e-discovery 2.0

Fulbright & Jaworski has conducted their Litigation Trends survey for nearly the past decade and the results are always interesting since they tend to capture the mindset of inside counsel and litigators as they anticipate the upcoming year.  In their 8th Annual Litigation Trends Survey, Fulbright noted that 92% of U.S. respondents predict that litigation will either increase or stay the same in the upcoming year.  This trend bodes well for players in the litigation services and eDiscovery sectors, and confirms the counter cyclical nature of the industry.  Breaking down the perceived increases across industry verticals, the Survey noted that the biggest anticipated jumps were in the technology, financial services, healthcare and insurance sectors.  Meanwhile energy (the leading sector from the prior year) was one of the few that predicted a decrease.

Going behind the scenes, there were a number of factors that caused respondents to predict litigation increases.  First and foremost, respondents indicated that “stricter regulation was the number one reason” for the increases, particularly with insurance, financial services, health care and retail sectors.  These concerns around regulatory compliance have been increasingly keeping GCs and corporate boards awake as the governance climate continues to heat up.  This regulation driver showed a demonstrable increase with 46% of all respondents having retained outside counsel to assist with regulatory proceedings, up from 37% in the prior year.  The Survey noted that U.S. companies facing a regulatory investigation were most likely to be under pressure from the DOJ (27%), State Attorney General (24%), OSHA (18%), the EPA (16%) and U.S. Attorney (13%).  Also on the regulatory front, U.S. respondents have increasingly begun to recognize the potential jurisdictional reach of the U.K. Bribery Act, with 25% of U.S. companies stating that they have already conducted a review of existing procedures in preparation for implementation.

In addition to managing risk, most in-house counsel are keenly concerned with controlling litigation costs.  The good news here is that associated costs are predicted to be generally flat.  Yet, eDiscovery remained the largest category targeted for increased spending, with 18% of respondents making this their top priority.  Interestingly, though, large enterprises seem to have been doing a good job of getting eDiscovery expenses under control (likely by taking expensive elements of the EDRM in-house), with these expenses declining among the largest companies, from 42% last year to 24% this year.

The Survey noted that the use of cloud computing has gained speed, with 34% of all public companies using the cloud.  And yet, only 40% of those companies using cloud computing have had “to preserve and/or collect data from the cloud in connection with actual or threatened litigation, disputes or investigations.”  This number appears curiously light, and it should definitely rise during the upcoming year as the plaintiff’s bar gets more savvy about this relatively new source of responsive electronically stored information (ESI).

On the narrower eDiscovery front, the Survey honed in on newer issues like cooperation.  Here, the Survey noted that this Sedona-sponsored concept still hasn’t completely taken hold, with nearly 40% of all respondents claiming that “their company has not made the effort to be more transparent or cooperative” due to a litigation strategy of “defending on all fronts.”  This area appears particularly muddled, with one third saying their previous attempts haven’t been reciprocated and another quarter feeling that their company was already transparent.

All in all,  the 2011 Fulbright Litigation Trends Survey notes trends that appear to be largely in line with the primary drivers of (1) managing risk and (2) lowering litigation costs.  On the risk side, compliance with an increasingly complex regulatory environment is offsetting any potential lull in the litigation environment.  And, on the cost side, eDiscovery continues to be a hot button issue, particularly with the relatively new challenges associated with ESI distributed on social media, cloud computing and mobile sources.

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.

It’s not just in New Jersey that corruption is in the news. It feels like everywhere you go, the authorities are investigating white collar crime and thus have an increasing need for electronic discovery technology.

Earlier this month, as those of you who follow my Twitter feed will know, I was visiting customers and partners in Germany. In virtually every meeting, data privacy and corruption investigations were top of mind, and with good reason. Following the Siemens case last year, German investigators have become much more active and it was easy for my hosts to list example after example of recent cases. There was the Deutsche Bahn case of management spying on its own employees, in violation of German privacy laws; the Deutsche Bank case of management spying on its own board; and, the Deutsche Telecom case of management phone tapping employees to find leaks. There were stories of price collusion among cable car companies in the Alps, and corruption investigations into the activities of German companies in Eastern Europe.

A similar focus on anti-corruption exists closer to home. I have written before about the increase in FCPA investigations and that’s been reflected in recent headlines. As the Wall Street Journal reports, Sun and Shell have recently come under the microscope, according to their public filings. And Frederic Bourke, a founder of the accessories firm Dooney & Bourke, was recently found guilty of conspiracy to violate the Foreign Corrupt Practices Act, which may result in jail time.

All indications are that the U.S. Department of Justice and its counterparts overseas are just warming up. It’s not a good time for white collar crime, wherever you are in the world.

Part I of this series on managing e-discovery costs discussed a number of approaches for reducing e-discovery costs.  One of the approaches is to perform early case assessments.  Pioneered by Dupont and others, the objective of this approach is to learn a substantial percentage of the key case facts within a short period of time so that the litigation team can make better decisions quicker.  There are a number of good sources for information on what is early case assessment (ECA) and how to conduct ECAs including John DeGroote’s articles on the Settlement Perspectives blog, Eric L. Barnum‘s “An Introduction to Early Case Assessment” and Dean Gonsowski’s Early Case Assessment article on this blog.  The point that these articles make is that early case assessment is a different approach to litigation that can significantly reduce the overall cost of litigation and electronic discovery.

As Mr. DeGroote highlights, the two main benefits of ECA are: better settlements and better case management.  First, ECA enables the litigation team to make a better decision as to whether to settle or not by giving the team an enhanced understanding of the costs and benefits of settling.  Early case assessment also provides the team with valuable information for negotiating the best possible settlement with the other side.  Second, even if the case is not settled, ECA can reduce costs through improved case management.  For example, e-discovery costs can be better managed by targeting discovery efforts to reduce the data reviewed and by improved planning and budgeting.  Overall, Dupont estimates that, by performing early case assessment on 18 of their cases, they reduced their costs by over a third.

Given the clear benefits of early case assessments, one would expect that early case assessments would be the norm.  However, as Mr. Gonsowski points out, this doesn’t appear to be the case.  Mr. Gonsowski points out that one of the reasons for this “may lie in a common litigation mindset:  i.e., the desire to avoid costs for as long as possible.”  This makes sense and I would venture to suggest some additional reasons.  First, ECA can be hard to do, especially when it comes to the e-discovery piece of ECA.  Traditional lead-times for performing collection, processing and loading electronic documents into a review platform are measured in weeks or months.  And because ECA works best when analysis is performed iteratively (e.g. start with a small, targeted set of documents, analyze them, use that analysis to target additional information, and repeat) and often ideally on-site, this long cycle time can shackle the efficient execution of an early case assessment strategy.  Second, ECA can be too expensive, again using traditional approaches.  If a company spends too much money on an early case assessment, they might be less inclined to settle because of how much they have spent already.

Recent advances in electronic discovery software, however, are addressing these issues and making it easier to perform early case assessments.  This newer software, which can often be installed on-site as well as in a hosted fashion, can be used to review data within hours of it being collected and often provides content analysis technology that speeds up analysis to help attorneys find the critical information faster.  The lower cycle time allows for prioritized and iterative analysis largely removing technology constraints from the adoption of early case assessment methodology.  This newer ECA software is also less expensive because it is more automated and easy-to-use than traditional technology.

An early case assessment case study of Holme, Roberts & Owen’s (HRO) experience performing an early case assessment, is a good example of what is now possible with new software solutions.  HRO was representing a client who was facing a time-critical false advertising lawsuit. With expedited discovery ordered and a motion for a preliminary injunction pending, the attorneys at HRO had less than two weeks to gather and analyze the underlying documentation and determine case strategy. Leveraging new e-discovery software, HRO was able to perform the early case assessment in days and at cost much lower than traditional means.  The ECA ultimately enabled HRO to conclude the matter on a favorable basis for their client saving significant costs that would have been incurred if they had been required to continue the litigation.

As the HRO case study shows, early case assessments have become a powerful method for reducing not only e-discovery costs but also overall litigation costs.  Any corporation looking to lower their e-discovery and litigation costs would do well to consider adopting early case assessment methodology where practical.  How do you expect the frequency of practicing ECA to change over the next year?  Please take a moment to fill out our poll.

Unfortunately, though, early case assessments are also not a silver bullet solution to the e-discovery cost problem because some cases are going to require full discovery and will go to trial no matter what.  To address these costs, other methods are required.