Where Have All The Lawsuits Gone? PART 1
Bob Banks wrote in the Harvard Business Review a number of years ago that Xerox had a legal budget and it was always exceeded. For sure there are numerous legal expenses, but the culprit for breaking the budget was typically litigation.
Many ACC (formerly ACCA) members convened at the Brookings Institution to seek a remedy. They had tried the usual attempts to manage billings. These remedies get dusted off, renamed and revived to manage legal fees. Those of us who have been around long enough have seen them in their various reincarnations. Increase the number of law firms serving you to increase competition and loosen the dominance of any one firm. Then came “shrink the number” of the law firms serving you, so you negotiate a better price. Alcoa took this idea to extreme by reducing the number of firms serving it to one. It did not survive because it had its own price distortions built in.
These fee management schemes, flat billing, value billing, all come and go, and it is a bit amusing watching them rediscovered by new in-house attorneys who are convinced they have found the fountain of youth. But this is not about billing schemes; it is about lawsuits. Frustrated by the inability of these fee management schemes to control costs, many ACC senior counsel joined other members of the legal community and convened at the Brookings Institution in the mid 1990’s to fix the problem once and for all, at least in the federal court system, their forum of choice.
The newest version of cost control was based on the assumption it was a systemic problem. That is code for “none of our other solutions worked and it is not our fault”; it is therefore an endemic problem with system. The result was the Civil Justice Reform Act which had both its supporters and detractors. Then there were skeptics like me who believed that this too would pass.
The Civil Justice Reform Act had two fundamental premises at its heart. First, since no one else seems to be able to control costs, it was decided to give the courts the power to do it; and even better, they would design a process that encourages Alternative Dispute Resolution (“ADR”) and avoid the courts altogether. As ACC’s value challenge Version 9.2 illustrates, these rather dramatic efforts failed. ADR, upon solid scientific analysis, did not prove to have an impact on litigation costs, nor did the other attempts at case management.
However, in recent conversations with various court staff, a new concern is arising that is very troubling to the courts (we are talking jobs here) yet promises to dramatically reduce litigation expenses. Traditional commercial litigation is disappearing from the federal courts, perhaps the state courts as well.
In the next couple of blogs we speculate on causes of the phenomenon, and anyone with ideas please feel free to contribute.
I always ask business clients in a a dispute with another business if the in house lawyer would be applauded if he or she went to the GC or CEO and said "I've asked a stranger off the street to resolve our problem with ABC Co." Of course everyone says "no." Next question is whether it would be better to say you've given the problem to 12 strangers? Same answer. So why, I ask, does giving these strangers the titles judge and jury make it better? And as judges' workloads increase so dramatically, how can we hope they will have the time to thoughtfully study and resolve the problem?
It is, of course, a different story when your opponent is an individual, because individuals see the court system as giving them a fighting chance. But B2B disputes are down because the process is expensive and doesn't yield good results.
Mind you, this is coming from a 27 year litigator who loves being in court trying cases more than any other part of the practice!