E-Discovery Resource Guide
Strategies for Controlling E-Discovery Costs
Discussions about electronic discovery are largely dominated by two topics: potential sanctions and high costs. In the current economic climate, the latter has come to the fore. A wide range of strategies are used to address it. Many companies are reluctant to discuss specifics, for understandable reasons. Not the least of these is uncertainty over what courts will consider reasonable when internal e-discovery processes are exposed during litigation. However, a recent FTI-commissioned survey of in-house counsel and other professionals responsible for corporate e-discovery, in various sized companies across a range of industries, sheds light on trends in balancing the need for legal compliance with the costs that are unavoidable in electronic discovery.
The survey (accessible at www.FTITechnology.com) involved telephone interviews of 29 professionals. About three quarters of the interviewees were in-house lawyers. The rest included electronic discovery project managers, records managers, and IT security, strategic sourcing and contracts personnel. The industries represented include manufacturing, financial services, energy and utilities, telecommunications, healthcare and technology.
PRIMACY OF DOCUMENT REVIEW
Seventy two percent of respondents recognized that document review is the largest component of e-discovery-related costs. This is the inevitable consequence of applying attorneys’ hourly billing rates to the massive volume of information subject to review.
Respondents reported various ways of addressing the issue. The most common is to focus on reducing the volume of data as much as possible before it gets reviewed by lawyers. Various approaches are used. These include culling software, refining collection processes, and implementing routine information management policies that are sensitive to the impact of retention on litigation cost.
There is widening acceptance of the notion that star trial lawyers do not need to review every potentially relevant document. Many companies, as a cost-cutting measure, are turning to outsourced document review. Some review firms provide the added benefits of experience with advanced review technology and a pricing model that improves budget predictability.
Finally, technical tools that speed review, in particular data clustering and visualization tools, are becoming more widely used. There is evidence we are reaching a point where data will demonstrate the superiority of these tools to older “linear” review tools.
One respondent, in addition, noted that concentrating data with a smaller number of providers also can have a meaningful impact on review cost. Fewer providers handling data should improve consistency and thus defensibility, and can also reduce transitions or “hand-offs” that provide opportunities for bungling.
INFORMED PLANNING
Notwithstanding economic pressures, companies are recognizing that saving money on e-discovery requires some investment up front. This may include acquiring or licensing technology for internal use. Sixty-nine percent of respondents reported that their companies had brought software tools in-house, with the aim of reducing e-discovery costs.
Respondents also recognized that technology alone is not a panacea, and pointed to other approaches. Some may seem obvious, but they do require a willingness to devote resources and time in a period of intense budget pressure.
The first is simply acquiring the information necessary for evaluating any e-discovery plan. Respondents pointed to the need to understand both the litigation profile of the company and the retention and IT environment to which e-discovery processes are applied. Other steps cited as necessary for e-discovery planning include making a realistic appraisal of available in-house resources, identifying best practices and staying updated about the software and services market.
The respondents suggested looking for providers who offer robust support. As one respondent put it, “a seamless, end-to-end solution is on everybody’s wish list. That is why it is important to have a vendor who understands that the sale does not end with the installation.”
Several respondents, recognizing that the quality of communication and collaboration between legal and IT personnel is a major factor in the success or failure of the e-discovery effort, strongly recommended having a dedicated person whose sole responsibility is to orchestrate the process.
As with any investment, establishing a new job title with salary and benefits can be a tough sell in this cost-sensitive era. However, for big companies with frequent e-discovery-intensive lawsuits and investigations, it may be the best cost-saving decision in the long run. As one respondent noted, it’s important to hire an e-discovery manager, and “that is the absolute best advice I can give anybody.”
VENDOR VIABILITY
It’s a sign of the times that financial viability of business partners has become an important concern, and that concern extends to e-discovery vendors. When the dot-com bubble burst, waves of technology companies with gold rush mentalities vanished almost overnight, and their commercial partners were left holding the bag. The explosion of the e-discovery market has brought a similar rush of entrepreneurs, and caution on the part of corporate buyers is warranted.
Inside counsel responding to the survey listed company viability as the second most important consideration in selecting an e-discovery software or service provider, right behind defensibility and having a proven track record. However, for most vendors in this market, determining viability can be difficult. There are some industry sources that identify the market players, including some that are public companies and therefore offer greater transparency regarding their financial situation.
The possibility that a vendor holding large volumes of your corporate data in connection with a critical lawsuit or regulatory investigation might fold is understandably unnerving, and it suggests one reason why making cost the major factor in vendor evaluation is dangerous. Companies whose exit strategy is to be acquired may bid lowball prices in an effort to show short-term revenue to prospective acquirers. The bottom line is that corporate e-discovery buyers should be careful where pricing is tantalizingly low.
OTHER SURVEY RESULTS
Some readers may be surprised to learn that, even in this down economy, corporate e-discovery decision-makers cited cost as only the third most important factor when selecting a service provider, and fourth when selecting software. Defensibility was listed twice as often as cost. Respondents seemed to recognize that e-discovery represents a compliance issue with risks that overshadow any one-time cost difference. While the potential impact of sanctions, lost cases, damage to reputation and other negative fallout from botched e-discovery may be hard to quantify, corporate e-discovery decision-makers know that they are no less real.
Moreover, most respondents reported that identifying and calculating e-discovery costs and the impact of cost-cutting measures was not always possible. While they all try to reduce e-discovery costs, only 34 percent could describe their savings, and only 21 percent could quantify it.
Historically, handling electronic discovery for many companies has been a painful experience, marked by severe sanctions and shocking expenses. But research indicates that businesses are taking control of the e-discovery process and developing practices that foster both better legal compliance and greater efficiency. To get to the next level, companies will need to develop metrics that will allow them to more accurately measure the size of the problem and effectiveness of their solutions, and this seems to be the direction that most companies are moving.
Adam Cohen is a Senior Managing Director with FTI Technology, where he advises corporate clients on legal compliance issues related to electronically stored information. He serves in federal court as a court-appointed neutral expert for e-discovery issues, and he is co-author of The ESI Handbook: Sources, Technology and Process and Electronic Discovery: Law and Practice. He is a member of the Executive Counsel Editorial Advisory Board.