e-discovery 2.0

Recently, I moderated a panel at the Masters Conference with John Loveland, Sonya Thornton, and Bruce Markowitz entitled: How Defensible is Your E-Discovery Process? (Click here to read a summary of the panel.) It was well attended, and I think that the draw (aside from the esteemed panel) was that this topic still remains very vexing for most practitioners.

Initially, we started at ground zero with the notion that defensibility is in most instances equated with the “reasonableness” standard, which is pervasive across many areas of the EDRM spectrum… from preservation to production.  Instances include:

• Preservation — “[a]s soon as a potential claim is . . . identified, a party is under a duty to preserve evidence which it knows, or reasonably should know, is relevant to the future litigation.”
• FRE 502 (b) – the disclosure does not operate as a waiver in a Federal or State proceeding if the (2) the holder of the privilege or protection took reasonable steps to prevent disclosure;
• General Privilege Waiver — In SEC v. Badian, 2009 WL 222783 (S.D.N.Y. Jan. 26, 2009)(link), “there is no basis … to conclude that there were precautions [to prevent the disclosure], let alone whether they were reasonable.”
• FRCP 37(e) — Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.

While the foregoing isn’t exhaustive it does highlight the persistent nature of the reasonableness standard as practitioners seek a defensibility sanctuary.  The good news is that the law doesn’t require perfection and there are also a number of ways to obtain reasonable defensibility:

• Demonstrable acceptance by the opposition – here the notion is that collaboration with the opposition allows the parties to comfortably move ahead with their discovery process and even if it’s not objectively reasonable, the parties consent to the protocol will in most instances carry an imprimatur of reasonableness.
• Auditing / process transparency.  Similar to the first bullet, auditing the process and giving the opposition visibility into the process steps will often make it hard for them to lodge successful downstream challenges.
• Adherence to Local Rules (See 7th Circuit Pilot Program) or judicial order.  Another avenue than can provide some degree of safety is compliance with a discovery protocol mandated by local rules, although that compliance may ultimately be challenged.
• Statistical confidence intervals / sampling – the use of statistics as a way to bolster process defensibility is starting to come to maturity and in the future I think that detailed precision, recall and other statistical indicates will play a large role in e-discovery defensibility.

None of these steps can be guaranteed to really get you off the hook from a rapid opposing party calling foul, but using them in a “belt and suspenders” fashion will certainly help buttress any discovery process.

For more illumination on the topic please see the following video of my interview with John Loveland, who’s waxing poetically about discovery defensibility.

On of August 14, 2009, the California Judicial Counsel amended their Rules of Court to augment discussion of electronic discovery issues during the meet and confer process.

Rule of Court 3.724 was amended to require discussion of “Any issues relating to the discovery of electronically stored information” no later than 30 calendar days before the date set for the initial case management conference.  The broad language (i.e., “any”) was augmented by eight specific categories that must be expressly discussed:

(A) Issues relating to the preservation of discoverable electronically stored information;

(B) The form or forms in which information will be produced;

(C) The time within which the information will be produced;

(D) The scope of discovery of the information;

(E) The method for asserting or preserving claims of privilege or attorney work product, including whether such claims may be asserted after production;

(F) The method for asserting or preserving the confidentiality, privacy, trade secrets, or proprietary status of information relating to a party or person not a party to the civil proceedings;

(G) How the cost of production of electronically stored information is to be allocated among the parties;

(H) Any other issues relating to the discovery of electronically stored information, including developing a proposed plan relating to the discovery of the information;

Many of these issues track FRCP language (including forms of production, preservation, privilege issues, etc.).  However, section G seems somewhat novel given the historical “American Rule” where the producing party is required to bear all necessary costs of production.

Curiously missing, in comparison with FRCP 26 B(2)(b), is the need to discuss the handling of “inaccessible” ESI, although this could easily be subsumed in the “any other issues” language of section H.  Also missing is a discussion about proposed searching and/culling protocols (aka “keyword negotiations”) which are often part of the core meet and confer topics in Federal court.

Nevertheless, the scope is broad enough to require *a* discussion of all likely relevant electronic discovery issues, which was often lacking historically.  Once that discussion starts, reasonably savvy counsel should be able to flesh out most of the significant issues.  And, given this broad language a judge would presumably give them a hard time for any material omissions.

We’ve devoted a number of posts to the topic of ECA, ranging from a quest to define the acronym, all the way to the cost savings benefits of the ECA approach.  And, while there seems to be relative unanimity around the beneficial aspects of ECA, there still seem to be a number of myths and misconceptions.  So, ala the Mythbusters, we’ll run these myths through the gauntlet to see which survive scrutiny.

Myth #1: ECA Is Only Valuable if Performed “Early”

Certainly, ECA is best leveraged and will be most valuable when performed at the outset of litigation.  As has been stated before, it has value on two primary fronts, the first being the ability to scope electronic discovery (both in terms of cost and timelines).  The next is the more traditional value proposition where ECA is used to get an understanding of the case facts to enable the strategic decision making process.

As such, there are scenarios where an ECA methodology would still generate value even if performed “later” in the mater.  For instance, with bifurcated, class action litigation initial discovery about the class may occur months before discovery on the merits.  In this instance using a later ECA approach would still make sense since discovery about the case facts may not have been possible earlier on.  Similarly, “late” ECA may still hold value when new parties or claims are added to an existing lawsuit, or when there’s a substantial change in case direction, data, or custodians.

Myth #2: ECA Is Only Performed With Technology

Sure, enterprise grade ECA products  are an important part of the mix, but the products won’t perform an ECA by themselves.  There’s just too much subjective decision making involved in the assessment process.   Therefore, the right people are critically important — not only in terms of experience performing this analytical work, but also in their ability to capably testify about the underlying decision making process.  It’s also important to be able to follow a repeatable and defensible processes to show that the “recipe” used was aligned with industry best practices and wasn’t ginned up for a particular engagement.

Myth #3: ECA Only Works With Large ESI Volumes

Yes, ECA methodologies makes a lot of sense for large, bet-the-company matters because even modest savings when processing, analyzing and reviewing terabytes will easily approach six to seven figures.  However, smaller matters will still benefit from better budgetary insights that facilitate informed matter management.  And, in a way there’s almost more benefit from being able to quickly evaluate (fight/settle) smaller suits since the transactional costs are so high relative to the amount in controversy.  In both scenarios it’s important to view objective case data to prepare for meet & confer conferences.

Myth #4: Clients Don’t Want To Pay for ECAs

Many end clients (corporate counsel typically) have a similar litigation mindset:  i.e., the desire to avoid costs for as long as possible.  While avoiding early costs makes some sense on its face, the fact is that spending a small amount of money early on (for budgetary and case assessment purposes) will in most instances reduce the overall litigation budget.  It’s the classic, “you can pay me now, or pay me later” situation.

Counsel must understand that while some costs are incurred early in the process the benefits are crystal clear: i.e., determining customized case strategies early in the matter to decide whether to fight or settle.  Similarly, corporate clients must recognize that the benefits outweigh the costs and require their litigation counsel to include this process in every significant matter.

This illustration highlights how an initial ECA investment actually pays for itself over the life of the litigation.

Myth #5: ECAs Begin when the Complaint is Filed

Many newbie ECA practitioners may think that the timing for an ECA approach would start when the complaint is filed.  And, while this isn’t patently ridiculous, I think the better approach is to begin the clock at the time litigation becomes “reasonably likely” — versus later dates such as when the complaint is filed or when discovery is propounded.  This trigger is also the same for trigger preservation obligations and a host of interrelated activities such as ESI “identification,” which makes the matter kick-off more synchronized.

For more information about ECA, watch a recording of our recent webinar — E-Discovery MythBusters: Debunking Common Myths About Early Case Assessment.

Earlier today, Clearwell announced Version 5.0 of its e-discovery platform. Unlike prior versions which focused on processing, early case analysis, and first-pass review, this release extends Clearwell’s capabilities in two directions: upstream, by adding pre-processing; and downstream, by adding document-by-document review and production. I wanted to say a few words about what motivated these changes, and why the new release greatly increases Clearwell’s value to enterprises, government agencies, law firms, and litigation support service providers.

Over the past year, the benefits of early case analysis and first pass review have driven hundreds of companies to adopt Clearwell. They have saved huge amounts of money and time, and often become evangelists for the product. But despite that, we continually hear that the overall e-discovery process remains expensive, unpredictable, and risky. When we investigated why, we found the problem lies less in the features of the products being used than in the number of products used.

Once data is collected, a typical e-discovery process today may involve as many 4 different tools: one for filtering by custodians or date range, another for de-duplication and keyword search, another for load file creation, and yet another for review and production. Each time data moves between these tools, and there’s a handoff from one to another, there’s the risk that document counts do not tie out, data does not convert correctly, or any of a hundred other things go wrong. This risk is magnified by the fact that e-discovery is highly iterative: custodians are often added or keywords changed as new information comes to light, forcing people to redo many steps of the process. As a result, timelines are unpredictable and it’s hard to stick to a budget, even with extensive project management which itself is not cheap.

Since the problem lies in the handoffs between different products, it’s impossible to solve this problem by making any one part of the process better. The only solution is to have a single product that can manage collected data from soup (filtering / pre-processing) to nuts (production). Prior to today’s announcement, that product did not exist: there was no single, integrated product that could do everything from process data to review and produce it. And that, in summary, is why Clearwell is releasing Version 5.0.

With Clearwell’s new product, there are no handoffs, no uncertainty about how long it will take to export out of one tool and into another. There’s no need to cobble together a string of different products or train lawyers on multiple different interfaces and workflows. As a result, the risks of cost overruns or missed deadlines are greatly reduced.

To our mind, this is just part of a natural evolutionary process that affects many markets, not just e-discovery. Who wants to carry a Palm Pilot, iPod, and a mobile phone when you can carry a single device like the iPhone? Who wants a cable receiver and a TiVo when you can get both in a single set-top box?  As markets mature, there develops a logical package of functionality that customers prefer to buy from a single, integrated provider.

You can sign up for a product demonstration at our website, or come see the product at ILTA next week (Booth 606). Take a look – and let us know what you think.

Maybe this will show my age, but I’ve been around the electronic discovery business since the days when pricing was both simple and very expensive. Terabytes were at the mythical high-end of the spectrum and gigabytes of “e-docs” (not “ESI”) cost $3,000 – $4,000 to process. Understandably (and fortunately for most), pricing models have evolved, thanks in part to more educated consumers and initiatives such as Sedona’s RFP + Vendor Panel.

Leaving the WABAC machine and moving into present times, we’ve starting to see some variance from traditional pricing models that primarily focus on data “into” the processing machine. More and more companies (such as Kroll Ontrack) are moving to models that price on data “out” of the process. Since that’s a bit nebulous, an example might illustrate:

Traditionally, in a somewhat simplified fashion, an electronic discovery project would be priced by the amount of data in the initial corpus (say 100 gigabytes) and processing would be priced at $500 a gigabyte (for round numbers purposes). Leaving out the sometimes significant caveat that the 100 gigabytes would likely increase due to expansion of compressed files, this would mean that the bulk of the project expenses would be $50,000 ($500 x 100), plus relatively nominal costs for monthly hosting and user access rights.

At the end of the day, after elimination of system files, deduplication and application of search terms (reducing the initial corpus by say 70% collectively) there would be 30 gigabytes remaining for hosting and possible production, both of which are most often priced separately.

Given rampant commoditization there’s an arms race underway among certain service providers where they’re now changing the above model to give away initial processing as a loss leader – pricing only on the data that comes out the end of the processing/search step. In this approach the above workflow would largely stay the same, but the vendor would charge a higher rate for what ultimately is hosted on the back-end. If this back-end fee was $2,000 per resulting gigabyte and the same 30 gigabytes was seen out the back end, then the customer would pay $60,000 for the project. But, if the deduplication, searching, culling, etc. was more effective (at say 80%) then the resulting 20 gigabytes would only cost $40,000.

The question then, as Clint Eastwood would put it, is: “Do you feel lucky?” This pricing model forces attorneys and litigation support managers to guesstimate what culling, search, and de-duplication rates they’ll likely get on the data corpus. Guess right and they save the end client money, guess wrong and they’re way over budget.

The dynamics of this purchasing decision are a bit atypical because the buyer (usually counsel) doesn’t pay the bills, so the decision can often be more vexing than most. When a direct consumer gambles on pricing things will ideally balance out over time, with money being saved in some instances and some being overspent in others. But, when the buyer doesn’t pay the bills the motivation is less clear.

Thoughts run to Maslow’s hierarchy of needs to determine which pricing model is ultimately more compelling: (a) price certainty/adherence to budget, or (b) cost variability and the opportunity to save money. While it’s never good to understate the upside of saving money (Esteem), I think ultimately there’s a more fundamental need (Safety) to stay within budget and avoid the painful (sometimes client imperiling) call to discuss how a given e-discovery project has gone way over budget.

This calculation is made further vexing because it not only pits the purchasing party against unknown data culling/searching rates, but it also puts the vendor in an ethical bind where they make less money if they’re supremely effective at data reduction, whereas if they’re either intentionally or accidentally beneficiaries of relatively little data reduction then they stand to make a ton of upside.

It’s like you went to Vegas to gamble your kid’s college fund and on top of the already questionable house odds you knew that the dealer stood to profit by your losses. So, as for myself, no, I don’t feel lucky.

Over the past 4 years, I have had hundreds of conversations with corporate counsel and “legal IT”, meaning technical folks charged with supporting the legal team. More and more of them are looking to lower their costs by bringing e-discovery in-house. But as they work through that process, there’s one question that consistently comes up, even today – namely, “When [insert name of software company] says they “do” e-discovery, what exactly does that mean?”

There has been progress towards answering this question, thanks mainly to the analyst community. George Socha and Tom Gelbmann’s EDRM framework has been immensely helpful in breaking down electronic discovery into its component steps. Other analysts, like Debra Logan at Gartner, were quick to embrace the framework, prompting every software provider to follow suit. As a result, there is today a common language that everyone uses to describe the e-discovery process.

The Electronic Discovery Reference Model (EDRM) breaks down the e-discovery process into a series of steps. Companies looking to buy e-discovery software to lower costs typically map different software products to each of these steps, to make sure that they cover the entire process.

But having a universally-agreed framework is only half the answer. To eliminate customer confusion, there also needs to be agreement on how different software products fit into the framework. This is especially important since there is no single, end-to-end solution for e-discovery which covers all aspects of EDRM. So customers are forced to think about how different software solutions fit together. And that is where things begin to fall apart.

Many software vendors feel it is advantageous to claim that they do everything, even though they do not. Customers are rightly suspicious of those claims, and so press vendors to provide more detailed information – hence the question, “when you say you do e-discovery, what exactly does that mean?”

In light of that, how can litigation support teams, corporate counsel, or legal IT people figure out which e-discovery solution best meets their needs? From observing this decision-making process hundreds of times, I have found 3 simple steps are incredibly helpful.

Step 1: Read the analyst reports

Two reports in particular make for required reading. One is Gartner’s MarketScope Report, which is available for free at certain sites; the other is the 451Group’s recent e-discovery report, which is summarized in a publicly available presentation. The helpful thing about the 451 Group’s report is that it tells you which software companies do which parts of the EDRM process. You do have to buy the report to get the full picture (it’s well worth it!), but the publicly available presentation will give you a flavor for their analyis, and I have drawn from that presentation in the figure below:

Analyst firms like the 451 Group map software vendors to the EDRM framework according to what they actually do, which is often different from what software vendors claim they do.

The 451 Group’s analysis highlights several important points. First, it shows that there is no single end-to-end solution. Even the products of giants like EMC (SourceOne), HP (IAP), and IBM (CommonStore) only solve one piece of the puzzle, information management. Second, it shows that customers have choices at each stage of the EDRM process. For example, to solve the problem of identification, collection, and preservation of electronic information, customers can choose from solutions as diverse as Guidance EnCase (forensic collection), Index Engines (back-up tapes) and Mimosa NearPoint (email archive). Third, it provides an independent assessment of what vendors do, as opposed to what they may claim. For example, Kazeon claims analysis and review capabilities, whereas the report shows its product does identification, collection, and preservation; Recommind claims its Axcelerate eDiscovery and MindServer products do processing, whereas the report finds that they do not.

Step 2: Evaluate the products prior to purchase

Just as anyone would test-drive a car prior to purchase, it’s critical to test-drive e-discovery software. Any vendor should be willing to provide their software free of charge for an evaluation on-premise. The most effective evaluations are when the customer uses the product themselves, either on a live case or test data. This is far preferable to just sending the data to the vendor who then loads it into their system, as in that scenario there are too many opportunities for the vendor to hide their product’s shortcomings.

Step 3: Check references carefully

The trick with references is to insist on relevant references. It’s not good enough for the vendor to dredge up some random person who says nice things; or even a credible knowledgeable person who is using the product in a completely different way. For example, if a company is happy with Autonomy’s IDOL for enterprise search, that does not tell you much about what Autonomy might be like for e-discovery. What really counts are references from other customers who are using the product for the same application that you are.

All this can sound like a lot of work, but I have seen people go through the process in as little as a month, and be much happier for it. A little work up front can save a lot of time (and heart-ache!) later on.

Cheesy Successories posters aside (for an alternative take, go here), the need to work together is much more than just a cliché in today’s environment.

In its recent brief on the five major trends that will shape business technology in 2009, leading management consultancy McKinsey and Company noted one trend in particular which highlights the urgent need for an organization’s IT and legal groups to forge better, faster, and more efficient ways of collaborating on electronic discovery issues:

Regulators demand more from IT

Government scrutiny of business will intensify in many developed countries. Already, in the United States, the Office of the Comptroller of the Currency weighs in on the resiliency of banking systems, the Food and Drug Administration (FDA) requires that many pharmaceutical systems be “validated,” and Sarbanes-Oxley drives decisions about accounting systems in every industry. In the future, policy makers and regulators will probably demand that IT systems capture more and better data in order to gain greater insight into and control over how banks manage risk, pharma companies manage drugs, and industrial companies affect the environment. Government officials also will monitor many legal and business rules more closely to ensure compliance with mandates. Successful CIOs should enhance their relationships with internal legal and corporate-affairs teams and be prepared to engage productively with regulators. They will need to seek solutions that meet government mandates at manageable cost and with minimal disruption.

- McKinsey Quarterly, February 2009

The current economic environment is creating a “Double Whammy” within almost every enterprise that has ongoing or pending electronic discovery issues (and are there many organizations left out there that don’t?):

• As the McKinsey article notes, regulators will increasingly be demanding more from IT as government scrutiny of business intensifies. Just look at the just-launched recovery.gov site to see the level of transparency and accountability that the government is aiming for with regard to the stimulus package. The bailout will not directly affect every business, but there is a new sheriff in town who will likely set the tone across the entire business landscape.
• At the same time, there is relentless pressure on controlling costs. When times are tough, dollars that can be saved on the expense side are much more valuable that top-line revenue, since 100% of every dollar of cost savings goes directly to the bottom line.

The net-net: Enterprises will be forced to do more, with less.

How? With regard to electronic discovery, there is a lot of low-hanging fruit to be picked in the area of IT and legal cooperation:

• In-house legal teams should meet with IT (if they aren’t already) to help them better understand the nature of electronic discovery, particularly as it applies to the more “upstream” parts of the process (specifically, identification, preservation, and collection) which IT tends to be more responsible for. Through a better understanding of the nature of electronic discovery, IT can improve its ability find the right documents, avoiding over-collection and reducing downstream processing costs. In addition, new electronic discovery technologies are making it increasingly easy for legal to own more of the process, reducing the electronic discovery burden on IT.
• Conversely, IT should coordinate with in-house legal teams to provide advice and mentoring as legal seeks to bring e-discovery platforms in-house to assist with early case assessment, search, culling, and analysis. To many legal teams, bringing e-discovery in-house may seem like a daunting proposition, but enterprise software has been around for a long time, and learning from IT’s experiences can make the process far less intimidating.

Yes, regulators are going to be far more demanding in the future than they have been in the past. But some simple collaboration and coordination between IT and legal will go a long way toward lightening the regulatory burden, especially as it pertains to electronic discovery.

In today’s economy, controlling electronic discovery costs has taken on a new urgency.  Because the financials of many companies have deteriorated so quickly, there is great interest in finding methods to reduce any costs in the short-term.  As  a result, anyone in a company’s IT or legal department that comes up with a plan to substantially reduce their company’s electronic discovery costs in the short-term is likely to become a hero in their company.  So, what’s the best way to reduce electronic discovery costs quickly?

A natural first step is to decide where to focus.  Which electronic discovery activities are the most costly today?  Which have the greatest room for cost reductions?  The EDRM model serves as a good guide for answering such questions by breaking electronic discovery activities into Information Management, Identification, Collection, Preservation, Processing, Analysis, Review, Production and Presentation.  One thing I have noticed when interacting with enterprises is that the IT and legal departments tend to focus on different stages within electronic discovery based on their perspective.  IT managers naturally concentrate on the information management, identification, collection and preservation activities because these are the activities in which they are most involved.  Similarly, legal managers naturally look to preservation, processing, production and review.

Given these different perspectives, it’s important to take an objective approach to calculating electronic discovery costs.  Doing so is not that easy.  Costs can vary significantly depending on each company, the nature of the case, nature of the data, which vendors/technologies that are used and a variety of other factors.  Costs also come in many different forms: direct hard dollar costs, such as spending on legal and electronic discovery fees delivered by third parties; indirect hard dollar costs, such as time spent by company employees; and soft dollar costs, such as increased risk that could lead to adverse judgments and sanctions.  Finally, electronic discovery costs are often buried across both legal operating budgets and IT budgets making it hard to separate these costs from the costs of other activities.

Undertaking an internal analysis to understand your company’s electronic discovery costs is a valuable activity if you want to better control these costs.  However, while costs do vary between companies, most companies will find that the same activities contribute the most direct hard dollar costs and that these are the costs that are easiest to control in the short-term.  To demonstrate this, let’s walk through a generic cost analysis of a typical case.  Fortunately, we don’t have to start from scratch in doing this.  Leonard Deutchman, an author of several excellent electronic discovery articles, has already done most of the work in a May 2007 article, “Get Ready for the Rules Changes, Part VIII“.  In this article, Mr. Deutchman walks the reader through a hypothetical litigation between an Investor and a Venture Capital firm.  He describes the typical electronic discovery activities and calculates the direct hard dollar costs for these activities including:

• Collection: Mr. Deutchman calculates that it costs $10k to collect 400GB from 8 hard drives and the data of 8 custodians on file and email servers using an outside vendor (doing it in-house can be less expensive).  Note that this excludes any collection from back-up tapes, which can be more costly.
• Culling & Processing: it costs $4k to reduce the 400GB to 90GB by removing non-relevant file types prior to processing.  Processing 90GB costs $90k at $1000/GB.  De-duplication and the application of search terms reduce the data to 25GB.
• Production: it costs $4k to produce the 4GB of data that is deemed responsive and not privileged to produce to the other side.

Mr. Deutchman doesn’t identify direct hard dollar costs for Information Management, Identification or Preservation.  These activities are typically not associated with direct hard dollar costs on a per matter basis.  Rather, they involve indirect hard dollar costs such as employee time and software licenses.  Mr. Deutchman also does not provide an estimate for the costs of review.  However, since review does contribute significant direct hard dollar costs for every matter, this gap needs to be filled in order to get a complete sense of the direct hard dollar costs.  The two big buckets of cost in review are: attorney review costs and review software costs.  In Mr. Deutchman’s hypothetical litigation one might imagine the following scenario for these costs:

• 25GB translates into 195,000 documents using the low end of the documents per GB email (9,000/GB) and documents per GB files (7,000/GB). Industry survey data that is available from EDRM.  This example assumes that 40% of the 25 GBs is email.
• The attorneys reviewing the data charge $75/hour and make 100 document decisions per hour.  This translates to approximately $146,000.
• The hosted review service costs $50/GB/month and, in this case, let’s assume we host it for 6 paid months.  This costs $7,500.

If we tabulate these costs and calculate the direct hard dollar cost shares for each stage, the clear take-away is that Processing and Review costs comprise the vast majority of direct hard dollar costs.  Collection and Production direct hard dollar costs are significantly smaller in comparison.

Now, it’s possible to come up with many arguments for why Mr. Deutchman or my estimates could be high including different assumptions for attorney hourly review costs, higher document decision rates, cheaper vendor pricing, etc.  Similarly, it’s possible to come up with many arguments for why the estimates could be low including the need to perform multiple review passes, slower document decision rates, more expensive vendor charges, etc.  In addition, each company will have their own unique circumstances that will change this picture.  However, this generic analysis strongly suggests that more customized analyses would come to the same conclusion: if you want to reduce electronic discovery costs quickly, then you need to focus on processing and review costs.  One can also imagine that even if you were to use some form of activity-based costing to allocate indirect hard dollar costs on a per matter basis, it would likely not change the importance of Processing and Review costs.

What does this mean for IT and legal managers in Corporations?  These kinds of analyses make it pretty clear that, even though they are more involved in the Information Management, Identification, and Collection phase of electronic discovery, IT managers need to focus more on helping the legal team optimize Processing and Review activities.  You are not going to get the biggest bang for your buck in the short-term by trying to reduce costs in Information Management, Identification, Preservation, and Collection.  Similarly, legal managers need to work more closely with IT in order to focus on how to reduce processing and review costs.

So, the obvious question coming out of such an analysis is what’s the best way to reduce Processing and Review costs?  We’ll discuss this issue in a future post.

In the meantime, tell me what you think by participating in our first e-discovery 2.0 poll.  See the sidebar here: Which Phase of Electronic Discovery Do You Think is the Most Costly?

Last month, for the first time, friends of mine who do NOT work in the legal industry starting talking to me about e-discovery. In the past, they had always taken on the glazed look of a bored 8th-grader whenever I spoke about what I do. But suddenly, they were strangely interested and full of questions.

The reason was two articles about e-discovery in the mainstream media which appeared within a week of each other. The first was in the Wall Street Journal, which wrote about how tech firms are at war with lawyers. According to the Journal, the fact that companies are saving money by using e-discovery software is bad news for lawyers, since they are “facing the loss of lucrative client fees.” In response, the lawyers are fighting back: “The attorneys counter that there are pitfalls to replacing them. Early this year, a federal judge required chip maker Qualcomm to pay rival Broadcom more than $8 million after it failed to uncover and share emails relevant to a case.”

I am sure there are lawyers who see technology as a threat, but the firms I deal with are actively embracing e-discovery technology, not fighting it. They see it as another way they can add value to their clients, and would prefer to have their staff focused on practicing law, not mindlessly reading irrelevant documents. So I ended up spending a lot of time explaining to my non-legal friends that there are two sides to the coin. As for my friends who do happen to be lawyers, they focused on the Qualcomm case, pointing out (as we have written before) that the problem was not technology, but rather poor processes and bad judgment on the part of the attorneys concerned.

The second article appeared in the Economist and took a different tack. It argued that the stratospheric cost of e-discovery is gumming up the court system and preventing justice from being served. According to one former justice from Colorado quoted in the article, even mundane landlord-tenant disputes “are now digital wars of attrition”; there are “cases that are settled only because one party cannot afford the costs of e-discovery”; and, many “plaintiffs cannot afford to sue at all, for fear of the e-discovery costs.”

I love the Economist’s tongue-in-cheek style and thought the article made many valid points. My one disappointment was that its spin was unequivocally negative, as though e-discovery is a self-inflicted wound on the American judicial system. Nowhere was there mention of the fact that electronic evidence often helps litigants get at the truth. Rather than incomplete recollections or “he said-she said” claims and counter-claims, there’s no disputing an email that captures a person’s words and actions in black-and-white. Nor was there any mention of how technology is solving the problems that it inadvertently created: today, there are many products that rapidly sift through electronic information, dramatically lowering the cost of e-discovery.

It is great for everyone in the e-discovery community for our domain to get more ink in mainstream, quality publications. I expect that the trend will continue as the industry grows, and especially once the investigations start into our current financial meltdown.

In a time before e-discovery, I toiled away alongside a partner at Chapin, Fleming and Winet – Larry Shea. While not reducing his legal sagacity to one pithy catch phrase, his “no ask-y, no get-y” line is nevertheless a truism I often ponder.⁽ⁱ⁾

As a green associate, fresh out of law school, I had a number of idealistic (read: naïve) assumptions about how litigators wrangled over discovery disputes. One day, while dealing with a particularly thorny electronic discovery problem, I came to Larry and told him what I thought we wanted and why we needed it in a specific format. I knew that the opposition wasn’t likely to grant our e-discovery request, partially because they’d surely intuit how badly we needed it. Larry simply responded with his truism and explained that if we didn’t express our wishes we’d (a) likely not get what we wanted and (b) would not have established our position if push came to shove with the judge.

Well, I just read a recent case (Autotech Techs. Ltd. P’ship v. Automationdirect.com, Inc., 2008 WL 902957 (N.D. Ill. Apr. 2, 2008)) and it showed me that no matter how evolved the legal discovery process has become, the basic “no ask-y, no get-y” notion still applies.

In Autotech, the issue surrounded the production of electronically stored information (ESI) per Fed.R.Civ.P. 34(b)(2)(E) which basically says that court documents must be produced as they are kept in the “usual course of business” or in a “reasonably usable form.” Significantly, section (iii) also states that a party need not produce the same ESI in more than one form.

Unfortunately, the requesting party (ADC) didn’t specify a form for the production of the document at issue, so “Autotech had the option of producing it in the form in which it was ordinarily maintained, or in a reasonably usable form.” Similarly, ADC did not specify that it wanted metadata as a part of the responsive document production. The court was not sympathetic to ADC’s requests: “It seems a little late to ask for metadata after documents responsive to a request have been produced in both paper and electronic format.” The court ultimately found that “ADC was the master of its production requests; it must be satisfied with what it asked for.”

In other words, “no ask-y, no get-y.”

Yes, this all seems so simple, but parties still are routinely stepping in this same pothole. Useful e-discovery best practices to avoid this predicament follow along these lines:

1. Determine what format of ESI production you’re going to require. This sometimes isn’t as easy as it sounds since there are a number of permutations of review environments, even for common platforms such as Concordance [s1]and Summation Work backwards with the attorney review team and their litigation support personnel to figure out what you’ll need and the type of “load files” that are required.
2. Determine if you’ll likely want metadata. In lieu of any specific guidance, it’s fair to assume you’ll want metadata for spreadsheets (to calculate formulas), in cases involving computer forensics and for matters involving granular document authenticity/chain of custody, to name a popular few. The challenge is that you may not know about some of these issues at the time of the early Meet and Confer conferences. This is particularly important since there is a “modest legal presumption in most cases that the producing party need not take special efforts to preserve or produce metadata.” Williams, 230 F.R.D. at 651 (quoting The Sedona Principles, Comment 12a). So, the opposition may be on pretty solid footing if they claim that they had no duty to keep the metadata if you don’t make your needs known early on.
3. Ask for what you want. Here, you’ll want to get specific, especially if you’re wisely carving out certain data types for different handling. Documenting your requests is a good practice too.
4. Prepare to substantiate your needs for #1 & #2. Courts aren’t very willing to entertain overly broad requests for metadata if there isn’t a showing of need. So, be prepared to be challenged and have a solid rationale for the e-discovery request.

⁽ⁱ⁾ His saying, “if ‘its’ and ‘buts’ were candy and nuts it would be Christmas all year long” is another great pearl, but I couldn’t find a good case law tie-in.