Where have all the hours gone?

The song – or lawyers’ lament perhaps – about the gap between the anticipated rush of litigation and the reality of what actually seems to be happening, might go something like this..

Listening to Stephen Fry on the radio the other day  talking about the Y2K phenomenon [‘In the Beginning  Was the Nerd‘ broadcast 3rd/5th October, 2009] brought back old memories. Firms were fascinated by the forebodings expressed by experts that on the stroke of midnight on 31st December 1999 all computer systems would crash as there was no facility to deal with dates after the end of 1999. It was said that nothing we had come to rely on would work on New Year’s Day 2000 and that that was nothing to do with monumental millennium hangovers.

We were encouraged to believe that traffic lights would not work causing huge snarl ups on our roads. Air traffic control screens would be blank leading to no flights and railways too would be at a standstill. Telephones would not work and in short the world as we knew it would have ceased to function just as the world faced the new Millennium. Lawyers and other professionals spent oodles of time preparing Y2K disaster and recovery programmes and tried to persuade their clients to buy them. Some doubtless did so.

What happened? Absolutely nothing! The so called experts were wrong and the world continued into January 1st and beyond,  just like any another year before it. Are we seeing the same phenomenon now in late 2009 in relation to litigation? Let me explain what I mean.

Over the past few months I have talked to many lawyers in the City of London and elsewhere round the country. Pretty well all of them assert that their litigation departments are busy but that there is no real appetite amongst their clients to go down the full blown litigation route. They are being asked to advise on a range of issues with potential for litigation but few “Start” buttons are being pressed. Occasionally there is an instruction to “collect the evidence” we may need if we were to litigate this or that matter in the future but that is often as far as it goes.

What Finance Director would not prefer to put off a decision to plunge into the expensive and uncertain world of litigation if they could put off the litigation spend for a period?

Cost is always an issue. I firmly believe that this is more of an issue now than ever, despite the views of a number of senior London based litigation lawyers, often expressed, that clients do not mind paying for litigation in London. I cannot prove that they are wrong but I would love to see someone conduct a survey of major companies on the subject and I would be prepared to wager a modest sum that a majority of companies would prefer litigation to be cheaper and more efficient and that, yes, they do actually mind paying London prices when the litigation on which they have embarked could be run more efficiently and, therefore, more cheaply.

However, I digress. I must admit I am confused. On the one hand we have litigation lawyers telling us they are busy but that there is no real appetite for litigation. On the other hand we have newspapers and legal weeklies screaming out about this or that piece of litigation with headlines speaking of this win or that and this huge fine or that intended prosecution.

Which is right and if there is no real appetite for litigation, “Where has all the litigation gone?”

Crystal ball gazing is often fun but not particularly accurate or meaningful. However, I think there are some trends emerging if the actual and anecdotal evidence is to be believed. So where is the litigation of the future coming from? Areas might include:

• Regulatory/competition issues and investigations. Regulatory bodies have been flexing their muscles recently. They are keen to assert their authority after no one predicted the credit crunch. The Attorney General (she of the illegal immigrant cleaner) is being asked to consent to a prosecution by the SFO of BAE Systems. Fines have been handed out in huge numbers and amounts to the recruitment and construction industries (£40 million and £129 million respectively). There is more of this to come.
• Last month Mabey & Johnson pleaded guilty to offences related to corruption and was fined approximately £6.5 million.
• Two former partners of City law firms, Andrew Rimmington and Michael McFall, were committed for trial at Southwark Crown Court at the end of October, charged by the FSA with insider trading. They are contesting the allegations.
• Former bank employees are suing to recover allegedly guaranteed bonuses which have been withheld by their former employers.
• Lawyers will increasingly be taken to task by their clients for mistakes made in drafting contracts about complex issues. After all, anyone making a huge loss will want to see who can be blamed and who can pay and professional advisers are in the frame. Support for this view comes from research carried out by Renolds Porter Chamberlain which shows the number of negligence claims against solicitors in the High Court grew from 31 in 2007 to 80 in 2008, an increase of 158%.
• International claims will play their part. Claims arising from airline disasters like the Air France crash off Brazil in June this year and the Qantas crash are examples. The Madoff scandal, the collapse of Lehman Bros and the restructuring of AIG are others.
• Claims in respect of the collapse/nationalisation of banks in the UK. Northern Rock is an example.
• Mis-selling by banks and other professionals e.g. of specialised financial products to the retail market.

Clearly there is litigation out there or at least the potential for it. But will it happen or will we find in 2010 and 2011 as the economy picks up and the thoughts of recession begin to fade that there really was no appetite for hefty pieces of litigation and that disputes have somehow been settled because the parties decided they did not want to risk the uncertainties and expense of litigation and found other ways to settle their differences?

As if that prospect is not enough to send the proverbial shiver down a litigator’s back, there is the prospect of such litigation as exists not coming the way of the law firms in the traditional way. Expense and inefficiency (my colleague and fellow director James Moeskops has coined the phrase “justifiable inefficiency”) could take their toll on the traditional workflows for litigators. Clients want to pay less and increasingly will react against those firms who are perceived to be expensive and above all less efficient in the management of litigation than they should be.

It really is not good enough for lawyers to say that the judges should be more proactive in managing cases and everything will then be fine. The judges can play their part but lawyers must learn what it takes to manage cases more efficiently or their clients will not send them the work. They will happily bypass their lawyers and give the work to experts to prepare and only then will they give the remnants to the lawyers to chew over in Court. The big 4 accountancy practices appear to be on a roll at present and at least part of that is because they have considerable expertise in the field of technology. Most law firms have not got that expertise. There are others out there in the market place who have the expertise and clients will increasingly seek them out to the detriment of the traditional litigation practice.

For the sake of those law firms affected it really will be a case of “When will they ever learn?”