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Your Outside Counsel May Be Giving You Bad E-Discovery Advice

Sometimes, law firms’ interest conflicts with that of their clients’ when it comes to e-discovery.

Many companies often turn to outside counsel for advice to improve their e-discovery capabilities and become litigation ready. Unfortunately, they do not always receive good advice. (Disclaimer: my company, Contoural, provides litigation readiness and other services, occasionally competing with law firms.)

In 2006 when the amended Federal Rules of Civil Procedure impacting e-discovery were adopted, there was a gold rush mentality and many law firms, especially many of the larger ones, realized that e-discovery was a potential source of additional revenue. They developed their own e-discovery practices, including collection, data processing and review services, often competing against some of the more traditional e-discovery vendors. They touted their e-discovery services as “your law firm knows best.”

Law firms’ interests are not always aligned with their clients’. An important objective for many firms is a) increasing or maintaining the number of billable hours per year, and b) enabling the firm to be selected for lucrative litigation work. Companies, on the other hand, are looking to a) reduce costs by managing more of the e-discovery process themselves by implementing internal tools and processes, b) reduce risks and develop more consistent and defensible e-discovery, and  c) enable competition among firms vying for litigation work. I have seen a number of business conflicts arise:

  • One law firm developed a legal hold process for their client. Instead of having the client initiate legal holds, the process was architected such that outside counsel needed to be involved in choosing custodians for every hold at every level (assuring a near continuous stream of business for the firm). Likewise, the company’s written legal hold policy, also developed by the firm, declared that the firm should be engaged to defend all choices made in the selection of custodians.
  • One law firm created a detailed electronically stored information (ESI) data map for its client. To find certain data types, the map contained the following: “To find these types of data, please engage ABC Law Firm,” where ABC was the firm that created the map.
  • One law firm insisted that it house all documents related to a specific matter. When additional litigation arose in a similar dispute, the firm strongly argued it would be difficult for them to share or hand off these documents to another firm, and therefore they should by default handle all litigation.
  • Some firms subtly discouraged their clients from becoming litigation ready. One partner from a large international law firm relayed how she received grief from her partners when she encourage her client to become self-sufficient in its e-discovery processes. Law firms make a lot of money when their clients are not litigation ready, and the partners were worried about losing the revenue.

For the most part, law firms’ foray in e-discovery has not been successful. This year, many firms that launched these practices five years ago are either downsizing or eliminating them. The firms found that e-discovery is operationally a different business than practicing law.

The best firms, in my view, understand that their core competence in providing highly-skilled services, and encourage their clients to develop defensible in-house hold and discovery processes. Some outside counsel litigators I have spoken to welcome this change, allowing them and their firms to focus on high-value areas such as litigation strategy, settlement conferences and actually litigating cases.  

Unfortunately, many law firms still see litigation readiness and e-discovery as excellent billing opportunities. Companies need to be careful in understanding this conflict.

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Mark Diamond

Mark Diamond, Founder & CEO of Contoural, Inc., is a regular contributor to Inside Counsel on Litigation Readiness and Records Information Management. You can e-mail...

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