A Data Discovery Department?

The need for e-discovery processes and support to handle them cannot be disputed. Where the tension might arise is in more corporate counsel taking control of the e-discovery process as law firms continue staffing up for e-discovery.

Consider that in a first-of-its-kind survey of chief operation officers conducted by our ALM affiliate publication, Law Firm Inc., executives at Am Law 200 firms said a director of litigation support was the position most commonly added to the executive ranks within the last 12 months.

This shift in who is managing discovery is having an impact on the law-firm business model concerning litigation preparation. From temporary hires for document review to managing data processing, law firms have always played an integral role in these crucial components of overall firm business process.

'The individual law firms around the U.S. are beginning to acquire their own comfort level for e-discovery, but are then working out compromises with clients that balance the ability that corporations have in-house,' says Thomas Allman, senior counsel at Mayer, Brown, Rowe & Maw in Chicago, and former general counsel for BASF Corp.

Talk About Billables

It's an important balance because there's a big bagful of money on the table. In 2005, somewhere around $1.3 billion was spent on e-discovery, and the market was expected to grow by 37% ' to $1.8 billion ' last year, according to the most recent Socha-Gelbmann Electronic Discovery Survey Report. (For more on the Socha-Gelbmann Report, see, 'EDD Market Growth Will Continue' from our Sept. 2006 issue, available at www.lawjournalnewsletters.com/issues/ljn_ediscovery/3_5/news/147280-1.html.) It's exactly such expenditures across the board that are significant motivating factors for the administration of the process internally in individual firms.

'The minute you need data more than once, it becomes cost-prohibitive to have anyone but the company manage it,' says Laura Kibbe, senior corporate counsel and an e-discovery specialist at Pfizer. '[Discovery] is not paper anymore and if you are not in charge of mission-critical systems, you will screw it up.'

These reasons are among those why Pfizer manages the collection and processing of documents, as well as the initial review for responsiveness and privilege. The company's outside counsel then renews the subset of responsive, non-privileged material for submission to the opposing party. Pfizer handles all logistical production matters in-house.

And that's precisely the approach that appears to be coming into fashion in much of corporate America.

'Since the litigant knows his data better, having created and stored it, he is in the best position to oversee the 'first cull,” says James Wright, director of e-discovery for Halliburton Energy Services Group in Houston.

Wright is a co-founder of The Corporate E-Discovery Forum, which was created in May 2006. Executives from the 85 member companies use the confidential forum to discuss strategies and emerging issues that involve e-discovery.

Companies such as Halliburton are streamlining management of information across multiple topics to save costs on duplicative or extraneous legal review. They are also planning or actively working on developing enterprise records-management systems to facilitate e-discovery.

So what does this mean for law firms? After all, contract attorneys can produce a significant revenue stream. Last fall, The American Lawyer reported that in a survey of the nation's 200 largest law firms, nearly one-third (31%) billed out their contract attorneys at more than a 200% markup. (See, 'Temporary Solution,' The American Lawyer, Sept. 2006) The author provided as illustration the following example: At an average markup of 100%, 100 temporary lawyers hired for four months could generate a profit of about $5 million. Yet, while law firms are doing less of the data maintenance, in some cases, they are still an essential part of the equation.

Building Procedure, Establishing Standards

'We see corporate management of electronic discovery as a good development, because when companies undertake to manage e-discovery, we can review their procedures in litigation and our defensive job is easier,' says Adam Landa, co-chair of the national e-retention and litigation preparedness practice group at Greenberg Traurig.

Landa also proposes that companies consider using outside lawyers for national coordination of discovery responses because the representations to the court about a company's systems and data must remain consistent across every jurisdiction.

From a big picture perspective, Barry Murphy, a senior analyst for Boston-based Forrester Research, says that businesses recognize that a law firm has to be a partner and strategic advisor in litigation, but they are trying to build control.

'Fixed prices and bidding are gaining momentum,' Murphy says.

Corporations will start to look at bids on e-discovery projects with better focus on cost-containment, requiring firms, especially those with experience in electronic-data management, to move toward a fixed-price model, Murphy adds.

Having expertise in-house to address cost-containment and related issues is one area where efforts in e-discovery are starting to pay off, practitioners say.

'We are seeing renewed interest by our clients in seeking our advice on the law and on the technology to make sure that they have a handle on the retention protocols and policies,' says Robert Brownstone, law and technology director for Mountain View, CA-based Fenwick & West.

Brownstone says that his firm invested more than $1 million to strengthen its e-discovery expertise and technology over five years, and has posted seven-figure revenues from its electronic information-management group in each of the last two years.

Building on its success, his group is providing a full range of services, including advising on overall document-management approaches, computer forensics, information-security policies and best practices in handling metadata. Brownstone notes that the great e-discovery/retention conundrum is that saving too much can lead to unnecessary costs and risks, but that saving too little might not be enough to satisfy statutory and litigation-hold requirements.

Of course, some people and companies remain on the sidelines. Despite the fact that a number of large companies have taken the process in-house, mid-sized and small companies haven't to the same degree because the computer tools and development of expertise required are costly.

'We don't think we should try to control it in-house because we don't have the horsepower and expertise to supervise the consultants,' W. David Romoser, general counsel of A. O. Smith Corp., a Milwaukee-based manufacturer of water heaters, explains.

More Business

In the end, because law firms and corporations are potential sources of new business, vendors are targeting them equally.

'We are taking more of a holistic approach to working with our clients, working with both law firms and corporations, in contrast to focusing solely on law firms,' says Courtney Barton, vice president of industry relations for LexisNexis Applied Discovery in Washington, DC.

Even when a corporation owns the e-discovery process and technology, an important business opportunity still presents itself.

'Though we earn less billable hours on an e-discovery project, we establish a greater rapport with a client,' Brownstone says.

This relationship is based on truly understanding a company's electronic information systems and often results in repeat engagements for full-service firms, he adds.

Clients are increasingly looking to their lawyers to help select the proper vendor and technology, as well as to handle more complex litigation. Of the in-sourcing trend, Allman, of Mayer Brown, says, 'the pie is ever-expanding, so nothing is lost.'

The need for e-discovery processes and support to handle them cannot be disputed. Where the tension might arise is in more corporate counsel taking control of the e-discovery process as law firms continue staffing up for e-discovery.

Consider that in a first-of-its-kind survey of chief operation officers conducted by our ALM affiliate publication, Law Firm Inc., executives at Am Law 200 firms said a director of litigation support was the position most commonly added to the executive ranks within the last 12 months.

This shift in who is managing discovery is having an impact on the law-firm business model concerning litigation preparation. From temporary hires for document review to managing data processing, law firms have always played an integral role in these crucial components of overall firm business process.

'The individual law firms around the U.S. are beginning to acquire their own comfort level for e-discovery, but are then working out compromises with clients that balance the ability that corporations have in-house,' says Thomas Allman, senior counsel at Mayer, Brown, Rowe & Maw in Chicago, and former general counsel for BASF Corp.

Talk About Billables

It's an important balance because there's a big bagful of money on the table. In 2005, somewhere around $1.3 billion was spent on e-discovery, and the market was expected to grow by 37% ' to $1.8 billion ' last year, according to the most recent Socha-Gelbmann Electronic Discovery Survey Report. (For more on the Socha-Gelbmann Report, see, 'EDD Market Growth Will Continue' from our Sept. 2006 issue, available at www.lawjournalnewsletters.com/issues/ljn_ediscovery/3_5/news/147280-1.html.) It's exactly such expenditures across the board that are significant motivating factors for the administration of the process internally in individual firms.

'The minute you need data more than once, it becomes cost-prohibitive to have anyone but the company manage it,' says Laura Kibbe, senior corporate counsel and an e-discovery specialist at Pfizer. '[Discovery] is not paper anymore and if you are not in charge of mission-critical systems, you will screw it up.'

These reasons are among those why Pfizer manages the collection and processing of documents, as well as the initial review for responsiveness and privilege. The company's outside counsel then renews the subset of responsive, non-privileged material for submission to the opposing party. Pfizer handles all logistical production matters in-house.

And that's precisely the approach that appears to be coming into fashion in much of corporate America.

'Since the litigant knows his data better, having created and stored it, he is in the best position to oversee the 'first cull,” says James Wright, director of e-discovery for Halliburton Energy Services Group in Houston.

Wright is a co-founder of The Corporate E-Discovery Forum, which was created in May 2006. Executives from the 85 member companies use the confidential forum to discuss strategies and emerging issues that involve e-discovery.

Companies such as Halliburton are streamlining management of information across multiple topics to save costs on duplicative or extraneous legal review. They are also planning or actively working on developing enterprise records-management systems to facilitate e-discovery.

So what does this mean for law firms? After all, contract attorneys can produce a significant revenue stream. Last fall, The American Lawyer reported that in a survey of the nation's 200 largest law firms, nearly one-third (31%) billed out their contract attorneys at more than a 200% markup. (See, 'Temporary Solution,' The American Lawyer, Sept. 2006) The author provided as illustration the following example: At an average markup of 100%, 100 temporary lawyers hired for four months could generate a profit of about $5 million. Yet, while law firms are doing less of the data maintenance, in some cases, they are still an essential part of the equation.

Building Procedure, Establishing Standards

'We see corporate management of electronic discovery as a good development, because when companies undertake to manage e-discovery, we can review their procedures in litigation and our defensive job is easier,' says Adam Landa, co-chair of the national e-retention and litigation preparedness practice group at Greenberg Traurig.

Landa also proposes that companies consider using outside lawyers for national coordination of discovery responses because the representations to the court about a company's systems and data must remain consistent across every jurisdiction.

From a big picture perspective, Barry Murphy, a senior analyst for Boston-based Forrester Research, says that businesses recognize that a law firm has to be a partner and strategic advisor in litigation, but they are trying to build control.

'Fixed prices and bidding are gaining momentum,' Murphy says.

Corporations will start to look at bids on e-discovery projects with better focus on cost-containment, requiring firms, especially those with experience in electronic-data management, to move toward a fixed-price model, Murphy adds.

Having expertise in-house to address cost-containment and related issues is one area where efforts in e-discovery are starting to pay off, practitioners say.

'We are seeing renewed interest by our clients in seeking our advice on the law and on the technology to make sure that they have a handle on the retention protocols and policies,' says Robert Brownstone, law and technology director for Mountain View, CA-based Fenwick & West.

Brownstone says that his firm invested more than $1 million to strengthen its e-discovery expertise and technology over five years, and has posted seven-figure revenues from its electronic information-management group in each of the last two years.

Building on its success, his group is providing a full range of services, including advising on overall document-management approaches, computer forensics, information-security policies and best practices in handling metadata. Brownstone notes that the great e-discovery/retention conundrum is that saving too much can lead to unnecessary costs and risks, but that saving too little might not be enough to satisfy statutory and litigation-hold requirements.

Of course, some people and companies remain on the sidelines. Despite the fact that a number of large companies have taken the process in-house, mid-sized and small companies haven't to the same degree because the computer tools and development of expertise required are costly.

'We don't think we should try to control it in-house because we don't have the horsepower and expertise to supervise the consultants,' W. David Romoser, general counsel of A. O. Smith Corp., a Milwaukee-based manufacturer of water heaters, explains.

More Business

In the end, because law firms and corporations are potential sources of new business, vendors are targeting them equally.

'We are taking more of a holistic approach to working with our clients, working with both law firms and corporations, in contrast to focusing solely on law firms,' says Courtney Barton, vice president of industry relations for LexisNexis Applied Discovery in Washington, DC.

Even when a corporation owns the e-discovery process and technology, an important business opportunity still presents itself.

'Though we earn less billable hours on an e-discovery project, we establish a greater rapport with a client,' Brownstone says.

This relationship is based on truly understanding a company's electronic information systems and often results in repeat engagements for full-service firms, he adds.

Clients are increasingly looking to their lawyers to help select the proper vendor and technology, as well as to handle more complex litigation. Of the in-sourcing trend, Allman, of Mayer Brown, says, 'the pie is ever-expanding, so nothing is lost.'