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Technology: Preparing and managing a budget for e-discovery

How to avoid the pitfalls of processing charges, document review costs and vendor hosting fees

Companies large and small face many challenges when it comes to dealing with electronic discovery: new case law, evolving rules, legal defensibility, production deadlines, developing technology, skyrocketing amounts of stored data and plenty of other issues. However, predicting e-discovery costs and managing the budget are major issues that companies often overlook when it comes to early case assessment and general litigation preparedness. 

An e-discovery undertaking can quickly become big and complex. It involves a multitude of timeframes, deadlines, agendas and people. Before practicably assessing the potential costs, one should have at least a basic knowledge of the process by which electronic documents and data are obtained and reviewed.

The process of collecting and reviewing electronically stored information (ESI) involves four stages: data harvesting, processing, filtering and formatting for review.

  1. Harvesting raw data. Harvesting is the initial collection phase of the project. It is the process by which the raw data from network drives, computer hard drives and other data storage locations are copied in a manner that preserves the original data profile characteristics, also known as metadata. An e-discovery vendor often carries out this phase, occasionally with the assistance of company IT staff.
  2. Processing. ESI processing is the stage in which the raw data is stripped down to a usable form. The data on hard drives typically consists of many operating system files, program files and other data created automatically, not by any user or custodian. A process called “de-nisting” removes these types of data so that attorneys and clients deal only with non-extraneous, user-created evidence.
  3. Filtering. After harvesting and processing the data, the e-discovery vendor then works with counsel to develop keyword terms, date parameters and/or predictive coding specifications in order to pull out only the documents that could prove relevant to the litigation, culling the entire collection of ESI to a manageable size.
  4. Formatting. After filtering, the documents are then converted into a format compatible with some type of electronic document or litigation support database software wherein attorneys and client representatives can begin to search, review, sort and organize the entire collection of documents as they see fit.

The costs from the harvesting to formatting stage depend mainly upon two factors: time and quantity of data. The interplay between time, in terms of billable hours, and the size of data, measured in gigabytes or the more gargantuan terabyte, result in the three top expenses that a company will face during an e-discovery project:

  1. E-discovery vendor collection and processing fees. E-discovery vendors normally charge from $350 to $1,200 per gigabyte to process the initially collected data. This line item charge is usually named “native file processing.” It would be prudent to request bids from an assortment of vendors and shop for cost savings for this stage of the work.
  2. Attorney document review costs. With attorney billable hour rates that can range from as low as $150 per hour to as much as $450 per hour for law firm associates, and possibly more for senior-level partners, the legal review of your documents can quickly become the most expensive portion of e-discovery. To cut costs, many companies are bringing this process in-house, hiring their own staff to review documents under the direction of in-house or outside counsel. Hiring contract attorneys, with rates of around $50 to $80 per hour, is another way to reduce document review costs. Also, e-discovery project managers should be sure to monitor the reviewers’ pace in order to provide meaningful and fairly accurate cost estimates.
  3. E-discovery vendor hosting fees. The client or client’s counsel can store data remotely without incurring a monthly hosting charge, or the e-discovery vendor can hold the data and make it available via the vendor’s online document review software. Such data hosting and storage fees usually range from $25 to $100 per gigabyte per month. This can lead to high charges if litigation lasts for a term of years. One way to reduce this expense, other than through aggressive negotiation of the hosting fee, is to make sure your team has the option to make the database inactive or dormant and thereby incur a lesser fee if or when the case allows. One can also inquire about a tiered pricing approach based on case activity and data size. 

As with any significant purchase, research and due diligence into a potential e-discovery vendor’s scope of services and previous or current client experiences is critical to weed out vendors with a history of disappointing results and out-of-control costs. 

You will certainly need to refine any e-discovery budget throughout the process; however, through early planning, constant communication and the ability to adapt and adjust, you can manage your budget for e-discovery and better stay within company expectations.

Contributing Author

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George Carry

George D. Carry is an Associate in the Construction and Litigation & Trial Practice Groups at Shapiro Lifschitz & Schram, P.C. He has extensive experience...

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