Litigation is Recession Proof -- But are Experts?

By Robert Ambrogi Esq
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.

"I don't see it changing," Beighle says.

 

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Robert Ambrogi Esq

We are proud to partner with an author of Bob’s caliber to provide exclusive articles for our legal clients and leading industry experts. Robert J. Ambrogi is a news media veteran and the only person ever to hold the top editorial positions at the two leading national U.S. legal newspapers, the National Law Journal and Lawyers Weekly USA. He is currently a Massachusetts lawyer who represents clients at the intersection of law, media and technology. He is also internationally known for his writing and blogging about the Internet and technology. Media and Technology Law Bob represents a range of businesses and individuals, concentrating in print and electronic media companies and the editorial, sales, marketing and technology professionals who work in them. He also counsels businesses and individuals in employment matters. Arbitration and Mediation An established professional in alternative dispute resolution, Bob has been an arbitrator since 1994, focusing on labor and employment and securities disputes. A mediator in a range of civil disputes, Bob completed the training required by Massachusetts law to protect confidentiality.

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