5 Areas Bucking the Slowdown in Litigation
New York (April 1, 2016, 11:43 AM ET) -- While some firms have taken a hit recently from a litigation slowdown in core practice areas and an overall drop in civil filings over the last year, there are nevertheless several industries bucking that trend.
A recent report by the Administrative Office of the U.S. Courts shows that civil federal case filings declined 6 percent last year, including in areas related to banking, forfeitures and penalties, personal injury, contracts and real property. Intellectual property litigators have also seen a slowdown as a result of changes to federal law and the growing popularity of dispute resolution in administrative legal settings and arbitration.
Reed Smith LLP in January trimmed its legal staff as part of a restructuring responding to changes in the demand for legal services, while other firms, like Cadwalader Wickersham & Taft LLP, reported a revenue decline last year because of the litigation slowdown. Some firms, such as boutiques Mavrakakis Law Group LLP and Roylance Abrams Berdo & Goodman LLP in the hard-hit area of IP litigation, have merged with larger firms, allowing them to encompass more practice areas.
Despite the larger stagnation, there are nevertheless some firms and types of litigation where the future remains bright, experts say. Although litigation has diminished in volume, there are sectors seeing increased levels of activity. Here are areas where litigation is anything but slow.
Bet-the-Company and Class Action Cases
Although large firms have lost litigation business due to competitive rate structures at smaller firms or have seen less demand from clients because of changes in the way disputes are resolved, some matters have kept and will continue to keep litigators at top-tier firms busy, experts say.
"As it relates to revenue and how much business is there, I think the general bet-the-house litigation, the kind of stuff you see people going to the Gibson Dunns and Quinn Emanuels for, is always going to be there," said Lyndon Parker, the managing director of JD Search Advisors LLC.
Alan Levin, the vice chair of Locke Lord LLP, who specializes in insurance industry matters, said that while firms like his are putting litigators to work on various investigative matters or in other capacities outside the courtroom, the area of bet-the-company litigation is unaffected "because that's a different animal."
While the handling of some legal disputes may have changed since the economy receded in 2008, big class actions continue to pop up, keeping talented litigators in high demand, according to Parker.
"There's still a significant amount of class actions, like consumer fraud, that I don’t see diminishing any time soon,” said James C. Grant, Alston & Bird LLP's litigation team national co-leader. "While there might be, as many commentators are saying, 'fewer cases,' we’re still seeing this large volume of bigger matters."
Those big matters include multidistrict litigation, like the MDL against Takata Corp. over allegedly defective air bag inflators, and other consumer suits, as well as shareholder disputes, Grant said.
Energy Disputes Stemming From the Oil Decline
As the price of oil and gas has fallen across the globe, stress has mounted on U.S. energy companies and others that service the industry, leading to failures to make good on certain contracts and other legal problems. For some litigators, especially those in Texas, the squeeze on the energy industry from depressed crude oil prices has led to an uptick in business, as commercial disputes arise.
"The energy industry has a huge need for litigation services," Anne Johnson, the former chair of Haynes and Boone LLP’s litigation department, told Law360. "It's every type of dispute you can see in that industry. A lot of trade secrets and contract disputes."
Energy litigation continues to be a large area of focus for big and small firms alike, said Michael Hurst of Dallas-based boutique Lynn Pinker Cox & Hurst LLP, who said it can be less expensive for companies to litigate than to comply with contracts. A lot of trade secret disputes are coming out of the oil and gas industry too, he noted.
"It’s gotten to where the tech is so advanced in the drill industry that there’s a whole subindustry of finding this information and protecting it,” he said.
Bob Jewell, the managing partner of Andrews Kurth LLP, noted that his firm has also been "very busy" with litigation stemming from the problems being dealt with by the oil and gas industry.
Shareholder and Deal-Related Disputes
With the growing importance of legal transactional work, which has covered for some firms’ loss of litigation revenues, experts say that litigation stemming from mergers and acquisitions, contract agreements and other deals has remained stable.
"This is related to the amount of deal flow over the last few years," said Kent Zimmermann of consulting firm Zeughauser Group LLC, explaining that firms have seen several cases borne out of contract disputes or from disgruntled shareholders. "Because deal flow's been hot, there's been follow-on litigation."
Alston & Bird’s litigation team has seen its share of this type of litigation recently, Grant said, using the shareholder suit against Dell Inc. over the computer giant's $25 billion go-private deal as an example. He said the firm continues to see cases where a deal happens and then something like the adequacy of disclosures will give rise to litigation.
Additionally, Hurst said his firm has seen an uptick in its representation of clients involved in lawsuits between trustees and their fiduciaries, officers and directors, partners, shareholders and others in relationship to a trust or estate.
Data Breach and Related Insurance Claims
As the business world adapts to changes in technology, so does he legal landscape. Much litigation has been waged against businesses affected by a cybersecurity breach, particularly in the retail space, and attorneys expect that trend to continue.
"Companies that interface with consumers are prone to draw these cases,” said Grant, whose firm has represented large companies like The Home Depot and Wendy’s after customer data was recently hacked or suspected of being hacked.
A breach doesn't always lead to litigation, Grant added, but the firm is still getting hired repeatedly for investigations after one happens.
In addition to The Home Depot, recent cases against Target Corp., Neiman Marcus Group LLC, the University of Central Florida, extramarital dating website Ashley Madison, electronic learning toymaker VTech and others show that cybersecurity litigation is on the rise. Last year, 29 percent of corporate counsel who participated in a survey said they anticipate data privacy will be the next wave of class action litigation.
There's also been a lot of insurance written in the area of cyberspace, according to Levin, who said although there has not been a great deal of disputes in the coverage of that space yet, more will come along.
"There will be an uptick in disputes over cyber [coverage]," he said. "Those products are just beginning to mature on the market."
Certain types of employment litigation are also going strong, especially whistleblower suits filed under statutes that allow individuals to pursue claims against employers and businesses on behalf of the government.
"In California, there is no question that employment litigation has increased," Parker said.
California’s Private Attorney General Act allows private citizens to pursue civil penalties on behalf of the state against companies for labor violations, and receive a quarter of penalty payments without being subject to arbitration agreements. It has led to a steady flow of employment-based litigation in the Golden State, and kept litigators like Los Angeles-based Seyfarth Shaw LLP attorney John R. Giovannone busy.
"This is unique to California. I think that's a reason why there's so much litigation out here," he said. "We have unique statutes that create unique incentives to bring civil lawsuits."
While Giovannone said he has heard of litigation slowdowns in other jurisdictions, his experience has been the opposite, giving credit to a plaintiff-friendly atmosphere.
Meanwhile, Dallas-based Victor Vital, a Barnes & Thornburg LLP litigator, also has not experienced a downturn in his practice, saying he has seen a steady stream of medical device litigation and False Claims Act suits.
Like the PAGA in California, the FCA allows individuals to file whistleblower qui tam suits accusing businesses and organizations of defrauding the federal government.
"I've not experienced a downturn, so to speak," he said. "Folks want to file lawsuits."
--Editing by Katherine Rautenberg and Rebecca Flanagan.