Survey: Legal Departments Stretched to the Limit

Survey: Legal Departments Stretched to the Limit

Jaclyn Jaeger | August 02, 2013 | Compliance Week

Despite an increase in the number and scope of more costly and complex legal disputes, most corporate legal departments’ budgets continue to hold steady as pressure builds on in-house counsel to stretch their budgets to the max.

That’s according to the findings of a recent survey by professional services firm AlixPartners, which surveyed more than 100 general counsels at companies with annual revenues of $250 million or more and primarily located in the United States.

According to the study, 36 percent of respondents said the number of cases that their companies have faced in the past year has increased. Of the companies that reported increases in disputes, 83 percent said their litigation costs rose over the past 12 months.

The survey also found that the five most common types of litigation legal departments have faced over the past 12 months involved:

• Contracts (89 percent);
• Intellectual property or patent infringement (59 percent);
• Product-related lawsuits (45 percent);
• Class Actions (41 percent); and
• Securities actions (23 percent).

Other common types of litigation include e-Discovery (22 percent); Bankruptcy (21 percent); Accounting/financial reporting/disclosure (17 percent); and anti-trust litigation (12 percent).

Despite facing more litigation, the majority of general counsels (64 percent) said the size of their legal departments have remained the same. Only 27 percent reported an increase in the size of their legal departments, and nine percent said their departments have “decreased slightly” in size.

Specifically, among companies that experienced an increase in disputes, 53 percent said their litigation departments remained the same size, whereas 45 percent said size of their litigation department grew. Only three percent said it decreased slightly.

To reduce their risks, companies are employing several measures. These include:

• Increasing reviews of existing compliance programs and identifying gaps (84 percent);
• Implementing tools to mitigate risk (64 percent);
• Monitoring and enforcing document retention policies (63 percent);
• Increasing the number of internal and external compliance audits and documenting results (53 percent); and
• Increasing due diligence procedures (52 percent).

According to the survey, companies are reducing litigation costs primarily by retaining more work in-house. Other cost-conscious tactics include alternative dispute resolution and alternative fee arrangements.

Even though many companies choose to manage their legal work in-house, however, 25 percent said they’ve increased the dependency they have on outside law firms, particularly in such specialized matters as mergers and acquisitions (M&A) and regulatory investigations, each cited by 60 percent of respondents.

Other areas where legal departments are retaining outside counsel include internal investigations (34 percent); FCPA (15 percent) and whistleblower allegations (15 percent).