I relate to in-house counsel. Not because I’m a lawyer, but because we are both cost-centers to our respective organizations. We are both beholden to the shareholders and partners of our companies and firms. We are trusted servants of a budget with no apparent revenue stream. We both provide necessary services. Yet, in a down economy, our cost-centers are immediately looked to for further belt-tightening. Any savings, or costs, within our departments directly impact the bottom line.
We also support the livelihood of our vendors, consultants and service providers outside our firms. Many of whom become the first casualty of our budget tightening.
Sometimes, however, I wonder if my vendors and consultants get this. Several have come to me with new (and more expensive) “solutions” to problems I really don’t have … or problems I don’t need to concern myself with this year or in 2010 either.
I have a feeling that corporate counsel and their litigators are experiencing a similar schism.
Litigators across the nation were waiting breathlessly for a wave of litigation that normally follows a recession. Unfortunately, litigators are realizing something all Americans are these days: this is not your father’s recession or your grandfather’s Great Depression.
A year ago, as the economy began its freefall, corporate law departments were preparing for an all-out assault by plaintiffs. Some 34% of in-house counsel polled as part of Fulbright & Jaworski’s annual Litigation Trends Survey said they expected to face more suits against their companies in the coming 12 months — a significantly higher percentage than in the previous year. That result made sense: Recessions usually breed litigation.
The early numbers for this recession are showing something quite different. Litigation, a number of recent surveys show, isn’t really all that more active than it was before the recession.
Corporate counsel are more concerned today with containing costs, avoiding litigation and settling matters than previously anticipated.
A survey of general counsel by Altman Weil in late 2008 found that 75% of general counsel had their budgets cut in 2009. The average decrease was 11.5%. “It’s not down 2 or 3%. It’s double digits,” said Susan Hackett, senior vice president and general counsel for the Association of Corporate Counsel. “They can’t afford litigation. There’s a real sense of, ‘Make this go away quickly and quietly.’ “
Hackett has observed a greater reluctance by companies to initiate litigation or defend themselves in court. Instead, they are “looking to apply the least expensive Band-Aid” to their legal problems. “I’m seeing a greater focus on saying, ‘We will try to make you whole somehow. What can we do? What do you want?’ Sometimes money isn’t the ultimate goal,” Hackett said.
Hackett’s point was echoed by Peter Sloane, a litigation partner at Cahill Gordon & Reindel in New York: “I see clients who are much more focused on the cost-benefit analysis before starting litigation. There’s a much greater emphasis on thinking outside the box in approaching legal disputes.”
This can actually be good news for many lawyers and the RELATIONSHIP they have with their clients.
First of all, put down that pre-bill and call your clients. Sit down, face-to-face and for free, and discuss with your clients how the recession is impacting their companies, their legal departments. What are your clients’ strategies to protecting their personal jobs, as well as insulating their companies? How can you, as their legal counsel, partner with them on alternative solutions to litigation? How can you become part of the solution rather than a line item that can be vetoed during the 2010 budgeting process?
You might not see a new matter this year, but you will gain a deepened relationship that will be rewarded once the economy, and litigation, picks up.