Advice from Counsel: Trends that Will Change E-discovery (and What to Do About Them Now)

Executive Summary

In the fall of 2012, we interviewed 30 inside counsel to identify the most important trends that will transform e-discovery in the next decade, and to solicit their guidance on how to navigate this altered landscape. All of the respondents worked for Fortune 1000 companies and all had e-discovery responsibilities.

The full Advice from Counsel study summarizes these findings in greater depth. It also discusses other predictions and advice from leading in-house lawyers.

Introduction

What will e-discovery be in the future? What will be the main challenges? What technology and processes will be used, and what will be the costs? Who will be the key practitioners and what education and training will they need? These questions were just a few of the many asked of 30 in-house attorneys by Ari Kaplan Advisors in the fall of 2012. Their candid and practical advice offers a window into the changing digital landscape of modern litigation. It reflects a universal understanding and a shared sense of responsibility for influencing the trajectory of e-discovery in the coming years.

This study summarizes the key areas of agreement, as well as certain issues of contention, with the goal of providing a roadmap for piloting process enhancements and cost-effective technological improvements for counsel. Similar to the three previous Advice from Counsel studies, this year’s study is intended to provide readers with qualitative and anecdotal advice beyond the quantitative statistics included in many industry reports. The interviews with leading practitioners yielded a number of insights that are shared directly in their own words and help characterize the trends driving the e-discovery market.

Participants

Ari Kaplan Advisors personally interviewed 30 in-house legal professionals with responsibilities that included e-discovery. All participants were from Fortune 1000 corporations and spoke by telephone, under condition of anonymity, in October and November 2012. The results of this study reflect the second consecutive year of 100% corporate counsel participation, up from 72% in 2009 and 97% in 2010.

Of this year’s participants, 90% select e-discovery tools and vendors for their organization; 83% implement e-discovery technology; 93% manage e-discovery tools and vendors; and 97% develop and implement e-discovery processes.

The vast majority of participating organizations had total annual revenues greater than $10 billion and over 10,000 employees – 70% and 86%, respectively. In terms of litigation events over the past 12 months, 37% reported managing more than 500 litigation events and 20% reported managing more than 2,000 litigation events.

By industry*:

• 30% financial services industry, including banking and credit institutions, as well as insurance companies
• 13% manufacturing
• 13% life sciences
• 13% technology
• 13% energy and utilities companies
• 10% retail
• 3% telecommunications
• 3% transportation

*Note: Figures do not total 100% due to rounding.

2011 revenues:

• 70% had total annual revenues greater than $10 billion
• 17% had total annual revenues between $5 billion and $10 billion
• 13% had total annual revenues between $1 billion and $5 billion

Number of employees:

• 86% worked for a company with over 10,000 employees
• 7% worked at companies with 5,000 to 10,000 employees
• 3% worked at companies with 1,000 to 5,000 employees
• 3% worked at companies with fewer than 1,000 employees

Number of litigation events in the past 12 months:

• 20% reported over 2,000 litigation events
• 7% reported between 1,000 and 2,000 litigation events
• 10% reported between 500 and 1,000 litigation events
• 53% reported between 100 and 500 litigation events
• 10% reported fewer than 100 litigation events

E-Discovery Success in 2015

In many ways, 2012 was a watershed year for e-discovery – from high-profile court rulings on predictive coding, to ongoing market consolidation of providers and software vendors. How were these changes impacting counsel, and what were they planning for the future? In this year’s Advice from Counsel study, unlike in previous years, we asked our panel of e-discovery practitioners for their thoughts and educated guesses on the future of e-discovery. And, where appropriate, we included data from previous years to compare and contrast changes in perception.

According to 90% of respondents, e-discovery will be different in 2015. Seven key reasons emerged from interviews with counsel:

1 “Predictive coding will have a dramatic impact.”

No matter current adoption rates, predictive coding will be a key e-discovery tactic in 2015, according to 57% of respondents. This indicates that predictive coding continues to gain interest within the industry, considering that in the previous year’s survey 55% of respondents said they were considering the use of predictive coding. Many respondents expressed optimism that predictive coding technology can better automate the review process and dramatically reduce costs.

Quotes included:

• “People will get more comfortable with technology-assisted review.”
• “Predictive coding or some type of algorithmic/automatic document review should be more mainstream.”
• “E-discovery will just be more prominent and more sophisticated with the implementation and increased use of predictive coding.”
• “There will be a growing push to fully automate review.”
• “You will see a rise in predictive coding primarily based on practicality and expense.”
• “We are moving to predictive coding to reduce cost and improve efficiency.”
• “Things like predictive coding will take an increasingly important role in e-discovery.”
• “Technology is evolving all of the time and technology assisted review/predictive coding is the hot subject. That and other tools will become more mainstream.”

While expectations for predictive coding were high, many respondents noted that the technology was evolving quickly, requiring acceptance from the courts, new skills from e-discovery practitioners, and necessitating greater partnership with predictive coding services providers. In this ideal, corporations could conduct predictive coding in a defensible manner, reduce the costs of e-discovery while keeping internal control of the process, and rely on a service provider partner to constantly innovate on the technology.

2 “The more (skills) they can bring to bear, the better they will be.”

Reflecting expectations that predictive coding will play a greater role in e-discovery, respondents broadened the list of skills helpful for future e-discovery practitioners. While legal and technology aptitude remained high at 83% and 77% respectively, respondents also listed new, and perhaps surprising skills – including statistics, accounting, project management and linguistics.

While many acknowledged that there is no formal curriculum for this diverse skill set, representative comments include:

• “You need to have a broad set of skills. Increasingly, people who manage these decisions from within companies need to have technological and legal training. We will also need to give basic training in statistics to understand the probabilities of predictive coding and how to use the data to determine what should be reviewed. There needs to be a math-based education for those individuals.”
• “An understanding of data privacy is essential because you may need to address international data.”
• “It would be good for people to be familiar with statistics. Project management and process principles are also important. This work requires someone who has more of a scientific and mathematical mindset to understand the underlying issues. Math is also important in managing the process.”

A large number of respondents maintained that a core legal and technology understanding would always remain in demand, but that for more specialized skills, including statistics, project management and data privacy processes, service provider partners would augment the company’s skill sets.

It’s interesting to note that just four years ago, in the first Advice from Counsel study (2009), respondents were primarily focused on enabling greater collaboration between legal and IT.

3 “I don’t think you can ever do it purely in-house.”

Connected with the last point, 73% of the respondents noted that future management of e-discovery would be more team-oriented and consist of a combination of influence from in-house counsel, outside counsel and providers. Additionally, 60% of the respondents said that they would prefer to buy predictive coding as a service, versus 33% preferring to buy it as a software.

Two important themes emerged from discussions on who would conduct e-discovery: the increasing importance of collaboration across inside counsel, the law firm and service providers, and the need to clearly define roles.

“There will be a lot more openness and cooperation between all of the participants,” one attorney remarked. “I don’t know anyone who is doing it alone,” added another. Many agreed, “Vendors will have a large role, with cooperation and assistance from both in-house counsel and outside counsel.” One specifically encouraged peers to seek outside support: “Organizations would be wise to bring in third-party consultants to assist.”

And while the degree of involvement may vary, the consensus was that there would be a role for each group in the future. “Outside counsel will always have their hands in it. In addition, some companies will bring more of the work in house for cost-saving purposes, but vendors will become more and more involved as time goes on,” noted one lawyer. Technology is also impacting this shift and “There will always be a place for vendors because they are continuously developing the technology.”

Ultimately, many agreed that e-discovery is a specialized area and predicted a rise in the number of in-house lawyers with e-discovery in their title. These lawyers will work directly with records management and IT to ensure that the company addresses the law department’s interests in data retention or reduction. “The likelihood of having those titles and a career path there is greater than it has ever been and will continue to grow,” said one participant.

4 “Legal review in the cloud is inevitable.”

A big reason why providers will continue to play a large role in e-discovery, according to respondents, is the advent of e-discovery in the cloud. In the prior year, 52% of respondents indicated a growing interest in using cloud applications for e-discovery, but had no specific plans. In this year’s study, 37% of respondents are currently evaluating the use of a legal review tool in the cloud and are doing so for a variety of reasons, including freedom, cost-control, and a continuing interest in being more efficient. “Cost is a driving factor,” said one respondent. “We have looked at it and would definitely consider it because it offers us leverage and flexibility,” said another.

Some are simply trying to keep pace with their peers. “It is out there now and everyone is doing it,” one lawyer said. “We want to explore all of the options and make sure we are picking the right one,” the lawyer added.

Still others are not ready. “There is a hesitation to deal in the cloud until we understand it,” noted one participant. “I’m not convinced of the safeguards; I probably will be, but not yet,” said another. Indeed, security in the cloud remains a sticking point for many. The ability to access, control and protect discovery data will remain a baseline requirement for providers offering cloud-based legal review software.

5 “The lack of control that corporations are going to have on their information and knowing where to find it will be the biggest issue.”

64% of the in-house lawyers participating in the survey noted that the impact of “Big Data” on e-discovery requests will be the overwhelming challenge for the foreseeable future, followed equally at 32% by “social media and data in the cloud” and “the emergence of the ‘bring your own device’ environment becoming a workplace norm.” A notable 14% believe that the ongoing conflict between US e-discovery requirements and data privacy rules overseas will continue to present obstacles to seamless discovery.

“The big data problem cannot be avoided and it is not going to subside in volume or variety,” remarked one lawyer. Ironically, however, “as technology increases, the courts are less sensitive to the burdensome nature of e-discovery,” cautioned another participant.

With respect to using personal devices for work-related matters, “Many of us are dealing with the BYOD issue right now,” noted one in-house respondent, who advised, “There is a lot of competition between IT, which wants to serve the employees, and the legal/ compliance teams, who want it done properly.” One lawyer described it as a “self-inflicted wound,” and another remarked, “The lack of control that corporations are going to have on their information and knowing where to find it will be the biggest issue.”

Since many of the issues are related in that BYOD and social media are causing the exponential increase in data, the participants suggested that legal teams should develop stronger processes that they can implement and audit. That capability is particularly important since many remain concerned with the treatment of these issues by the judiciary. “How the courts deal with the amount of personal sources of information that may need to be accessed in the future is key,” noted one lawyer.

6 “If you don’t have a process and you are not constantly streamlining, costs will increase.”

As with any discussion on e-discovery, cost was a recurring theme during all of the interviews. Despite the advances expected with predictive coding, emerging challenges such as increasing data volumes, complex data types such as from social media and the cloud, as well as increasing international discovery demands provided such a counterweight that 47% of counsel expect e-discovery costs to increase over the next few years. Roughly the same number of participants (27%) thought costs would decrease or stay the same.

The emphasis placed on process underscores its importance and complexity. The more sophisticated technology used, and the more techniques employed to save review time (such as segregating documents that are most likely responsive or potentially privileged), the more sophisticated processes will be needed. Inside counsel, outside counsel and service providers all play a role in utilizing repeatable processes to help streamline e-discovery, reduce costs, and bring greater budget predictability. E-discovery process and litigation readiness audits can provide best practices for improvements specific to a company’s litigation profile.

7 “I expect e-discovery will be easier as we get more technologically savvy and the courts provide additional guidance.”

The courts were mentioned by 43% of respondents as a catalyst for future change. Judges were growing increasingly savvy about e-discovery, according to respondents, and counsel was hopeful that this would enable the courts to provide additional guidance and improvements on a wide variety of issues, from predictive coding to reasonable collections.

Some of the comments include:

• “The courts will have refined the amount of information that is required to be searched.”
• “As judges and lawyers become more comfortable with predictive coding it will be cheaper and it will lead to a greater use of predictive coding.”
• “E-discovery will become more mainstream as judges and lawyers become aware of the risks in the process. I think it will continue to improve as a result.”
• “Courts and practitioners realize that it is unsustainable to cull and collect as much data as we are.”
• “As judges and lawyers become more comfortable with predictive coding it will lead to greater use.”

Additional Findings

While the primary focus of the interviews was to gather predictions from counsel on the future of e-discovery, the discussions provided insight into the present-day realities for these legal professionals.

Unprecedented Understanding of Spending

60% of respondents revealed that they are able to quantify how much they spend on e-discovery annually. This is a significant jump from the 42% who were able to do so in 2011, the 40% in 2010, and the 34% in 2009. Although, more in-house counsel are familiar with their spending, that knowledge is almost universally based on a substantial range, rather than an exact figure. As an example, one respondent said their company spent $3 to $5 million per year on e-discovery, and another gave “over $10 million” as the annual spend.

One lawyer, who advised that the legal department spends 28% of its legal budget on electronic discovery, stated that “It is easy to capture the vendor and internal spend, but it is more difficult to capture the outside counsel spend because the uniform billing codes did not address e-discovery in the past or did not address them clearly.”

One of the challenges is the diversity of personnel involved. After all, knowing what you are spending is closely linked to tracking it and that is confusing for many in-house lawyers. One lawyer noted that the legal department spends over $1 million on e-discovery, but was not sure of the exact amount because the costs are spread across various business units. “The problem is that the bills are not centralized through the legal team,” reported another participant.

Despite the increased awareness of spending metrics, 40% of participants are still wholly unfamiliar with the amounts at issue. “That is one of our biggest struggles,” reported an inhouse lawyer. “We have a tremendous amount of inefficiency and do not have a means by which we can quantify it,” the lawyer added noting, “It is probably worse than I fear and more than I imagine.”

Others are partially familiar. For example, one lawyer advised that although the legal team spent $200,000-$300,000 for searching, processing, hosting, and filtering data, it could not quantify what it spent on outside counsel fees for review. Another noted: “When we get a large piece of litigation, we spend $500,000/year, but what is harder to quantify is the internal resources specifically devoted to this work.”

Greater Re-Use of Coding Decisions

Since legal review is the most expensive phase of e-discovery, and privilege coding is the most expensive phase of legal review, it isn’t a surprise that 57% of participants are re-using coding decisions made on documents for previous matters. Given the focus on efficiency, this number is likely to increase. “The company has created a master set of data since several cases have similar themes, including the same custodians and issues,” remarked one lawyer. Many noted that when they manage repeat or related litigation (e.g., patent matters), they preserve the basic coding.

Others, however, recognized their disorganization. “We do not do this nearly enough; we are inefficient and collect some of the same stuff over and over,” admitted one lawyer. Another cautioned “You cannot be so rigid that you apply that designation for the entire lifecycle of the record,” since the issues may change the meaning or impact of a particular document.

Potent Information Governance Strategies

Given the concern over Big Data, it was not surprising that 77% of respondents reported that their organizations maintain some type of information governance strategy. In the next few years, these are likely to become more robust and integrated into the overall e-discovery structure since most respondents seemed to believe that their policies offer room for improvement. “It is more in concept than in reality,” said one lawyer. “The company has information governance standards and its employees aspire to a high level of sophistication, but the company is in the early stages of this process,” remarked another.

The Quality of Service Providers is Key

From discussions on predictive coding workflow, to collaboration and streamlined processes, respondents explicitly asserted the need for high-quality third party professionals. In fact, 60% of counsel listed this as the most important factor in selecting an e-discovery service provider.

As one commented:

“You can have a great technology and a great process, but it is only as good as the people that manage it. It is not only about being technologically savvy, but professionals need to have business savvy and be able to translate something that is highly technical in a way that makes sense to a business person. The people who work with the service provider have to be top notch.”

There was also acknowledgement from the group that top-quality professionals do not come cheaply. As one stated, ““We do not mind paying a premium for a firm that we trust, but then we are also very demanding and expect a high level of service.”

Significant Year-Over-Year Changes

For the most part, criteria scores remained consistent or showed moderate increases. Yet a few areas showed considerable year over year jumps in the “most important” rankings:

Software

• The ability to scale up or down increased by 163% from the previous year, perhaps reflecting increasing concerns about growing data volumes.
• Integration with existing applications increased by 78% from 2011, an indication that counsel may be looking for point solutions to work alongside their existing in-house e-discovery investments.
• 53% of respondents said that minimizing the disruption of normal business processes was most important, an 51% increase from 2011. Services
• Mirroring the software criteria increases, 53% of respondents said that minimizing the disruption of normal business processes was most important when selecting a service provider, an 83% increase from 2011.
• The service provider’s long-term viability grew in importance as a consideration, increasing from 29% in 2011 to 50% in 2012.

Forecasts:

Based upon the survey responses, it is possible to forecast coming trends that e-discovery teams should be aware of:

• In-house counsel will begin conducting more predictive coding pilots with experienced service providers. While predictive coding is growing in acceptance, corporations indicate a preference to use trusted and proven service providers to handle the complexity and defensibility of predictive coding.
• An increasing number of professionals, with backgrounds in statistics and economics, will enter into the e-discovery industry. As predictive coding and analytics play a bigger role in e-discovery, those with legal, IT and mathematical skills will be in great demand.
• Data security in the cloud will be a key component of any RFP process for cloud-based tools. Cost-conscious companies are evaluating cloud-based tools because they can reduce IT spend and often provide flexible subscription billing models, yet adoption has been slow to date because of data security concerns. Providers will need to ensure both cost savings and data security in order to help adoption grow.
• More corporations will develop their own “privilege coding repositories” to more efficiently store and re-use privilege coding decisions made in previous matters. As legal teams grow more knowledgeable about their e-discovery costs, privilege coding will likely be a key target for efficiencies because of its expense. The ability to store and re-use coding decisions made in previous matters will enable legal teams to quickly reduce costs and focus on important information faster.

Next steps:

Learn more about themes discussed in this paper:

• Predictive coding best practices:
  Advice from Counsel: Can Predictive Coding Deliver on Its Promise?
• E-Discovery cost control:
  Budgeting for E-discovery: Understanding Pricing Models for Cost Control and Transparency
• Legal review in the cloud:
  Attorney Review in the Enterprise: Choosing Deployment Options
• Multinational data discovery:
  E-Discovery and Legal Frameworks Governing Privacy and Data Protection in European Countries