Declining Litigation Demand May Be Due to Client Pressure, Latest Data Shows
Litigation demand – long-seen in steady decline over the past several years – may actually be a more complicated issue, with client push-back on billing playing a larger role in falling demand numbers than any actual decline in the number of litigation actions, according to a new report by the Legal Executive Institute and Thomson Reuters Peer Monitor.
The report, Litigation in 2016, shows that despite a seeming downturn in litigation demand for many firms, real litigation activity is still happening, and in fact, is not showing any real signs of slowing down. Filings for civil matters in U.S. District Courts have remained at or near the 200,000-matter mark since 2011, with the current year staying right on par, according to the report.
However, the numbers do show that despite the steady pace of filings, most large law firms are experiencing a decline in litigation demand this year, compared to previous years. One very likely reason: Clients may be pushing back more aggressively on billing for litigation matters, perhaps more aggressively than in any other practice sector.
“The decline in demand likely represents the results of clients pushing back on traditional law firm billing models,” the report noted. “Additionally, nearly all law firms are using some form of alternative fee arrangement that may not rely on billing hours. Matters handled on a non-hourly basis would not be included in demand figures. Lawyers may also be doing more work “off book” than in years past, in an attempt to satisfy client desires for lowers bills, while not jeopardizing their own performance metrics.”
Of course, some firms are handling this demand downturn and the client pressure better than others. Those firms that did see an increase in demand enjoyed a healthy 9.7% rise, attributable in a large part to several firms that expanded their litigation practices.
Interestingly, those firms that saw negative growth in litigation demand declined at an almost identical 10% contraction in demand.
Also significantly, small and midsize law firms were still grabbing the much of the litigation activity that was out there. (See chart above). Firms with between 501 and 750 attorneys saw the total number of dockets filed remain relatively steady since 2013, while firms with more than 750 attorneys saw a slight decline.
Another revealing trend was the reversal of a multi-year trend with litigation closing the gap with transactional work. According to the report, 48% of law firms in the Peer Monitor sample saw positive litigation growth thus far in 2016, with 21% of those firms seeing growth rebound into positive territory after shrinking in the previous year. On the transactional side, 33% of firms that saw positive transactional growth in 2015 are now experiencing contraction of transactional practices so far this year.
Download a the full Litigation in 2016 report here.
This post originally appeared on the Legal Executive Institute blog on Sept. 21, 2016.