My expectation that companies sue or are sued more during recessions found no support in a recent survey of 191 in-house senior legal attorneys. The LexisNexis CounselLink study, entitled “Effects of the Current Economic Downturn on U.S. Law Departments” 2009 at 8, shows the rank given 11 “effects of the current economic environment on law departments.” “An increase in litigation matters” came dead last.
The respondents chose reductions in budgets, accountability pressures, increases in transactional work, and other effects more commonly that more lawsuits. Three quarters of the respondents did not mark it at all. Litigation, therefore, appears not to be counter-cyclical, rising as revenues fall. The costs and risks of a lawsuit bulk larger as the cash register stills. Litigation being the largest component of outside counsel spend, general counsel would be fortunate if pressure to reduce costs finds a systemic solution.