Legal Costs Continue to Climb – Isn’t it Time to Investigate an Offshore Partner?

 

 

Tricom Document Management is an ISO Certified offshore partner for corporations and law firms, delivering quality legal process outsourcing, coding, and EDD at cost-effective prices.

 

Corporations such as Microsoft, General Electric and Cisco Systems have found that not only does an offshore litigation service provider dramatically cut legal costs, outsourcing to a trusted partner such as Tricom also helps corporate legal departments and law firms maximize their capacity so they can focus on more strategic issues.  

 

Tricom was established in the year 2000 and has emerged as an industry leader in the new world of large-scale outsourcing.  Utilizing our state-of-the-art facilities and an employee force of over 3000, Tricom is providing an industry-leading outsourcing model for legal services and is recognized internationally for its offshore data capabilities. 

 

In addition to our coding and EDD services, Tricom offers legal process outsourcing including the first pass review of documents to determine relevancy, responsiveness, and privilege through a combination of the appropriate legal professionals, the best practices and the latest technology.  

 

Whether your project involves contract drafting and editing, research support, or document review, each project is managed by experienced and licensed U.S. attorneys with Tricom providing full project management. Tricom also maintains strict confidentiality and takes extraordinary measures to ensure data security.   Here are just a few of the reasons why you should consider us as your partner for offshore needs:

 

► Tricom has the infrastructure, facilities, financial independence, and manpower to quickly assemble a team with qualifications specific to your legal department’s needs

 

► Tricom has a written training and certification program for offshore attorneys working on U.S. matters, including rigorous training and testing on professional ethics.

 

► Tricom verifies backgrounds and qualifications of attorneys, including its team of U.S. attorneys who are some of the most experienced in the industry

 

► The Tricom facilities and technology in India are state-of-the-art, matching or exceeding that in the U.S.

 

► Tricom Document Management is a division of Tricom, a publicly traded company with more than 3,000 employees – all experienced in providing excellent service and a commitment to quality

 

Tricom is recognized internationally for its offshore data capabilities.  We invite you to gain a strategic advantage by partnering with us.  Please call us today to schedule an investigation of Tricom’s offshore solutions for your corporate litigation needs.

Passage to India

 

Some companies see big savings in “offshoring” legal work. But how’s the quality?

David Hechler
Corporate Counsel
January 01, 2009

Martin Shively directs the worldwide IP operations of Microsoft Corporation. But he doesn’t commute to the company’s campus in Redmond every day. The associate GC works in a remote office in New Delhi, where he’s been based for 18 months overseeing not call centers, but outsourced patent work. And his operation is saving Microsoft millions on its legal bills.

Shively’s Indian experience dates back to 2004, when he took over budget responsibility for Microsoft’s patent group. There was a lot of buzz about outsourcing legal work to India; corporations like General Electric Company were doing it, and slashing their legal bills. So Shively figured why not Microsoft? He started with the most basic task he could think of-proofreading patent applications. Instead of paying high-priced associates to do this work at a dozen U.S. law firms that drafted Microsoft’s filings, he hired one vendor in New Delhi to do them all. It was, he says, “a safe place to have a failure.” If it flopped “we just wouldn’t tell anyone,” he laughs.

But it didn’t flop. “We went there to save money,” he acknowledges. “We stayed and expanded because we liked the quality of the work.” It wasn’t just okay, it was better.

Shively began to fly to India once or twice a year to discuss plans, review the work, and build relationships. More than satisfied with the results, he pushed the volume and complexity of the tasks and hired a second firm. Soon the Indian companies had 35 people working exclusively on Microsoft projects. In July 2007, at the suggestion of his bosses, Shively moved to India himself. He points to the Indian operation’s numbers: In fiscal 2005, patent work there amounted to less than $150,000. In fiscal 2009 the tab will probably come to around $4 million. The work product continues to meet Microsoft’s standards, and the cost is never more than 40 percent of what he’d pay in the United States; in some instances, it’s a mere 10 to 15 percent, he says. In fiscal 2008, which ended last June, his company saved $6.5 million outsourcing its patent work. He’s confident the savings will hit $10 million this year.

Offshoring, as it’s often called, has been widely adopted by many companies when it comes to back-office operations like accounting and information technology (including call centers). These fall under the category of business process outsourcing, or BPO, and for big companies the savings makes the move a no-brainer-even though last year some companies took political heat for exporting American jobs abroad. India is the most popular destination, though companies have shipped work to other countries where labor is cheap and English is spoken, like the Philippines and Australia.

But LPO-legal process outsourcing-is different. Despite the early hype, companies have not been as quick to sign up. Why not? Fear is part of the reason. Some are worried about the quality of the work, and cite cultural differences and security concerns as reasons for the reticence of some legal departments to send work abroad. Many of their outside law firms hate it; offshoring is a threat to their business model, taking away work they’d rather give to their associates. Firm partners are commonly consulted when a company is considering shipping tasks overseas because, whether it’s patent research or litigation support, they have to work with the product that offshore shops like UnitedLex Corporation or Pangea3 LLC deliver.

What about 2009? Will recessionary pressure to reduce legal costs push more companies to ship work overseas? Perhaps; despite the doubts, companies are spending more on LPO every year. A recent report by the Indian business research company ValueNotes estimates spending on legal offshoring to India doubled from $62 million in 2006 to $124 million in 2007. Still, that’s well below the optimistic projections of a few years ago. Even some vendors concede that no more than 10 percent of the Fortune 500 are offshoring.

Yet interest among the in-house bar is high. At the Association of Corporate Counsel’s annual meeting in October, there were two sessions on offshoring and few empty seats. And the practice has received professional approval: the American Bar Association issued an opinion in August blessing outsourcing, as long as U.S. attorneys take responsibility for the final work product. Susan Hackett, ACC’s general counsel, says moving work abroad seems almost unavoidable for large companies with a large amount of repetitive legal work. “For me,” she says, “offshoring is just another kind of outsourcing.” And after all, sending work to outside firms is outsourcing. With the ABA approval, it comes down to cost. If the savings in India were marginal, she says, offshoring might not be worth it. “But 80 percent less? It’s kind of hard not to at least check it out.”

BUSINESS OUTSOURCING  to India began in the late 1980s. Texas Instruments Incorporated was a lonely pioneer back then, joined a few years later by GE. New York Times columnist Thomas Friedman described some of those early ventures in his 2005 book The World Is Flat. Many of the earliest companies to delve into legal outsourcing had already begun using Indian labor for back-office work. India has a key advantage when it comes to legal work for American clients: The country has a common law legal system, like the U.S., and it churns out about 80,000 new lawyers a year.

Some pioneers, like GE, started out by creating captive legal units. General Electric Capital Corporation started a business process operation near New Delhi in 1997. As early as 2001 it began performing basic legal functions like checking trademarks for renewal dates and reviewing warranty agreements, according to GE associate general counsel Janine Dascenzo. Even though the tasks were routine, sending out legal work was new and unsettling for the lawyers. That’s why “having the employees be GE people was huge,” Dascenzo adds.

But in those days there weren’t many choices; now more than 100 vendors offer legal processing in India. Companies and law firms looking to cut costs while maintaining security no longer have to start their own firms. A report published last year by Capgemini, the French IT services and consulting company, says that captives (not limited to LPOs) are being released-literally. Though Capgemini as a competitor has an obvious bias, it cites an analysis by Forrester Research which found that the cost of starting and maintaining captives far exceeds the cost of hiring third-party alternatives, and that 60 percent of the captives in India are struggling. Many of the companies that created them later sold or dissolved them, the report notes.

GE is Exhibit A. It spun off its captive in 2004. Now a public company called Genpact, the independent outfit is doing quite well, with 2007 revenues of $823 million. GE still uses Genpact for some legal work, and retains a 19 percent stake in the company, but also plays the field.

Last year GE hired Pangea3 to handle some of its bigger assignments in India. GE sold most of its stake and began using independent companies, Dascenzo says, because “it’s not what we’re in the business of doing.” They want their lawyers focused on the big stuff. At the same time they don’t want to pay their outside firms lawyers’ rates for paralegal work.

WHAT DOES AN INDIAN LEGAL services provider look like from the inside? In November Daniel Reed, CEO of UnitedLex, invited two executives to tour his company’s new offices in Gurgaon, a fast-growing city just outside Delhi. The execs were from the Chicago-based Huron Consulting Group Inc., which processes document reviews, but didn’t have an offshore presence.

UnitedLex, founded three years ago, is a rapidly growing shop that for months had been discussing a possible partnership with Huron that would give the two the onshore/offshore capability that their competitors offer. The company’s top brass already has a foot on both continents (as virtually all leading LPOs do). Reed is based in the U.S. and leads the consulting/marketing team that meets with clients back home. The company’s cofounder, Ajay Agrawal, who was a senior associate at Simpson Thacher & Bartlett and Jones Day before joining the structured finance team at NM Rothschild & Sons, is the mainstay in India-along with COO Anup Bhasin, whom the firm snagged from IBM.

The offshore vendor has leased two floors in Gurgaon, with offices full of 20-somethings pecking at computers. Reed says his company employs about 240 lawyers. They may look little different from their U.S. counterparts on a casual Friday, but their education and training aren’t quite the same. In India, lawyers earn their degrees by completing a three-year post-graduate degree, as in the U.S., or a five-year program following secondary school. But there’s no bar exam. And some of the prized talent at the offshoring companies are engineers trained at the renowned Indian Institutes of Technology. UnitedLex has 40 (70 percent of whom are IIT grads) along with four MDs who work on medical litigation.

Agrawal recounts the challenge of hiring the right lawyers. Without a bar exam, the execs can’t be sure of the skills candidates possess. So they test applicants themselves. From each pool of 100 to 200 candidates they winnow five to 10 new hires-lured by the chance to join a growing company and acquire stock options (rare for employees in India).

Even after they’re hired, Agrawal continues, extensive training is essential. For starters, new employees have to get accustomed to such concepts as punctuality and appropriate office attire. UnitedLex also brings in two U.S. patent attorneys to train the lawyers and review their work. One attorney spends six months a year working with them. According to Kanti Prabha, the company’s 27-year-old IP team manager (and a nonlawyer), his presence is crucial. At her previous offshoring company, Prabha says, when attorneys performed invalidity searches, they were often able to find documents that seemed to prove elements of a patent invalid. But clients never told them what happened, so they never knew if their work stood up in court. “We never knew the laws the way we needed to,” she says. Now they’re trained by an expert who answers those questions.

UnitedLex’s lawyers are evaluated regularly. The company keeps performance statistics on both the speed and accuracy with which they complete assignments. Law firms are horrible at process and training, Reed tells Robert Rowe, one of the visiting Huron executives. Rowe, who runs his company’s four document review centers, and was previously a lawyer at three Am Law 100 firms, nods enthusiastically. It would be interesting, Rowe responds, to take the processes the Indian companies use and apply them to U.S. firms. It isn’t outsourcing that’s costing legal jobs in the U.S., adds his fellow Huron exec, Shahzad Bashir. “Poor business models are losing jobs.”

OFFSHORING COMPANIES may boast about their performance, but they say they know their limits. They aren’t qualified to replace law firms. As the ABA opinion made clear, U.S. lawyers must review and take responsibility for the Indian firms’ work. And the prudent providers avoid getting in over their heads. David Perla, co-CEO of Pangea3, said at the most recent ACC conference that the best vendors are those willing to turn down assignments. “A provider who says yes to everything may be hiding their unwillingness to say they can’t do something well, or can’t save you money,” he explained.

What they’re qualified to do is process mostly low-level work: repetitive tasks that can be taught on the front end, and measured for accuracy on the back. Not all companies have it, or have it in sufficient volume to justify offshoring.

The selling point isn’t just savings, however; it’s quality, too. Savings are a given in a country in which a billable hour of $40 is high, and fees of $20 and $30 are common. But the key focus at UnitedLex, according to team manager Prabha, is delivering work that’s “exactly equivalent to, or better than, what is being done in the U.S.”

LPOs say they are able to deliver for two reasons. Their employees are highly motivated. Associates at big American firms may view coding discovery documents or reviewing them for relevance as demeaning drudgery on the path to “real” work, but young Indian lawyers are happy to have the work. And unlike the big U.S. firms, the offshoring companies treat the tasks for what they are: commoditized operations they roll out with assembly-line efficiency.

That could change. Microsoft has been moving up the value chain-feeding its vendors increasingly sophisticated jobs. Working with one called Computer Patent Annuities Limited (CPA), headquartered in the U.K., Shively, who had begun by giving it proofreading assignments, asked a team of the company’s engineers to perform prior art searches. He started with ten, got good results, and repeated. Now Microsoft does “the vast majority” of its prior art searches in India. CPA also does invalidity analyses of claims filed against Microsoft, and patent landscape analyses when, for instance, the folks in Redmond want to know which companies hold patents for mobile devices in Scandinavia.

But developing a successful partnership doesn’t happen by itself. It takes a lot of hand-holding, Shively says. CPA has a U.S. attorney who works full time on Shively’s projects training and evaluating employees in India-half of whom are engineers. And even though most CPA employees work for multiple clients, those who work on Microsoft projects work for no one else. To reinforce the bond, Microsoft periodically flies small groups of CPA employees to Redmond to get to know the people they work with. In addition to formal meetings, dinners and hikes are thrown in.

In recent years the larger, more ambitious vendors have looked to provide services onshore and off because that’s what their clients want. E. I. du Pont de Nemours and Company’s primary offshoring partner is Office Tiger (now a division of Chicago-based RR Donnelley). And one of its selling points, according to Andrew Schaeffer, DuPont’s managing counsel for operations and partnering, is that the vendor works with his company’s legal team in the U.S. as well as abroad. Office Tiger helps manage DuPont’s discovery process, doing everything from training DuPont employees to reviewing and coding documents to hosting Web-based litigation databases. Bottom line? The company saves between 25 and 40 percent, Schaeffer says. “And often the quality is better than you’re going to get out of a law firm.”

Yet skeptics of offshoring abound. When Dan Reed dropped by the Miami office of Greenberg Traurig a few months ago to talk about life at UnitedLex, he visited his old mentor, a longtime corporate practice leader. Reed had been an associate in that office for six years, and he expected a supportive reception. But his old colleague thought offshoring was a terrible idea, until Reed mentioned that his company also does accounting-and can reduce a company’s costs by 30 to 50 percent. Suddenly, Reed says, the lawyer was very interested in outsourcing.

THE OFFSHORING INDUSTRY has endured much worse than law firm skepticism. The recent presidential campaign demonstrated that outsourcing in general has become a potentially explosive topic. Microsoft’s Shively says that the in-house grapevine buzzes with stories about offshoring projects gone wrong.

Intel Corporation, for example, tried offshoring one project and quickly pulled back. A couple of years ago, recalls general counsel D. Bruce Sewell, the company had a batch of patent applications the lawyers were handling in-house. They noted common issues, and decided these could be bundled and assigned out in common packages. So they put the jobs up for bid in an online auction. Among the firms Intel selected, one was in Australia and another in India. They did the work, but the quality “was lower than what we were willing to put up with,” Sewell says. “We’re not doing it anymore.” Intel dropped the auctions and stuck with its domestic firms-but managed to negotiate better prices, he says.

Despite the doubts about offshoring, however, there’s a sense of inevitability about it. Boosters of offshoring argue that legal work, like IT before it, naturally flows to the locations where it’s cheaper. In fact, some law firms have embraced what they can’t prevent. The most notable example is the British firm Clifford Chance, which has created its own captive unit in Delhi for research, analysis, and document reviews.

Even companies like Axiom are looking for ways to align themselves with the LPOs. The San Francisco-based Axiom provides temporary attorneys to work at in-house departments that might otherwise hire a law firm. And cost-cutting is part of its pitch. “We’re definitely seeing work pulled from law firms and given to us,” says Mehul Patel, a corporate development executive.

Patel’s company might perceive the LPO shops as the competition, but he prefers to consider partnerships. Perhaps because he predicts the tipping point for offshoring will arrive within 12 months, Axiom has been thinking about offshoring, too. “Our clients will want us to be project-managing folks in India,” he says. Why would the vendors sign on? “LPO firms want to work with us because they don’t have the brand recognition that we have,” he responds.

So 2009 seems sure to bring more growth for LPO firms. And that could force law firms to continue to adjust. Globalization, which has already changed the practice of law so much, is doing it once again-forcing law firms, and the law departments that hire them, to speak English with an Indian accent.

 

_____________________________

Tricom Document Management, Inc. is a leading company that offers various Legal Process Outsourcing (LPO) services such as document review, contract drafting, legal research, litigation review besides litigation support sevices such as electronic discovery and coding.

Tricom Document Management, Inc.

2450 Peralta Blvd., Suite 222 • Fremont, CA 94536

Phone: 510.494.7800 • Fax: 510.494.7802 • Email: sales@tricomdata.com

For additional information visit us on the web at

www.tricomdata.com

In E-Discovery, It’s Not About The Hourly Rate

Posted on March 6, 2009 by Richard Stout

The billable hour has received a lot of attention in recent months as it relates to associate salaries and the value the client receives, among other issues. But it has been especially relevant in the e-discovery field in recent years, as more in-house departments have realized that much of their discovery work can be done for under $65 an hour versus the $200-400 they were accustomed to paying.

So now that this is the norm in our profession – paying $45-65 an hour for e-discovery work – the real question becomes, ‘What am I really getting for that money?’

Once you’ve driven down costs to the $45-65 per hour level for e-discovery, I would argue that the hourly rate makes little, if no difference, on your bottom line. The most important factor is the review rate of the attorneys. In fact, it’s really very simple math.

Let’s take a medium-sized matter: 30 gigabytes of data, or 400,000 e-mails.

Using a traditional (linear) review tool, an average review rate would be approximately 50 document decisions per hour for an attorney. By increasing the attorney review rate by 20 decisions per hour, the cost savings over the life of the project would amount to $125,000 and cut the project’s time by 25-40%. That more than compensates for a $20 per hour difference in an attorney’s hourly rate, too.

That’s also a very conservative answer, because many companies now utilize a content analytic review tool that clusters documents together by topic versus a linear tool that only organizes data chronologically. Using the content analytic tool is likely to produce a 300-500% increase in the review rates, which saves in excess of $300,000 and 70% in time on that same 30GB of data. Content analytic tools cost more, but you can see where that difference can be accounted for.

So if you can accept this concept, it truly becomes a question of what you’re getting for your money. Many in-house departments have $48 an hour attorneys handle their e-discovery work, but ultimately the work is re-reviewed by outside counsel, there’s no fluid process in place and the client has no idea what kind of productivity the attorneys are generating. How would they know if they could be doing it better?

The question really becomes about how to increase review rates and thus productivity. There are many ways to do this, but it starts with experienced attorneys who know e-discovery and the technology. It’s supported by proven processes and talented project managers. Everything must be transparent: work closely tracked, benchmarked and learned from. It’s a collaborative, highly communicative process with outside counsel. And it can be repeated from matter to matter, creating more opportunities for learning and efficiency.

Focusing on the process and maximizing productivity — not the hourly rate — is where money is truly saved in e-discovery. The math really will speak for itself; all a client has to do is ask for it.

_____________________________

Tricom Document Management, Inc. is a leading company that offers various Legal Process Outsourcing (LPO) services such as document review, contract drafting, legal research, litigation review besides litigation support sevices such as electronic discovery and coding.

Tricom Document Management, Inc.

2450 Peralta Blvd., Suite 222 • Fremont, CA 94536

Phone: 510.494.7800 • Fax: 510.494.7802 • Email: sales@tricomdata.com

For additional information visit us on the web at

www.tricomdata.com

Turning to India at Break-Neck Speed

Richard Susskind

Ten of England’s top 30 law firms have outsourced back office functions or legal work to India, according to new research from RSG Consulting.

The RSG India Report 2008 is a definitive 200-page analysis of the current legal market in India. Beyond the subject of outsourcing, it also shows that this market is evolving at break-neck speed.

India now has its own “magic circle” of leading law firms with senior corporate lawyers earning incomes comparable with those of partners in medium to large-sized London firms. But, as the study notes, there is a dearth of experience and attrition rates are high.

RSG also emphasises the increasing purchasing power of general counsel in Indian companies, most of whom favour liberalisation of the legal market — unlike the Bar Council of India and many of the top law firms. Only 40 per cent of the latter actively support liberalisation.

While the politics of the Indian legal profession are interesting, the growth of the Indian legal process outsourcing (LPO) industry raises more fundamental long-term issues.

The report notes that, since the start of this year, there has been a dramatic shift in attitude towards outsourcing among top English firms, with initial resistance weakening considerably.

What has brought about this change of heart? In my new book, The End of Lawyers?, I argue that the pressure here is coming from clients. Boards are urging general counsel to cut their internal headcounts and to reduce substantially the amount they spend on external law firms. Legal and compliance departments also are being expected to take on an increasing and often riskier workload.

In short, many leading corporations and financial institutions have in-house legal functions that are being compelled to provide more for less. This was emerging as a trend even before the credit crunch; now it is an overriding imperative.

One obvious way of delivering more for less is to cut the costs of legal services. Historically, this would have meant firing support staff and slashing expenses on infrastructure.

However, law firms have recognised that this can prejudice the quality and reliability of service and so some have been exploring other ways of reducing expenditure on back office and administration, such as IT, finance and document production.

One approach has been to invest in outsourcing. In October 2006, for example, Clifford Chance announced its intention to outsource much of its back office to India, in the hope that it would make annual savings of almost £10 million.

More fundamental still, though, is outsourcing legal work itself. Examples here include legal research, document review in litigation or due diligence for corporate work.

LPO companies, strictly, are not law firms, even though they may employ legally qualified and paralegal staff. Generally, they keep their overheads low by operating in places where incomes are modest and property inexpensive. They rely on well-developed standards and systems that may be worked out with the firms outsourcing to them. Most provide their services simultaneously to a variety of firms.

The business case, as RSG points out, is compelling. Its report notes that LPO companies employ Indian legal graduates with starting salaries of about $7,000 (£4,700) — while top Wall Street firms pay their newly qualified associates about $160,000 (£108,000) a year.

In summary, LPO businesses incur radically reduced labour costs in delivering routine and repetitive legal work. In turn, the result can be a radically cheaper legal service — which clients welcome.

Some are going farther than applauding. As RSG shows, clients too are outsourcing legal work. Deutsche Bank, BT, Sun Microsystems, among others, are presented as case studies.

In The End of Lawyers?, I suggest that outsourcing is but one of a growing number of different ways of handling legal tasks of a sort that do not require genuine legal experts. Others include off-shoring, co-sourcing, sub-contracting, leasing, computerising and open sourcing.

The details are not important. The principle is that the market will find ever more efficient ways of sourcing routine and repetitive legal work.

In boom times, leading law firms did not give serious thought to outsourcing or to other novel techniques for delivering legal services.

The work flowed in, profitability rose, and there was no obvious incentive to buck what seemed like an unstoppable trend. It was hard to convince millionaires that their business model was wrong.

But the world has changed and 2009 will be a tough year for most English law firms — fee income will decline and clients will demand yet further reductions in cost.

By contrast, for LPO providers in India and for other legal businesses who source legal work in new ways, it may be the dawn of a prosperous era.

_____________________________

Tricom Document Management, Inc. is a leading company that offers various Legal Process Outsourcing (LPO) services such as document review, contract drafting, legal research, litigation review besides litigation support sevices such as electronic discovery and coding.

Tricom Document Management, Inc.

2450 Peralta Blvd., Suite 222 • Fremont, CA 94536

Phone: 510.494.7800 • Fax: 510.494.7802 • Email: sales@tricomdata.com

For additional information visit us on the web at

www.tricomdata.com

How to Get an E-Discovery Protocol Rolling

LAW.COM

LEGAL TECHNOLOGY

By E. Kendrick Smith and Robin A. Schmahl
Fulton County Daily Report
January 27, 2009

The past decade witnessed the explosive growth of computer use among corporate clients — anecdotal reports indicate that businesses send 36 billion e-mails daily and electronically store 93 percent of all information. Nearly 80 percent of this information will never be converted to paper form. Although Georgia has not yet adopted specific provisions governing the discovery of electronically stored information, the Georgia Civil Practice Act’s inclusion of “data compilations” as a category of discoverable documents leaves little doubt that electronic discovery is fair game.

In most cases, reviewing and producing every relevant electronic document is infeasible. Therefore, parties — and their respective attorneys — must narrow and focus their electronic discovery efforts. Not surprisingly, in the two years since the federal electronic discovery rules were enacted, few litigation issues have generated as much controversy as how much electronic discovery is enough. A motion to compel additional discovery may be motivated by:

• a responding party’s genuine failure to conduct an adequate search;

• a pervasive belief that there must be a “smoking gun” somewhere, if only enough ESI can be examined; or

• a desire to drive up the cost of discovery and thereby extort a settlement.

In any event, the best defense against being sanctioned or ordered to go back to the drawing board midway through discovery is to craft an electronic discovery protocol that is mutually agreed upon by the parties and memorialized in the form of a stipulation or letter agreement.

There is no one-size-fits-all prophylactic solution for solving all possible discovery controversies. Instead, the scope of electronic discovery will necessarily be guided by the rule of reason, taking into account the nature of the claims and the amount in controversy. That said, every litigator should consider the following preliminary issues before starting to negotiate and draft an electronic discovery protocol:

Custodians: Who are the key players for each side and which other individuals will most likely have discoverable ESI? The protocol should identify by name each side’s custodians whose electronic files will be searched.

Date Limitations: The system data for ESI typically records when an electronic document was created and when it was last modified. One can drastically reduce the volume of ESI by using the “date created” and/or “date last modified” to limit searches to documents created or edited during the relevant time frame.

Search Terms: Learn the relevant terms of art. Anyone who ever has tried to research an unfamiliar legal issue online knows the challenge of crafting search terms broad enough to find the most relevant authorities without also sweeping in hundreds of other irrelevant cases. One must become familiar with the relevant terms used in the specific case to frame a legal issue and determine proper search terms that strike the balance between getting too little and too much. The same holds true for developing ESI search terms. If time permits, consider reviewing and producing at least a portion of your client’s hard-copy documents before trying to formulate search terms for electronic discovery.

Duplicates: Avoid them. Most ESI vendors can eliminate true duplicates of electronic documents, either horizontally (across all custodians) or vertically (only across the files of a single custodian). Since the same e-mail may be sent to dozens of people, “de-duplicating” can dramatically reduce the volume of ESI. If a discovery protocol calls for de-duplication, however, it also should require the producing party to keep a record of all deleted duplicates.

Metadata: Be aware and afraid of it. Metadata is information about a document that is automatically created by a computer and hidden from view. There are two types: (1) system data, which records objective data about a document such as its custodian, file type, size, creation date, location on the computer, etc.; and (2) embedded data, which tracks edits made to the document.

Producing the first type of metadata is fairly uncontroversial; indeed, its production may be necessary to demonstrate that the party produced ESI in the manner in which it is ordinarily kept. See Pass & Seymour Inc. v. Hubbell Inc., 2008 WL 4240490 (N.D.N.Y. Sep. 12, 2008) (compelling the plaintiff to provide an index of the ESI and hard-copy documents produced, including information regarding the custodian, location and general description of the filing system).

The second type of metadata is more problematic. The embedded data may include information that has no bearing on the final document — for example, when someone copies an existing document to use as a template for a new document. Even though none of the original document’s language appears in the new document, the original language may still be reflected in the embedded data. This is especially troublesome when the embedded data contains privileged or commercially sensitive information.

Take, for example, a VP of human resources who writes a letter to outside counsel detailing her concerns about potential wage and hour violations and requesting legal advice — clearly a privileged communication. She later sends a cover letter to outside counsel enclosing a newspaper article about her company, but uses her original (privileged) letter as a template to avoid retyping counsel’s address. The non-privileged cover letter’s embedded metadata may still contain the privileged text of the original letter from which it was copied. Therefore, to the extent you agree to produce all forms of metadata, be prepared to conduct a privilege review and prepare privilege logs for attorney-client or work-product information that may be hidden within a document’s metadata. See, e.g., Williams v. Sprint/United Management Co., 230 F.R.D. 640, 653 (D. Kan. 2005). (“As Defendant has failed to provide any privilege log for the electronic documents it claims contain metadata that will reveal privileged communications or attorney work product, the court holds that Defendant has waived any attorney-client privilege or work product protection with regard to the spreadsheets’ metadata.”)

The form in which ESI will be produced: The Advisory Committee’s notes to Rule 34 of the Federal Rules of Civil Procedure highlight the importance of producing ESI in a form that can be electronically searched. There are two “best practice” methods of producing ESI in a searchable form: (1) as native documents, for example, producing Word documents in Word format; or (2) as static TIFF images or PDF documents accompanied by text files, which can be searched by virtually any document review program. Both production methods have pros and cons. Producing ESI in native form eliminates the front-end cost of converting electronic documents into a different format, but may increase the back-end cost of reviewing embedded data. Producing ESI in static form is more costly on the front end because the document must be converted from its native form and then processed through optical character recognition software to create a searchable TXT file. The static images, however, can be “Bates” labeled with sequential document production numbers, plus the accompanying text files do not contain embedded data.

Discovery protocols work best when the attorneys do their respective homework and cooperate with each other early in the discovery process. If done thoughtfully and in good faith, entering into such a protocol can drastically reduce costs and streamline discovery. It is a litigator’s best tool for managing electronic discovery and avoiding discovery disputes.

E. Kendrick Smith, partner, and Robin A. Schmahl, counsel, are litigators in the Atlanta office of international law firm Jones Day.

 

_____________________________

Tricom Document Management, Inc. is a leading company that offers various Legal Process Outsourcing (LPO) services such as document review, contract drafting, legal research, litigation review besides litigation support sevices such as electronic discovery and coding.

Tricom Document Management, Inc.

2450 Peralta Blvd., Suite 222 • Fremont, CA 94536

Phone: 510.494.7800 • Fax: 510.494.7802 • Email: sales@tricomdata.com

For additional information visit us on the web at

www.tricomdata.com

Webinar: Proactive E-Discovery Best Practices

 

By Eric Brown / Jan 19, 2009

 In a down economy businesses need to be more concerned than ever about potential litigation costs and risks. Next week HP brings you a webinar covering best practices for proactive e-discovery (electronic discovery) by utilizing good records management. Aimed at lowering litigation costs and mitigating risks, this webinar is a must for legal teams, upper management or any business concerned about potential electronic discovery issues.

E-discovery is a term used to describe any process in which electronic data is sought, located, secured, and searched with the intent of using it as evidence in a civil or criminal legal case. It can mean large amounts of time and money lost for a company. But by being proactive, businesses can help stave off some potential headaches down the road.

Brought to you by HP, the Best Practices for Proactive E-Discovery with Records Management webinar is scheduled for January 27, 2009. Both Brian Hill of Forrester Research and Noel Rath, World Wide Product Marketing Manager for HP TRIM will present. Hill is a reported expert on topics such as enterprise content management and records and retention management initiatives.

Together the two will discuss not only some best practice solutions for becoming more proactive where e-discovery is concerned and how to do it through records management, they will also look at HP’s goals in information governance strategies and how they plan to help business become more efficient.

Again, for any concerned about possible e-discovery issues, don’t wait until they happen to end up paying exorbitant costs when being proactive can help eliminate or lower much of the cost. Use the link below to register for HP’s webinar scheduled for January 27, 2009 at 11am PST/2pm EST.

 

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Tricom Document Management, Inc. is a leading company that offers various Legal Process Outsourcing (LPO) services such as document review, contract drafting, legal research, litigation review besides litigation support sevices such as electronic discovery and coding.

Tricom Document Management, Inc.

2450 Peralta Blvd., Suite 222 • Fremont, CA 94536

Phone: 510.494.7800 • Fax: 510.494.7802 • Email: sales@tricomdata.com

For additional information visit us on the web at

www.tricomdata.com

United States: E-Discovery: Can´t We All Just Get Along?

              

16 January 2009

Article by Eric J. Sinrod 

Reprinted with permission from FindLaw.com

Here’s the “Grimm” news: Parties and counsel must cooperate when it comes to e-discovery in civil litigation. Judge Paul W. Grimm, of the United States District Court of Maryland, while handling a discovery dispute in the recent case of Mancia v. Mayflower Textile Services Co., has taken the opportunity to pontificate as to why working together collaboratively is essential for e-discovery to be meaningful and fair within our judicial system.

While the particular discovery dispute in the Mancia case is not so noteworthy, Judge Grimm’s broad vision of e-discovery certainly is worthy of consideration. Judge Grimm begins by looking to Federal Rule of Civil Procedure (FRCP) 26(g).

That rule requires that an attorney of record sign every discovery disclosure, request, response or objection. The attorney’s signature “certifies that to the best of the person’s knowledge, information, and belief formed after a reasonable inquiry,” the request is reasonable and the disclosure is complete and correct. Judge Grimm expresses concern that counsel do not necessarily perform a “reasonable inquiry” before propounding and responding to discovery requests.

Judges in other cases have required at a minimum that outside counsel interview information technology employees and custodians of records to determine and understand where responsive electronic data is stored. Without conducting such an investigation, an attorney cannot fully certify a discovery response, for example.

Too often, attorneys, in shoot-from-the-hip fashion, propound broad discovery requests and respond with boilerplate objections to discovery requests. Indeed, Judge Grimm was dealing with just that scenario in the Mancia case, which is what prompted his cooperation tutorial.

Importantly, FRCP 26(g) requires the imposition of mandatory sanctions when the rule is violated without substantial justification; indeed, judges are entitled to issue sanctions even when not requested on a motion. Rule 26(g), according to Judge Grimm, is one of the least abided discovery rules. And that is because sanctions have not been routinely and automatically applied by judges when violations occur.

Thus, while counsel, on behalf of their clients, do not always conduct reasonable inquiries when it comes to e-discovery, the judiciary is complicit in the problem, by not issuing sanctions for violations. Without the real threat of sanctions, improper e-discovery requests and responses will continue and threaten the integrity of the judicial system.

According to Judge Grimm, “the failure to engage in discovery as required by Rule 26(g) is one reason why the cost of discovery is so widely criticized as being excessive to the point of pricing litigants out of court.”

Judge Grimm goes on to quote Harvard Professor Lon L. Fuller for the proposition that “partisan advocacy is a form of public service so long as it aids the process of adjudication; it ceases to be when it hinders that process, when it misleads, distorts, and obfuscates, when it renders the task of the deciding tribunal not easier, but more difficult . . . .”

For parties and counsel who are dealing with oppressive or obstructionist adversaries, they might consider encouraging cooperation by providing a copy of Judge Grimm’s Mancia decision to other side. If that does not work, the next step might be to enlist more active judicial support by relying upon Mancia by way of a discovery motion and a request for sanctions.

At the end of the day, Judge Grimm is right. E-discovery should not be used as a weapon or a shield. Counsel really must dig in before propounding and responding to e-discovery requests. And yes, judges must be willing to issue sanctions for violations.

Eric J. Sinrod is a partner in the San Francisco office of Duane Morris. His focus includes information technology and intellectual-property disputes. This column is prepared and published for informational purposes only, and it should not be construed as legal advice. The views expressed in this column are those of the author and do not necessarily reflect the views of the author’s law firm or its individual partners

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Tricom Document Management, Inc. is a leading company that offers various Legal Process Outsourcing (LPO) services such as document review, contract drafting, legal research, litigation review besides litigation support sevices such as electronic discovery and coding.

Tricom Document Management, Inc.

2450 Peralta Blvd., Suite 222 • Fremont, CA 94536

Phone: 510.494.7800 • Fax: 510.494.7802 • Email: sales@tricomdata.com

For additional information visit us on the web at

www.tricomdata.com

Legal outsourcing to deliver ‘historical legacy’

IP Review Online

Posted in: Legal Outsourcing
on 12th January 2009

Legal process outsourcing (LPO) is poised to fulfil the legacy of landmark global communities such as the Commonwealth, says Mark Kobayashi-Hillary, author and director of UK trade group the National Outsourcing Association (NOA). Thanks in part to a spreading framework of British-based legal standards and business language, he says, LPO will emulate Commonwealth values in its trading activities. Mark’s bold prediction comes in an interview with IP Review Online, in which he sets out his views on how LPO will stimulate the world’s buoyant sourcing market.

A major advantage that Mark sees in legal outsourcing is its ability to raise efficiency in law firms without necessarily changing their cultures. ‘Once there is a robust and reliable network that can link resources around the world,’ he says, ‘there is no requirement to service clients locally. Outsourcing itself does not essentially change the way the law, or law firms, operate – but it offers access to some external resource that can offer increased capacity or flexibility. It does not really change what a firm does, just increases its ability to do things faster, better or cheaper.’ This flexibility extends to the involvement of non-lawyers, who are increasingly entering the field as entrepreneurs. ‘Non-lawyers can build firms offering legal services,’ says Mark, ‘though the actual professionals offering the service need to be qualified. You don’t need to be a lawyer to build an organisation offering services to law firms.’

As the author of several books on offshoring, including Outsourcing to India: the Offshore Advantage (2004) and Who Moved My Job? (2008), Mark has kept a keen eye on the cutting-edge technologies that have driven LPO’s development since the start of the decade. He argues that the ever-evolving Internet will continue to make an impact over the next few years. ‘Broadband penetration is now so extensive and so reliable that there is little need for private lines or other complex and expensive networks anymore,’ he says. ‘The robust nature of the public Internet, plus the use of Software As A Service (SAAS) tools – where applications can be run from within a web browser rather than being installed on PCs – will create an environment where teams can work together regardless of where the people are physically located.’

In Mark’s view, these enhancements of software and remote working will lead to a closer-knit global trading climate that will echo models from the past. ‘We will see the historic legacy of the Commonwealth come into play in the modern era,’ he says. ‘Because of the similarity in legal frameworks in many countries – thanks to the British legacy – and the use of modern technology reducing the impact of distance, we will see huge growth in legal support services in places such as India, Malaysia, Sri Lanka and East Africa, with qualified resources in those regions working to support firms back in the UK. It is a legacy of the past that these people will be in a position to work with UK firms – in much the same way as the English language has been left behind as a language of business in those regions. But it is the open technology of the future that will ensure there is a complete death of distance.’

To find out more about the National Outsourcing Association’s work, please visit www.noa.co.uk.

 

_____________________________

Tricom Document Management, Inc. is a leading company that offers various Legal Process Outsourcing (LPO) services such as document review, contract drafting, legal research, litigation review besides litigation support sevices such as electronic discovery and coding.

Tricom Document Management, Inc.

2450 Peralta Blvd., Suite 222 • Fremont, CA 94536

Phone: 510.494.7800 • Fax: 510.494.7802 • Email: sales@tricomdata.com

For additional information visit us on the web at

www.tricomdata.com

E-Discovery Trends in 2009

 

New developments in e-discovery will affect enterprise general counsel and compliance officers, law firms serving corporate clients, and IT departments

 

By Christine Taylor, January 9, 2008, 12:10 PM

A few years ago, the Taneja Group coined the term “Information Classification and Management” (ICM) to describe the technology of locating and classifying data throughout the enterprise. ICM covered sub-technology sectors such as e-discovery, compliance, data security control, and data management. However, we saw the term “e-discovery” trump the more comprehensive name as rabid attention turned from ICM to the specifics of civil litigation software tools. We are now seeing the e-discovery term itself take on a fuller usage, more akin to ICM. People do use the term when talking about civil litigation, but are also expanding it to encompass compliance, corporate governance, data classification, and even knowledge management.

In this broad sense we have looked at the trends of the e-discovery market as they impact its largest stakeholders: the enterprise general counsel and compliance officers, law firms serving corporate clients, and IT.

The crux of the matter is that e-discovery and its related areas will be extremely hot for litigation and compliance, especially those related to the financial meltdown. The market increasingly understands the necessity of e-discovery software tools and systems, and will move toward proactive e-discovery adoption. A more reactive approach will remain alive and well as many companies will still avoid implementation until driven to it by a lawsuit or federal investigation. But companies will increasingly understand that the e-discovery solution phenomenon is much more than a litigation aid. It also has major effects on federal compliance and internal governance, and potentially on data management throughout the enterprise.

Corporations will be looking for technology that helps them meet compliance and litigation demands while controlling costs, and will demand that their outside law firms do the same. IT will be looking for ways to add value around data classification and management. By forming interdisciplinary teams at the corporate level to research e-discovery solutions, the enterprise will help to drive wide e-discovery development past specific litigation concerns. Litigation will remain the most significant pain point, but compliance/governance and data management will not be far behind. The most successful e-discovery vendors will be those who can meet these expanded needs in the enterprise, whether through a comprehensive platform or best-of-breed integrated offerings.

Let us take a closer look at the trends surrounding the three primary stakeholders in the e-discovery field. These include corporations, law firms, and e-discovery vendors.

 

Corporations — Primary e-discovery technology sales will be to corporations under pressure from regulatory and litigation matters. Many implementations will be reactive and require fast deployment. A growing number will be proactive, with vendor research led by interdisciplinary teams of the general counsel’s office, compliance officers, and IT. 

General counsels and in-house attorneys will defend companies against civil lawsuits relating to financial losses and will file lawsuits of their own. Blame and finger pointing will be everywhere, and corporations will practice e-discovery to defend and attack. They also want to cut outside counsel document review costs and will require greater accountability from them, which will frequently require e-discovery technology. Outside counsel may use their own e-discovery tools for billing corporate customers, or they might be required to use the same system the corporate client is using.

Compliance officers are under pressure from regulatory compliance and internal governance. Many will be investigated by federal teams and need e-discovery collection and analysis tools now to ease the pain. They are also under pressure to set up clear knowledge and data management systems for tighter internal governance.

IT professionals understand that accurate collection and thorough culling are critical to analysis and review. In terms of e-discovery workflow, this gives increased importance to the identification, collection, and processing phases of the Electronic Discovery Reference Model.

IT will work closely with vendors to locate data sources and manage collection and culling. IT should be able to take advantage of e-discovery tools for broader enterprise data management, making the technology a win for them as well as for the general counsel and compliance. IT will push back on large storage resources dedicated to indexes, so vendors with indexing capability will need to reduce index size, decrease network drag from background indexing, and prove ROI even with added storage resources. Quickly and cost-effectively restoring email archives from tape will increase in importance.

 

Law firms — E-discovery is a double-edged sword for law firms. Some of them welcome review and analysis tools that help them to produce more accurate review results for their customers. However, outside law firms make a huge amount of money doing document review for corporate customers, and many do not welcome technology that cuts down on those billable hours. Increasingly law firms will need to control and audit attorney review costs for corporate customers, and might be required to adopt their customer’s e-discovery technology to do so. 

The technology might be as simple as adopting the same analysis and reporting software, or may be as complex as deploying large multi-team project management platforms. Either way, law firms will be increasingly required to toe the cost-cutting line for their corporate customers.

This will be a difficult change for many law firms, which have built huge and profitable practices from attorney document reviews. Law firm document review billings have grown right along with an increasingly volume of discoverable electronic documents. But corporations are biting back by requiring much stricter auditing and billing oversight from their outside law firms. And corporations that have adopted e-discovery collection and culling tools are sending fewer documents for review to begin with, which is taking an additional bite out of law firm pocket books.

Law firms can still win by becoming expert at e-discovery workflow, early case assessment, analytical review tools, and document production. This is a sea change for experienced litigation attorneys, but it is one they will have to make if they do not want to see their corporate clients go elsewhere.

 

E-discovery vendors — The third group of e-discovery stakeholders is the e-discovery vendors themselves. Market pressures are increasing along with opportunities. 

Last year there were well over 100 self-described e-discovery companies all trumpeting their wares. However, customer confusion about what e-discovery vendor did what was rampant, and still is. This has led to a customer demand for clarity around e-discovery products, and for full integration around the e-discovery workflow process. This year we will see many more e-discovery companies starting up. This seems incongruous with poor economic news in North America and the European Union, and with the stated intention of venture capitalists to pull in their horns. However, the e-discovery field is being helped by the financial meltdown. It benefits from the increasing demand by beleaguered companies for litigation and compliance support. That is not to say that every e-discovery vendor is walking into a rose garden. Many vendors depend on venture capital, and many of these same vendors struggle with clients not paying the bills. But on the whole, the e-discovery vendor community will not be nearly as hard hit as many other technology sectors.

We are seeing developing partnerships and integration points between e-discovery vendors, with an eye toward offering end-to-end e-discovery. This is particularly true with specialty e-discovery vendors such as those that provide review and analysis. Corporations increasingly want to see data collection and culling along with review and analysis products. To that end, analysis vendors are either collection vendor-neutral or actively partnering with data management vendors. The latter will become more common in order to provide a single highly integrated response to corporate clients.

Another hotbed of partnering activity is between data management companies and hosted e-discovery products and services. A data management company can add e-discovery to its line of services, and a software-as-a-service provider can integrate with on-premise data collection and repositories.

Early case assessment is a very hot topic in the corporation for several reasons: It can save a great deal of money and resources by providing an accurate picture of a case’s merits early on. It bolsters settlement talks and/or trial strategy. And it can close a federal investigation in the early stages by presenting strong analytical proof of compliance. (Or not, in which case the corporation knows what it needs to fix.)

Even small cases benefit from e-discovery process management, and large cases and serial litigation require it. Vendors offering e-discovery workflow process management will benefit both governance and compliance, and have a strong advantage. Workflow management may be embedded in the interface, offered through vendor consulting, or both. The latter model is increasingly common at the corporate level.

One of the most pressing issues in terms of e-discovery and compliance is different requirements across countries. For example, a global enterprise based in the U.S. must comply not only with American regulations, but also the EU Data Protection Act, differing national protections of employee privacy, and other foreign legislation. This makes cross-border e-discovery actions a minefield for a hapless general counsel. Regulatory compliance and litigation search must stretch across international boundaries as one part of a global content management strategy. Vendors who offer e-discovery tools customized for different international requirements will have a very strong message to multinational corporations.

Many companies offload data and operations to offshore vendors. When it comes to the upfront question of data security, offshore vendors are usually competent. But these same offshore providers are not prepared to support e-discovery and compliance actions, especially when it comes to providing legal holds and tracking evidence chains. This situation increasingly calls for e-discovery solutions that allow for offshore oversight and auditing. These solutions tend to be hybrids of e-discovery/compliance software and management services that interact directly with the offshore parties.

The e-discovery segment is changing so fast that our collective head is spinning. These massive changes have been a few years in the making, driven largely by stricter litigation oversight and electronically stored information management demands, such as those required by the federal rules of civil procedure; stronger federal regulations and compliance demands contained in a variety of rules, regulations, and laws here and abroad; hugely growing volumes of potentially discoverable data; and the need for comprehensive content management tools throughout the enterprise.

This fast-growing sector can be seen as both a blessing and a curse. It’s clearly a blessing to strategic e-discovery vendors that can stay the course, but it can be either a blessing or a curse to corporate and legal customers. Frankly, the choice depends on customer attitude.

A number of highly respected litigation attorneys recently issued an open letter stating that legal e-discovery demands are blight on civil law. And why not? Their expertise is in managing massive manual document review projects and using delaying tactics to force their opponents to settle. But these strategies no longer work from either the court standpoint (courts want to speed up the e-discovery process) or the corporate customer standpoint (business lawyers want to save massive amounts of money). The solution for the law firms does not lie with the traditional civil attorney, but with new attorneys earning e-discovery specialty certifications in the law schools. There is a tremendous profit potential for law firms that can offer e-discovery workflow management expertise and oversight, but this does require a change from traditional methods of working. And corporations can deeply leverage their e-discovery investment past litigation and onto compliance, internal governance, and data management for efficiency and value.

To paraphrase an old Western movie cliché, “There’s gold in them thar hills.” Now go out and find it.

 

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Tricom Document Management, Inc. is a leading company that offers various Legal Process Outsourcing (LPO) services such as document review, contract drafting, legal research, litigation review besides litigation support sevices such as electronic discovery and coding.

Tricom Document Management, Inc.

2450 Peralta Blvd., Suite 222 • Fremont, CA 94536

Phone: 510.494.7800 • Fax: 510.494.7802 • Email: sales@tricomdata.com

For additional information visit us on the web at

www.tricomdata.com

Arbitration’s E-Discovery Conundrum

Dealing with complex evidence problems in a streamlined process

 

By Thomas L. Aldrich
The National Law Journal
December 16, 2008

LAW.COM

It’s no secret that the recent expansion of document discovery in federal civil litigation has driven many corporations and their lawyers to eschew court battles for alternative dispute resolution.

Today, however, the experience of massive, uncontrolled document discovery, particularly with regard to electronic documents, has eviscerated most of the benefits of arbitration.

The broad scope of Federal Rule of Civil Procedure 26, which deals with discovery, as interpreted by the courts and exacerbated by electronic technology and creative trial counsel, has hugely increased litigation costs in terms of dollars, time to resolution and the burden on management. Thirty years ago, the specter of copying, storing and producing tens of millions of hard-copy documents caused many in-house and outside counsel to consider arbitration as a cheaper and faster alternative to litigation.

But as litigation discovery techniques have become more prevalent in arbitration, arbitration has become just as time-consuming, expensive and burdensome. Without the benefit of an appeal process for the losing party, the primary remaining benefit for binding arbitration — privacy — is often outweighed by the other negative factors.

Parties and their litigation counsel have pointed to runaway discovery as one major reason why they have abandoned arbitration in favor of mediation in the United States and even internationally.

How can the long-recognized benefits of arbitration — speed and cost savings — be restored? To regain favor among parties and their legal representatives, the process must address the needs and interests that led them to arbitration in the first place: to balance the need to discover those documents reasonably necessary for a party to prove its case with the cost, burden and time involved in producing such documents, while taking into account the need for fundamental fairness and to avoid surprise and trial by ambush.

Understanding the problem requires a look at the development of electronic discovery rules and what some arbitral institutions are doing to address the situation. This article will describe briefly how we got here.

The 1925 Federal Arbitration Act created a body of federal substantive law that recognized contracting parties’ obligations to honor a private agreement to submit a dispute to arbitration.

Although the FAA authorized arbitrators to subpoena witnesses and documents for testimony at hearings, it did not specifically address the subject of prehearing discovery. Many commentators and court decisions have differed on whether prehearing discovery is permitted under the act. At a minimum, one can infer that no right to discovery exists without an express agreement by the parties to the contrary.

Recent experience, however, has shown that arbitrators are reluctant to deny or limit discovery when confronted with trial counsel used to the breadth of discovery under Rule 26. Moreover, the threat of overturning an award or not being selected for a future case weighs heavily and has resulted in many arbitrators expanding the scope of prehearing discovery to more closely resemble that prevalent in the federal courts.

In addition, parties have adopted the approach of spelling out in detail in their predispute arbitration agreement the scope of discovery preferred in the event that a dispute arises.

The 1955 Uniform Arbitration Act, which was adopted by virtually all of the states except New York, was silent with respect to discovery. It was modeled after Article 75 of the New York Civil Practice Law and Rules, which still governs arbitrations in that state.

The 2000 Revised Uniform Arbitration Act includes several explicit provisions dealing with discovery. Section 17(c) provides that arbitrators “may permit such discovery as [they] decide … is appropriate in the circumstances, taking into account the needs of the parties to the arbitration proceeding and other affected persons and the desirability of making the proceeding fair, expeditious and cost effective.” The RUAA has been adopted by at least 12 states and the District of Columbia and is currently under consideration for adoption in New York.

Although the RUAA provides that the scope and breadth of permitted discovery remain within the discretion of the arbitrator, the various factors described above have resulted in arbitrators acceding to the wishes of one party, or both, to expand discovery in prehearing arbitration proceedings to closely resemble that permitted in the courts.

Thus, the original benefits of arbitration perceived by the FAA and by corporate and legal proponents of arbitration — speed, efficiency, low cost and control — have fallen victim to the e-discovery morass. And companies and their lawyers who used to seek arbitration over litigation are now choosing mediation over arbitration.

What can be done to save arbitration from the e-discovery morass? To address this compelling need, arbitral institutions have assumed a greater role to provide comprehensive guidelines for shaping discovery and resolving disputes.

THE DRAFT CPR PROTOCOL

The International Institute for Conflict Prevention and Resolution arbitration committee has proposed and will soon promulgate a protocol that seeks to alleviate the problems created by runaway discovery.

Underlying the protocol is the philosophy that arbitration must be expeditious, cost-effective and fundamentally fair. Section 1(a) of the protocol reads, “[a]rbitration is not for the litigator who will ‘leave no stone unturned.’ … [Z]ealous advocacy must be tempered by an appreciation for the need for speed and efficiency … .[D]isclosure should be granted only as to those items that are relevant and materials for which a party has a substantial, demonstrable need.”

The guidelines provide that the disclosure of electronic documents shall follow the general principles of narrow focus and balancing cost, burden and accessibility with the need for disclosure. Production of e-materials from a wide range of users or custodians, which is both costly and burdensome, should not be permitted without a showing of extraordinary need.

The CPR guidelines present a cafeteria list of potential modes of disclosure from which the parties may select as a practical approach to the breadth of permitted discovery. Mode A, the narrowest scope, provides for no prehearing disclosure other than copies of printouts of e-documents to be presented in support of each party’s case. Mode B provides that each side produce e-documents maintained by an agreed limited number of designated custodians, that the disclosure be limited to e-documents created from the date of signing the arbitration agreement to the date of filing the request for arbitration, and that production be limited to e-documents from primary storage facilities. In other words, no documents from backup servers, backup tapes, cell phones, personal digital assistants or voicemails will be produced. And no information obtained through forensic methods will be admitted in evidence.

Mode C provides for a larger number of specified custodians and a wider time period than Mode B, and also provides that the parties may agree to allow documents obtained through forensic methods to be admitted. Finally, Mode D provides for disclosure of electronic information regarding nonprivileged matters relevant to any party’s claim or defense, subject to limitations of reasonableness, duplicativeness and undue burden. It is a broad level of disclosure similar to that required or permitted under FRCP Rule 26.

Other arbitral institutions are issuing e-discovery guidelines similar to those of CPR.

CHARTERED INSTITUTE PROTOCOL

For example, the Chartered Institute Protocol for E-Disclosure in Arbitration, newly promulgated in October, shares many of the same purposes and concepts, including early consideration of the scope and conduct of e-disclosure; avoidance of unnecessary cost and delay; reasonable and appropriate steps for the retention and preservation of e-documents; agreements by the parties to limit the scope and extent of production; reduction of the cost and burden of production; and placement of the ultimate burden of persuasion on the requesting party.

The CIP authorizes the parties to confer at the earliest opportunity regarding the preservation and disclosure of e-documents and the scope and methods of production.

Matters for early consideration include the types of electronic documents, computer systems, devices, storage systems and media involved. Early consideration matters also include appropriate steps for the retention and preservation of e-documents; the applicable rules of practice; an agreement to limit the scope and extent of disclosure; the tools and techniques to consider in reducing the burden and cost of e-disclosure; and whether any party or the tribunal may benefit from professional guidance on information technology issues.

The Chartered Institute’s Protocol for E-Disclosure in Arbitration, like the CPR Protocol, is quite comprehensive. A particular strength is the detail regarding IT capabilities, media and the potential use of professional IT experts. A possible weakness is the lack of detailed choices regarding potential modes of production, as provided by the CPR Protocol.

THE ICDR

The International Centre for Dispute Resolution, the international arm of the American Arbitration Association, issued guidelines for arbitrators concerning the exchange of information, which became effective in May.

While the introduction to the ICDR guidelines provides a general statement that international commercial arbitration should offer a “simpler, less expensive and more expeditious form of dispute resolution than resort to national courts,” the guidelines themselves offer only limited suggestions for dealing with runaway discovery, especially e-discovery.

To that end, the guidelines provide that “[t]he tribunal shall manage the exchange of information among the parties in advance of the hearings with a view to maintaining efficiency and economy … [by] avoid[ing] unnecessary delay and expense, while at the same time balancing the goals of avoiding surprise, promoting equality of treatment, and safeguarding each party’s opportunity to present its claims and defenses fairly.”

Under the ICDR guidelines, the only documents required to be exchanged are those on which a party intends to rely. The sole provision dealing with e-documents speaks primarily to the form in which such documents shall be disclosed (the form in which they are maintained, absent a showing of compelling need by the requesting party for production in a different form). Finally, requests for e-documents “shall be narrowly focused and structured to make searching for them as economical as possible.”

IBA RULES

Similarly, the International Bar Association Rules on the Taking of Evidence (1999) provide little guidance in addressing the problems of runaway e-discovery in arbitration proceedings.

Article 3, Section 2 provides that any party may submit to the tribunal a request to produce documents (including electronic documents), subject to exclusion on grounds of relevance or materiality, legal impediment or privilege, unreasonable burden to produce, or considerations of fairness or equality that the tribunal determines compelling. Section 9.2.

Thus, while the IBA Rules offer few specifics, one gets the sense that arbitrators armed with these rules may feel relatively secure exercising their discretion to resist e-discovery fishing expeditions.

In sum, the application of the broad discovery standards in arbitration proceedings has led to parties forgoing arbitration altogether in favor of mediation.

New arbitration protocols and guidelines seek to change the e-discovery landscape by narrowing the focus, providing a balancing test and shifting the burden to the requesting party to demonstrate that the need for disclosure outweighs the cost and burden of disclosure.

Thus, the protocols seek to recapture the traditional benefits of arbitration — speed, efficiency and cost saving — while preserving fundamental fairness.

Ultimately, the success of these efforts to stem the tide of runaway e-discovery in arbitration rests upon the parties’ agreements to use the protocols and the arbitrators’ willingness to exercise their discretion to enforce such agreements.

Thomas L. Aldrich is a senior consultant for the International Institute for Conflict Prevention & Resolution.

 

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Tricom Document Management, Inc. is a leading company that offers various Legal Process Outsourcing (LPO) services such as document review, contract drafting, legal research, litigation review besides litigation support sevices such as electronic discovery and coding.

Tricom Document Management, Inc.

2450 Peralta Blvd., Suite 222 • Fremont, CA 94536

Phone: 510.494.7800 • Fax: 510.494.7802 • Email: sales@tricomdata.com

For additional information visit us on the web at

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25 Percent of Reported E-Discovery Opinions in 2008 Involved Sanctions Issues

Sheri Qualters
The National Law Journal
December 17, 2008

LAW.COM

One-quarter of the reported electronic discovery opinions issued in the first 10 months of the year involved sanctions issues, according to a new Kroll Ontrack Inc. study.

The Kroll Ontrack software division of risk consultant Kroll Inc. analyzed 138 reported cases from January through October 2008 for the study. Also, according to the analysis, 13 percent of cases addressed preservation and spoliation issues; 12 percent involved computer forensics protocols and experts; 11 percent addressed admissibility; and 7 percent of cases involved privilege considerations and waivers.

The cases illustrate that judges frequently issue sanctions for mishandling of electronic discovery and lack of document retention policies, said Michele Lange, Kroll Ontrack’s director of legal technologies, in a statement. “It is clear that courts are no longer allowing parties to plead ignorance when it comes to [electronic discovery] best practices.”

Kroll Ontrack’s study detailed several decisions, including a federal court decision in the Northern District of California that required defendants to pay more than $250,000 in fees and costs for discovery conduct “among the most egregious this court has seen,” according to an Aug. 12 opinion by U.S. Magistrate Judge Elizabeth D. Laporte. Keithley v. The Home Store.Com Inc., No. 3:03-cv-04447 (N.D. Calif.).

 

_____________________________

 Tricom Document Management, Inc. is a leading company that offers various Legal Process Outsourcing (LPO) services such as document review, contract drafting, legal research, litigation review besides litigation support sevices such as electronic discovery and coding.

 

 

 

Tricom Document Management, Inc.

2450 Peralta Blvd., Suite 222 • Fremont, CA 94536

Phone: 510.494.7800 • Fax: 510.494.7802 • Email: sales@tricomdata.com

For additional information visit us on the web at

www.tricomdata.com