Improving Smaller Companies' Litigation Readiness with Little or No Budget

When you read about litigation readiness, typically larger companies and their legal departments get all the attention. After all, many of the high-profile e-discovery cases have involved such well-known names as Morgan Stanley, Qualcomm and UBS Warburg. The truth is that small- and medium-sized enterprises (SMEs) face similar issues, but may lack the resources to address them as fully as they'd like.

Smaller legal departments tend to be underserved in the legal and technology markets, or so it seems. They generally have smaller litigation dockets, along with smaller headcounts and budgets to manage them. While the vast majority of your litigation matters do not rise to the level of the more newsworthy cases, that doesn't stop the occasional large matter from coming your way--typically complex litigation or a regulatory investigation. With more information being stored electronically, these tend to be disruptive and costly fire drills--especially if your proactive response preparation is lacking.

So in this hostile economic environment with limited resources, what can and should you do to prepare?

Assessment & Awareness is Key

First off, it's important to identify your gaps and related risks. You're probably already aware of some of them, whether it's an over-reliance on backup tapes for preservation or simply retaining too many e-mails or electronic documents in normal operations. Both will add substantially to your discovery risks and costs. Over-retention of electronically stored information (ESI) increases storage, preservation, collection, processing and outside counsel review costs. Indeed, industry observers estimate the legal review by outside counsel can constitute up to 80 percent of litigation costs.

Consider engaging a qualified e-discovery consultancy to provide you with a litigation readiness risk assessment. In addition to identifying best practices and key areas for improvement, such a report arms you with an objective foundation upon which you can make your case for allocating resources and future investments. It's also a necessary first step in the development of a comprehensive litigation response plan.

Revisit Your Policies & Procedures

There is a lot you can do internally that generally requires employee time as opposed to hard dollar costs. Review, reconcile and refine your policies and procedures. You may find that your e-mail retention periods are too long. Absent a specific regulatory or other legal requirement, companies are generally free to set their own retention periods. The trick is balancing the need to retain information necessary for proper business operations against the need to reduce retention to lower e-discovery and review costs.

For example, if your e-mail system retains incoming e-mail for six months or longer in employees' inboxes, consider reducing it to something less burdensome, such as 30 days. Also determine and set appropriate storage limits on users' e-mail accounts. It's amazing how many companies still haven't properly addressed one or the other, and sometimes both.

Train Your Employees

People are your most valuable asset, so why not invest in them? Education and training can help reduce your e-discovery costs. Consider adding effective e-mail usage to your training curriculum, including such topics as appropriate content and retention, and when to use other methods for communication. If you don't have one already, consider creating a corporate university for training initiatives and related programs. Among other benefits, it will allow you to track the status and completion of training on various topics.

This brings us to the big "C"--Compliance. The best policies are only as effective as their overall compliance within your company. How do you know your various electronic usage and retention policies are working if you don't have any internal audit or feedback mechanisms on overall enforcement and compliance? A policy that is not uniformly enforced tends not to be much of a policy and may have the unintentional consequence of actually increasing a company's risk rather than reducing it. Working with your HR and training organizations in shoring up these areas helps to show that not only do you have a policy, you actively educate employees on it and have records confirming enterprise training completion rates.

Understand & Document Where Data Exists & How to Find It

Unstructured data is another area for improvement. "Unstructured data" is best described as the loose documents, spreadsheets, presentations and other files people create and store on their local hard drives, network file shares and folders, thumb drives and elsewhere on company systems. Network file shares in particular tend to be unmanaged, resulting in electronic landfills. They can be a bit more challenging to address, depending on what you have to work with.

As mentioned, a very common problem is reliance upon backup tapes for preservation and collection. This practice adds costs and disruption in pulling tapes out of rotation, purchasing new ones to replace them and the costs of restoring the data to another suitable IT environment. And that's before anyone can even look at the data.

The hidden problem of using backup tapes for preservation and collection is that it also defeats your records retention initiatives. Typically, when backup tapes are pulled from rotation, they contain not only the relevant and responsive ESI for the identified custodians, but likely even more non-responsive ESI from non-custodians. In effect, these backup tapes have become multiple redundant data repositories that cannot be managed effectively or dispositioned by a company's records or content management systems.

This problem is further exacerbated when cascading holds are implemented. But for the earlier legal hold(s), the ESI contained on the backup tapes would have been overwritten However, now you're stuck with it--until your IT department or a service provider performs a tape remediation process to separate the wheat from the chaff.

If you have any Enterprise Content Management (ECM) or Document Management Systems (DMS) within your company, explore expanding their uses since they add much-needed categorization, retention, and search features. If you don't, consider using your existing network management tools to add age limits to various network folders. You can determined these by having a discussion with your IT department. While adding age limits is not nearly as robust a solution as a full-fledged content management solution, it's yet another thing you can do to help content expire at set time limits rather than leaving it up to time-strapped employees who are focusing on more pressing concerns than document management.

Long-term, you should look at a combination of content management and other tools that can automate the process of locating, indexing, preserving, and collecting ESI. Naturally, your level of investment in these tools will likely be driven by your company's particular risk profile and business needs. The higher the risk and probability, the higher your level of cost-justification.

Records & Information Management

Records Management has clearly moved to the forefront of many organizations' litigation readiness initiatives. The more you can simplify your record types and retention categories, the better. However, it's necessary to point out that while improving Records Management (RM) is vitally important to reducing mountains of data long-term, it's not a panacea in of itself with respect to discovery. The simple fact is that declared records are but a subset of discoverable information under the FRCP. With a few exceptions, information stored outside your company's RM system is generally discoverable if relevant and responsive, or if it aids in the discovery of other relevant information.

That said, however, the more your information is well-managed within defined and enforced retention periods, the greater the reduction in risk. Thus I prefer the term, Records and Information Management (RIM), which encompasses a wider focus on managing the cradle-to-grave lifecycle of corporate information in a variety of paper and electronic formats. Companies looking to reduce their overall risk need to continue their efforts in these areas, because over time they will continue to reap benefits.

Developing a Comprehensive Response Plan Before Litigation Occurs

As part of that plan, working with consultants and service providers to determine which efforts can be fulfilled with in-house resources or by service providers. Tying those resources together in a comprehensive response plan can not only prepare your organization, but optimize and reduce your discovery spending. A proper and comprehensive Litigation Response Plan should address both paper and ESI sources, and document procedures for executing the full range of discovery processes. When followed, this results in standardized procedural and substantive responses, and helps to reduce costs, increase efficiencies and compliance and mitigate risks.

In-Sourcing + Outsourcing = Right-Sourcing

Typically, SMEs can't afford to do it all themselves. Your overall level of cases and associated risks probably won't justify such an intense in-house investment in technology geared primarily for e-discovery and litigation response, especially during a tight economy. But you still need to be prepared well before that bet-the-company matter hits your desk. That's far from the ideal time to start shopping for consultants and service providers, as your deadlines are tight and the focus is reactionary. Those two aspects tend to increase costs exponentially compared to proactive situations.

Instead, take the time now to explore and engage those outside resources to better understand what you need in terms of services and technological solutions, and how and when to bring them onboard as part of your comprehensive litigation response plan. You'll want to have trusted advisors as partners in your corner well ahead of time. They can help you assess and develop more consistent and defensible processes, identify more cost-effective ways to accomplish your goals and even provide expert testimony to back them up when challenged. Look for providers who can offer these value-added services.

While there's no silver bullet for enhancing your litigation readiness during tough economic times, there are a number of things you can do to improve your overall preparation without heavily impacting your bottom line. While the focus of this discussion has been on helping small and medium-sized organizations, you should take some comfort in knowing these issues apply to larger organizations as well. Given the long-term benefits of improving compliance and readiness, it's an investment in which in-house counsel can take a leadership role and deliver excellent value-added results with the "Right Stuff"--the effective combination of an informed approach supported by mutual cooperation and optimized sourcing.

About the Author:

Mr. Beard is also a former Legal Services IT Manager with Caterpillar Inc., a Fortune 50 corporation, and is a Six Sigma Green Belt. He has extensive experience with matter management, electronic invoicing, and document and enterprise content management. He served on the ABA TECHSHOW Executive Board and is a frequent national author and presenter. His popular blog, LawTech Guru, regularly covers new developments in e-discovery.

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