Mapping out an e-discovery strategy

The numbers on e-discovery projects can be staggering both from a dollar and document perspective. E-discovery can represent 50 per cent of the cost in a litigation matter. It can also be a process where 50,000 documents are looked at for 200 that really matter.

Mapping out an e-discovery strategy
The numbers on e-discovery projects can be staggering both from a dollar and document perspective. E-discovery can represent 50 per cent of the cost in a litigation matter. It can also be a process where 50,000 documents are looked at for 200 that really matter.

As Loreto Grimaldi, former general counsel with Progressive Waste Solutions and now senior vice president and general counsel at ECN Capital, says, “There’s a lot of money at stake here and these aren’t things that can be budgeted for — you can’t plan litigation, necessarily, you can’t plan a regulatory proceeding that pops up, so when general counsel are dealing with large unplanned expenses, there’s going to be a tremendous amount of pressure to try and minimize those if and when they happen.

“It’s no surprise these types of files are becoming more scrutinized both by the law departments and by the CFO and finance people,” adds Grimaldi.

According to the Association of Corporate Counsel Chief Legal Officers 2017 Survey, the percentage of in-house counsel in Canada who say they are sending e-discovery work to outside firms is projected to be 73 per cent in 2016-2017, up from 55 per cent in 2015-2016. The survey shows there has been a drop in work outsourced to LPOs/LSPs from 19 per cent to six per cent.

Increasingly, in-house departments are being more proactive about how they handle e-discovery. About eight years ago, Bell Canada’s legal department was one of the first in Canada to adopt an in-sourcing model to address all phases of the e-discovery process. The legal department started making capital investments in infrastructure and software so it could do more of the work internally.

It was born out of the “astronomical costs associated with the e-discovery process,” says Melanie Schweizer, vice president, legal with Bell Canada. She has accountability across the BCE group of companies, overseeing litigation and labour & employment for the consumer and advertising law team. “We had a couple of files where we incurred significant expense. We looked around and realized we had the expertise internally to do it; we just needed some tools.”

For in-house lawyers challenged with driving cost out of the business and the legal department budget, tackling e-discovery has been a process of refining how the work gets done. At Bell, the cost savings “quickly eclipsed” the cost of making the investment in technology and other resources.

“With some of the early files eight years ago, we really choked at the cost of e-discovery,” says Schweizer. “It’s hard to turn around and say that adds a lot of value to the company, spending hundreds of thousands and even millions in certain unfortunate cases, on this exercise.”

With buy-in from the IT department and Bell’s corporate security group, along with using the talents of technically trained people in the legal team, the legal department began investing in the right tools, including software, to go through documents. “The business case we made has more than justified the investment made,” says Schweizer.

Bell has recently carried this initiative through to the review phase. “We are more hands on in terms of how the reviews are run. We learned from trial and error. We make mistakes with every file we do and learn from them and the next one is always better,” she says. “We’ve learned the quality of the review is dictated by the resources you throw at it, especially at the beginning.”

Schweizer says the team has learned that it’s more efficient if team members are available side by side with reviewers to answer questions in real time and make sure the coding decisions are consistent.

“We’ve even gone so far as to have someone from the business on a very technical file available on site to answer questions in real time, so you don’t have reviewers flagging questions and sending them back and you get an answer 24 hours later. This makes for higher-quality reviews,” she says.

Schweizer cautions that the in-house model Bell has built only works with the right technical expertise on staff. Bell has a paralegal who is the e-discovery specialist internally. She runs all the document processing. Bell also has help from other business units such as the corporate security digital forensics team, which is considered “invaluable” to the exercise.

“I think the [law] firms would say they get better-quality work as a result of it because the data they get is vetted, so less time and energy has to be spent culling out data that is irrelevant and useless because that exercise has already been done. The firms we have the best relationships with see this as complementary to what they’re already doing,” says Schweizer. “I wouldn’t say the firms are in any way losing work as a result of it. Some of the e-discovery vendors probably are.”

Where there are “monster files” with significant data, Schweizer says, the legal process outsourcing firms are “absolutely necessary and complementary to what we’re doing.”

“We still need LPOs, we still need our outside firms; we’re just using all of them more efficiently,” she says.

Anne Glover of Blake Cassels & Graydon LLP has seen the rise of in-house counsel taking on e-discovery and understands law firms need to work closely with clients to make it work better for them. “I am seeing clients bringing more of it in-house, which I think is a good idea. With the amount of data and volume of materials, it’s getting extremely expensive, and relying on the vendor for everything can get very costly, so it’s not surprising in-house counsel are looking for a better way to deal with it,” says Glover, who is a partner in the firm’s litigation and dispute resolution group.

The Blakes inSource group is a 19-member staff of lawyers primarily focused on document review. In some instances, in-house counsel have sat with Blakes inSource staff while the document review process happens at the firm.

“We often spend a week or two thinking through what exactly do we expect to see in terms of volume and using the technology to determine that. If everyone is telling me there is going to be 2,000 documents and with my terms we come up with 100,000 documents, that seems wrong,” says Glover. “That doesn’t seem like a good use of my client’s money. So we take a week to determine what we need to do for it to not be so expensive. I’m a big believer in taking it step by step.”

Glover says she has used predictive coding with great success. “It doesn’t work on all documents — Excel not so much — but we’ve had good success with it on certain files.

“It’s great more clients are bringing it in-house, but where inSource can add value to those clients is being able to walk them through and add value in the sense of thinking through before [they] get to review stage,” she says.

In some cases, in-house departments may think they want to do more of the work themselves, but they just aren’t ready. Understanding what is involved can be a steep learning curve.
“I’ve had in-house clients who are extremely sophisticated and know what they are doing. I also have clients where we’ve had the conversation where they say they are doing it themselves and a week later it comes back to us,” says Glover. “They want to understand the process. It’s pretty hard to challenge a bill from a vendor when you don’t understand what they’re doing.”

In one instance, Glover recalls, a client had three different IT systems and they knew they weren’t organized. They ended up over-collecting for a file she says really didn’t warrant it.

So why is more e-discovery work going to the outside law firms? “I think because there is so much data to deal with and I think they’re [in-house] overwhelmed,” says Glover.

One client sent her a three-terabyte hard drive. “They don’t have the tools to defensively filter that data,” she says.

Grimaldi says law firms have done “a great job” over the years of being a “one-stop shop” and, as they realize how important the e-discovery piece is to the litigation file or regulatory investigative file, they want to make sure they remain a central piece of that solution.

“There are a lot of software solutions out there creating a compelling value proposition for in-house counsel to go directly and deal with it,” he says. “I think, frankly, very few law departments are going to be well equipped to manage that exercise even with some of these AI-based tools — it’s always going to be important to have the law firm play some role in that process,” he says.

Timothy Morgan, a litigator at Speigel Nichols Fox LLP predicts in the next five years a computer will do “a better job than a young lawyer” at finding relevant documents and that will change the role of lawyers in the proces. “Humans can help set up parameters for the computers. There needs to be a matching of computers and e-discovery lawyers who know what the computers can do,” he says.

He is also a believer in following best practices. “Just as a house needs maintenance  you need a good document retention  process — that helps when litigation arises.  Not having a handle on electronic data can have huge effects.”

Proof that the law firms are locking in on the need to provide greater services in this area, in January, McCarthy Tétrault LLP acquired e-discovery law firm Wortzmans so they could have a more complete offering. Fasken Martineau DuMoulin LLP aligned with PwC and Borden Ladner Gervais LLP announced in December they were offering e-discovery services using technology supported by KPMG.

“Law firms started to realize they were being cut out of the loop and I don’t just mean from the business perspective,” says Martin Felsky, national e-discovery counsel at BLG. “The client and vendor were making decsisions on how a project should be managed and lawyers were after thoughts. Outside counsel were saying, ‘Hang on, we’re not even sure we can do our job properly if everything is getting outsourced and lawyers across the world are reviewing documents we should be reading.’”

Firms decided there had to be a way to get back in the game using best practices.

 Wortzmans founder Susan Wortzman is now an equity partner at McCarthys and Wortzmans is a division of McCarthy Tétrault. Her firm also retained the right to operate independently for other clients.

McCarthys now has a greater ability to host and store the data, do the processing and conduct the review.

Wortzman says there are two approaches in-house counsel will generally take. She  has several clients who just say, “This isn’t within my expertise, get it out of my door and how much can I hand over to Wortzmans/McCarthys? Others want to do as much as they can in-house. I think a lot is going out the door.

“Most clients now want to self-collect because it’s with their IT department. They aren’t comfortable letting third parties into their infrastructure where they may have confidential information and it’s easy for their IT department,” says Wortzman.

Other large organizations are bringing some review tools in-house behind their firewall or opting for managed review services from vendors. “They do the collection and processing themselves, they will de-duplicate data, they will run search terms, some subject matter expert review, predictive coding and analysis, then say to the law firm at the end of it all, “Here is what you can have for the litigation.

“They are two very different approaches,” says Wortzman. “A large factor is what their spend is on e-discovery. Another is the comfort level and expertise of the in-house counsel — if they think their team can manage it.”

There is also the privilege issue, which is best maintained by having an outside law firm continue to play the role of some kind of conduit for the exchange of information, says Grimaldi.
“That’s the other competing interest against having everything done purely in-house.”

For Grimaldi, it also depends on the size of the matter. For a small regulatory investigation where a government agency is requiring the disclosure of certain email documents or other correspondence, it may be a lot easier to deal with that internally. But for complex litigation, it’s going to be tough for firms to not be involved.

Grimaldi once dealt with a regulatory investigation relatively small in scope and targeted. “It was straightforward for us to partner with an e-discovery firm directly to manage that data-gathering exercise. They had some very sophisticated tools that allowed us to get through the investigation quickly,” he says. “It was a very discrete, one-dimensional investigation where it was clear what they were after. Frankly, for something larger and complex, you also have to balance the burden on the company’s time as well.”

Discovery proceedings can be highly disruptive to management. In deciding on the appropriate solution, the key criterion has to be minimization of disruption. “If you have an e-discovery solution that’s not being run by someone who can simplify things for participants, even though they may be saving money at the end of the day, you may be costing more to the organization in terms of down time and the need to explain things. To me, that’s where the law firms would have a superior offering because they can manage that for you and minimize that disruption,” says Grimaldi.

“For a lot of these investigations, you don’t even need an e-discovery firm. The regulator will ask you for certain types of information and, with proper email filters developed by your IT department, if it is good enough, you should be able to harness that information without having to layer on top another filter. This is pre-litigation — files where data gathering — e-discovery can be a generalization — some things have e-discovery-like behaviour, but it’s simply data gathering at the request of a third party.”

A key area Girmaldi says in-house will need to focus on in the future is the question of liability when using new tools such as AI and other machine-learning tools.

“Someone needs to be responsible if there is an error. The law society rules make it pretty clear the lawyer in charge is ultimately responsible. I think, at least in the short term when legal departments are considering using a lot of these tools, it may make sense to have them come through an outside firm so you can hold someone accountable for mistakes. Between the law firm and the AI firm, the liability will always rest with the legal firm,” he says. “I think it’s a key point law departments need to focus on. It may draw them to the hybrid model of having an outside firm deploy the AI tools. It’s not getting a lot of air time right now, but these tools are revolutionary but not yet perfect.”

At Clyde & Co in Montreal,  partner Jo-Anne Demers says on small files the firm can process and host data in-house. In larger matters with multiple terabytes of documents they are looking at other solutions for clients. By using the services of independent legal contract lawyers and a dynamic pool of lawyers reviewing the documents, the firm has came up with a new approach. With the contract lawyers and using an e-discovery platform, they have worked on a number of large files with greater efficiency. “We meet with the review team every week and discuss the issues. As the group evolves they become very sophisticated and can identify what is key to a file — that is very important. Once of the key issues is documentation review.
The devil is in the details. Once you have a team that owns the project they will pay attention to what you are reviewing and that’s when you find the ace in the hole that will help your case,” says Demers.

At Royal Dutch Shell, an e-discovery team was created in Houston in 2004 when the Zubulake line of decisions came out of the Federal Court in New York. Zubulake v. UBS Warburg was a landmark decision in the area of e-discovery and the burden of costs for such discovery.

“While electronic information had been the subject of discovery prior to 2004, the expectations around preservation capability changed with Zubulake. Additionally, technology rapidly evolved from the late 1990s to today making electronic discovery (preservation, collection, review, production) critical,” says Gordon McCue, associate general counsel with Global Litigation at Shell Canada Ltd.

Shell has had an inside discovery team since the late 1980s and this team has been refocused on e-discovery since about 2002.

The team has attorneys, paralegals, technology administrators for in-house tools and project co-ordinators on staff with administrative support, both on-shore and offshore. “In-house resources have a better historical knowledge of Shell and aspects of Shell information management, organization, IT systems and ways of working than outside counsel or an outside vendor would be capable of,” says McCue.

 Generally, e-discovery at Shell is focused within the in-house team for preservation and collection. Review and production capability is also in-house with shared services with outside vendors depending on the matter. Outside counsel is involved in an advisory capacity with all steps in the e-discovery lifecycle.

 “There is a general belief that the in-house team is a critical component to overall cost-reduction efforts and to the reduction of discovery risks. The team is right-sized but expects growth in both resources and tools as new challenges from technology changes continue,” he says.

For the most part, departments such as Shell’s are still the exception not the norm. Sarah Millar of Osler Hoskin & Harcourt LLP says more work is going to external firms because the firms have improved their expertise in the last four or five years. “We have two computer scientists from Queens — we recruit people who specialize in this area and have become better and more efficient at delivering the services,” says Millar who heads up Osler’s discovery management group. “You need people who can write script and have engineering or expansive education in where computers are used every day.”

Millar says Osler works with several e-discovery vendors, but it doesn’t align with any specific provider, preferring to keep its options open.

She understands why clients want to do more of the work in-house. “The costing in this space is all volume driven. Any effort made to target the relevant data upfront with the people in the organization who are creating it will save you potentially hundreds of thousands of dollars down the road,” she says. “Even working with your external counsel for 15 hours upfront can save you $150,000 down the road. It really is just making sure the creators of the data in the organization really understand what’s relevant in the lawsuit or regulatory review and that they really put their minds to where the data is and being concise as opposed to us coming in and grabbing everything.

“When in-house counsel cares about facilitating that process, that’s the best,” says Millar. “I love it when that happens. The biggest cost-saving measure is an engaged in-house counsel. You can have the smallest department with one or two people and they do a better job than the biggest blue-chip Canadian companies with 70 in-house counsel. They are taking ownership over the process.”

If well managed, e-discovery doesn’t have to be entirely painful.
• When you get hit with a discovery project, engage help from outside providers who have discovery management expertise and do it at an early stage even if they aren’t the ones who will be doing the document review.
• Ask external counsel how they are going to save on costs and what the plan will be.
• A case is only as good as its documents. Ask what kinds of documents are involved.     What are you doing to get rid of useless data?
• Ask for a budget and make the firm track to it every week. What is the per-document rate? Inform yourself so you’re not surprised when the bills come in.
• Be prepard to spend time planning and getting your head around who the important people are on the file and where the data is stored.
• Lack of planning causes most problems. Know where to find all the data you need.
• The software doesn’t run itself. Disasters can ensue if you don’t have the right resources and training internally. You can find yourself in situations where you have bitten off more than you can chew.
• Look at what’s out there. Some vendors offer managed services that don’t require the degree of upfront investment and provide scalability.
• If choosing to invest in software, remember it’s always evolving. You don’t want to be tied too closely to a single software solution.
• As a law department, you can’t be running multiple pieces of software, so that should be taken into account when the system is being built.

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