By Ari Kaplan
In a telephone research study, of 28 legal professionals from Fortune 500 corporations conducted between March 25, 2008 and April 18, 2008, New York-based Ari Kaplan Advisors engaged corporate counsel responsible for litigation in a conversation to spark a dialogue on legal holds, data management, vendor selection, the amendments to the Federal Rules of Civil Procedure, litigation readiness, technology and e-discovery cost drivers.
Twenty-six of the respondents were lawyers who managed litigation in some respect, and two were non-lawyers with significant responsibility for e-discovery. The companies were in financial services, health care, manufacturing, pharmaceutical or technology.
The research revealed that:
Technologists and lawyers are working more closely than people think.
The most significant investments are being made in legal hold and e-mail archiving tools.
The amendments to the Federal Rules have been, to many, much ado about nothing.
CROSS-FUNCTIONAL TEAMWORK IS KEY
Teams of people are overwhelmingly responsible for e-discovery in the modern corporate legal department. Despite the fact that almost 57 percent of the respondents advised that an associate general counsel or senior counsel-level attorney managed the day-to-day e-discovery process, most indicated that the effort was more of collaboration between litigation support and IT.
Another 89 percent reported that their organization has an e-discovery response team in place, and they are cross-functional interdepartmental teams comprised of lawyers, paralegals, litigation support and IT. Some companies also included records management and forensic document specialists as well.
This integrated relationship between the technical experts and the legal department was evident in almost every metric. Seventy-nine percent of the respondents reported working “very close” with IT, and 61 percent noted that legal is “often” consulted when IT adopts new technology.
Stronger internal structuring may also be responsible for the fact that 46 percent of the respondents do not have a long-term agreement in place with a preferred e-discovery services provider, and that only 14 percent of the respondents engage national e-discovery counsel.
Most were also candid about the role of their general counsel. Thirty-nine percent of the respondents indicated that their GC has little to no involvement in the management of e-discovery. While there were unique issues of ongoing litigation or regulatory matters at some companies that required the GC’s oversight, 79 percent of the respondents noted that their GC is involved at a level of 3 or below (on a scale of 10).
LEGAL HOLD MANAGEMENT IS CRITICAL
Despite the bottom-up approach, 75 percent of the respondents ranked their organizations at a 7 or higher (on a scale of 10) in terms of how well legal holds are enforced, documented, re-issued and monitored. This has been tested since 61 percent of companies have completed a litigation-readiness assessment, mostly with the assistance of an outside source.
The primary legal cost drivers are fairly evenly divided in corporate America between patent/IP (29 percent), regulatory investigation and compliance (29 percent) and products liability/class action (25 percent) matters. A few attributed their costs to general commercial matters and others selected an option based on unique issues occurring at the moment (e.g., subprime investigations, employment litigation and merger activity).
An overwhelming 79 percent of respondents reported investments in technology over the past 12 months. Of those that reported such investments, it was primarily in tools for e-mail archiving (39 percent) or legal hold management (50 percent). Others had also invested in case management software (11 percent), review programs (11 percent) and data hosting and storage (22 percent).
While they know where the money is being spent, only 43 percent of the respondents admitted that they did not know how much the company is spending in its entirety on e-discovery.
THE FEDERAL RULES ARE AMENDING THE LANDSCAPE
A majority of respondents (61 percent) did not feel that their organizations were particularly impacted by the amendments to the Federal Rules of Civil Procedure, ranking the impact at five on a scale of 10.
Surprisingly, the respondents were almost evenly divided on this issue. Forty-three percent reported that their organizations were minimally impacted by the amendments to the FRCP and selected a rating below five. Thirty-nine percent reported being more substantially impacted by the changes and selected a rating of six through 10. The majority of the responses landed at five.
The reason for the balance is that most companies reported some level of preparation prior to December 1, 2006. While a few organizations created a new position, “The amendments are a non-event,” said one participant. Another commented, “We would have made all the changes without the rules.”
The perceived impact and the material impact are, however, markedly different. Many reported a substantial increase in e-discovery processing, notwithstanding the fact that there has not been any increase in the number of cases filed. This can be attributed to the heightened awareness of e-discovery along with a new intensity from judges and plaintiffs.
COST IS PARAMOUNT, BUT NOT EVERYTHING
Cost is a major factor for 61 percent of the respondents, and the slowing economy came up in a few conversations. That said, while cost was raised most often as a factor in selecting vendors and support products, most people simply offered it as the obvious choice. Surprising was the passion with which individuals spoke about the responsiveness, experience and collaborative nature of their partners. They want skilled individuals that provide solutions to their problems and honest relationships founded on integrity.
One person commented, “Candor is a huge issue; someone who tells me their limitations makes me feel more comfortable than one who makes promises on which he or she cannot deliver.” The issue came up frequently enough to suggest that some may have already had a disappointing experience with a vendor.
TECHNOLOGY LEADS TRENDS
Automate legal hold: Despite the fact that a majority of respondents gave themselves a seven or higher in terms of how well legal holds are enforced, documented, reissued and monitored, many still had lingering concerns about perfection. The assurance of accuracy in a sea of litigation raises insecurities, particularly around the difficulty in determining what ESI is subject to a hold notice and what is not. Those insecurities prompted 33 percent of the respondents to purchase or create litigation hold programs for managing and automating the process in the past 12 months. Fourteen percent are planning to do so in the coming year.
Comments included, “it is not a perfect science,” “there is always room for improvement,” and “every time you think you have gotten everything, you find something that remains.”
Centralize e-mail: E-mail management is the biggest concern after legal hold oversight. In fact, 39 percent of the responding organizations have recently added e-mail archiving and related software to address preservation and collection issues. Another is planning to do so in 2008.
Increase insourcing: More control of e-discovery is coming in-house, especially with increases in staffing as the most popular addition in 2008 (25 percent of the respondents reported that they will be adding at least one team member). With almost 79 percent of the participants reporting the addition of technology in the past 12 months to address e-discovery, there is clearly a campaign to manage more of the process internally.
Invest in the Future: Ultimately, companies want to reduce the volume of material that human beings need to review. Many plan to adhere to stricter destruction policies while others hope that the growth of concept searching and artificial intelligence will solve certain cost and control issues. One respondent commented, “The company needs to spend more time counseling IT and other business clients on the proliferation of electronic records at the creation stage.”
Organizations will more fully standardize their retention policies with respect to e-mail and expand it to other forms of communication, such as instant and unified messaging. It will also include centralized control and storage of electronic documents, improved sorting and enhanced identification of electronic records.
Any solution to ballooning costs, however, must begin with knowing how much is being spent. Only 57 percent of respondents knew or could easily find out the extent of their costs. There will be a major push toward readily identifying costs, both in the aggregate and in narrowly tailored segments for quick evaluation purposes. Outside counsel will need to bill their time more specifically and according to a uniform code system, which will enable in-house teams to make these calculations.
Electronic discovery is no longer a mystery in the legal community. The rules are well defined and the case law is mature. Every company in America has digital records, but the responsibility and maintenance for those records is shifting. A single person or department no longer manages them. Rather, companywide teams influenced by business interests across the entire spectrum are accountable.
The transformation in how the discovery of ESI is viewed throughout an organization requires corporate counsel to adjust their practices and adapt. They must collaborate, understand the technical aspects of the process and anticipate shifts in the landscape. Perhaps more importantly, they must demand the same from their outside counsel and their e-discovery partners. It is only through this seamless integration that they can persuade judges and adversaries to support their positions.
On the bright side of these challenges, laughed one participant, “One of the benefits of being sued all the time is that you have to be ready to respond.” Incorporating industry-accepted best practices should help you do so more effectively.
Ari Kaplan is the founder of Ari Kaplan Advisors and author of “The Opportunity Maker: Strategies for Inspiring Your Legal Career Through Creative Networking and Business Development” (Thomson-West, 2008).
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