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Litigation Cuts Corporate Profits By One-Third (That Seems About Right)

November 9, 2009 | Posted in : Article / Book, Legal Bills / Legal Costs


A recent article, "Fortune 500: The Total Cost of Litigation Estimated at One-Third Profits", estimates that litigation cuts into profits by one-third for Fortune 500 Companies. The article states, "Fortune 500 corporations spend an average of three years to resolve litigation. This is true across practice areas. In general, Fortune 500 corporations employ a delayed resolution business model for litigation. Fortune 500 corporations increase total cost by delaying case resolution. They prepare each case as if it were going to trial, but end up settling to avoid trial, only tying 3 persent of cases."

The article continues, "Incentives drive delayed resolution. Paying outside counsel by the hour encourages more hours. Engaging in exhaustive discovery and aggressive motion practice increases the time it takes to resolve the litigation."