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My doubts about a claimed increase of 75% in litigation costs over the past ten years

Jeff Schuett, the VP and GM of LexisNexis CounselLink, contributed an article to Met. Corp. Counsel, Nov. 2011 at 30. He writes “Corporate litigation costs have grown 75 percent over the past ten years – even at a time when overall costs rose just 20 percent.” Schuett doesn’t give the source of that growth figure so, because the figure seems odd, I asked him about it. He replied by email that “my views come from reviewing data and information from several sources, including the Hildebrandt Client Advisory; Inside Counsel Law Department Survey, LexisNexis Estimates and “The Tipping Point for the ACC Value Challenge”, Discovery Resources 2009.”

Those sources don’t convince me. My premise is that during the decade he refers to, presumably 2000 to 2010, total legal spending by U.S. law departments has more or less kept pace with revenue growth. In Schuett’s terms, overall legal costs rose just 20 percent and that seems roughly in line with corporate revenue during a tough decade.

If so, the dramatic spike in litigation costs would have had to crowd out some other legal spend. By most accounts, law departments typically spend more than half of their total budget on external counsel and more than half of that disappears down the litigation hole. Granting those benchmark metrics, litigation consumes something like a third of the budget (60% and 50% of it). General counsel are not likely to be able to absorb a 75% increase in litigation – where they spend one out of three of their dollars – yet hold the budget in line with corporate revenue that grows much more slowly. They would have to starve out all other spending on outside counsel and even reduce the internal headcount. I see no signs of those drastic alterations to cope with litigation costs, and so wonder about the validity of the number cited by Schuett.