e-discovery 2.0

Ralph Losey, never one to mince words, recently analyzed a recent litigation survey from the elite Fellows of the American College of Trial Lawyers. The survey highlights the fact that one of the main problems facing the U.S. legal system today is (surprise!) e-discovery. Also (not) a surprise is that the study “places the blame squarely on poor rules, bad law, and judges”, while overlooking the role that lawyers play in the problem.

In his analysis, Ralph makes a number of insightful observations that should help lawyers move from being e-discovery troublemakers to being part of the solution. However, one of his key critiques is targeted not at lawyers but rather at the vendor community: “[E-discovery] is too expensive because lawyers and judges do not know what they are doing, and do not know how to properly cull and review email, and because clients are disorganized pack-rats. Many of the e-discovery vendors are also misinformed, but often they do know better; they just have no pecuniary interest in aggressive culling. Some may even seek to line their own pockets in inflated discoveries.”

As Ralph bluntly points out, pecuniary interests (translation: money) plays a big role here, but so does risk reduction. Imagine you’re given the opportunity to process a 2 terabyte case all the way through to review. With the “funnel” of e-discovery costs placing the highest dollar per gigabyte value on the end of the process (i.e. review), what’s your incentive to cull aggressively at the beginning? Not much from a revenue perspective, certainly, but also not much from a risk perspective: particularly when you have sanctions and lawsuits on your mind and are thinking about the potential liability that you incur by excluding potentially relevant documents by using too broad a brush (or pair of garden clippers) in your pruning.

How do we move forward? As document volumes continue to grow, it’s clear that aggressive culling (with a few caveats which we’ll get to in a minute) is a critical tool for managing costs and improving case outcomes (let’s go out on a limb and define “improving” as producing fairer and more equitable rulings). However, in order to adopt more aggressive culling as a standard part of the electronic discovery process, the community has to come to terms with three things:

• The Myth of Perfection: There may be perfect abs, but there is no perfect e-discovery. Organizations like the E-Discovery Institute are doing fantastic work to measure and improve the accuracy of electronic discovery efforts, but in the end it’s tough to make the argument that having 100 contract attorneys manually reviewing 10 million documents will necessarily produce a better overall e-discovery outcome than  10 specialized attorneys reviewing 200,000 documents that were aggressively (but thoughtfully) culled from initial 10 million document set. There simply is no black and white set of rules that will lead to a perfect process.
• The Benefit of Cost Control: Given that, it is in the best interest of everyone involved (yes, even vendors) to choose the most cost-effective process that provides a high likelihood of producing the information relevant to the case.  This means “saving your bullets” by not spending all of your e-discovery dollars up front in a case pursing the perfection myth, but instead approaching discovery in an incremental fashion which can adapt to changing facts and circumstances as the matter unfolds. How, you may ask, do vendors benefit? They can become more strategic e-discovery advisors by working with counsel over the full lifecycle of a case, providing higher-value (and, by the way, more interesting and intellectually challenging) consulting services to help incrementally adjust and adapt the course of e-discovery. As Ralph puts it: “…Trial lawyers should accept that specialists in the field of e-discovery are a necessary evil. If an e-discovery specialist knows the field, they can save you money and take you out of the e-discovery morass faster and more reliably than a dozen new rules. The world today is too complex for one man or woman to do it all.”
• The Value of Defensibility: Many of you likely winced at the term “high likelihood” in the previous point. “Sacrilege!” you cried. “I demand certainty!” First, go back and re-read the first point about the Myth of Perfection. Then, consider that a better way forward may be an approach to e-discovery that involves more aggressive culling early in the process to focus on the most important documents first, more iterations to adapt to changing facts and circumstances, and, all along the way, a complete audit trail that provides defensibility in the event that any aspect of the process is ever questioned. Such defensibility would include specific documentation about the culling decisions that were made, down to the keyword and “sub-keyword” (i.e. wildcard expansion) level, so all the cards are on the table for everyone to see.  The value of defensibility when performing aggressive culling is enormous, in that it adds an additional measure of safety and trust to the process, minimizing the amount of doubt and second-guessing that so often plagues e-discovery negotiations.

By coming to terms with the fundamental imperfections of the e-discovery process and embracing the promise of lower costs and the agility and responsiveness that can be gained with a more iterative approach, everyone stands to gain from the safe and controlled adoption of aggressive culling – yes, even the vendors (at least the smart ones) and their ever-present pecuniary interests.

Yesterday, George Socha and Tom Gelbmann published summary results for their 2008 EDD survey. George and Tom gathered self-reported data from 85 e-discovery service providers and 40 e-discovery software companies. To help vendors resist the temptation to “exaggerate” their accomplishments, they then cross-referenced the responses against independent surveys submitted by 29 law firms and 19 corporations, and applied a healthy dose of their own good judgment. The outcome, which they will publish in-full next month, is a great snapshot of the industry, and probably the most objective ranking of e-discovery vendors that you can find.

By comparing this year’s results to the 2007 survey, you get a sense for how much has changed in the e-discovery world over the past 12 months:

Top E-Discovery Software Companies

Note: arrows show change to rankings from last year’s Socha-Gelbmann Survey

Autonomy and Clearwell move up to the Top 5, overtaking Attenex and CT Summation which slip back to the second tier. There are also 3 new names ranked 6 through 10 (Epiq, iConect and Symantec) who displace Cataphora, Doculex, ISYS, and Oracle, none of whom even make it into the top 15. In other words, 70% of the rankings have changed since last year.

If a litigation support manager were to focus only on the Top 5 in making her e-discovery software decision, she would have a choice of some very different solutions. Autonomy positions itself as a high-end (expensive) platform for corporations, while Lexis offers a comprehensive toolset for law firms. Guidance and Clearwell are complementary in that both provide best-of-breed solutions for parts of the EDRM model: Guidance is the leader in collection and preservation, while Clearwell is the leader in processing, analysis and review. Finally, FTI takes a services-based approach which centers around RingTail, its hosted review application.

Looking lower down the list, there were some other interesting results, primarily around which companies were NOT ranked. Kazeon made it into the third tier (ranked 11-15) whereas StoredIQ, its main competitor, did not. Nor did Recommind break into the rankings, despite making a major push into e-discovery from knowledge management over the past year. But the most striking absentees are PSS Systems and Exterro, which have pioneered litigation hold management for Fortune 100 companies. I can only guess that they cover too much of niche market to warrant inclusion in an industry-wide report.

Top E-Discovery Service Providers

In contrast to the world of software, e-discovery services saw much less movement in this year’s rankings:

Note: arrows show change to rankings from last year’s Socha-Gelbmann Survey

There was only one change to the top 5: Fios moved up, displacing Guidance which plummeted 10-20 places down to a 16-25 ranking. In addition, there were two new players in the top 10, Epiq and Huron, who edged out Electronic Evidence Discovery and Ernst & Young.

Conclusion

Changes to the software rankings reflect broader changes in the e-discovery market. As e-discovery has moved in-house, corporations have become a major driver of purchase decisions that were previously left to law firms. Many software companies, such as Attenex, have struggled to make this transition, while others, such as Clearwell, have capitalized on it. There has been no such change in the service provider world and, as a result, the rankings are relatively stable.

It will be interesting to see what happens next year. Every other software space is dominated by a small number of players, like Oracle for databases or VMWare for virtualization. If the same is true for e-discovery, then we can expect many fewer changes to the software rankings in future surveys as the leaders pull away from the pack.

Most science fiction visions of the distant future seem to contain a rather singular fear: that the human race will be taken over by computers.  Think “Terminator” series, preferably without the naked Arnold Schwarzenegger visual.  Regardless of whether this vision fills you with trepidation or excitement there is a very real possibility that we’re on the cusp of computers taking over a significant e-discovery task for attorneys.

For past several decades, attorneys have had to manually review information for relevancy and privilege in response to the e-discovery process.  Quoting from Information Inflation: Can the Legal System Adapt? by George Paul and Jason Baron, this task has always been viewed as sacrosanct “because of ‘death penalty’ waiver doctrine that evolved long ago when information was still manageable.”

Like so many industries, the legal profession has attempted to grapple with the transformation that the digital revolution has brought to the forefront.  The latest revisions to the Federal Rule of Civil Procedure (FRCP) is the most obvious case in point.  And yet, electronically stored information (ESI) is proving difficult to fit into traditional, even remodeled, paradigms.  Even ignoring (for the moment) the proliferation of novel data types (i.e., blog content, voice over IP or VOIP, webmail, text messaging, web services, etc.) the amount of data that attorneys are being required to review has reached a tipping point of review feasibility.

Back in the day, information was viewed in terms banker boxes of information, and even in the most document intensive discovery matters this measuring stick belied the belief that armies of attorneys could conceivably conquer the massive document review problem.  But now, we often see clients that process routine matters containing terabytes of information.  Most of us in the e-discovery space have become numbed to the abstract nomenclature of megabytes, gigabytes, terabytesⁱ, petabytesⁱⁱ, and in the process we may have failed to realize that we have moved well beyond the scale of information that can be reasonably attacked with even the largest armada of contract attorneys (assuming that the client could conceivably bear the astronomical costs).

“At the petabyte scale, information is not a matter of simple three- and four-dimensional taxonomy and order but of dimensionally agnostic statistics. It calls for an entirely different approach, one that requires us to lose the tether of data as something that can be visualized in its totality. It forces us to view data mathematically first and establish a context for it later.”ⁱⁱⁱ

I’m certainly not the first to point out that this tipping point is coming, but now we are really starting to see early adopters respond to this sea change. In their linked article above, George Paul and Jason Baron state “It is no exaggeration to say that litigation, as we have known it, is threatened by information’s new hyper-flow. The amount of electronically stored information relevant to a case is already a stress point in litigation.  […]  Litigators can no longer depend on manual review alone….”

Up until now, attorneys and the clients that are footing the bill have had to make a Hobson’s choice:  either “force parties to continue hugely expensive privilege reviews, or to forego the attorney-client privilege or work-product privilege altogether.”   But, now it appears that another way is evolving.

The following lays out a scenario where a non-manual review methodology may make sense.  ***Please note: this approach is not without risk.  At this moment in time neither clawback provisions, the potential adoption of Evidence Rule 502 nor any other know prophylactic measure can completely insulate a producing party from the unforeseen consequences of an inadvertent disclosure.  But, as they say, desperate times call for desperate measures….

Step one: Evaluate the Environment

The following factors represent some of the elements that should be taken into consideration prior to skipping the normal, human based review steps that are seen in most e-discovery matters.

1. Large data set.  This may sound a bit obvious, but a non-manual approach is best suited for large, unwieldy data sets.  The corpus doesn’t need to be in the terabytes, but the data set should be evaluated in term of discovery processing costs and attorney review estimates.
2. Short Production Timelines.  Once the above calculations are conducted, the next step is to determine if a human based review could even conceivably be conducted in the given time frame.  In many instances, an eyes-on review process just won’t be feasible since there won’t be enough bodies to throw at the problem.
3. Next Gen “PAR” Tools.  In order to pull this “review-less” review process off, both safely and quickly, the responding party needs to have access to fast, robust processing, analysis and review (“PAR”) tools.  Certainly, it’s possible to have this scenario work with an e-discovery service provider, if they have the capability.
4. Relatively Small Amount in Controversy.  For the time being, this approach should not be considered for any “bet the company” litigation, nor anything with significant downside risk (governmental inquiries, punitive damages, class actions, 2nd requests, etc.).  Yet, for many standard commercial lawsuits, corporate investigations, HR claims, etc. this review-less approach may be worth considering.
5. Ability to Use a Clawback Provision.  Entering into a clawback provision with the opposition is mandatory in this methodology since the chances of an inadvertent production are statistically ever-present.  Yet, until Evidence Rule 502 is resolved, there will always be a risk that the clawback won’t be enforceable against 3rd parties.
6. Non-governmental Production.  Most information in governmental productions becomes part of the public record, meaning that a clawback isn’t going to be feasible.  Here, trade secret information, personally identifiably data and the like would be disastrous if pushed out into the public domain.

Step two: Perform a Risk/Benefit Analysis

Next, take all the above factors into consideration and determine if the risks (of inadvertent production, the clawback being ineffective, etc.) are worth the benefits (reduced costs, lower attorney review fees, ability to meet deadlines, etc.).

Sure this is hard work, but the alternative (manual review) is more ephemeral than realistic.

[In my next post, I’ll address the tactical steps to conduct a review-less review process.  Stay tuned……]

ⁱ One terabyte is generally estimated to contain 75 million pages and could conceivably cost $18,750,000 to review.  Anne Kershaw, Automated Document Review Proves Its Reliability, 5 DIGITAL DISCOVERY & E-EVIDENCE 11 (2005).

ⁱⁱ According to Wired, we’re now in the “Petabyte Age” where that amount of data is processed by Google’s servers every 72 minutes.

ⁱⁱⁱ Wired article, above.

Hello from Los Angeles, where the weather’s fine and summer’s in full swing! Accordingly, a few of us in the legal technology community spent the night before LegalTech enjoying a Dodger’s game hosted by LTN editor-in-chief and rabid Yankees fan Monica Bay (outfitted in full Yankee regalia for the occasion). So as to not incur Monica’s wrath, I left my Red Sox cap at home.

At the game, I happened to sit next to a colleague from another vendor who mentioned that her firm is about to celebrate twenty years in e-discovery.

Twenty years! What a remarkable milestone for any company. It got me wondering about how much technology has evolved over that time period, and raised an interesting question to noodle over between innings: With all of the investment and innovation in the e-discovery space, who’s actually winning the e-discovery tug of war, twenty years in?

What is the e-discovery tug of war, you ask? Let’s start with the scene in 1988.

On one side, the documents: They stared at you from across the mud puddle — hundreds or even thousands of boxes stacked one of top of another, hauled out from a warehouse where they’d spent their days, against their will, in windowless solitude, ready for battle. They were ticked.

And on the other side, you: With your new IBM PS/2 Model 80 (the best money could buy: 640×480 VGA color screen, 16mhz 386 processor, 80MB hard drive), flatbed scanner, and some new DOS-based database program called “Concordance.” To add insult to injury, Starbucks hadn’t even really gone national yet, so you were probably stuck with a jar of instant coffee to try to stay awake.

You didn’t stand a chance.

From then until now, two different dynamics have played against each other, pulling the flag back and forth over the dividing line:

1. On one side, the explosive growth of electronic documents has been truly mind-boggling. From a baseline of close to zero in 1988 (WordPerfect 5.1 wasn’t introduced until 1989), today essentially every single business document is created, transmitted, and stored electronically.
2. On the other side, technology innovators in the e-discovery space have used creativity and a large dose of Moore’s Law to store, process, and search electronic documents with ever-increasing speed and efficiency.

During the seventh inning stretch, with the Dodgers holding a commanding lead over the White Sox, I thought: Maybe technology is about to win.

Here’s the argument: Assuming that the creation of document content will still largely be human-driven, now that most every legally significant class of communication is being created and managed on-line, growth of e-discovery-relevant data volumes may quickly move from being exponential (when everything was “going digital”) to a rate driven more by productivity improvements and economic growth. Improvements in processing, search, and analysis of documents, however, will continue to improve at a Moore’s Law pace for the foreseeable future, presumably making it fairly trivial for advanced e-discovery technologies to outmuscle their longtime adversary.

Google shows some evidence of this victory of technology over data. Remember that just a few years back, search engines frequently trumpeted how much of the Internet they were able to index – and it was far from the whole thing. Today, that’s largely a solved problem. It’s simply amazing how quickly Google’s index ingests new data, often in what seems like a matter of minutes. In fact, I dare say that by the time you read this post, you’ll be able to perform a Google search on some of its content and have it come up front-and-center in your search results. Amazing.

What does this mean for e-discovery? The best e-discovery technologies will change to solve challenges that are far more strategic in nature. Instead of focusing on how fast and effectively they can process documents, or how quickly they can allow attorneys to review them, they’ll provide powerful capabilities for addressing some of the most important e-discovery problems that inside and outside counsel face, such as:

• How do I craft robust, defensible search strategies for my cases while minimizing e-discovery costs?
• How can I standardize a repeatable, high-quality discovery process that’s executed consistently across my organization?
• How can my organization become more proactive in identifying potential legal risks and liabilities based on our company’s “legal history”?

I’m sure you can come up with a number of others. What do you think – is the war against documents over, and e-discovery ready to move to a new phase? Or are there still many more battles to be fought?

I knew the rumors about FTI’s acquisition of Attenex were true when we received a call in early May. It was from a large Attenex partner, who said: “We need to switch out Attenex no later than the end of June.” There have been many similar calls since then; as one service provider told us the other day, “I cannot imagine any Attenex partner not looking for other alternatives.”

The reason is obvious: Attenex Advantage partners – such as BDO Seidman, Deloitte & Touche, DiscoverReady, DTI Global Document Technologies, Forensic Consulting Solutions, Navigant Consulting, SPI Litigation Direct, VMAX Consulting and 10-15 others – compete directly with FTI. If they must now rely on FTI for their Attenex technology, it puts them at a massive disadvantage when competing for business. FTI could easily undercut them on price, since it no longer pays usage fees to Attenex; or, FTI could promise additional features in the Attenex product that its competition cannot match. It could certainly claim to be the world’s greatest Attenex experts (after all, who knows Attenex better than Attenex itself?). Perhaps worst of all, every time an Attenex Advantage partner works on a client using the Attenex product, it has to inform FTI at the end of the month so that it may be invoiced for usage, thus enabling FTI to track its client engagements.

Yes, FTI will likely make all sorts of promises about “Chinese Walls” and continuing to support other Attenex Advantage partners. But those promises are impossible to enforce (ask the editor of the Wall Street Journal!), and FTI could change its mind at any time, leaving service providers which depend on Attenex in the lurch. I don’t know anyone who would take that risk.

So the single greatest impact of the FTI-Attenex deal is that every other “Attenex Dis-Advantaged” partner needs to find an alternative e-discovery solution – and fast!

A second impact can be surmised from the market’s reaction to the deal. As the chart shows, FTI’s stock immediately popped 10%, adding about $300 million to its market capitalization. Partly, that’s because FTI negotiated such a great deal. It purchased Attenex for only 3.5x revenue, in a transaction that is neutral/accretive to earnings. Partly, it’s because FTI has a great track record with software acquisitions. For example, it acquired RingTail (a hosted review platform) in 2005 for $34 million, and today RingTail generates over 3 times that amount in revenue. Personally speaking, I have always been impressed by FTI’s team which is without doubt among the best in the business.

The interesting thing in this acquisition, unlike many others, is that the value will not come from selling the acquired product, since FTI is doing that already. In fact, FTI has been selling Attenex for years, and has even integrated it with RingTail. Rather, my guess is that FTI will use Attenex to grow its consulting business in several ways, such as:

1. By convincing clients to switch consulting firms, not technology. Let’s take a hypothetical example and say Ford is presently using Attenex through LECG. If LECG now uses a different e-discovery solution, then Ford is left with a choice: keep LECG and lose Attenex, or change from LECG to FTI and keep Attenex. Ford’s decision will, of course, be driven by many factors, and it will be interesting to see what happens in scenarios like this.
2. By winning a greater share of e-discovery dollars. Today, companies primarily engage FTI on life-threatening issues: stock option investigations, merger 2nd requests from the DoJ/FTC, and so on. By leveraging Attenex’s brand, FTI might extend that to also cover everyday e-discovery issues like run-of-the-mill litigation and regulatory inquiries.
3. By building an e-discovery footprint behind the enterprise firewall. Attenex has struggled to sell its product for on-premise deployment at enterprise customers in the past. Its website has no customer logos and I’m only aware of a couple of installations, neither of which is publicly reference-able. FTI’s strong consulting business might help change that and make it easier for enterprises to adopt Attenex.

I am sure there are other ways for FTI to get value from the deal that I am not smart enough to think of. My point is that, given FTI’s leadership talent and the scope of its consulting engagements, there are lots of things FTI could do with Attenex to create shareholder value far in excess of the acquisition price. That’s why I believe the second impact of the deal is that it will have a positive impact on FTI’s core business.