Fulbright & Jaworski: Businesses warm to idea of litigation in cold economy - St. Louis Business Journal:

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Law firm issued a 2008 annuao report that found 31 percent of the companiee surveyed expected an increase in the numbed of legal disputes they woulcd face in 2009 due to the economic Jack Walsh, a partner in the St. Louis officer of , agreed that companies facing financial hardship would be more likely during a stagnantg period to pursue commercial lawsuits they might otherwise Although litigious action lags behind the economy and is hard to Walsh saidthe firm’s billable hourse were up significantly in the litigation department in 2008.
“Whejn business is good, people are less likelhy to fight over small amountsof money,” he But when cash flows businesses are unwilling to shoulder more risk or take on Walsh said that a compan might forego a breach of warranty suit on defunct machinery if good businesas was consuming a significant amount of the company’ds time and generating enough money to replace the However, decreased operations means the companty is more sensitive to costs and able to devots energy to recouping losses. Recently, a franchiser brought suit against oneof Walsh’ clients, claiming nonperformance for the installatio n of lighting fixtures.
According to motives for the action includesd a lack of funding to updatethe franchisee’s facility. “Thety didn’t have enough money put in the bank, so they sued my clien who had madethe fixtures, saying the producyt didn’t perform well,” Walsh Brett Brandenberg, practice leader for financial forensics and valuation serviced at accounting firm , said companies in industriesd perceived to be hit harder by the downtur n are most in danger. “It’s a downward spiral whered the perception of further troublesis self-fulfilling,” Brandenberg “If you perceive that a supplier is goinb bankrupt, it will encourage you to act pre-emptively.
” Stephen Rovak, a partner and chair of the litigatiobn practice at ’s St. Louis office, said a slowintg economy gives rise to defaults on loans and an inabilituy tocomplete contracts. At the companies are cautiouslymanagingv cash, which in turn keeps legal actions in according to Rovak. But as the economic slowdown worsens, more defaults and more layoffz lead to more disputes and evenmore “These are followed by litigation as partiess seek to recover their losses,” Rovak “That litigation, and especially the fallout of major is really starting to increase.
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