Rethinking e-Discovery

By Tom McNichol

Looking for some good news about the recession's effect on the business of law? One unintended consequence could well be that it wrings efficiencies out of one of today's most inefficient areas of legal work: e-discovery.

Everybody knows that the time-consuming process of e-discovery drives up litigation costs. And when even trial lawyers - who can actually turn a profit on it - think it's too expensive, you know something's wrong.

In the short term, the Wall Street swoon is certain to lead to more litigation, and in turn, more e-discovery. Some e-discovery vendors are already tying on their bibs in expectation of a litigation feast. Fios, a large e-discovery services vendor, now offers 30-minute Web-based seminars on how the financial-services crisis will bring even more e-discovery - and, not coincidentally, more e-discovery vendors. Recommind, a San Francisco company that specializes in e-discovery, recently secured $7.5 million in venture funding and is even looking - gasp - to hire. Other vendors report that law firms are starting to gear up their own e-discovery operations.

"We've already heard from some law firms that are seeing more litigation and more e-discovery," says Warwick Sharp, a vice president of marketing and business development at Equivio, which makes e-discovery software. "And we hear a lot of firms saying that they see a wave of litigation coming. Clients are holding off on the execution until they see where the economy is heading, and that could take several months or more. So firms are trying to develop their e-discovery strategy now to meet the demand and what kinds of resources they're going to need."

Of course, with every boom there is bound to be an eventual shakeout. And the e-discovery boom is likely to be no exception. For law firms that count on continuity, this makes the choice of an e-discovery vendor all the more critical. A glimpse of what could be the future: In November, AccessData, a Utah-based computer forensics and e-discovery firm, bid $100 million to acquire Guidance Software, a large publicly traded vendor with more than 20,000 clients worldwide.

"It's just like Wall Street," says attorney Sharon Nelson, president of computer forensics firm Sensei Enterprises and author of the e-discovery blog Ride the Lightning (www.ridethelightning.senseient.com). "Minus the prosperity, some of them aren't going to have the ongoing cash flow to stay in business. The trouble is, no one [will know] for sure who is in trouble and who isn't."

Consequently, law firms must vet e-discovery vendors even more carefully when contracting out work with them (see "10 Questions for an e-Discovery Vendor," page 46). Those law firms that view the downturn as an opportunity to fashion a more efficient e-discovery process will stand out from the pack.

"There's a real opportunity here for firms that get it, and are willing to manage e-discovery like a business," says Ron Best, director of Legal Information Systems at Munger, Tolles & Olson in Los Angeles. "You have a chance to put reliable processes in place and build a team that makes smart decisions about e-discovery strategy."

As corporate revenue declines, both law firms and their clients are looking for ways to reduce costs across the board, and e-discovery is a conspicuous target. In e-discovery, there's nothing like a tight budget to focus the mind. Law firms that can come up with smarter, cheaper ways of collecting and analyzing electronic documents will have a real leg up, not only in weathering the recession, but also in building a competitive advantage for the recovery.

"The onus is on the technology vendors," says Equivio's Sharp. "The vendors are in the best position to advise users on how to implement the tools. They have the bird's-eye view.

"More and more, the technology is so complex that it's not enough for a vendor just to come in with data-crunching services," he continues. "That's not good enough. You have to do that efficiently, but to win the case, you have to come up with the right strategy to use the tech that's out there. That's why you're seeing a lot of the top e-discovery providers offering consulting services as part of their standard package."

Indeed, the complexity of e-discovery is giving rise to a growing array of consulting services that advise lawyers on how to use existing technology that's already available. These consultants may actually see more work during the downturn, because their legal clients are hoping to maintain profit levels by reducing costs - especially litigation and e-discovery costs. In particular, document review is one area of e-discovery where vendors are seeking to trim expenses. Recommind's e-discovery software platform, for example, codes every document regarding responsiveness, privilege, relevance to an issue, and priority before the formal review process begins, thus reducing the time needed to more thoroughly analyze the documents. And Equivio's technology roots out "near duplicate documents," letting attorneys skip straight to what matters.

"Essentially, you're stripping away the redundant data, and you can zoom in on the unique documents and the unique data within those documents," says Sharp, adding that savings in time - and money - for reviewing can run 30 percent to 50 percent. The process also gives you "a much better chance of finding what you're looking for and building your case strategy around that," he says. "You want to save costs, but the end game is winning the litigation."

Thanks to the economic downturn, the days of boundless e-discovery searches are quickly drawing to a close, and that's a good thing, for both attorneys and clients.

10 QUESTIONS FOR AN E-DISCOVERY VENDOR

The economic downturn is putting more pressure on law firms to lower e-discovery costs, especially when they contract with third-party vendors. Here are ten questions you should ask an e-discovery vendor before entering into any agreement:

1. Can you quote full costs of e-discovery up front, even if I?m uncertain how much data will be processed?

2. Can you provide references for five recent jobs you have done that are similar to mine in size and scope? Would you give me a free sample of your work?

3. Can you show me a typical bill for a job similar to mine?

4. How much of what we contract with you to do is performed by other technology partners, and who are they?

5. What timetable do you propose for completing the project? How and when will you inform me of any changes to the schedule?

6. What flexibility can you give me for reducing the volume of data I must review? How do I know that the winnowing process is valid, so that I can defend it if challenged?

7. Who will testify on our behalf if your process is challenged? Has this person taken the stand before?

8. Who will be assigned to manage my project? Can I have his or her direct and cell phone numbers?

9. How can you help me minimize costs through search consulting, document culling, or other expert advice?

10.Does your company currently have a positive cash flow? Can you document that?

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