Percentage of Companies with Litigation Hold Procedures in Place

Have Procedures

62%

24%38%

No Procedure

Revised Last Year

43%59%

57%

76%

41%

Did Not Revise Last Year

US

UK

0 10 20 30 40 50 60 70 80 90 100

Fulbright is one of the very few law firms with a formal practice

group for records management and litigation hold procedures.

Fulbright lawyers are active in the Sedona Conference, a US

non-profit research and education institute working on emerging

issues in the areas of antitrust, complex litigation and intellectual

property rights—all issues of major concern to UK companies.

Globally Speaking, Three Key Concerns Litigation Hold Policies Should Address:

D Ensuring that recipients of

litigation hold orders have

received them and complied

D When back-up tapes must

be preserved

D Company records held by third

parties (e.g., research labora-

tories or outside suppliers)


A World of International Arbitration

In last year’s survey, arbitration/ADR was the second most

mentioned trend seen as likely to increase in the future. It was

also very high amongst topics desired for further investigation by

General Counsel in our future surveys. This year’s findings reveal

considerable sophistication regarding international arbitration.

Companies are choosing arbitral rules and types of proceedings

based on their industry and company size.

3232

INTERNATIONAL

Arbitration

Preferred Arbitration Rules

ResponseUnder $100

Million$100 - $999

Million$1 Billion or

More

AAA/ICDR 63% 56% 49%

International Chamber of Commerce 44% 27% 28%

London Court (LCIA) 6% 17% 10%

CPR Institute 0% 8% 18%

ICSID 6% 2% 5%

UNCITRAL 0% 6% 8%

WIPO 0% 2% 3%


Administered vs. Non-Administered Arbitration

Although nearly two-thirds of the total sample favoured

administered arbitration over non-administered arbitration,

non-administered preferences were highest among companies

with the most arbitration experience. This included the large

companies and those in industries that use the process extensively

(i.e., finance, healthcare, energy and technology/communications).

The fact that the AAA/ICDR offers more than 25 specialised sets

of rules for specific industries also seems to be a factor in its strong

showing among arbitral institution choices. American lawyers have

a clear preference for AAA/ICDR; two-thirds identified them as

their administering institutions of choice.

The second most popular (selected by less than a third) was the

International Chamber of Commerce. Roughly 10% each said

they prefer the London Court (LCIA) and the CPR Institute.

The reasons that respondents gave an overwhelming thumbs-up

to administered arbitration over non-administered arbitration

were that they liked the process and the rules better and are more

“familiar with that type” of arbitration.

Despite the frequent use of the three major venues (New York,

London and Paris), there was a substantial use of other locations

among all sizes of companies.

33

“Successful outside counsel is familiar with our business, familiar with the arbitration process and has the ability to deal with a variety of matters.”

General CounselFinancial Institution


0 10 20 30 40 50 60 70 80 90 100

Most Frequently Used Venues

New York

25%33%

3%

31%21%

60%

London

Paris

5%4%

13%

Singapore

2%2%2%

Geneva

2%2%2%

All Other Cities

32%36%

18%

Total Sample

US

UK

Contractually Agreed Dispute Escalation Process

Saves Money

Approximately 60% of the UK companies and 51% of the US

companies have, pursuant to pre-dispute agreements between the

parties, resolved disputes in a multi-step process that entails:

D Direct negotiations between senior executives

D Mediation

D Arbitration

Most that have tried the process believed it produced at least some

savings, and only 2% believed it had increased costs. Among the

largest companies, 94% believed it had produced savings.

34


More Litigation Seen on the Horizon

When asked about other trends in litigation they foresaw, more

than half of the total sample noted that more litigation was in

store for them. UK lawyers highlighted rising costs more than

their US counterparts and also expect a higher increase in the use

of arbitration.

When asked where the largest increase in number of matters will

occur in the next three years, 70% of UK lawyers expect the largest

increase in UK-based matters, but 24% of the UK respondents

expect more action in the US. The other 6% will be focused on

other corners of the world.

What Other Trends in Litigation Do You Foresee?

Response Total US UK

More Litigation 53% 54% 48%

Rising Costs 21% 20% 26%

Increase Use of ADR 10% 9% 15%

More Use of Technology 8% 9% 4%

“In the UK, we will see more class action environmental legislation and more consumer group actions.”

Network & Ownership Director

Vehicle Manufacturer

“In the UK, there will be more litigation around shareholders.”

General CounselLondon Financial Institution



FUTURE

Trends




WHAT WE’VE

Learned

A Final Look

Almost half of UK companies expect to face more litigation in

the future than they did last year. The 2005 Litigation Trends

Survey reveals that UK corporations are working in an increasingly

litigious environment. Two-thirds of UK businesses stated that they

had faced court actions in the last 12 months and were particularly

concerned about the increasing frequency of product liability cases.

UK lawyers are watching closely the demands that electronic

discovery has placed on companies in the US and should prepare

themselves to manage the problem in the UK.

The findings showed, however, that UK companies are still under

less pressure than those based in the US, where three-quarters of

respondents have faced at least one court action filed against them

last year.

This overview of the Fulbright & Jaworski 2005 Litigation Trends

Survey is available to our clients and friends. We welcome the

opportunity to conduct onsite, personal presentations of our survey

findings for your company, as well as web seminars.

Please contact us if you would like further breakdowns of the

data, whether by industry, company size or location. If you have

suggestions for topics to be covered or would like to participate in

future surveys, visit our web site at www.fulbright.com or email

[email protected] or your regular contact at the firm. Finally,

we hope that you will keep Fulbright in mind when a dispute is on

the horizon anywhere in the world that your company operates.



B U S I N E S S C A R D

W H E N Y O U T H I N K

Litigation InsightT H I N K F U L B R I G H T

™


© 2005 Fulbright & Jaworski L.L.P.

F U L B R I G H T J a w o r s k i L. L. P.

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Second Annual Litigation Trends Survey Findings

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