Labor and Employment Lawsuits Most Numerous and Growing, Survey Says 

Following two straight years of reporting declines in the number of new lawsuits and regulatory proceedings, U.S. companies now anticipate an uptick in new actions and government probes, as well as the need to hire more in-house litigation staff to help manage the expected rise in disputes. Such is the outlook from the 2008 Litigation Trends Survey just published by international law firm Fulbright & Jaworski.

Despite a two-year downtrend in cases pending, nearly one-third of the total sample and 43% of respondents from the largest companies surveyed expect disputes to increase in the coming year. Both figures are higher than the previous two years' expectations.

Moreover, despite a general decline in litigation volume the past two years, 27% of all the U.S. companies surveyed had more than 20 lawsuits commenced against them in the past year, up slightly from last year. The pace of new litigation is especially marked for larger companies and as Fulbright notes this year, among public companies, which were twice as likely as private films to be on the receiving end of a new filing.

Labor and employment litigation accounted for a significant number of lawsuits filed, survey respondents reported. And while some litigation threats are of concern primarily to particular industries, "the widening strains of workplace suits such as wage-and-hour and privacy... are hitting everyone," said Stephen C. Dillard, who chairs Fulbright's global litigation practice

Drop in new case filings

By several key indices, the overall pace of fresh litigation indeed trended downward in 2007-08, with 21% of U.S. companies reporting no new lawsuits filed against them in the past year. That's an improvement from 17% having stayed litigation-free in 2006-07 and nearly double the number from 2005-06, when 11% of companies reported enjoying a year without any new lawsuits to defend.

And there was more to cheer for companies on the defensive --a noticeable drop in big-dollar filings. Only 26% of U.S. firms were tagged with one or more new lawsuits with claims above $20 million in the year past, a decline of 14% from 2007. While 37% of billion-dollar companies had to defend at least one new $20 million suit, that was a dramatic 25% drop from the number reporting a year ago.

Litigation exposure remains

While overall case filings may have slowed this year, the litigation landscape is by no means shrinking. Findings show that most U.S. companies still face a challenging web of litigation exposures, with certain industries prone to particular types of actions --intellectual property/patent infringement, product liability, environmental/toxic tort --even as nearly all businesses contend with disputes involving employment, contracts and personal injury.

Companies also detect a spike in specific types of actions. Nearly a third (32%) of Fulbright respondents reported a jump in multi-plaintiff suits stemming from wage-and-hour claims by employees in the past year, with 29% notching an increase in discrimination cases, including age claims. Companies also cited a noticeable rise in privacy lawsuits, whether class or collective actions.

Workplace suits on the rise

As in past surveys, the three most common lawsuits facing U.S. companies were labor/employment, contracts, and to a lesser degree, personal injury. Labor/employment was cited by 47% of respondents as the most numerous type of litigation pending in 2008, with contract claims only slightly lower. Labor/employment cases dominate across most industries, except manufacturing, where product liability is the most common type of litigation.

Why is labor and employment litigation such a dominant concern? Thirty-two percent of respondents cite the financial exposure that such lawsuits pose, while 19 percent attribute their concern to the sheer cost of handling such disputes.

With employment cases perennially taking up the largest portion of corporate dockets, Fulbright sought to learn which types of employment disputes are the most nettlesome, particularly in multi-plaintiff cases and class actions. Respondents report the greatest spike in wage-and-hour suits, in which employees allege underpayment for overtime, meal and rest times. Nineteen percent of U.S. companies cited an increase in wage-and-hour cases in the past year vs. only 1% noting a decrease. Retailers, which frequently call on part-time or seasonal workers, appear to have the most exposure: One-third of retail firms saw an increase in wage-and-hour litigation, with none reporting a drop.

After wage-and-hour, companies saw pronounced increases in five other areas of workplace litigation: general discrimination suits, followed by privacy, ERISA, disability claims, and age discrimination. Retailers and financial services firms saw the sharpest rise in discrimination claims; retailers shared the lead with energy firms in ERISA cases; and retailers led again in cases tied to ADA claims.

Of 10 major types of employment litigation, U.S. companies pointed to race discrimination cases as creating the highest financial exposure, followed by claims stemming from sexual discrimination; wage-and-hour violations; age discrimination; harassment; retaliation; disability; non-compete disputes; and violations of the Family Medical Leave Act.

Only 25 percent of U.S. companies surveyed require arbitration of employment disputes in a non-union setting. The cost of arbitrating employment disputes can have a significant impact on smaller companies: almost one-third spend $50,000 to $100,000 per dispute, and a quarter of them spend more than $100,000. A quarter of the mid-sized companies spend $50 to $100,000, and 12% average $100,000 or more per dispute. Among the largest companies, 23% are in the $50 to $100,000 range, and 19% spend $100,000 or more per dispute.

About the survey

This is the fifth year Fulbright has polled corporate law departments in the U.S. and U.K. on the state of global litigation. The 2008 survey drew input from 358 in-house counsel on both sides of the Atlantic, including 251 U.S. respondents spanning ten industry groups of varying company size and geographic regions. The survey, initially launched by Fulbright in 2004, is the largest canvas of corporate counsel on litigation issues and trends.

The 2008 Fulbright & Jaworski Litigation Trends Survey and a white paper detailing its findings is at: www.fulbright.com/litigationtrends29.

Reprinted with permission. © CCH

Labor and Employment Lawsuits Most Numerous and Growing, Survey Says  Following two straight years of reporting declines in the number of new lawsuits and regulatory proceedings, U.S. companies now anticipate an uptick in new actions and government probes, as well