Project: Corporate Counsel Part II (Compliance Readiness) - Legal Service Providers Process Managing Electronic Discovery

Monday, August 1, 2005 - 00:00

Karl Schieneman
Ernst & Young

The severity of sanctions and problems with the electronic discovery productions in a spate of recent cases might cause in-house lawyers and law firms to begin to question if the best methods for handling electronic discovery matters are being observed. This article will focus on how some companies are re-evaluating their electronic discovery processes in light of the pressures caused by electronic discovery.

Some of the challenges frequently cited by parties who have faced electronic discovery are the difficulty in locating electronic records, the lack of filing systems for electronic records, getting business people in companies to diligently attempt to locate their responsive records, employees who feel that by deleting or hiding electronic records, they might be helping their case or individual situation, and communication errors associated with trying to get larger organizations to change course to appropriately address an electronic discovery issue. Ineffective document management processes was one of the key findings by Cohasset Associates, 2004 Electronics Records Management Survey co-sponsored by ARMA and AIIM. This study revealed among other things that 41% of records management professionals surveyed found their record management programs either marginal (18%) or fair (23%), the lowest two results on a five point scale. Surprisingly, 47% of the surveyed record management professionals said electronic records are not included in their retention schedules.1

Part of the problem might also be that electronic discovery is so dissimilar from traditional law firm practice involving individual lawyers or small teams working to advise clients on legal issues. However, electronic discovery is not a task your "grandfather's law firm" would have undertaken. Law firms who handle sophisticated electronic discovery matters with voluminous amounts of electronic records realize these types of projects put a strain on resources and require skill sets in management and technology know how that are generally not part of a law school curriculum. In addition to the challenges identified above, law firms face many other practical pressures in electronic discovery, including assisting clients with pulling the records and maintaining them without altering or losing them; selecting the best technology for retaining, searching, analyzing, coding, redacting and producing the electronic records; and determining how to staff and manage these projects in an efficient and effective manner. So when issues arise with these tasks, there may be a void of management experience which makes it not only difficult to manage such a process, but even more difficult to spot problems quickly and change the process if required.

There seems to be emerging from companies actively evaluating electronic discovery a recognition that companies need to take control of their electronic records in general and establish processes and practices that support litigation and electronic discovery. These companies understand that establishing processes and practices dealing with electronic records for only one case is foolish, given that electronic discovery is here to stay. According to Fred Egler, Chief Counsel - Litigation at PNC Bank, "companies must find their own solutions for managing their electronic information instead of relying on outsiders and also set the tone for their processes to their outside electronic service providers." Egler added, "[t]his is extremely important because while most companies have not yet experienced how painful the electronic discovery process can be, given cases like Morgan Stanley and Zubulake, it is likely that electronic discovery will become a normal occurrence for many larger companies."

According to Jim Michalowicz, Litigation Program Manager at Tyco, a company's obligation for electronic discovery litigation or any complex litigation is to "set the tone and own the process, define it, and get their service providers to consistently get it." Michalowicz has broken the litigation document management process into seven steps: 1. Define & Refine, 2. Identify, 3. Preserve, 4. Collect, 5. Convert/Index, 6. Review, and 7. Produce. In this process, it is interesting to note that the outside law firm is often only primarily responsible for the first step and then works in tandem with the company and selected service suppliers for achieving the last six steps. Michalowicz suggests the reason for this evolution is "companies are recognizing the benefits associated with a consistently applied document discovery process to minimize or eliminate the risk of discovery abuse allegations." Michalowicz added, "[l]aw departments can fully appreciate how re-engineered processes can lead to efficiency and also the reduction of risk."

The approach suggested by Michalowicz is echoed by Kevin Esposito, Director of Electronic Discovery at Pfizer, Inc. Pfizer has become very "hands on" in electronic discovery from the selection of technology, "taking an active role in vetting the attorneys who will handle the review," and even establishing a document review center where electronic discovery projects are managed.

One company which has been chipping away at the management of electronic discovery and complex litigation for the past four years is Nationwide Mutual Insurance Company. Joseph Kasouf, Senior Counsel at Nationwide reflected that before their process of taking discovery in-house was started, "there was no consistency in reviews, accuracy was not always great, and document reviews were very expensive." Kasouf has stated his objective is to "manage discovery from beginning to end." By controlling the process, Kasouf's group has saved tens of millions of dollars over the past four years and received positive attention throughout the company.

The evolution of companies taking control of electronic data is viewed positively by many law firms who have experience with electronic discovery. James Daley, a partner in charge of electronic discovery at Shook, Hardy and Bacon LLP, believes that e-discovery difficulties are often a symptom of inadequate records retention policies and processes. Daley observes that "Recent court rulings demonstrate companies must be able to locate and produce relevant electronic information." Daley further notes that "Consistent electronic records retention programs can help companies significantly reduce costs, as well as avoid discovery sanctions."

In conclusion, electronic discovery has put new pressures on the legal field perhaps like no other force impacting the legal industry. It is an evolving field as both companies and law firms seek to identify the best methods for approaching electronic discovery projects. The recent spate of headline-generating decisions only further highlights the need for the legal industry to continue working on developing effective tools and processes to handle these types of matters. Companies taking proactive steps to manage their electronic documents as well as the electronic discovery process are steps that some companies are successfully implementing and are worth evaluating by other companies who face frequent electronic discovery challenges.

1 There are many other eye opening findings in this survey which can be found at www.cohasset.com.

Karl Schieneman, Esq./MBA is Vice President of Special Counsel and was selected as 2004 Ernst & Young Entrepreneur of the Year.