ACC Boston: law department technology wrap up — reducing costs and increasing the control over all that data (Part 1)

As last week’s sessions at ACC Boston (click here) certainly stressed — stress being the operative word — in-house legal departments have been forced to cut their budgets just like their “sisters”, the law firms.   But with a greatly increased workload.  And it is due not just to the increase in litigation/investigations but because of regulatory/compliance issues.  As one GC told us, “we have more and more regulatory/compliance issues and we are seeing far more regulatory inquiries than in prior years … and we simply cannot cover it all.  Worse are the ‘information requests’ which seem to have tripled”. 

Corporate law departments have always sought ways to control spending on outside counsel — which (according to ACC members we spoke with) can be 60 percent or more of their budget.  Costs of outside counsel had been growing at eight to ten percent per year while law departments’ budgets averaged four to five percent growth per year. So, the question facing general counsel has been:  “How can I deal with skyrocketing outside counsel expenses on an ever-shrinking corporate budget?”

The next largest drivers are salaries for house staff and technology costs. Legal management software, for instance, covers not only the basics like spreadsheets and word processing but also more complex functions like matter management and spend management solutions as well as e-discovery tools, which increasingly includes tools that enable a law department to bring some of that work in house and not rely as much on outside firms.  As the staff at LexisNexis told us “technology costs are growing today because there is more pressure to reduce budgets by using technology to reduce people costs” [LexisNexis introduced us to their product CounselLink  which captures all legal department spending. We’ll detail that in a subsequent post]. 

So with the litigation train continuing to steam ahead, creating ever-increasing risk management challenges for large corporations, many corporate legal executives have come to the conclusion that their best option for survival is to wrest back control over their litigation portfolio. This may be a bit of a hyperbole – few companies ever actually ceded their litigation management to outside law firms over other service providers – but it seems clear that the balance of power in the control over how litigation is managed is swinging back toward the corporate law office.

And as Craig Bennett of LexisNexis recently opined “one important metric that benchmarks the industry trend of more legal work moving back in-house is the shift in hiring plans this year. According to an Inside Counsel survey reported in the March 2009 issue, 48 percent of corporations plan to reduce the number of outside law firms they use, but a nearly identical 49 percent plan to increase their number of in-house staff attorneys. Clearly, the trend is toward companies exercising greater control over their litigation portfolio”.  For his full post click here.

But it is not just in the discovery process but for overall efficiency in all law department operations.  It is part of the compliance initiative, an understanding of the broad Governance, Risk and Compliance (GRC) program that all law departments have developed or are developing.  The explosion in technology over the past 15 years and the “sudden appearance” of e-discovery are just a part.  Yes, dealing with e-discovery is a component of a risk management program, and understanding how e-discovery magnifies risk is one of the major factors in compelling companies to be proactive in setting up compliance and risk management programs.   But how a company goes about addressing the risk of litigation before a summons and complaint are served is where the battle lies.

There is still, in many companies, a patchwork of technologies and solutions to address a variety of problems — in place but disconnected.  Too many technologies make for overlapping coverage of risk and, at the same time, gaps in coverage.

Which is why we heard the clarion call (at least 1 million times last week) from GCs and AGCs: “we need a proactive information management strategy that can greatly improve our preparedness and increase our organization’s cost savings.” 

But let’s focus on the immediate concern in the life of an in-house counsel is a scenario (or a variation of this scenario) playing out daily in countless companies around the country:  you just received a complaint filed in Federal Court … or if you’re PepsiCo it’s a $1.26 billion default judgment  because you forgot to show up in court 🙂  

The complaint raises [product liability claims, contract violation claims, patent infringement claims, fill in the blank] and the allegations implicate the engineering, manufacturing, marketing and sales organizations. Relevant information needs to be identified and preserved, and the clock has started ticking.  What do you do?

But whether the information request comes in the form of formal discovery, a request for information from a government agency, or the need to identify information relevant to a pending internal investigation, the steps you have taken to manage your information before such a request materializes will have a direct impact on your ability to respond.

Today, information is being generated at such a rapid pace that the typical reactive approach to discovery no longer makes sense. As courts and practitioners have struggled to interpret the practical application of the revised Federal Rules of Civil Procedure, the challenges of handling these issues have highlighted the need for a different, more efficient approach to the discovery process. This has become even more apparent given today’s economic climate and the need to reduce costs and promote efficiencies.

For many organizations, responding to discovery or requests for information has been reactive, something akin to a fire drill. The typical response was a shotgun approach where information was over-preserved and then provided to outside counsel for review.   In today’s world of electronically stored information, these practices do not scale.  The reactive approach is time-consuming and expensive, and it diverts resources (both human and financial) from other critical functions within the business.

Enter … technology!   And technology will tell you (ok, the vendor will tell you) “I can help.  Bring all your troubles to me and I will solve them.  But first, let’s make 5 baskets because I work better in a basket, or maybe 2 baskets and sometimes all the baskets  … but the point is I love baskets … and PowerPoints … SlideShare works for me, too”.  Anyway, the baskets:

1.  Information Management

Information management is relevant to all layers of an organization. No matter what a person’s job function entails, it is imperative that end users are able to access the information they need to do their jobs. However, retaining too much information can overwhelm an organization’s systems and increase risk in the event of litigation or regulatory scrutiny.

2.  Centralized Identification/Preservation/ Collection

One of the most significant challenges an organization faces in its discovery process is the ability to quickly identify information that may be relevant to a pending matter and the ability to preserve and collect that information. Oftentimes, the costs associated with identifying and preserving data can be extraordinarily high from both a monetary and a human resources standpoint.

3.  Legal Hold

An organization must make a good faith and reasonable effort to preserve information that may be relevant to a legal or regulatory matter once litigation is reasonably anticipated. Unstructured data and data dispersed across multiple locations makes it extremely difficult to determine what is relevant. In addition, securing relevant information from normal destruction practices can test an organization’s ability to identify which systems and processes may be affected.

4.  Early Case Assessment/Meet and Confer Preparedness

The Federal Rules of Civil Procedure require that parties meet and confer to discuss various e-discovery issues early in the discovery process. In addition to these legal requirements, there is a strategic advantage to being able to review and analyze the facts surrounding your case as quickly as possible. Whether an organization is sued or is evaluating bringing a cause of action against someone else, knowing which information supports your case and which information may harm it can help you evaluate your position and risk.

5.  Review and Production

Given that the bulk of e-discovery costs can be attributed to the review process, the ability to proactively manage some of this workflow in-house can result in tangible cost savings. For organizations that are not staffed to do review in-house, an archiving and review tool can still provide substantial benefit. In these cases, an in-house legal or IT team can simply search the archive for relevant information using specific keywords, date ranges or custodians. This allows much larger data sets to be culled down to more manageable volumes and reduces the amount of information that is ultimately exported for review by outside counsel.

And so we come again to … the technology.  And if the Fulbright 6th Annual Litigation Trend Survey Report is to be believed, this is one hell of a great time to be a litigation/e-discovery vendor.  Or any legal vendor.

So, we have set the scene, we have summarized highly complex relationships and concepts in some ridiculously short paragraphs so now … what technology tools can be deployed to manage/assess data and enable law departments to enhance the department’s global risk management preparedness? 

Good question.  Coming up next in this series are interviews with companies that say “Yes, we can” and they cover a wide range of expertise:  Business Integrity, CaseCentral, doeLegal, eTERA Consulting, Digital Reef, Fios Inc., Huron Consulting, LexisNexis, Lex Mundi, Orange Legal Technologies, Practical Law Company, Recommind, and Transperfect Legal.  

We will then follow with “non-tech” interviews with Ajilon Legal, Foley & Lardner, Hogan & Hartson, Morgan Lewis, Robert Half Legal, and Womble Caryle.