e-Discovery Options

By Thomas Brom

The vast exhibit hall on the upper floor of the Seattle Convention Center could have been a Chautauqua tent, filled with sales reps giving away pens and paperweights. But the big pitch at the annual meeting of the Association of Corporate Counsel in October wasn?t selling snake oil. It was all about e-discovery --with more than 40 vendors offering database software, document reviewers, outsourcing, or all three to the more than 3,000 attendees.

There was no mystery to their presence at the conference. In litigation, first-tier document review can be incredibly expensive for clients?and incredibly lucrative for vendors. ?Of the U.S. [survey] respondents, 30 percent estimated that privilege reviews comprised 6 percent to 10 percent of their litigation costs, while 16 percent estimated the figure as high as 30 percent to 50 percent,? noted law firm Fulbright & Jaworski?s 2007 Litigation Trends Survey Findings. The study added, ?One third of the technology/communications respondents were in the 30 percent to 50 percent range.?

Outside the exhibit hall, the ACC devoted a half-dozen panels to e-discovery?one of them called, ?Outsourcing: The New Tsunami.? Sending legal work to India, of course, is now commonplace. ValueNotes reports there are more than 100 legal process outsourcing firms in India employing around 7,500 people, and it predicts the industry will grow to 32,000 employees by the end of 2010. The newest new thing, according to a presentation by Howard B. Hill, president and CEO of Quatrro Legal Solutions, is a ?follow the sun? strategy of stationing employees in each time zone, so documents within a common database can be processed 24 hours a day.

To convince any doubters in the room, Hill cited as authority Formal Opinion 08-451, released in August 2008 by the ABA?s Standing Committee on Ethics and Professional Responsibility. ?The outsourcing trend is a salutary one for our globalized economy,? according to the opinion. ?Outsourcing affords lawyers the ability to reduce their costs and often the cost to the client.? The opinion states further, ?There is nothing unethical about a lawyer outsourcing legal and non-legal services, provided the outsourcing lawyer renders legal services to the client with the ?legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.?

Of course, substantial concerns tied to outsourcing include how to maintain the attorney-client privilege, the work product protection, and client confidentiality. In addition, members of the California Bar are governed by differing rules of professional conduct and bound by statute to ?maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.? (Bus & P Code § 6068(e).)

Addressing those concerns, Hill referred to ethics opinions on outsourcing released in 2006 by the Los Angeles County Bar Association (LACBA Opinion No. 518) and the Association of the Bar of the City of New York (Formal Opinion 2006-3). Aphelion Legal Solutions, another legal process outsourcer at the annual meeting, also circulated an ethics memorandum that referenced San Diego County Bar Association Ethics Opinion 2007-1 and Florida Bar Proposed Advisory Opinion 07-2.

Though the rules of professional conduct vary among those jurisdictions, all of the authorities conclude that outsourced legal work does not constitute the unauthorized practice of law if certain conditions are met. These include securing the client?s informed consent, maintaining supervision of outsourced attorneys, ensuring the confidentiality of the client?s data, and avoiding conflicts of interest.

Still, as the LACBA opinion points out, ?An attorney is responsible for all of the attorney?s submissions to the court. Any inaccuracies in the materials submitted to the court could not only be a violation of rule 3-110, but also could be a violation of rule 5-200(A) and (B), and a violation of Business and Professional Code section 6068, subdivision (d).?

?The problem is, I have to stand before the judge and say that document production is complete,? says David M. Lisi, litigation partner in the East Palo Alto office of Howrey. ?The client may be looking for ways to cut costs, but it?s often the attorneys who are held most responsible.?

However great the potential savings offered by outsourcing, then, there are still hazards associated with this ?new tsunami.? Enter Congress, attempting to lighten the e-discovery burden in its own way. In December 2007 Sen. Patrick Leahy (D-Vermont) introduced S 2450, a bill adding rule 502 to the Federal Rules of Evidence (FRE). The new rule permits federal judges to issue uniform nonwaiver orders of attorney-client or work product?privileged information that is disclosed, inadvertently or intentionally, in both federal and state courts.

Leahy, in his opening remarks, made congressional intent clear: ?I hope we pass a bipartisan bill that will go a long way in reducing the costs of litigating disputes in our civil justice system.? On September 19, President George W. Bush signed the bill into law, which applies to pending cases at the discretion of the trial judge and to all cases filed on or after that date. But no sooner had the ink dried than attorneys began questioning the new rule?s effectiveness, unintended consequences, and even its constitutionality.

In some ways FRE 502 simply gives teeth to the 2006 amendments to the Federal Rules of Civil Procedure. ?You have to look at the two together,? says Erin A. Smart, an associate at the San Francisco office of Bingham McCutchen. ?Rule 502 provides the substantive backing to the inadvertent disclosure ?clawback? provision [FRCP 26(b)(5)(B)] in the federal rules.?

Some litigators were pleased. ?The new rule reduces to writing how to deal with the reality of what lawyers and judges face every day,? says Kirby D. Behre, cochair of the e-discovery group in the Washington, D.C., office of Paul, Hastings, Janofsky & Walker. ?If the result is a more uniform set of discovery rules, then I?m all for it.?

But David B. Alden, a litigation partner at the Cleveland office of Jones Day, points out in a legal blog that the new rule goes much further. Under 502(d) a federal judge can issue a nonwaiver order declaring that in a given circumstance the work product or attorney-client privilege has not been waived. Alden contends that such orders will become ?a trump card? in other federal courts, and in all state courts. As long as litigants have the prior blessing of a federal court order, he writes, they ?may (a) produce privileged and protected documents in federal proceedings with no pre- or post-production privilege review, yet (b) retain otherwise applicable attorney-client privilege and work product claims and (c) assert them when the adversary attempts to use the documents. If that is what FRE 502(d) means and producing parties elect to proceed in this manner, this could be a huge cost-savings.?

But Alden remains skeptical. ?Congress may be trying to do something to reduce litigation costs,? he says in an interview, ?but in complex cases we really mean it when we say we don?t want the other side to see protected documents.? He also cautions that some critics view the new rule as an improper usurpation of state law governing attorney responsibility. ?If so, and courts find that Congress could not give federal courts this power, then much of the ?certainty? provided by FRE 502 will have been illusory.?

The constitutional question already has prompted a panel discussion at the Sedona Conference in December, and a forthcoming law review article by Professor Henry S. Noyes of Chapman University School of Law in Orange (?Federal Rule of Evidence 502: Stirring the State Law of Privilege and Professional Responsibility with a Federal Stick,? 66 Washington & Lee Law Review (2009)).

Noyes focuses on the implications of FRE 502(d). ?The express purpose of Rule 502(d) is to relieve the disclosing party of the burden and cost of paying its attorneys to conduct a document-by-document review of the material that will be produced during discovery,? he writes. ?In order to be effective, however, entry of an order must relieve the disclosing party?s attorneys of their state-imposed professional responsibility obligation to review their client?s confidential information before producing it to the requesting party during discovery.?

Worse, Noyes contends that the new rule runs afoul of federalism principles. ?It permits parties to voluntarily, knowingly and intentionally disclose attorney client privileged and work product protected documents without waiving the privilege or the protection,? he states. ?It permits federal courts the discretion to override substantive state laws regarding waiver of a privilege that is created under state law. It also gives federal courts discretion to issue orders that bind non-parties and state courts that have no notice and no opportunity to be heard regarding the entry of the order.?

Noyes says, ?The new rule of evidence no longer requires the producing party to review documents. But the rules of professional conduct in most states do require attorneys to review documents. So 502(d) is either worthless, or it preempts state ethical rules.?

Plaintiffs attorneys also have concerns about the new rule. ?You could intentionally release a document in one proceeding to protect it in another,? says Steven N. Williams, a partner in the Burlingame office of Cotchett, Pitre & McCarthy. ?The federal supremacy issues are very troubling.?

Noyes acknowledges that responding parties aren?t likely to simply dump documents on requesting parties. ?There could be collateral damage from wholesale disclosure,? he says. ?Documents could be privileged but permit your opponent to ferret out facts in other ways. The documents could be responsive but disclose trade secrets. Or, they could be unresponsive but disclose other embarrassing information.?

Still, he predicts that lawyers will take advantage of nonwaiver orders whenever possible. ?The rule provides the lawyer with great CYA,? he says. ?With a court order in place, you can afford to do a less-than-thorough review and still catch inadvertently privileged documents through the clawback provisions.?

Nonetheless, Howrey?s Lisi still isn?t buying it. ?You?re signing discovery responses that attest to a thorough review,? he says. ?The rules are getting ahead of the practical costs to attorneys and their clients.?

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