e-discovery 2.0

As the Mark Twain quote goes, there are “lies, damn lies and statistics.”  In this case, however, and regardless of the exact numbers, two recent surveys provide some very interesting directional trending.  The first is Fulbright & Jaworski’s 6^th Annual Litigation Trends Survey.  In addition to covering a range of general and vertically oriented topics, they also focus on electronic discovery specifically.  Not surprisingly, reducing e-discovery costs bubbles up to the top of the list as major initiatives for most respondents.  Interestingly though, remediation plans attacking this problem seem to fall into two different camps.  On the one hand, 24% of respondents plan on outsourcing certain e-discovery tasks further leveraging preferred partners.  Conversely, the method that leads the pack (at a whopping 47%) is the corporate initiative of taking components of e-discovery in-house.  Other methods were listed, but most didn’t appear to have critical mass, including: using clawback agreements more, enforcing document retention policies, and negotiating with the opposition over the scope of discovery.

Similarly, Clearwell Systems recently conducted a survey in partnership with analyst firm Enterprise Strategy Group titled Trends in Electronic Discovery – A Market Perspective, which attempted to pinpoint similar pain points and solutions. The questions focused more on 2010 planning and they found a general expectation of more litigation/regulatory inquiries where 53% of the respondents expect the number of lawsuits and regulatory inquiries to increase by at least 20% in 2010, with 13% of respondents planning for an increase of 50 percent or more.  Again, not surprisingly, many plan on attacking this increase in litigation (and the corresponding e-discovery costs) by bring parts of the process in house.  In fact, 48% indicated that they currently have an active project to bring segments of the e-discovery process in-house. And for those that aren’t currently in the building process, 87% of respondents plan to budget for technology that specifically supports the electronic discovery process in 2010.

Given the length of time required for planning, RFPs and e-discovery tool procurement, clearly time is of the essence for companies that want to take advantage of internal solutions in the 2010 time frame.  Failure to get off the dime means that an enterprise is more likely to get caught in the middle of deliberation, versus deployment.

Part I of this series on reducing e-discovery costs discussed a number of approaches for managing e-discovery costs.  The third approach suggested in the original article is to bring e-discovery in-house.  This means taking some e-discovery tasks that were previously conducted by external organizations, such as e-discovery service providers or outside law firms, and performing them using in-house enterprise e-discovery software, and/or people.

How does bringing e-discovery in-house reduce costs?  The way in-sourcing e-discovery reduces costs is fairly straightforward.  It simply is a way to take variable costs and convert them into fixed costs.  If the variable costs are incurred frequently enough, then the sum of the variable costs will at some point become higher than the fixed costs.  In this case, a company bringing e-discovery in-house reduces costs by investing in fixed cost in-house software and/or people and using these to reduce the amount of variable e-discovery legal and service provider fees.  Over time, the savings from these reduced fees outstrip the cost of the original investment.

Cost is, of course, not the only factor that must be considered when a corporation, or law firm, decides to bring e-discovery in-house.  There are additional benefits as well as additional challenges.  Some of the additional benefits include:

• Increased visibility into costs and schedule: you’ll have a better idea about the specific costs and duration of e-discovery and how they relate to the overall management of the matter.
• Increased control of process and data: better visibility and in-house tools and/or people give you greater control over the conduct of e-discovery, so there’s less finger-pointing.  In-sourcing also allows you to keep control of your data avoiding the risk of entrusting it to third parties.
• Greater efficiencies: over time, in-sourcing allows you to build up data, processes and experience that will reduce costs further over time.  Instead of potentially training new people or adapting new software to your company’s business and processes every case, you’ll build an expertise that will lead to greater efficiency.  It also be easier to retain your work product and reduce the times when, for example, a document is inadvertently re-collected, processed, analyzed, reviewed and produce when it already from produced for a different matter.

Some of the challenges of bringing e-discovery in-house include:

• Risk: Risk is often the biggest concern when a company considers in-sourcing.  Many corporations feel that in-sourcing could increase their liability and risk of sanctions because if something goes wrong, they are more responsible.  The reality, of course, is that if something goes wrong the corporation often bears much of the liability even if e-discovery is out-sourced.  There are also ways to mitigate risks, which is typically more related to people in-sourcing not software.
• Expertise: how do you find the right people and software to perform e-discovery in-house?  This can be challenge but there are now many good options.  The first is to hire expertise from service providers or law firms.  The second is in-source only the software and continue to use outside people.  This is an approach worth discussing in more detail.
• Overhead: many corporations are concerned that bringing in software will require a large investment in people and an increase in operational costs, potentially out-weighing the variable cost savings.  Fortunately, e-discovery software has improved such that the best software does not result in a significant increase in overhead, and the savings from reduced service costs more than offset any additional overhead.

In recent months, a large number of organizations have analyzed all of the benefits and challenges of bringing e-discovery in-house.  The results have been both unsurprising and somewhat surprising.  Unsurprisingly, what most of these companies have found is that bringing parts of the e-discovery process in-house makes a lot of sense if the company has a fairly consistent case load from litigation and/or internal investigations.  More surprisingly, many companies have also determined that bringing e-discovery software in-house can often pay for itself with just one large case.  The first finding suggests that, as one might suspect, most Fortune 500 companies and large government organizations, should be taking a look at bringing e-discovery in-house.  The second finding though suggests that it’s not just the Fortune 500 that should be taking a hard look at in-sourcing.  If bringing parts of e-discovery in-house can pay for itself on one large case, then many organizations, not just the Fortune 500 should be taking a hard look at e-discovery in-sourcing.  When they do, one of the big questions that each organization needs to answer is what part of the e-discovery process do I want to in-source?  That will be the subject of my next post.

Since I’ve finished off the last of the Halloween candy and tossed out the moldy, squirrel ravaged pumpkins, it occurred to me that now might be a good time to think about what 2010 will hold for the electronic discovery industry.  My 2009 list seems to have been fairly prescient and many of those notions still hold true since the legal industry (as we know) doesn’t move at the most blistering pace.

Again, doing my best Nostradamus impersonation, here are my top ten trends for 2010:

1. Early case assessment (ECA) moves from a “nice to have” to a “must have” requirement for any matter involving electronically stored information (ESI).  In 2009, we saw ECA move into the mainstream as a methodology to quickly understand case facts, assess risk and lower both review and data processing costs.  But, in 2010, with the advancement of the tools and the increased socialization within the bar and the litigation support community, ECA will graduate into a core methodology for savvy litigators regardless of matter type or size.
2. Appetites for broad information lifecycle management initiatives diminish as organizations realize these programs are far too complex to solve specific pain points, and they often take too much time (measured in years) to execute.  The economic reality is that these holistic, cross data, cross enterprise pipe dreams really can’t demonstrate the ROI that’s needed in today’s challenging economy.
3. Staffing roles continue to evolve with a newfound focus on project management. The role of an in-house e-discovery coordinator will emerge as more of a project management and analyst versus pure legal or IT. This shift will become increasingly necessary as e-discovery evolves from an ad-hoc fire drill to a standard business process that is repeatable, measurable, and defensible.
4. Data analytics and statistical methodologies gain traction to augment the type of subjective decision making approaches that have historically formed the backbone of the e-discovery search and review processes.  These objective methodologies have long been called on as best practices by the likes of the Sedona Working Group. In 2010, they now will start to move from theoretical to practical task as e-discovery tools increasingly move in-house and departments enhance defensibility and add elements such as sampling into the workflow.
5. Platform e-discovery solutions finally become a reality as customers finally graduate from painfully stitching point solutions together, thus requiring less physical document hand-offs (i.e., exports and imports) between applications, cutting costs and lowering the risk of data loss.
6. Associate-based review gradually goes extinct, as both clients and law firms tire of expensive, linear review processes.  More review work becomes either insourced or is managed with specialized contract attorneys, who are both cheaper and better trained for this type of work.
7. Similarly, FRE 502 and “clawback” agreements will be increasingly used to reduce the need for any manual, eyes-on review, although many litigators will resist this trend because of the fears of “un-ringing the bell” when privileged information is disclosed in any context.
8. While perhaps anathema, alternatives to the much lauded EDRM model will gain traction, as practitioners strive to find an even better, and perhaps more practical, project management framework, in many cases acknowledging the role that the EDRM has taken in forming *the* lingua franca of the e-discovery industry.
9. The push for cooperation in the e-discovery process, will make incremental progress despite reticence by old school litigators.  Increasingly, this type of cooperation, as strongly advocated by the Sedona Working Group, will be ironically forced by judges and local rules.
10. “Cloud” computing starts to really impact how e-discovery data preservation/collection is done, both in terms of social media and traditional ESI.  More and more companies block social media applications and file types in the workplace because of fears surrounding the inability to preserve and collect.