Nine Tips For Controlling Discovery Expenses And Risks

Monday, August 25, 2014 - 12:38

Whether in major litigation or a government investigation, big discovery projects can be expensive and bruising. Here are nine ways that inside counsel can help keep pending and future projects on time, on budget and under control.

1. Pursue strong information governance

In our team’s experience, the biggest driver of costs in litigation is poor information governance. Fewer and fewer documents are stored as paper in boxes that take up leased space. Most data has moved to electronic repositories where storage costs have dropped radically year after year. Low storage costs incentivize data hoarding, i.e., retaining material that has outlived its usefulness. The consequence of hoarding is that when a major legal event occurs, such as litigation or an investigation, the amount of data that must be preserved, processed and collected is greater. This increases costs proportionately.

Combat hoarding by creating and enforcing a compliant records retention policy mandating elimination of material that has no business or historical interest to the company – and establishing complementary IT policies. A properly planned, implemented and audited data governance program will reduce everyday costs of storage, enhance data security, and lower costs in the event of a major legal matter. You should also pursue measures to keep company data on company systems – because personally owned computers and devices used for business often become subjects of discovery.

Do not neglect backup hoarding. Companies with their own email servers typically back up to tape. Less disciplined IT departments often keep the tape media for decades – even though the equipment to read it or use the data may be long gone. Your company is unlikely to have a business need to restore backups from, say, Christmas 1988. More likely, that media will be discovered and dragged into future legal matters – because it “might” contain some “important” data. If your company’s backups are for disaster recovery, limit backups to what is reasonably necessary to restore the system after an outage. Otherwise, you may end up paying to process and review large amounts of redundant or useless data.

2. Plan for legal holds

Legal holds (or litigation holds) are here to stay. Judicial opinions strongly suggest, and in many cases require, that a written hold notice go out to persons possessing (or controlling) information that is relevant to a pending or reasonably anticipated legal matter. Hold notices should be sent out as quickly as possible both to instruct employees and to document steps taken. You should have a standardized legal hold ready to complete (or to complete quickly on consultation with outside counsel) plus organization charts sufficient to identify relevant managers who can then cascade the notice to employees who have the ability to save (or destroy) relevant information. Your readiness goal should be to get the legal hold out as soon as possible after you learn of the investigation, litigation or third-party subpoena – or as soon as there is a realistic possibility that your company will institute a suit. Successive notices can be distributed as you learn of additional potential custodians. If your particular matter requires arresting backup rotations, IT needs to know before the next night’s backups are run, if possible. Most backups are run late at night or early in the morning, and in most backup schemes, an older backup is being rewritten by a newer one.

3. Work with IT to understand company data systems and limitations

At some point, a legal matter will force an accounting of systems your company uses, for example pursuant to an electronically stored information (ESI) protocol or in Federal Rule 26 disclosures. If you receive a criminal subpoena, you may be asked to identify your major systems. And in any event, having this type of information can help keep organization and spending under control.

Some larger organizations have forensic IT departments with a good grasp of the company’s data systems and what each does; others hire consultants to create “data maps” to provide a high-level view. Organizations without those budgets still should develop at least summary information for key systems – because without it, parties almost universally take longer to implement legal holds and pay more to collect data. Most IT departments at least have listings of applications they support.

It is also helpful for in-house counsel to have a quick, top-level description of the various systems in hand in advance of a contingency. No one expects a legal department to have perfect IT comprehension, but an inside attorney with a knowledge of the data landscape stands a better chance of avoiding missteps and extra costs.

4. Help IT create a plan for preserving and collecting data if something arises

Losing time in implementing legal holds can lead to sanctions or even prosecution. IT departments often are blindsided by the need to support legal holds. One frequent consequence of backup hoarding is lack of spare media or capacity on site. This makes retaining older backups (often required in investigations and sometimes in civil suits) very difficult – because business needs are in contention with legal obligations.

You should also prime IT people in advance on what is typically required for legal matters, so that they can have at least a high-level procedure in place for protecting and collecting data. This includes things like disk imaging, pulling current email accounts, and locating and collecting network file space associated with a particular user or group. The first priority should be understanding how to isolate and protect pertinent data sources; the second is actually collecting them.

Finally, it never hurts to explore relationships, in advance, with local vendors who can handle preservation and collection functions that your organization cannot. This will help to prevent panic when a new legal matter arises.

5. Create and enforce a procedure for equipment and infrastructure changes

A major cost and risk multiplier in legal matters accompanies changes in personnel and equipment, typically departing employees or equipment that is being disposed, reloaded or redeployed.

Risk flows primarily from failing to track data associated with outgoing personnel or equipment. If an employee pertinent to a legal matter departs during that legal matter or when it is reasonably foreseeable, his or her data (residing on laptops and network locations) might be lost, leading to claims of spoliation or, depending on the circumstances, criminal sanctions. It is important at the outset of a legal matter (or threat of it) to give a “watch list” to IT personnel so that they can make arrangements to preserve data that is otherwise endangered. The same goes for lease turn-ins or other dispositions of computer equipment.

Costs are usually incurred with old equipment that has been around too long, like the old laptop that is sitting in IT or in a file drawer. Sources like these often get pulled into legal matters either because they hold information of long-departed key players or, conversely, because no one knows what is on them or who used them. When a data source is no longer needed for business, when its data is outside required retention periods, and when there is no legal matter requiring its preservation, it should be eliminated.

6. Give your attorneys access to witnesses

Few business unit witnesses are paid $20,000 an hour for their day jobs. But an hour of their time can yield that much in cost savings. Although every organization has its own internal politics, inside counsel is not doing anyone any favors by allowing witnesses to dodge interviews with counsel, to delay them until late in the matter, or to point to a big pile of documents and say, “it’s in there.” These witnesses are likely to be questioned under oath at some point, they are often the key decision makers for purposes of the legal matter, and it is seldom possible to completely understand a factual scenario or transactional process solely from its document trail. Input of key witnesses at the beginning of a case helps avoid serious missteps and, by allowing a more focused document review, can greatly reduce costs.

7. Maintain historical information on your use of outside attorneys

Protecting privilege is critical. Your counsel may be able to obtain the return of inadvertently produced privileged documents, but one cannot erase the memory of opposing counsel, who may now know your trial strategy. In a document review, it is very expensive (and somewhat risky) to have outside counsel start from zero when determining what is privileged. Providing a list of past outside counsel (or even outside counsel firm names) can help the review team more quickly and effectively build a list of persons and entities associated with the attorney-client privilege or work product immunities. You may already have the records to tell you who is (or was) on the in-house legal team. And if nothing else, your accounts payable department may be able to generate a list of outside firms for you.

8. Don’t assume that “the easy way” will work (or that one exists)

Overproduction presents the greatest risk in a document production. Litigants are often drawn to the “document dump” because it promises to save money in the short term. The usual suggestion to “pull the privileged stuff out and produce the rest” almost never works. First, it is almost impossible to divine a set of search terms that will accurately remove all privileged material. There likely will be inadvertent disclosures, and some federal courts have denied clawbacks where a party has not given its document production due care.

Second, irrelevant documents can still do harm. They may give opposing counsel more ammunition in your matter – or in the absence of a protective order, give your competitors insights into your company. And although you might have a protective order to protect against the re-use of documents in other litigation, opposing counsel now has the road map for the discovery requests that get directly to documents needed to support the next suit against your company. And litigants who employ overproduction techniques more often than not are surprised by how much personal or inappropriate material ends up being produced. You do not want to be defending the “confidential” status under a protective order of someone’s romantic communications, medical information, or pornography collection. Similar warnings apply to over-reliance on predictive coding, which frequently requires a degree of overproduction to get the material that is relevant. In some contexts this is very dangerous.

Finally, overproduction can irritate opponents (not a good idea if a criminal enforcement division is your adversary). Sometimes issues of overproduction reach the court, and there have been federal decisions where overproduction has been sanctioned.

9. Do a postmortem with outside counsel

The only thing worse than paying big for an electronic discovery project is not learning anything from the experience. Ask your outside counsel where changes in internal policy and practices might help avoid costs and risks in the future. Although your own inside client may not take all of the suggestions, a postmortem at least arms you against uncomfortable questions from business units as to why certain aspects of a matter cost what they did.

Dante A. Stella, resident in the firm’s Detroit office, heads Dykema’s electronic discovery practice and co-chairs the firm’s Discovery Management Group. Mr. Stella focuses his practice in litigations and investigations that involve complex legal, factual and data management issues. He also provides non-litigation counseling to clients on data retention, information infrastructure, and electronic discovery planning.


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