Regulatory Matters Abound

American companies dealt with more regulatory and investigation matters in 2013 than in 2012, and the volume of labor and employment litigation matters outpaced contracts. The latter two areas usually track one another closely at the top of the list of most numerous types of litigation matters pending in the last 12 months, but Norton Rose Fulbright's 10th Annual Litigation Trends Survey revealed a notable gap between them: 48% of survey respondents put labor and employment on their list compared with 36% that included contracts.

Generally, the number of lawsuits commenced against companies in the previous 12 months in the United States has remained fairly consistent over the past several years, but high-value matters with more than $20 million at issue rose to just over one-third of U.S. companies facing one or more such lawsuits.

Still, the biggest news coming out of the survey conducted at the end of 2013 and beginning of 2014 related to the regulatory and investigations area. For example, nearly one out of every five companies reported regulatory/investigations among their most numerous types of litigation matters pending in the last 12 months. That compares with just 9% of U.S. company respondents in 2012 who dealt these matters that frequently. The technology/communications and healthcare sectors saw the biggest increases, with one-quarter or more of companies in those sectors reporting these matters among their most numerous types of litigation pending, compared with just 10% in 2012.

While U.S. companies with regulatory proceedings commenced against them have crept up slightly over the past three years to 45% in 2013, those facing regulatory proceedings with more than $20 million at issue jumped to 13% of the sample in 2013 ' more than double the number in each of the previous two years.

U.S. Companies

An independent research firm, commissioned by the U.S. member firm of Norton Rose Fulbright, surveyed 401 senior corporate counsel ' almost all of them in the U.S. The survey was re-focused to concentrate on senior U.S. in-house litigators, and the content was trimmed to a core set of questions.

Three-quarters of the respondents to the survey have the title of either General Counsel or Head of Litigation. Nine major industry sectors are represented, and as in past surveys, companies are grouped into three size categories based on their annual gross revenues.

Regulatory Environment a Concern for the Future

The increasingly active ' and potentially costly ' regulatory environment has raised concerns among companies of all sizes and in all sectors of the economy. Regulatory/investigations matters were among the top litigation concerns of 41% of the companies surveyed, up from 30% in 2011 and 23% in 2012.

By industry, the technology/communication sector had the largest jump in regulatory concerns, with 56% of respondents placing these matters among their greatest concerns in 2013, compared with just 16% of the sector in 2012. Financial services regulatory concerns rose to 57% of that sector in 2013 from 24% a year earlier, and healthcare increased to 52% from 24% over the same one-year period.

About six out of 10 U.S. companies retained outside counsel for assistance with a government or regulatory investigation in the last 12 months, a level that has changed relatively little for the past three years, but is still well above the 43% in the 2010 survey.

The larger the company, the more likely it is to have retained outside counsel in preparation for an external investigation. About three-quarters of the larger companies surveyed, more than half of the mid-sized and four out of 10 smaller companies had to hire outside counsel for this purpose. Three-quarters of the insurance sector had to do so, as well as about two-thirds of the energy, financial services and healthcare sectors.

Just over one-third of all survey respondents in 2013 included the Department of Justice (DOJ) as an entity involved in investigations of their companies, compared with just over a quarter of respondents in both the 2011 and 2012 surveys. Next most often listed was the Securities and Exchange Commission (SEC), which doubled in mentions to 23% from 11% in the previous two surveys. The Environmental Protection Agency (EPA) at 22% also topped the previous two years of 16% in 2011 and 8% in 2012.

The DOJ's most frequent industry targets were healthcare and manufacturing (50% of each sector). For the SEC, not surprisingly they were financial services (54%) and insurance (31%). The Financial Industry Regulatory Authority (FINRA) also had 44% of the financial services sector in its sights and 33% of the retail/wholesale sector. One-quarter of financial services respondents also reported the involvement of the new Consumer Financial Protection Bureau (CFPB), which equaled those in the sector who listed the Commodities Future Trading Commission (CFTC) and State Attorneys General. Energy (48%) and manufacturing (44%) were the industries most often involved in EPA investigations.

More Time Spent on Regulatory Matters

One of the survey's core questions over the years is whether the respondent's company spent more, less or the same amount of time over the past three years addressing regulatory investigative requests or regulatory enforcement proceedings, either as a party or non-party. Those who answered “more time” were in the majority (52%) in 2013 compared with 40% and 43%, respectively in 2011 and 2012. The sectors with the highest percentages of “more time” responses in 2013 were financial services (69%), insurance (67%), energy (59%) and healthcare (54%).

Internal Investigations Rise

Companies that commenced internal investigations in the last 12 months requiring assistance of outside counsel also were up over the previous two years. Again, a majority of respondents to the question (55%) said their companies commenced at least one such investigation in 2013 compared with 46% and 42% in 2011 and 2012, respectively.

Two-thirds of the larger companies began internal investigations in 2013, as well as 62% of engineering/construction companies and 60% of energy companies. The industries with the highest portions of those that conducted more than five internal investigations were healthcare (19%) and technology/communications (17%).

Leading Targets of Disputes

Clearly, the larger the company, the more often it is a target of a lawsuit. Nearly half (48%) of the larger companies with $1 billion or more in annual revenues had more than 20 suits filed against them, compared with 30% of all companies surveyed. Among companies with more than $5 billion in annual revenues, 43% had more than 50 suits filed against them.

Looking at industries, 55% of healthcare companies reported more than 20 new lawsuits. The next highest sectors for that volume of cases were insurance, manufacturing and retail/wholesale ' all in the 30% to 40% range.

The energy sector (52%) led all others in companies facing at least one new high-value lawsuit with more than $20 million at issue, followed by healthcare (42%) and financial services companies (40%).

Energy companies were also the most likely to have faced an arbitration with this much at issue (19%); next were healthcare (15%), technology/communications (14%) and engineering/construction (13%). The comparable figure for the total survey sample was 11%.

While the number of lawsuits initiated by companies has been relatively consistent over the last three surveys, some sectors were more aggressive than others. Almost two-thirds of manufacturers commenced at least one lawsuit in the last 12 months, compared with 56% of the total sample, but in terms of volume, the insurance sector remains the most likely to sue. One-third of the insurance companies commenced more than five lawsuits in the past 12 months versus just one-fifth of the total sample.

Annual Litigation Spending Goes Up

Companies spending $1 million and more annually on litigation, excluding costs of settlements and judgments, comprised 71% of those providing cost figures in 2013, compared with just over half of the sample in both 2011 and 2012. That level of spending virtually doubled among smaller companies from the previous two years, reaching 32% in 2013. Among the larger companies, 43% spent $10 million or more on litigation in 2013.

The highest-spending industries in 2013 were healthcare and energy, with 49% and 46%, respectively spending $5 million or more on litigation.

Companies using alternative fee arrangements (AFAs) for some portion of their outside counsel spend on litigation rose to 60% of the 2013 survey sample after a brief drop in 2012 to 51%. The majority (56%) use AFAs for 20% or less of their outside counsel spend, and just 10% use them for more than half of outside counsel spend.

Privacy and Data Protection Issues Rise

There has been a steady upward trend in companies encountering privacy and/or data protection issues in disputes or investigations over the past three surveys, rising from 25% in 2011 to 31% in 2012 and 43% in 2013. More than half of the larger companies in the current survey encountered them, as well as two-thirds of those in the healthcare sector and more than half of the technology/communications sector.

The issues usually involved data residing on company equipment or processed by third-party vendors, but more than a quarter of the issues involved data on employees' personal equipment.

The survey also shows a continuing increase in the use of cloud computing among U.S. companies: 27% in the 2011 survey, 37% in 2012 and 47% in 2013. In the current survey, 37% of those with cloud-stored data had to access it for actual or threatened disputes or investigations.

Again in 2013 as in 2012, 41% of companies in the survey had to preserve and/or collect data from an employee mobile device for litigation or an investigation. In the 2011 survey, the figure was 30%. More than half of the larger companies had to do so in 2013, as well as more than half of the energy sector.

More Resources Required

The picture provided by Norton Rose Fulbright's 10th Annual Litigation Trends Survey reveals the growing impacts of the regulatory environment and technology on how companies deal with disputes, particularly in certain sectors of the economy, as well as the increasing time and expenditures that must be devoted to the litigation process.

A few final numbers supporting that last point, which may also encourage job seekers: U.S. companies with more than five in-house lawyers managing litigation have increased over the last three surveys from 25% in 2011 to 30% in 2012 to 33% in 2013. And 16% expect to add to their litigation department numbers over the next 12 months while just 2% expect a decrease.

Otway B. Denny is U.S. Head of Dispute Resolution and Litigation at Norton Rose Fulbright.

American companies dealt with more regulatory and investigation matters in 2013 than in 2012, and the volume of labor and employment litigation matters outpaced contracts. The latter two areas usually track one another closely at the top of the list of most numerous types of litigation matters pending in the last 12 months, but Norton Rose Fulbright's 10th Annual Litigation Trends Survey revealed a notable gap between them: 48% of survey respondents put labor and employment on their list compared with 36% that included contracts.

Generally, the number of lawsuits commenced against companies in the previous 12 months in the United States has remained fairly consistent over the past several years, but high-value matters with more than $20 million at issue rose to just over one-third of U.S. companies facing one or more such lawsuits.

Still, the biggest news coming out of the survey conducted at the end of 2013 and beginning of 2014 related to the regulatory and investigations area. For example, nearly one out of every five companies reported regulatory/investigations among their most numerous types of litigation matters pending in the last 12 months. That compares with just 9% of U.S. company respondents in 2012 who dealt these matters that frequently. The technology/communications and healthcare sectors saw the biggest increases, with one-quarter or more of companies in those sectors reporting these matters among their most numerous types of litigation pending, compared with just 10% in 2012.

While U.S. companies with regulatory proceedings commenced against them have crept up slightly over the past three years to 45% in 2013, those facing regulatory proceedings with more than $20 million at issue jumped to 13% of the sample in 2013 ' more than double the number in each of the previous two years.

U.S. Companies

An independent research firm, commissioned by the U.S. member firm of Norton Rose Fulbright, surveyed 401 senior corporate counsel ' almost all of them in the U.S. The survey was re-focused to concentrate on senior U.S. in-house litigators, and the content was trimmed to a core set of questions.

Three-quarters of the respondents to the survey have the title of either General Counsel or Head of Litigation. Nine major industry sectors are represented, and as in past surveys, companies are grouped into three size categories based on their annual gross revenues.

Regulatory Environment a Concern for the Future

The increasingly active ' and potentially costly ' regulatory environment has raised concerns among companies of all sizes and in all sectors of the economy. Regulatory/investigations matters were among the top litigation concerns of 41% of the companies surveyed, up from 30% in 2011 and 23% in 2012.

By industry, the technology/communication sector had the largest jump in regulatory concerns, with 56% of respondents placing these matters among their greatest concerns in 2013, compared with just 16% of the sector in 2012. Financial services regulatory concerns rose to 57% of that sector in 2013 from 24% a year earlier, and healthcare increased to 52% from 24% over the same one-year period.

About six out of 10 U.S. companies retained outside counsel for assistance with a government or regulatory investigation in the last 12 months, a level that has changed relatively little for the past three years, but is still well above the 43% in the 2010 survey.

The larger the company, the more likely it is to have retained outside counsel in preparation for an external investigation. About three-quarters of the larger companies surveyed, more than half of the mid-sized and four out of 10 smaller companies had to hire outside counsel for this purpose. Three-quarters of the insurance sector had to do so, as well as about two-thirds of the energy, financial services and healthcare sectors.

Just over one-third of all survey respondents in 2013 included the Department of Justice (DOJ) as an entity involved in investigations of their companies, compared with just over a quarter of respondents in both the 2011 and 2012 surveys. Next most often listed was the Securities and Exchange Commission (SEC), which doubled in mentions to 23% from 11% in the previous two surveys. The Environmental Protection Agency (EPA) at 22% also topped the previous two years of 16% in 2011 and 8% in 2012.

The DOJ's most frequent industry targets were healthcare and manufacturing (50% of each sector). For the SEC, not surprisingly they were financial services (54%) and insurance (31%). The Financial Industry Regulatory Authority (FINRA) also had 44% of the financial services sector in its sights and 33% of the retail/wholesale sector. One-quarter of financial services respondents also reported the involvement of the new Consumer Financial Protection Bureau (CFPB), which equaled those in the sector who listed the Commodities Future Trading Commission (CFTC) and State Attorneys General. Energy (48%) and manufacturing (44%) were the industries most often involved in EPA investigations.

More Time Spent on Regulatory Matters

One of the survey's core questions over the years is whether the respondent's company spent more, less or the same amount of time over the past three years addressing regulatory investigative requests or regulatory enforcement proceedings, either as a party or non-party. Those who answered “more time” were in the majority (52%) in 2013 compared with 40% and 43%, respectively in 2011 and 2012. The sectors with the highest percentages of “more time” responses in 2013 were financial services (69%), insurance (67%), energy (59%) and healthcare (54%).

Internal Investigations Rise

Companies that commenced internal investigations in the last 12 months requiring assistance of outside counsel also were up over the previous two years. Again, a majority of respondents to the question (55%) said their companies commenced at least one such investigation in 2013 compared with 46% and 42% in 2011 and 2012, respectively.

Two-thirds of the larger companies began internal investigations in 2013, as well as 62% of engineering/construction companies and 60% of energy companies. The industries with the highest portions of those that conducted more than five internal investigations were healthcare (19%) and technology/communications (17%).

Leading Targets of Disputes

Clearly, the larger the company, the more often it is a target of a lawsuit. Nearly half (48%) of the larger companies with $1 billion or more in annual revenues had more than 20 suits filed against them, compared with 30% of all companies surveyed. Among companies with more than $5 billion in annual revenues, 43% had more than 50 suits filed against them.

Looking at industries, 55% of healthcare companies reported more than 20 new lawsuits. The next highest sectors for that volume of cases were insurance, manufacturing and retail/wholesale ' all in the 30% to 40% range.

The energy sector (52%) led all others in companies facing at least one new high-value lawsuit with more than $20 million at issue, followed by healthcare (42%) and financial services companies (40%).

Energy companies were also the most likely to have faced an arbitration with this much at issue (19%); next were healthcare (15%), technology/communications (14%) and engineering/construction (13%). The comparable figure for the total survey sample was 11%.

While the number of lawsuits initiated by companies has been relatively consistent over the last three surveys, some sectors were more aggressive than others. Almost two-thirds of manufacturers commenced at least one lawsuit in the last 12 months, compared with 56% of the total sample, but in terms of volume, the insurance sector remains the most likely to sue. One-third of the insurance companies commenced more than five lawsuits in the past 12 months versus just one-fifth of the total sample.

Annual Litigation Spending Goes Up

Companies spending $1 million and more annually on litigation, excluding costs of settlements and judgments, comprised 71% of those providing cost figures in 2013, compared with just over half of the sample in both 2011 and 2012. That level of spending virtually doubled among smaller companies from the previous two years, reaching 32% in 2013. Among the larger companies, 43% spent $10 million or more on litigation in 2013.

The highest-spending industries in 2013 were healthcare and energy, with 49% and 46%, respectively spending $5 million or more on litigation.

Companies using alternative fee arrangements (AFAs) for some portion of their outside counsel spend on litigation rose to 60% of the 2013 survey sample after a brief drop in 2012 to 51%. The majority (56%) use AFAs for 20% or less of their outside counsel spend, and just 10% use them for more than half of outside counsel spend.

Privacy and Data Protection Issues Rise

There has been a steady upward trend in companies encountering privacy and/or data protection issues in disputes or investigations over the past three surveys, rising from 25% in 2011 to 31% in 2012 and 43% in 2013. More than half of the larger companies in the current survey encountered them, as well as two-thirds of those in the healthcare sector and more than half of the technology/communications sector.

The issues usually involved data residing on company equipment or processed by third-party vendors, but more than a quarter of the issues involved data on employees' personal equipment.

The survey also shows a continuing increase in the use of cloud computing among U.S. companies: 27% in the 2011 survey, 37% in 2012 and 47% in 2013. In the current survey, 37% of those with cloud-stored data had to access it for actual or threatened disputes or investigations.

Again in 2013 as in 2012, 41% of companies in the survey had to preserve and/or collect data from an employee mobile device for litigation or an investigation. In the 2011 survey, the figure was 30%. More than half of the larger companies had to do so in 2013, as well as more than half of the energy sector.

More Resources Required

The picture provided by Norton Rose Fulbright's 10th Annual Litigation Trends Survey reveals the growing impacts of the regulatory environment and technology on how companies deal with disputes, particularly in certain sectors of the economy, as well as the increasing time and expenditures that must be devoted to the litigation process.

A few final numbers supporting that last point, which may also encourage job seekers: U.S. companies with more than five in-house lawyers managing litigation have increased over the last three surveys from 25% in 2011 to 30% in 2012 to 33% in 2013. And 16% expect to add to their litigation department numbers over the next 12 months while just 2% expect a decrease.

Otway B. Denny is U.S. Head of Dispute Resolution and Litigation at Norton Rose Fulbright.