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Case study:
Suntrust banks: getting to grips with legal issues US-based financial services provider SunTrust Banks provides deposit, credit, trust and investment services to a broad range of retail, business and institutional clients. It says it has seen levels of corporate litigation rise, largely in the employment area, and has 50 internal lawyers divided by subject matter, including a dedicated litigation manager. “Employment law in the US has become so much more intensive from a legal point of view,” says Ray Fortin, general counsel at the company. “It used to be that a high-quality HR professional could handle just about any tough employment situation. But now we’re at a point where you need a specialised lawyer because things are so much more complicated and technical.” He adds that the increasing complexity of products in the financial services sector is also contributing to growth in corporate litigation. And while the sub-prime crisis has not yet had an impact on SunTrust’s business, this could be a possibility in the future. “We’re involved in the old-fashioned world where people aren’t paying their loans and we have to foreclose,” says Mr Fortin. “But we are not a sub-prime lender, so we’re not currently subject to some of the more problematic issues that part of the industry is experiencing.” The biggest challenge facing SunTrust from a corporate liability risk point of view is the tension created by the need to keep expenses down at the same time as handling the growing complexity and legal demands being placed on the business.
“You try to do more with less,” says Mr Fortin. “It’s about how you make your decisions and how you deploy your resources. We work hard to make sure that the lawyers we hire have an idea of how to work efficiently.” The rising costs of dealing with litigation are an issue, according to Mr Fortin. “Outside counsel expenses continue to go up, and often we’re caught in the middle,” he says. “Obviously we’re not a revenue source, we’re an expense. And the outside law firms are trying to raise their fees too.” Ultimately, he says, businesses need to define their decisionmaking process to avoid unnecessary work. But this is easier said than done and appears to be a delicate balancing act. “There is that situation in litigation where sometimes you pursue things that seem to make a lot of business sense but aren’t that rational from an economic point of view,” he explains. “For example, there may be someone who owes us $100,000, but we can’t efficiently get it from him. Sometimes, you have to know when enough is enough.” Firms ultimately need to establish a good relationship with their legal teams to ensure that any litigation process is managed as efficiently as possible. Companies must also adopt a flexible approach towards their legal strategy and be prepared to review their processes time and again.
“the increasing complexity of products in the financial services sector is also contributing to growth in corporate litigation”