The Institute for the Advancement of the American Legal System (IAALS) is a national, non-partisan organization dedicated to improving the process and culture of the civil justice system. Executive Director and former Colorado Supreme Court Justice Rebecca Love Kourlis leads a staff distinguished not only by their expertise but also by their diversity of ideas, backgrounds and beliefs. IAALS is part of the University of Denver, and it benefits from gifts donated to the University for its use. None of those gifts have conditions or requirements, other than accounting and fiduciary responsibility.
This article sets forth verbatim the executive summary of the Report of the results of the IAALS's civil litigation survey of Chief Legal Officers and General Counsel belonging to the Association of Corporate Counsel ("General Counsel Survey"). You can access the full Report by going to http://www.du.edu/legalinstitute/form-chieflegal-success.html.
This survey explored the opinions of Chief Legal Officers and General Counsel - one per company - in an effort to capture how businesses experience the American civil justice process. The survey's goal was to achieve a better understanding of the litigant's perspective. While businesses are certainly a specific category of litigants, they are an important one, and their often repeat contact with the civil justice system is relevant to obtaining a complete picture of the status of that system.
Survey respondents represent a diverse group of companies whose legal departments have been involved in litigating at least five U.S. state or federal civil cases in the last five years. Industries range from "advertising" to "food distribution" to "property management," with no particular segment of the economy dominating. Exactly 30 percent of respondent companies have fewer than 500 employees, and exactly 30 percent have 5,000 or more employees. Just over half of the companies are multinational in scope, while almost 30 percent are national and almost 20 percent are regional or local. Of the companies headquartered in the U.S., they are geographically distributed across 43 states plus the District of Columbia and Puerto Rico. Highlights of the survey appear below.
In the last five years, most respondent companies have conducted discovery in the majority of their civil cases, and most respondent companies have experienced an increase in active cases and pretrial costs, without a corresponding increase in the number of trials.
On average, respondent companies were plaintiffs in 18 percent of their cases, defendants in 70 percent of cases, and non-party respondents in 12 percent of cases. The companies have most commonly litigated contract disputes (indicated by 54 percent), followed by "employment discrimination," "personal injury," "complex commercial," "product liability," and "intellectual property" cases. Two-thirds of respondents indicated that discovery was conducted in at least 70 percent of the company's cases, and a plurality indicated that discovery was conducted in at least 90 percent of cases.
A majority of respondents reported that active cases at their company have increased over the last five years, but only 16 percent reported that the number of trials has likewise increased. A majority of respondents also reported that pretrial litigation costs have increased, both in terms of the cost of a typical case and total yearly costs for the company. Those who indicated increasing costs most commonly cited discovery in general, and e-discovery in particular, as the basis for the trend. Respondents also pointed to rising attorney billing rates.
Those at the helm of respondent company legal departments perceive a need for changes to the American civil justice system.
A majority of respondents agreed that the American civil justice system is "too complex." In addition, 90 percent agreed that it takes "too long" and 97 percent agreed that it is "too expensive." Respondents find that litigation costs are commonly out of line with the stakes of the case. Approximately nine out of ten respondents disagreed with the statement that "litigation costs are generally proportionate to the value of the case." Furthermore, over 80 percent disagreed with the statement that "outcomes are driven more by the merits of the case than by litigation costs."
Respondents believe that notice pleading is an obstacle to the early identification of issues. Nearly 75 percent agreed with the statement that "notice pleading prevents the disputed issues from being identified early enough." Several respondents commented that requiring pleadings to include the facts known at the time of filing to support each legal theory would narrow the issues and allow for early discussions about the merits and the possibility of settlement.
When litigation is necessary, respondent companies tend to prefer federal court over state court. In addition to the quality of the judiciary, respondents cited greater adherence to the rules and the law in federal court, which results in more consistency and predictability in both the pretrial process and the outcome. With respect to state courts, respondents expressed a preference for business courts specializing in contract and commercial matters.
Discovery presents a significant challenge for respondent companies.
Respondents frequently advocated for curtailing "scorched earth" discovery and focusing its scope on the real issues in dispute. Suggestions included limiting the number of depositions and interrogatories, as well as having only one neutral expert. There were also suggestions for scaled or staged discovery, in accordance with the needs of the case. Many respondents envisioned a stronger role for judges in determining the parameters of discovery.
Respondents reported inconsistent communication and low levels of agreement between parties on discovery. According to respondents, parties are able to agree on the process for conducting discovery more frequently than they are able to agree on the scope of information to be exchanged. Nevertheless, for both issues, approximately 70 percent to 80 percent of respondents indicated an agreement no more than half the time.
In addition, respondents reported high levels of discovery misconduct. Nearly 40 percent indicated that parties frequently (often or almost always) "ignore or violate discovery rules." Over 60 percent indicated that parties frequently "harass or obstruct the opposition," by giving obviously inadequate answers or requesting information clearly not discoverable, for example. Over 70 percent indicated that parties "overuse permitted discovery procedures," by going beyond what is necessary or appropriate for the particular case. Such abuse was the most commonly cited justification for discovery cost-shifting.
Electronic discovery, in particular, presents a challenge for respondent companies.
Nearly one-quarter of respondent companies had requests for electronically stored information in every case in the last five years. By contrast, only 5 percent reported solely traditional paper discovery in all cases.
The majority of respondent companies reported establishing important e-discovery policies - litigation hold policies and records retention/destruction policies. However, fewer companies have implemented structures to proactively understand and manage their electronic data. Moreover, many respondents acknowledged significant resource gaps with respect to e-discovery. Over 40 percent do not believe that their company has sufficient in-house or outside expertise and infrastructure to implement "an adequate but targeted [litigation] hold without undue cost and delay." Exactly 65 percent indicated that their company does not have sufficient in-house or outside expertise and infrastructure to conduct an e-discovery search "without undue cost and delay."
There is also a consensus that legal professionals have inadequate familiarity with e-discovery technologies, as exactly 70 percent of respondents disagreed that attorneys have sufficient knowledge to obtain necessary information without undue cost and delay, and exactly 70 percent of respondents disagreed that judges have sufficient knowledge to rule appropriately in discovery disputes.
In terms of the level of information provided by the opposing party, nearly 65 percent of respondents indicated that their company usually has sufficient information about the claim(s) to implement an adequate but targeted litigation hold. However, respondents are split on whether their company usually has sufficient information from an e-discovery request to conduct a reasonable search.
Respondents would like to see clear, streamlined, and binding e-discovery rules based on "reasonableness" rather than "technical feasibility." One respondent commented: "As a general matter, for commercial contract disputes, the costs and abuses generated by unlimited e-discovery eclipse any true value in the discovery obtained."
A majority of respondents (62 percent) believe that greater court involvement in "crafting an e-discovery plan prior to a dispute would improve the process." With respect to sanctions, a majority of respondents (56 percent) disagreed that "motions for sanctions are a useful tool in responding to e-discovery abuse." Nevertheless, a majority (53 percent) did agree that "the threat of sanctions is a significant consideration in my company's e-discovery decisions."
While acknowledging the benefits of alternative dispute resolution ("ADR"), respondents had mixed reactions on its overall utility.
For nearly 85 percent of respondent companies, less than one-third of the company's civil caseload has been handled exclusively through an ADR process rather than the courts in the last five years. On average, ADR was contractual or by agreement of the parties in 71 percent of a company's cases, and court-ordered in 29 percent of cases. On average, ADR consisted of mediation in 59 percent of a company's cases, arbitration in 39 percent of cases, and some other form of dispute resolution in 2 percent of cases.
Of respondents who reported that a percentage of their company's caseload was handled in mediation, a strong majority believe that mediation involves shorter disposition times (83 percent) and lower overall costs (80 percent) than litigation. Moreover, a majority (61 percent) believe that there is no difference in the fairness of the two processes.
Of respondents who reported that a percentage of their company's caseload was handled in arbitration, a weaker majority believe that arbitration involves shorter disposition times (63 percent) and lower overall costs (55 percent) than litigation. Moreover, a plurality (47 percent) believe that there is no difference in the fairness of the two processes, but a significant portion (37 percent) find arbitration to be less procedurally fair.
The comments on ADR varied. Some respondents noted that the marginal time and cost benefits of ADR are decreasing, as ADR has assumed many of the attributes of litigation. There are additional benefits, such as a non-public process and more limited exposure, but also additional drawbacks, such as inconsistencies in the quality of the decision-maker, the procedures employed, and the extent to which the law is followed.