Julia Brickell, associate general counsel for Altria Corp., has an important message for general counsel seeking to rein in skyrocketing legal costs by bringing more of the e-discovery process in-house.
"Just get started," says Brickell, whose company is the parent of tobacco giant Philip Morris. "Outside counsel isn't familiar enough with your internal organization to address this issue intrinsically. You've got to assemble a team that includes your outside counsel and IT department. You've got to assess your needs and then begin the process of working with e-discovery vendors to see what they can offer."
With CFOs placing increasing pressure on GCs to reduce expenses, e-discovery costs have become a major target for cutbacks. Fulbright & Jaworski's annual study of litigation trends named e-discovery as the No. 1 new litigation-related burden for companies with revenues of more than $100 million.
That's why more and more legal departments are taking the e-discovery bull by the horns and systematically examining how electronic data is stored, located and extracted; how partnering with e-search vendors and other consultants can reduce the time and cost of an e-discovery search; and how to establish internal processes and best practices that provide real, quantifiable savings.
"When it comes to being prepared for e-discovery, for some GCs it's a function of where they are," says Michael Clark, principal of EDDix, an independent research firm that reports on the e-discovery marketplace. "For those in regulatory or litigation intensive industries such as tobacco, banking and telecommunications, litigation is almost a line of business. They are familiar with the nuances of e-discovery, as are their law firms."
A Team Approach
For those companies that aren't in litigation-intensive industries, the process of determining how best to reduce the e-discovery burden and the associated costs can be daunting.
"There are a lot of areas for risk reduction and cost containment in e-discovery," says Jonathan Redgrave, principal at Redgrave Daley Ragan & Wagner, a law firm that specializes in e-discovery matters. "But right now, a lot of companies are in a more reactive mode. The idea is to fix the hole in the roof before it starts raining."
The best way to find and patch the hole, experts say, is to assemble an interdisciplinary team consisting of people from the IT and records management departments, outside vendors, consultants and inside and outside counsel. It is the responsibility of that team to put processes together to handle e-discovery requests and to ensure that appropriate document-retention polices are in place and are being followed.
"The most important member of the team at the beginning of the process is your IT department," Brickell says. "Your IT people will help you understand the internal company structure. Further, they can help you select e-discovery vendors. It also pays to include your outside counsel. They will learn as you learn."
Once the team is in place, Brickell recommends that the team test all phases of the e-discovery process. She suggests the team conduct a fire drill or pilot program to identify any weaknesses.
"I cannot overemphasize the value of a pilot program," Brickell says. "It will help you identify the stress points. And e-discovery vendors will work with you at either no or low cost. You can identify and correct problem areas, determine what your needs are and begin the vendor-selection process all at the same time."
At Altria the team assigns project managers to oversee each pilot program. It is the project manager's responsibility to ensure the process is working and remind people of what they need to do and when. For example, it was one manager's job to examine the company's data-extraction process, which typically includes locating and extracting the electronic data, shipping it electronically to a vendor for processing and then delivering it to outside counsel for review. Once the initial pilot was complete, the team expanded the testing to progressively larger data sets until they had optimized the process.
A similar effort is underway at New York City-based Verizon Communications Inc. Patrick Oot, senior counsel with the company's antitrust and strategic projects group, also serves as the company's first-ever director of e-discovery.
Oot says Verizon's e-discovery team works with in-house and outside counsel, IT and document-management representatives who operate under an ongoing "master plan" that assigns specific tasks to each participant. Since its inception, the team has focused on a wide variety of e-discovery initiatives, both large and small.
One of the largest involves developing a list of preferred e-discovery vendors.
"The goal is to leverage our e-discovery data volume and establish a group of preferred vendors," Oot explains. "Right now our outside law firms usually choose our e-discovery vendors. We want to streamline our e-discovery spending and get national cost reductions in place. We did an initial analysis on a small set of cases and indications are we can reduce our vendor costs by at least 30 percent."
According to EDDix, that type of approach is gathering steam nationwide. "Roughly 90 percent of those decisions are still being made by law firms," Clark says. "But there are leading-edge corporate law departments that are negotiating their own deals."
Of course, doing that requires a strong relationship between legal and the IT department.
"Having the IT department involved is obviously crucial," Oot says. "Finding data is difficult enough, but finding the person charged with managing that information is even harder."
Managing and locating data is no longer a problem at Cisco Systems Inc. Beginning five years ago, the company invested in electronic storage systems that support tracking, retaining, organizing and archiving hardcopy and electronic data. To reduce e-discovery costs further, the company developed its own electronic search software.
"A lot of litigation arose after the technology downturn," says Mark Chandler, Cisco's vice president and general counsel. "We saw a need to make these investments. So we started the document-preservation effort first. You have to be able to conduct a search with a high level of confidence, and we had folks with a lot of insight on how to organize information."
Once its document-retention policies, procedures and electronic storage systems were in place, Chandler says the company focused on resolving the all-important search process. Rather than leaving it up to outside counsel and an assortment of vendors, Cisco developed a proprietary search engine capable of culling through terabytes of data to identify responsive documents.
"The key is to identify and limit the size of what your outside lawyers have to review," Chandler says. "To do that, you have to apply some kind of intelligence to cull out the duplicates. We broke that into 20 discrete tasks, figured out the work involved for each one and then built a software system that automates the process. The software culls out the duplicates and helps us reduce the data down to the true gems."
If and when litigation ensues, Cisco serves as both client and e-discovery vendor. The company's legal department works with outside law firms to determine exactly what kind of data is required for a particular case. With Cisco handling the search, outside counsel bid on the review work. In one instance, Chandler says a law firm reduced its review bid by $1 million after the company demonstrated its search technology.
"We're not just passive," Chandler says. "We're actively taking responsibility and teaming with our outside counsel to drive down costs. With e-discovery, it's a mindset issue. Companies need to start thinking about what they can do to be a better client to their law firms. They need to say, 'Here's what I will do to make the process more efficient.'"
After all, he adds, "Luck comes to those who prepare."