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Friday, August 8, 2008

eDiscovery Confounds Companies and Their Lawyers

As an excellent adjunct to my Blog entries over the past several weeks regarding how corporate council within the Global 5000 and their associated outside council are dealing with the eDiscovery Paradigm Shift, Neil Roiter, Senior Technology Editor at recently wrote a great aritlce titled "E-discovery still confounds companies and their lawyers".

Mr. Roiter does an excellent job of describing some of the more pressing issues facing the enterprise and their legal professional both inside and out with quotes from John Benson, an electronic discovery consultant for Kansas City law firm Stinson Morrison Hecker LLP.

I was particularly amused by a quote from John Benson where he state that "The world left the legal profession in the dust years ago," Benson told a Black Hat audience Wednesday. "Attorneys are just coming to the realization that people have computers and have important information on them. I spend a good deal of time dragging attorneys kicking and screaming into the 20th century."

I believe that this comment was definitely representative of the industry in 2006 and 2007. And, it may still be true for a certain portion of the industry that is probably going to have a hard time being successful with the eDiscovery Paradigm Shift. However, I have seen the legal profession take a much more aggressive embrace of technology over the past 18 months.

Mr. Benson also points out that the major cost of eDiscovery is with the review process and that this piece could cost upward of $1,000 per GB. Again, I believe that this was true in 2007 and and even early in 2008. However, with the mass roll out of email archiving technologies such as Kazeon, culling technology from the major EDD players, de-duping technology such as Equivio and the move to less expensive offshore review from organizations such as Integreon, the over all cost of review is beginning to fall. In addition, the legal market is becoming more aware of what eDiscovery should cost and processing best practices and as a result I am also staring to see "Quick Peek" EDD for an initial processing run on native files going for as little as $250-$300 per GB.

Benson also does an excellent job pointing out that eDiscovery security is an issue that the enterprise needs to be concerned with. Becoming known in the industry as "Chain of Custody", there are now several vendors that offer this as part of their overall offering such as "FirstLink" from Trial Solutions or as a stand-alone solution from organizations such as PSS Systems.

In summary, I think that Neil and John have pointed out some very important issues that are facing the legal community in regards to the eDiscovery Paradigm Shift. I just think that they are about 18 months behind in their view of where the industry, or at least the innovators and early adaptors actually are today.

The full article by Mr. Roiter is as follows:

E-discovery is incredibly expensive, time-consuming and fraught with error. If you botch it, your company may lose its case in court and be sanctioned with heavy fines for failing to produce all the required information. And your lawyers can get hauled before the bar association for ethical breaches if their client (that's you) fails to meet its legal obligations.

Federal Rules of Civil Procedure (FRCP) were amended in 2006 to clarify the requirements for e-discovery, said John Benson, an electronic discovery consultant for Kansas City law firm Stinson Morrison Hecker LLP, but the issues around e-discovery should have been resolved a long time ago, he said.

While companies have routinely been creating, distributing, storing, duplicating and re-duplicating information electronically for years, when it comes to e-discovery, most corporations, and what's more troubling, their lawyers, still don't get it.

"The world left the legal profession in the dust years ago," Benson told a Black Hat audience Wednesday. "Attorneys are just coming to the realization that people have computers and have important information on them. I spend a good deal of time dragging attorneys kicking and screaming into the 20th century."

Legal discovery is not a cookie-cutter process. Each corporate environment and case is different. E-discovery is expensive and will likely remain expensive. What's more, the e-discovery process itself is fraught with security issues; but companies can do a lot to minimize costs, strengthen their hand in court, and avoid sanctions while securing information. IT plays a critical role.
Companies and their lawyers typically overreact, attempting to preserve everything, for example, in backup tapes. This just adds to expenses -- IT folks reuse backup tapes for a reason -- and make it harder to sift through terabytes of information.

The greatest cost comes during the review process. Even with new search technologies, information still has to be eye-balled to ensure it's what you're looking for. And there's a lot of it. Mass storage is cheap, and employees can spread information among themselves and scatter it on servers, laptops, PDAs and smartphones, removable storage devices and home computers. Restoring data from backups and imaging files, and cleaning up metadata and OCR to produce documents in their final form for lawyers is costly.

Anticipate that the e-discovery process will cost about $1,000 per gigabyte. This is a fact of life, but you can control the cost, Benson said, by taking steps to identify data, lowering the volume to make it easy to secure and review when you need it, and centralizing storage.

Benson recommends fully documented and well enforced policies and procedures for handling and backing up data. There should be an established litigation response plan, including a formal litigation response team prepared to move into action as soon as the company sniffs the possibility of litigation.

That last point is important. Sometimes a company doesn't see a suit coming until it is served. But there's often much more lead time. You can anticipate possible litigation when there's a data breach or employee termination, for example. The sooner you move the better -- you have to take steps to preserve what's likely to be applicable data immediately. Your at the point when the lawyers, IT managers and other groups who might be involved need to decide what needs to be preserved -- from backup tapes to, possibly, an image of an employee's hard drive -- to avoid tampering.

"This is the most critical time to avoid sanctions and to avoid getting in trouble down the road with counsel and courts around preservation of data," Benson said.

Anticipation is key, he said. FRCP rules require the two sides in litigation to meet and discuss issues surrounding producing electronic information within 99 days of the start of litigation. That's not much time.

Be aware of e-discovery security issues, Benson warned. You're giving your data over to third parties -- your e-discovery processing vendor, your law firm, your opponent's law firm and its processing vendor. They all may be hacker targets, and it's a good bet security's not high on their priorities. There are a lot of new e-discovery vendors out there, Benson warned, vet both them carefully and take steps to make sure your law firm has solid data security policies and practices.
There's good news ahead, though, as technology gets better, and, we hope, companies get more savvy about dealing with electronic data.

"Technology will, over time, change the way legal system works," Benson said. "But that will only happen if there is good, meaningful communication between legal and IT communities. Through that communication, we'll drive the cost of litigation down. That's not necessarily a good thing for law firms, but it's certainly a good thing for corporations."

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Tuesday, August 5, 2008

Litigation Technology Paradigm Shift from Law Firms to Corporate Legal Departments

Since the amendments to the Federal Rules of Civil Procedure (FRCP) went into effect in December 2006, I have seen an increased level of fear, uncertainty and doubt (FUD) within the legal departments of the Fortune 5000 in regards to what will happen if changes are not made to how they respond to the new rigors of eDiscovery. Further, I have seen an erosion of faith in outside council's ability to provide the guidance, services, technology and consulting required to meet these needs.

Discovery as Normal?
Nevertheless, some enterprises are continuing to rely on their IT department and outside council and respond to discovery as discrete events as they have before. Costs are continuing to increase and depending upon the skills of the participants, the results have ranged from satisfactory at best to a complete disaster subjecting the enterprise to undue settlements, losses and sanctions because it didn't do the right thing(s) and can't defend its practices.

eDiscovery Readiness
The more progressive legal departments are taking overt action to improve their eDiscovery readiness through assessment, planning and implementation of technology independent of outside council. They are putting resources in place to gain better understanding of their electronically stored information (ESI) and data repositories. They are creating a dialogue with their IT department in which they discuss what business processes to put in place as a result of the changes. And they are creating formal eDiscovery response plans to reduce the unpredictability of eDiscovery and mitigate risk.

ESI Changes Discovery
One of the biggest changes revolves around the fact that the scope of discovery has significantly expanded, along with the definition of what is subject to discovery. In addition to all of the paper, discovery now includes everything from e-mail to voice mail and proprietary files stored on databases. And, the analysts are predicting that the market for technology to proactively manage all of this new technology is already one of the fastest growing markets in the technology sector.

Gartner estimates that the worldwide e-mail active-archiving market was $376 million in new software license revenue and maintenance services in 2007, an increase of 33.7% over 2006. The market is expected to grow to $1.7 billion by 2012 (see “Dataquest Insight: E-Mail Archiving Software Market, Worldwide, 2008″).

Moose on the Table
As I have covered all of these topics in great detail, this post is not about the accelerating increase in the volume ESI, the changes to the FRCP or opportunities for technology vendors to fill the needs of this ever growing market.

Instead, it is about the proverbial "Moose on the Table" regarding the new role of law firms in the litigation process. Or, why is our outside council involved in providing litigation technology? Are they the best organization to be working with? And, how is it effecting the overall cost of litigation?

Over the past ten (10) years, many of the major law firms throughout the US have invested in massive internal IT organizations and literally become litigation technology vendors. I can't count how many Partners from many of these firms that have told me that they didn't go to law school and spend the time and effort to build their litigation practices to become litigation technology providers. However, starting with scanning and imaging and moving into internal hosting and review platforms, many of them woke up one morning and had multi-million dollar technology investments.

But now, with the onslaught of the technology rigors of eDiscovery possibly rendering the current investments that law firms have in technology along with the growing realization in the market that the enterprise needs to manage their own ESI, where does this leave the technology offering(s) from the law firm? And, what value to they bring to the supply chain? Should law firms go back to providing legal council and leave the technology to the technology vendors and the legal departments? Or should the law firms jump into the single source vendor fray and truly be a source for all of the legal advice, technology, services and consulting required to support the entire litigation case lifecycle?

Gathering Input to Publish a Report
Over the next month I will be investigating these questions and therefore welcome input and/or comments from law firms, corporate legal departments, litigation technology vendors and litigation services providers. I will publish my finding in early October 2008.

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