Controlling the Cost of Discovery in a Digital Age By David Haines Legal Solutions Consultant Pitney Bowes Management Services Aside from trial, discovery is virtually always the single most costly part of the case. It is, therefore, incumbent on us as lawyers and our supporting paraprofessionals, to understand the likely extent of discovery in order to determine what the case may cost. Instinctively we know decisions, especially relating to cost control, are made based on facts and data patterns, not opinions. To continuously monitor performance, law firms look at baseline data: billable hours; revenue per partner, associate and paralegal; realization rates; and recoverable versus non-recoverable time, however, the divide between cost control and hourly billing rates continues to grow. Both are exacerbated by the communication, workflow and time gaps that impact relationships among all the discovery parties involved What challenges the preparation of a budget or plan for expected or anticipated costs in discovery in litigation? Think of the last time the question was raised: “How much is the discovery in this case going to cost?” A precise response is nearly always impossible—it can be time-consuming and difficult to control, impacting costs– due in no small part to the lack of control of the case. The presumption is the opposing party and the court determines what will happen and how much it will cost based on the response to the claims being challenged, however, control over the opposing side is limited and control over the court, nonexistent. Further, the scope and costs associated with discovery are impacted by the volume of data requested in demands for production of documents for the opposition, demands for documents from the opposition and document subpoenas to third parties who may have relevant documents. The emergence of Electronically Stored Information (ESI), or electronic discovery, increases the scope and complexity of discovery, driving up costs.

Written responses, and now, written electronic responses, generate questions about the facts, requests to admit facts and requests for information about what documents exist, where and in what form. Are they accessible, “normal course of business” documents? Are they inaccessible or archived? Are they stored duplicate documents due to our need to “reply to all” on every email? Putting the Right Steps in Place to Control Costs of the Discovery Process 1.) Form the Basis for Accountability and Cost Control of Discovery: The emphasis on corporate accountability and ethics has created responsibilities not only for the corporations subject to regulations — from Sarbanes Oxley Act (Section 404) for corporations, HIPPA privacy regulations for healthcare or Gramm-Leach Bliley (GLB) legislation for financial services — but also for outside counsel and consultants who specialize in these critical areas and act as fiduciaries. The Amendments to the Federal Rules of Civil Procedure December 1st 2006 addressing electronically stored information (ESI), has only heightened the awareness that managing, storing, and ESI workflow is a vital component for managing costs. It is no longer sufficient to have written document retention programs, policies and procedures impacting records management. Today on-going education and communication programs to employees and staff with enforcement provisions for those who violate the company policies are needed. Whenever discovery is initiated, we have a duty to perform the following tasks: 1. Preservation — of documents potentially relevant to the complaint or regulatory inquiry 2. Identification — of documents potentially relevant to the case due to the nature of the case 3. Collection — of documents, both paper and electronic in a defensible manner, preserving an inventory of the chain-of-custody of documents by individual custodian 4. Processing — conversion of paper documents into electronic form, extraction of data and metadata from electronic documents, removing duplicates that raise volume levels. 5. Review — privilege and responsiveness or relevancy review by attorneys 6. Depositions — of experts, potential witnesses supporting the fact base in the case 7. Settlements — including negotiations or preparation for trial 8. De-brief — assessments of lessons learned to build best practices to avoid repeating the mistakes of the past With that said, discovery complexities impacting costs in litigation with documents in paper form lead to tacit resignation. Workflow gaps inevitably emerge from vendors exchanging multiple copies of the same document sets.

Today with the prevalence of electronic documents with automated processes for the creation, storage and perhaps destruction of vital company document records, workflow processes have never been more vital. We must then focus on filling the workflow gaps and understanding workflow processes to form the basis for accountability and cost control. 2.) Assess and Determine the Efficiency of your Discovery Process: Estimating the Cost of Discovery The cost and scope of discovery may require answers to the following: 1. Who are the parties to the dispute? what is the valuation of each? 3. What are the missing links of fact between each party and resolution? 4. Could either side win on summary judgment, without a trial? � Who? The question of opposing party and other factors impact cost estimates in discovery. For example, if the defendant is litigating on insurance company funds it presents a different calculus from a defendant litigating a qui tam or whistleblower suit. Or a plaintiff litigating with a contingent fee attorney represents a different calculus from a plaintiff firm funding discovery in a complex class action matter. Knowing the financial status of the opposition also helps in the initial calculations or risks in litigation. � What? A company facing financial insolvency may fight harder, but may be more amenable to considering settlement out of fear. An opponent that will not be affected directly by the outcome of the case, may not put up as much of a defense, and may not consider settlement until late in the case. However, they may be driven to settle because of legal costs. � Missing Fact Base? If a party is driven by ego, anger or other non-economic motives, they may deny well established facts, refuse to disclose or produce key documents deemed relevant to the case. The impact of such motives on discovery needs to be quantified. Experience shows that common sense and economic decisions should drive strategy to settle or dismiss claims, yet they often do not. Awareness of whether these considerations exist in your case is vital Start with a recognition that all data exists in two forms, structured or unstructured. What is structured? E-mail, databases are inherently structured into fields. Unstructured are paper documents from letters, memorandum to the countless loose files we all store in our “someday I’ll need this” area. Second, start to methodically organize your company’s documents, both paper and electronic, adding structure to the unstructured information vital to the conduct of the business.

Documents generated in the “normal course of business,” should begin to establish what is potentially relevant, in the event of an investigation or complaint. Third, update your company policies and procedures and records management system to account for the changes cited above and for the amendments to the FRCP to be in compliance. This is not a fire drill, this is a requisite one can ill afford to postpone. Fourth, investigate and secure fully integrated technology (software) that supports the work performed above to enable collaboration and work flow automation to assure consistent, systematic processes and integration with the existing technology you have invested in. 3.) Manage Document Workflow during the Discovery Process: Now that we all know the discovery process encompasses at least seven (7) steps: 1. Preservation 2. Identification 3. Collection 4. Pre- Processing – filtering, culling prior to 5. Processing 6. Review 7. Production Where can we plan to control costs? Start with Identification, given you know you must, under the law, impose a “litigation hold” or “preserve” all information when an investigation or complaint are filed against your organization. Consider estimating case costs. � Settlement or Trial? Will the litigation and discovery costs have collateral consequences that the party would not wish to endure, such as bad publicity, pressure on a key person or witness, regulatory challenges, alienated clients, exposure of trade secrets? These facts are often overestimated in the calculus of impact. Anticipate resilience in your opponent and plan for the worst case is always prudent. Effectively, weigh the strengths and weaknesses of the opponent to calculate the cost impact to your firm or client. 1. What 2. Where 3. How 4. Why 5. When

Set up a source map (also referred to as mapping your network, but beyond this) by determining to determine your company’s work flow: 1) What you have; 2) Where in the company it exists; 3) How or in what form it exists (paper, electronic-active on a server, archived in storage, on our laptops, thumb drives, iPods, voicemail and more); 4) Why it is stored, i.e. personal information on the company mail server 5) When it was generated –creation date of documents, date modified, by whom? Collection poses the next critical obligation. Don’t wait until the investigation or complaint comes in. 4.) Assemble the right Discovery Response Team (DRT) After the first three steps are taken, corporate counsel can seek to control the discovery costs by seeking out law firms, consultants and technology to help manage the process more efficiently and to control or reduce costs by increasingly taking charge of discovery through DRT. A DRT is assembled from a multi-disciplinary task force of experts from: 1. The Office of the General Counsel, an attorney charged with overseeing the process we have defined 2. Information Technology – select an individual with knowledge of the company network, data storage, and records management system as impacts the Company Document Policies and Procedures you will be updating. 3. Outside Counsel – a respected Partner and Associate or Sr. Paralegal, with knowledge of your companies operations or who will invest in learning the aforementioned. 4. Consultants— a knowledgeable expert in Records Management and Document Retention Policies & Procedures is invaluable to guide you with the latest processes for saving money in this process. 5. Technology Advisor — an independent party, individual who can assure you are using the most cost-effective, latest technology to make the entire process as seamless, practical, usable as possible. These four to five individuals form the core of your Discovery Response Team. These individuals are integral to controlling the cost of discovery with the requisite expertise they bring to the process. And with a proactive DRT, costs increasingly can be managed and controlled. Through these steps— forming the basis for accountability and cost control of discovery, assessing the efficiency of the discovery process and managing document workflow during this process—corporate counsel can begin to put measures in place to control the costs of litigation. Putting the right discovery response team in place ensures that you have the right technology and process in place to succeed and get the return on investment (ROI) you are looking for.