GlobeSt.com: How much of the sampling were companies directly involved in commercial real estate?

Danzig: If you're talking about the principal business of the company, only 5%. But all businesses that responded are involved in one way or another in real estate, and that fact is baked into the responses.

GlobeSt.com: How much of a company's litigation budget is dedicated to real estate issues?

Danzig: It depends on the type of matter. We're seeing real estate anywhere between 7% and 27% of the litigation budget of a company. Roughly 20% of the respondents said 27% went to real estate-related litigation.

GlobeSt.com: What are the trends in terms of legal claims?

Danzig: The major real estate-related concerns, both currently and going forward, fell into three major areas: environmental; labor, employment and contracts; and personal injury.

GlobeSt.com: Your survey indicated that the environmental aspect will play a larger part going forward than it traditionally has. Explain.

Danzig: There is certainly a heightened awareness. Over time and through experience most companies recognize the astronomical costs and potential liability associated with a contaminated property. The risks include contamination caused not only by the current owner but also by a prior owner or an adjacent or upstream owner. For example, we represented one company that owned a New Jersey manufacturing facility that had contamination from two sources. One was upstream contamination from an adjacent river and the other was from a prior user. By the time this company engaged the appropriate environmental engineers, prepared a cleanup plan and commenced litigation against the prior owners and the upstream party, the costs well exceeded the value of the property. Any company considering acquiring a property or has an environmentally challenged property should be concerned about what it might do to the bottom line.

In addition, you've got the problem of employee illnesses related to working on a contaminated property, so you have loss of productivity and potential litigation. If you find that you have a property that's suffering from environmental problems, it will certainly adversely affect your ability to finance or sell that property. If you take all this and put it together it spells out in fairly clear detail why companies would be concerned about environmental issues going forward.

GlobeSt.com: Are companies equipped to handle the case load?

Danzig: Some 73% of the companies that are sued in connection with real estate-related matters use outside counsel, so the answer is yes. Due to the complexity of the matter, whether it's environmental or breech of contract, most inside counsel recognize they are better served by going outside. That's why real estate tends to be a larger percentage of the litigation budget.

GlobeSt.com: What is the dynamic that exists between in-house and outside counsel?

Danzig: Typically, outside counsel works hand-in-hand with the in-house team to make recommendations and suggestions as to strategy or a settlement. It's up to the in-house counsel to filter these suggestions as appropriate and present them to senior management.

GlobeSt.com: We keep hearing about an increasingly litigious society. Is it filtering into corporate America?

Danzig: The state of litigiousness is directly related to the state of the economy. In good times, when companies are making money, they tend to be less litigious than in a downturn. We actually defended a case where a broker made a claim that they were entitled to a commission, from a tenant who traditionally doesn't pay a brokerage commission, because the tenant failed to execute a lease. It happened several years ago in a downturn, and it's something you wouldn't see if that broker was doing deals.

GlobeSt.com: So, what is the economy saying about the state of litigation?

Danzig: It depends on which part of the country you're talking about. In New York City, we're seeing a flattening. As interest rates get higher, it gets more difficult to make properties pay if they were purchased at very high prices. In areas like Boston; certain parts of Texas; and outside of Washington, DC, we're seeing significant declines in the market, and I wouldn't be surprised to see an increase in litigation in those areas.

Instant Insights /

Fulbright & Jaworski's Doug Danzig

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