Editorial: The Great Equalizer
Turns out that litigation, not Samuel Colt's best-known invention, might just be the most effective mechanism for leveling the playing field in the United States today. The U.S. Chamber of Commerce Institute for Legal Reform recently released a study showing that the total annual cost of the tort system to U.S. businesses is $129 billion. But, while tobacco settlements and myriad other class action tort suits grab the headlines, it is contract disputes, and labor and employment claims that keep most corporate counsel awake at night, according to Fulbright & Jaworski LLP (New York).
In its latest annual 2005 Litigation Trends Survey, the firm found that regardless of size, industry or location, there is certain to be a sizeable number of disputes diverting the resources of American businesses. Nearly 90 percent of U.S. corporations are embroiled in some type of litigation, they learned, and the average company balances a docket of 37 lawsuits. And bigger means more; the average $1 billion-plus company is juggling 147 cases at any one time.
This state of affairs could be dismissed as amusing, albeit irritating, were it not for economic advancements elsewhere around the world. "China's economy has tripled in size since 1980 and continues to grow at 9 percent per year; it could equal ours by 2020," according to Charlene Barshefsky, Washington lawyer and U.S. trade representative from 1997 to 2001, and Edward Gresser, director of trade and global markets at the Progressive Policy Institute. Writing in The Wall Street Journal recently, they note that China is also investing in advanced technology, ports, coastal road systems, telecom networks, research centers and universities.
Manufacturing has been the lifeblood of Nagoya, Japan, since the 17th century. Nagoya experienced a brief slump in the early 1990s, along with the rest of the world's second-largest economy. Today, however, the economy in this area of Central Japan's industrial heartland is booming, so much so that it helped boost Japan's gross domestic product by 3.3 percent in the fiscal quarter ended June 30. It is noteworthy that Nagoya's economic engines of growth are those often dismissed as "sunset industries": automotive, machinery, steel, ceramics and chemicals.
Twenty percent of U.S. manufacturing companies have legal budgets of more than 2 percent of their total gross revenue, according to the Fulbright & Jaworski survey. An indeterminate, but significant, part of this legal budget represents lost opportunity. Invested in workforce development or R&D, just to name two profit-generating activities, those funds would certainly contribute handsomely to any manufacturing company's gross revenue and profit margin.
While litigation is increasing in Japan, and to a lesser extent in China, both have a long way to go before becoming as litigious as we are in America. Left unchecked, runaway litigation just might "equalize" American business right out of being competitive in the global marketplace.