Offsetting Sticker Shock

By Tony Kontzer  |  Posted 2012-07-11

By Tony Kontzer

When it comes to the electronic discovery of documents, less is more.

This concept is driving corporations and law firms to tap into a new generation of e-discovery tools designed to help them more effectively focus their document searches. It's an issue that strikes right at the bottom line: The more documents handed over to attorneys for review, the more expensive the discovery process is.

At United Technologies, efforts to pare down the amount of data it routinely handed off to third parties stretch back to 2007, when the company started looking into how it would cost-effectively comply with a wave of e-discovery legislation. Prior to that time, UTC had relied completely on those third parties to handle every part of the e-discovery process. But by late 2008, the Hartford, Conn.-based aerospace and building systems giant had decided to bring some of the process in-house, funding a team that would handle the collection and culling of documents needed to respond to regulatory and legal inquiries.

Early the following year, UTC (whose business units include aircraft engine maker Pratt &Whitney, helicopter manufacturer Sikorsky Aircraft Corp., and Otis Elevator Co.) began assembling that team, brought in e-discovery software from Guidance Software and Clearwell Systems, and started collecting broad swaths of data in search of relevant documents.

In relatively short order, the team realized it would be simpler to make a list of documents it didn't need. However, as it became more familiar with the software's capabilities, it moved on to more targeted inclusion lists, eventually adding filters that allowed it to search for documents by date and keyword.

The results spoke for themselves. "We were bringing in a very small fraction of the data that we used to," says Timothy Rogers, group manager of IT security and the man who recommended—and now leads—the internal e-discovery team.

Things got even better when, late last year, Rogers' team began working with UTC's internal legal staff to complete "first-pass" reviews of culled documents, a move that Rogers estimates has eliminated nearly one-third of the data being handed over to third-party lawyers. All told, Rogers says UTC's lawyers are reviewing 95 percent fewer documents than they were before the company acquired its new tools and began refining its e-discovery process.


Keeping Costs Down

UTC's tale is representative of e-discovery trends, as corporate legal departments and law firms look to tap recent advances in e-discovery technologies to bring down client costs, says Nick Pace, staff behavioral scientist with Rand's Institute for Civil Justice, and author of the recent report, "Where the Money Goes: Understanding Litigant Expenditures for Producing Electronic Discovery."

"Any money being spent on litigation is bad," says Pace. "You want it to cost as little as possible for everyone."

Pace says that there's still a lot of progress to be made in the area of document review, which now accounts for 73 percent of all e-discovery costs—a fact on which e-discovery vendors are focused. One of the up-and-coming technologies that’s helping with reviews is called "predictive coding," which is designed to replace the eyes of attorneys by finding relevant documents within large volumes of data. (Spam filters are a perfect example.) But Pace says predictive coding is more effective in larger cases, in which the volume of documents renders human review cost-prohibitive and inconsistent.

With the review stage remaining such a costly component of e-discovery, corporations are looking for other creative ways to get costs under control. For instance, Abby Dodd, director of e-discovery services for consultancy DW Legal Solutions, says clients are increasingly asking for per-document or project-based pricing, rather than hourly fees, so as to make costs more predictable. She expects that cost-conscious approach to result in more offshore outsourcing of e-discovery processes.

Dodd also says that more companies are demanding that consultants have expertise working with their chosen e-discovery tools. This enables more cross-case discovery efforts and stretches e-discovery dollars.

But for most companies, the name of the game is reducing their dependency on attorneys, even in the earliest stages of an e-discovery process. Ed Goings, principal in charge of forensic technologies for KPMG's Midwest operations, says that one of the ways the consultancy has attempted to meet that requirement is by matching a variety of e-discovery tools to their strengths. That makes the collection and culling of data more efficient and, ultimately, reduces the number of hours attorneys have to spend reviewing pertinent documents.

A case in point: In a recent case involving a global retailer, Goings was asked to help respond to inquiries from U.S. and European regulators regarding a potential violation of international anti-corruption laws. It was a potentially devastating inquiry that required the retailer to investigate its data in numerous countries. That meant searching different kinds of systems, in different languages, backed by different business processes.

By using an assortment of e-discovery tools deployed at the retailer's various locations to more effectively target relevant users and their data, Goings estimates KPMG was able to save more than $10 million compared with what the broad-brush approaches of the past would have cost.

The ability of new technologies to replace attorneys in the early stages of e-discovery and reduce their role in later stages has had a huge impact on KPMG's e-discovery client profile. Going says the ratio of corporations to law firms in his client mix has completely flipped: Whereas more than 90 percent of his clients were law firms five years ago, today nearly 90 percent are corporations.

"Corporations have taken charge of the e-discovery life cycle," says Goings. "They understand that they may not be able to keep all the e-discovery skills on staff, but they've realized that to manage costs, they've got to bring it back in house."


Offsetting Sticker Shock

Law firms are cognizant of this and are doing everything they can to reduce their e-discovery costs, most notably by adopting e-discovery technologies themselves. At Thompson & Knight, a 375-attorney firm based in Dallas, e-discovery tools have helped to offset the sticker shock clients used to experience when pricing e-discovery services.

In particular, Thompson & Knight is using Relativity, an e-discovery tool from kCura, to streamline its processing of collected documents. On a recent case in which the firm had collected 2.4 million documents totaling 450 gigabytes of data, it would have cost nearly $250,000 to have a third-party process those documents. Using Relativity in-house, the tab was less than $20,000.

Just a few years ago, that wouldn't have even been an option, says Danny Thankachan, Thompson & Knight's litigation support manager. "Bringing these kinds of capabilities in-house has helped us save clients enormous sums of money," he says. "The speed at which key pieces of information can be gathered has just improved dramatically."

Thankachan also wants to use predictive coding to bring down review costs, but third parties charge too much for the service for it to be a viable solution. Help is on the way, though, as he expects to have predictive coding capabilities in-house within six months, thanks to an expected upgrade to kCura's software.

And, as Rand's Pace notes, predictive coding and other technologies designed to supplant attorneys' eyes represent the future of e-discovery. Without them, he says, there isn't a whole lot more savings companies can squeeze out of the process.

"You get to the point where you've done everything you can to reduce the cost of e-discovery, and we're still talking about millions of dollars," he says. "You need to start moving away from the idea that an attorney has to look at all of those documents."