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Law360 (July 14, 2020, 10:02 AM EDT ) U.S.-based corporate clients tapped their outside counsel on fewer new cases and corporate matters during the first part of 2020 than in previous years, while at the same time receiving more discounts on their legal bills than usual, according to a report released Tuesday.
Between January and May, the industry saw a decline in new litigation, as well as in mergers and acquisitions and corporate and tax matters, when compared to the same time period in 2019 and 2018, according to LexisNexis CounselLink's Enterprise Legal Management Trends Report.
"As corporations seek to rein in 2020 expenses, the pressure on general counsels to do their part means a continued focus on outside counsel spending," said the report, which is in its seventh year.
The CounselLink trends report is based on legal spending by more than 250 U.S.-based legal departments representing a broad range of industries, with nearly 7 million invoices and more than 1.7 million matters captured by CounselLink's enterprise legal management tools.
As corporate counsel worry about keeping their own budgets in check, they must also keep an eye on their law firms if they want to ensure those firms are still around in 2021 and can continue what are often long-term law firm-client relationships, according to Kris Satkunas, director of strategic consulting at CounselLink and author of the report.
"It's important to understand that this is a relationship with outside counsel. It has to be managed as such and legal departments have to be sensitive to the fact that this is affecting law firms," Satkunas said.
That may mean clients help aid law firms with their cash flow by paying bills more rapidly or it could mean choosing a few law firms and strengthening the relationships with those firms by reducing the overall total number of firms used by the corporation, she said.
"Volume is down and discounts are up. That has to very clearly impact the bottom line of law firms," she said. "Sensitivity to the relationship is very important. It is not an antagonistic relationship."
The report found that there was a gradual downward trend in litigation from January through May 2020, with new matter volume in May at 82% of what it was in February.
New corporate and tax matters declined in March, April and May, falling to 68% of February's numbers by May. And new merger and acquisition matters had fallen to 57% of February's figures by May.
At the same time, new labor and employment matters increased by approximately 25% in March relative to February and 15% in April, before declining again in May, the report found.
--Editing by Jack Karp.
Law360 is owned by LexisNexis Legal & Professional, a RELX Group company.
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