by Robert Ambrogi BullsEye: November 2009 IMS ExpertServices™ is the legal industry's premier full-service
expert witness provider.
Litigation is recession proof. That, at least, is the conventional wisdom.
Can the same be said of expert witnesses? In this slumping economy,
have lawyers scaled back on their use of experts?
The answer,
as is often the case, depends on whom you ask. Lawyers generally say that the
economy has no bearing on their consideration of whether to hire an expert. Even
so, they are watching expert costs more carefully, they add.
Experts, on the other
hand, are more varied in their responses. Some say their business has dropped
with the economy while others report they are busier than ever.
Litigation is Up, GC Say The notion that litigation is recession proof finds confirmation in
the 2009 "Litigation Trends Survey" published in October by the
law firm Fulbright & Jaworski. Since its launch in 2004, this annual survey
of corporate counsel has become a barometer of the business world's legal
concerns.
This year's survey found that 42 percent of U.S. companies anticipate
an increase in the number of legal disputes they will face during the
next 12 months. That is up from 34 percent the year before. This follows
a year in which 83 percent of companies reported that new lawsuits had
been filed against them, up from 79 percent the prior year.
Well over a third
of U.S. companies cited the economy as the primary reason for the surge
in litigation. Large-cap companies had the highest expectation of litigation,
with 52 percent forecasting an increase in disputes.
"Generally, litigation
rises in an economic downturn as regulators tend to step up enforcement,
laid-off workers head to court and companies need to file more suits in order
to collect on money owed," observes Stephen C.
Dillard, head of Fulbright’s global litigation practice. "Perhaps
most telling about this year’s results is that companies across the spectrum
expect no substantial decreases in any area of litigation."
Companies Cutting Costs
As companies anticipate increases in litigation, they are revising
their budgets accordingly, the Fulbright survey found. Eighteen
percent of companies reported that they plan to increase their
budgets for labor/employment litigation, 15% will spend more on bankruptcy,
14% will budget more for contract disputes, and 11% say they will spend
more on regulatory and investigations work.
To find the money to budget for
these increases, companies are looking to cut their litigation
costs however and wherever they can. "While companies aren’t
necessarily spending less on litigation, in-house counsel are finding other ways
to cut costs," Dillard said.
Cost-cutting measures include in-sourcing e-discovery, using law firms
with specialized e-discovery practices and outsourcing certain e-discovery functions
through preferred provider relationships. Stricter document retention
policies, such as systematic destruction, also help keep discovery costs down.
No Skimping on Experts But when it comes to cutting costs related to experts, lawyers
say they are constrained by their need to meet legal burdens of proof
and to advocate zealously on behalf of their clients.
"Using experts
should have nothing to do with prevailing economic conditions," says
Scott I. Fegley, a business and employment litigator in Philadelphia. "If
a case requires expert testimony, skimping on experts does a disservice to the
client and failure to call an appropriate expert could be malpractice."
"The
economy doesn't change the burden of proof, and if an expert is necessary on
an issue, then an expert must be retained," agrees Stephen D. Dodd, a
commercial litigator in Cleveland, Ohio.
Clients understand that, lawyers say. "Clients
who are serious about winning a case, whether plaintiff or defendant, understand
that they may need to spend the money on an expert witness to do that," says
Paul W. Reidl, a Modesto, Calif. trademark litigator. "They might want
to explore settlement first, but at the end of the day they understand
that if they need an expert to win they will do it."
Controlling Expert Costs
Even though lawyers cannot – and should not – do without experts,
it does not follow that clients are letting lawyers spend on experts
with abandon.
"I have noticed a trend over the past several years towards
more aggressive budget control on the part of our larger clients," observes
Randall Beighle, chair of the complex litigation group at Lane Powell
in Seattle. "Controlling
expert witness costs has been on the forefront of that."
The late 1990s and
early 2000s saw an explosion in the use of expert witnesses, Beighle says. Clients
responded by reining in on their outside counsel. They demanded budgets with
regard to experts and aggressively monitored adherence to those budgets.
"The
clients I work with are cost-benefit driven. As part of the budgeting cycle,
they want to have an informed dialog with their legal counsel about why a particular
trial strategy is needed and what it will cost. That goes for the use of experts
as well as for any other significant aspect of the litigation."
Beighle emphasizes
that the budgeting he sees is not a response to the current economic downturn
but to the perceived excesses of a decade ago. Even so, the current down cycle
spurs clients to be even more vigilant with regard to costs than they had been,
he adds.
Experts' Views Vary
Experts' views on the impact the economy is having on them are more
varied. A key factor in their varying views may be their area of
concentration. As litigation surges in certain areas of law, demand for
experts relevant to those areas will likewise increase. As litigation declines
in other areas, so does demand for that group of experts.
Eric Fruits, for
example, is an expert in economics, finance and statistics and principal
of Economics International Corp. in Portland, Ore. Given his area of expertise,
it is not surprising that he has seen no decline in demand for his services.
"I have not seen any scaling back," he says. "I am finding
an increase in real estate and development litigation requiring expert opinions
on the real estate and credit markets. There is also a demand for statistical
analysis of market trends (such as property absorption, etc.)."
Along with
spurring an increase in litigation, the economy has made litigants less likely
to settle, Fruits believes. Because of that, more cases are going to trial and
the demand for experts is that much greater.
But Douglas Brush, principal of The
Digital Forensic Group in New York City, says he suspects that lawyers and clients
are holding off on hiring experts until they absolutely must. "As an expert
witness, I have seen reluctance from both litigators and clients to engage expert
witnesses as they have in the past."
Whether this is attributable to the
economy or something else, Brush cannot say. "I
am actually curious to know if some of this is due to the continued credit squeeze
and if firms are unable to take the float of trial expenses until a client pays
or settlement."
One thing seems sure, says Seattle lawyer Randall Beighle.
Whether it is the result of the current economic downturn or a longer-term litigation
trend, the days of unfettered spending on expert witnesses will never return.
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