Using Your Data to Predict Litigation Costs: Technology is driving up costs, but it may also hold the key to getting a handle on them

Tuesday, July 4, 2017 - 21:06

How we manage e-discovery is an ever-evolving thing. As the landscape changes, new trends constantly emerge that alter the way that corporations, law firms and service providers operate. Constant change is expected and necessary, given that data volumes continue to skyrocket. Coupled with stagnating and even declining litigation budgets, this means that the industry is ripe for yet another round of evolution.

Corporate legal departments have answered the call for change and realize that they must find new ways to control soaring costs. By thinking about where they came from, these departments have realized that years of litigation have given them one precious thing that may help – enough historical data to build tracking and prediction methods for the future.

The Past

We all know the horror stories of the expensive and inefficient handling of electronic data during the e-discovery dark days. Lawyers had to rely on technology that created static and often unorganized images of files to review. The process was often clunky and terribly costly to the corporate client. That inefficiency gave rise to an effort to revitalize the process, and save corporations on their litigation costs.

Technological solutions evolved. Legal service providers focused on these  advancements and improved the process. And corporate legal departments began to devise ways to control their ever-rising litigation costs.

These changes led to huge improvements over the mass quantity of billable hours being sunk into electronic review. Legal service providers were well positioned to thrive in this environment. They could show cost savings on a case-by-case basis, giving corporations the drop in spend that they were looking for. However, the landscape was about to change again.

Over time, these gains became an expectation. And data continued to increase, and corporate legal departments were finding that their litigation budgets were again falling short. How could they balance the ever-rising cost of litigation attributed to the growth of data with their budget shortfalls? Ironically, the answer could be found in their own data.

For years these legal departments had been supporting litigation efforts that created a trail of information – information that, if mined correctly, could aid them in controlling their costs.

The Present

In the last year there have been a number of articles, studies and industry discussions on the ways that corporate legal departments can control litigation costs. The speakers and writers come from a wide spectrum of corporations, but they seem to have a common message: In order to control your spend, you must also control the process. You must track and continually reform it using the metrics at your disposal.

The Association of Corporate Counsel’s Legal Operations Conference, held in June, provided multiple sessions on this topic. One in particular – “Five Ways to Better Control Discovery Spend” – highlighted the need for real-time reporting and analytics through a legal dashboard.

The need for good metrics is understandable, but how do corporate legal departments ensure that they have the metrics they need? To obtain them, you must first be able to locate your data. With this in mind, many corporate legal departments have created preferred vendor and counsel programs. Limiting the number of partners that a company works with during litigation has many benefits. For example, it allows vendors and law firms to become intimately familiar with company processes, limits the amount of startup and quality control time a project requires and allows for more predictable and stable pricing.

Most important to metrics tracking, this centralization of work allows a corporate legal department to know exactly who has the data and metrics they need to track and predict future spend. Once the data has been centralized and is available, they can determine what information they need. The most relevant information falls into two categories: actual spend and the work associated with it.

Actual spend is the amount of money invoiced for a particular project over its lifetime. These metrics are typically pulled from a billing or invoice receipt system. Thomson Reuters Legal Tracker recently published its first Legal Department Operations Index Benchmarking and Trends Report.[A1]  This report provided the metrics that were most utilized by customers of its e-billing system. Those metrics are:

  • Total spend by law firm
  • Total spend by matter type
  • Total spend by practice group
  • Number of legal matters opened/closed
  • Savings from invoice review/reduction
  • Total spend by business unit

Harnessing this specific data allows a corporate legal department to understand their biggest litigation challenges and the areas that take up the most of their budget. By picking apart which matters cost the most, or what practice groups spend the least, a corporate legal department can determine how best to allocate their upcoming budget forecast.

Once spend is clear, efficiency can be measured. For this purpose it is important to measure the cost of the entire process. Corporate legal departments must ask, “What is the total cost of the end result?” If a total cost tied to the result can be determined, the department can then measure whether the effort was worth the cost. To determine that amount, the following should be measured:

  • Data collected
  • Reduction amount prior to review (via culling, deduplication and other methods)
  • Documents reviewed
  • Relevant documents
  • Production size
  • Scope of privilege log

Using these metrics, a corporate legal department can determine what the cost is to produce an individual document, for example. If metrics for similar types of matters in the same business line are available for a year, think how powerful that information could be! A corporate legal department could use it to formulate a cost-benefit analysis in a similar matter just by harnessing the information from their own data.

The Future

As new technologies and communication methods emerge, the volume of data will only continue to increase, leaving corporate legal departments forever trapped in the Sisyphean task of controlling the constant rising litigation costs. Collecting and analyzing historical metrics on spend and efficiency will be a powerful tool in the fight against the data surge, but these departments should not have to do all the heavy lifting alone.

Their trusted partners that have access to the same information and the technical capabilities should step into the role of metrics gathering and delivery. These partners, the legal services firms, can use these metrics to become process advisers that offer a holistic approach to cost savings by leveraging the information. Taken one step further, legal services providers can also leverage their knowledge of data across their clients, projects and served industries. This would allow the provider to build out full prediction models for litigation costs, thereby taking the brunt of that work from their client’s shoulders.

So, although corporate legal departments may not be able to hold off the rising tide of data, they may be able to anticipate what it will cost them. As they continue to be understaffed and overutilized, this teamwork will be paramount to their success. Knowledge is power and allows us to be proactive. Providing this level of insight will be instrumental in keeping these departments moving in the future.

Jeanne Somma is the director of analytics and managed review at RVM Enterprises Inc., where she serves as a resource for clients on issues of discovery law and analytics. She can be contacted at jsomma@rvminc.com.