Although nearly 80 percent of Texas business leaders were sued during the past year, the number of lawsuits companies face declined significantly during the past five years, according to exclusive data provided to The Texas Lawbook by the Norton Rose Fulbright law firm.
There would have been even fewer lawsuit, but half of the Texas businesses surveyed actually sued other companies during the past year.
The 2017 Litigation Trends Survey reports that Texas general counsel have witnessed an uptick in lawsuits involving oil and gas operations, labor and employment disputes and contract violations this year.
The sharpest rise in civil complaints came in the energy sector. Lawsuits involving offshore oil and gas operations more than tripled during the past year, according to the report.
“During periods of declining commodity prices, we see an increase in contracts being defaulted, an increase in disputes with business partners and joint ventures gone bad,” said Gerard Pecht, a partner in the Houston office of Norton Rose Fulbright and head of the firm’s global litigation practice.
One-third of Texas companies were sued for alleged contract disputes in 2016, but the number jumped to 47 percent in 2017, according to the report.
The survey found that 47 percent of Texas companies actually initiated litigation against other businesses during the past year.
Norton Rose Fulbright issued its annual global litigation report last week, but the law firm, which has its U.S. headquarters in Houston, provided exclusive data to the Lawbook regarding the responses of Texas corporate in-house legal departments.
The most serious emerging legal threat to Texas companies, according to the study, involves risks to cybersecurity and data privacy.
The report does provide some good news for companies. Corporate legal departments believe that the threat of federal regulatory action against their businesses has declined dramatically.
Last year, every single Texas business told Norton Rose Fulbright that regulators were more interventionist. That number declined to 72 percent this year.
“The change in presidential administrations is the reason for this attitude change,” Pecht said.
The most obvious example, he said, is the U.S. Securities and Exchange Commission.
“The SEC is moving away from its broken windows approach and will pursue the bigger cases and focus less on smaller, more technical violations,” Gerard said.
Over all, the Norton Rose Fulbright survey found that companies spent only a tiny fraction of their total revenues – 0.17 percent – on litigation, but that is still nearly double the amount of their legal spend from a year earlier.
Twenty-seven percent of companies were sued 21 times or more during the past year, which is down from 32 percent in 2015. In addition, 21 percent of companies were not sued at all – up from 18 percent a year earlier, according to the report.
The Litigation Trends survey found that the median annual company spend on litigation was $1.5 million – up from $1 million a year earlier.
Cybersecurity is the legal threat that concerns most corporate general counsel, although Texas companies seem less worried than their national counterparts.
The Norton Rose Fulbright survey found that 53 percent of Texas companies feel more legal exposure because of cybersecurity – compared to 63 percent of national companies.
A stunning 9 percent of Texas general counsel said they feel less exposed to cyber threats than they did a year ago – a sign that many of them do not truly understand the threat their companies face on a daily basis.
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