Top Ten Tips for Managing e-discovery Vendors

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1 Top Ten Tips for Managing e-discovery Vendors Apr 03, 2013 Top Ten By Daniel B. Garrie This resource is sponsored by: By Daniel B. Garrie, Senior Managing Partner, Law & Forensics LLC, Thomson Reuters The transformation of discovery into e-discovery has wreaked havoc on the practice and business of law, creating more money for vendors at large and for some lawyers irrespective of the economy. It is virtually impossible to have litigation without some amount of e-discovery. From the s sent between employees around LIBOR, to digital footprints left by high-tech criminals in the New York Times breach, to employees involved in contentious divorce proceedings, the digital world is involved. This has led to a third party in the relationship between lawyers and litigants the e-discovery vendor. Today, e-discovery can be fully outsourced or done entirely internally, or some place in between. Irrespective of where you fall in the spectrum, at some point your corporation will undoubtedly involve one or more e-discovery software and/or vendors. This article provides ten tips for counsel to consider when evaluating e-discovery software or services. Of course, these are broad and general tips and require tweaking to be effective within your company. 1. Weigh the legal risks and your company culture to see if bringing an e-discovery solution in-house, or just a component of the solution, is a good idea. One of the most common reasons a company fails to deploy an e-discovery solution is the company culture. Some legal departments are structured such that the idea of being responsible for managing discovery is simply not part of the job description. Other companies struggle to get outside counsel on-board and acquiesce to using the solution their outside firm uses, and while this is happening less and less, it s still happening. Other times the system is purchased, but the champion of the tool leaves the legal department and the eight figure system simply dies on the vine. It is critical before looking at e-discovery solutions that counsel is aware of the corporate culture within which they are operating. For example, I have advised several global companies to utilize a managed service approach to e-discovery because the company culture lent itself better to utilizing vendors. By outsourcing a large portion of their IT functions it made delivery of any e-discovery solution a great deal more complex.

2 2. Try before you buy. Companies should follow the try before you buy principle, meaning they should test the e-discovery solution using an old case, not a case provided by a vendor. The vendor is never going to provide a case that is not going to work, because if it fails you will not buy the solution. In-line with this concept, counsel should encourage as many people in the legal department to test the new software before it is purchased. Ideally, counsel should bring in the end users of the software, or the team members who will work directly with outside vendors to make sure they have input in the review and selection process. Often these end users have a better idea of how the solution will be utilized and will most likely have a wish list of improvements for future software purchases. 3. Verify that the e-discovery solution you are buying is being used by the person selling it. You should never purchase an e-discovery solution from a vendor whose own legal team does not use the product. In addition, do not hesitate to ask around and see what other companies are using for their in-house software and outside vendor services. It is rare that an e-discovery solution provider will provide you with a bad reference. Thus, I strongly suggest that you reach out thru your network and ask to speak with people who have bought and used the system as they often will be able to deliver an unvarnished view. When you reach out to them, it is useful to consider asking questions that include: how easy or hard the e-discovery solution was to install, how much work is required to manage the e-discovery solution, and what would they do differently if they were starting from scratch. In addition, you should also ask about the skill level of the vendor, customer service, and overall abilities of an e-discovery solution or outside e-discovery service provider. I recommend having the conversation face-to-face. It is certainly a conversation that can save counsel a great deal of money, time, and headache. 4. Perform a cost benefit analysis of your existing e-discovery vendor services. Before buying an e-discovery solution or using an e-discovery vendor anything, it is important to understand the cost-benefit dynamic. high cost + low benefit = do not purchase low cost + high benefit = purchase solution high cost + high benefit = depends low cost + low benefit = depends Today, counsel often assumes that bringing a solution in-house will deliver value and lower costs, but it is critical that counsel validate this assumption before acting. Counsel should know the answers to these questions: How much money do you currently spend with outside vendors on each case in identifying, collecting, or preserving data? How much do you spend on e-discovery vendors for the other components of the e-discovery process? What is the cost to purchase, implement, and adopt an e-discovery solution for some or part of the e-discovery? What impact does having an in-house e-discovery cost have on your legal spend? Answer these questions by going to the accounting department and running a few reports to get an accurate estimate. If this is not available, then alternative paths exist, such as meeting with the CFO of your company to determine the current spend to e-discovery vendors. Our experience has suggested that if you spend more than $5,000 per-case with an e-discovery vendor to identify, collect, or preserve and you have more than 20 active matters a year, it might pay to evaluate bringing some of the e-discovery activities in-house. While bringing e-discovery in-house sounds daunting, the reality is that although front-end work for counsel and technologists exists, the times savings, peace of mind, and the monetary cost savings can be substantial and often outweigh the initial costs incurred in setting up and getting an

3 e-discovery solution operating. Counsel should be mindful when calculating the monetary cost that the total cost of ownership of an e-discovery solution is more than just the software itself. Counsel must be mindful that there will be technology costs (storage, server, and head-count) and legal costs (in-house person to manage and oversee the process). A company can incur the following costs depending on the e-discovery solution or service being sourced: Purchase new technology assets to administer the solution (e.g., Purchase a machine and several additional software applications to ensure litigation hold software operates properly); additional technology head count to support the machine; hire someone to administer the legal holds and ensure the litigation hold solution software is being utilized by counsel. While the total cost of using an e-discovery vendor or e-discovery system is higher than just the prices of the software, additional benefits are realized that go beyond being able to administer compliant legal holds, including: Avoiding the need to retain counsel to administer the litigation hold beyond validating that you are preserving as required; knowing that the company has mitigated the real-world risk that comes with an ad-hoc litigation hold system; saving money by avoiding the costly exercise of working with outside counsel of chasing down IT or employees to ensure the litigation hold letter was delivered arguably this is priceless. The above highlights some of the additional costs and benefits that should be included when calculating the cost-benefit of bringing e-discovery in-house. 5. Testing, Testing, Testing: scalability, security, usability, accuracy, and etc. While everything should work in the demo, it should also be tested with larger data sets, and preferably with your own data. If the e-discovery provider or software vendor says it is going to cost a couple of bucks to run a proof of concept: pay it. Why? It is better to pay a little up front than to go all in with a single software solution or vendor, only to lose your shirt (and your data!) in the process. This tip applies whether you are testing e-discovery software or an outside vendor service. The problem with using vendor data to run a test, is that their data is meant to highlight how smooth and efficient their software is. But the real world is anything but smooth sailing, especially when it comes to e-discovery. Using data from a prior case will give you an idea of how the software compares to prior software, as well as if the testing software is challenged with the same hurdles as the previous software. 6. Before you buy e-discovery software make sure you have the internal protocols and processes to address the use of e-discovery software or services. Preparation is the best preventative measure you can take. Make sure internal case handling protocols map to the software or services you are using. Maintaining a clear schedule of tasks and checklists will keep all parties on the same page and timeline, as well as clearly define expectations for each team member. These internal protocols should also include detailed plans on managing pre-litigation tasks, such as issuing a litigation hold notice. If you don't have protocols and process addressing vendor software or services, every time the software is used by a different member of the legal team, a different ad hoc process will emerge. This translates to more time and money spent re-documenting the e-discovery process and members of the legal team being given multiple sets of instructions on how to run a case. 7. Identify an internal owner of the e-discovery system. It is critical that there is an internal owner working with their fellow in-house counsel, outside counsel, and other vendors and is responsible for managing the system on a daily basis, resolving issues, and ensuring that the system is being used.

4 While it may seem counter-intuitive to bring in yet another person to the process, having a single person responsible for the coordination of identification, preservation, collection, search, and production of ESI will help you realize substantial savings and lower e-discovery risks overall. Often, this individual can also prove to be an invaluable resource in assisting their in-house colleagues and outside counsel in the often complex search and production process. 8. Investigate the long term viability an e-discovery solution or vendor. Software and technology changes rapidly, unlike the long-term nature of litigation. Consequently when evaluating an e-discovery solution or vendor, it is critical that counsel perform a risk analysis to ensure that the vendor is financially stable, meaning they are unlikely to file for bankruptcy. You do not want to invest in software only for it to disappear from the market. While it is possible to put software code in escrow, this is a high-risk solution. A company should also be mindful of the fact that it is very possible the software provider or solution provider will be acquired, as there is a great deal of activity in the e-discovery vertical, so counsel should make sure that the contract terms cover the life cycle of the caseload or provide a process by which the company can migrate to another vendor or solution. 9. Involve the Chief Information Officer in the selection process. Today, the gap between IT and legal is certainly shrinking, which is great for many reasons. However, if counsel engages IT after a solution is selected, they risk the solution not actually working. Almost all e-discovery solutions require some IT support, which usually translates into headcount to ensure the systems are available to run an e-discovery solution. Of course, any e-discovery system is handling sensitive documents, so ensuring the security of the environment within which the e-discovery solution is also tantamount and usually requires input from IT at some level. For example, when a company buys an e-discovery identification and collection platform, it will most likely require internal IT assets to assist legal in identifying and collecting data. Another benefit of dialoging with IT pre-purchase is that counsel will get a better grasp of the support costs. For example, we know of several great e-discovery predictive coding solutions that operate great in Windows environment, but when they are run in a non-windows environment installing software patches and updates can be a bit trickier and require additional costs. 10. Verify that the company s demand is sufficient to justify the investment. Often overlooked when selecting an e-discovery software solution is whether your company s case load justifies bringing such a system in-house, even if the budget is available. It is prudent for counsel to verify that the company s case load is sufficient to justify the investment and share this information with the technology stakeholder as well, to avoid IT purchasing a solution that is not necessary. At larger companies, the case load assessment requires counsel to reach across different legal groups to determine the current case load, and while this process may seem tedious it is essential. For example, a mid-size company might think that they do not have an active enough case docket to justify buying an e-discovery solution. However, if the legal team reaches out to the compliance department such a solution might be a huge cost saver, because that department is managing dozens of internal investigations and would benefit by having an in-house e-discovery platform to manage such investigations. With this tip, unlike evaluating the cost-benefit for the legal department, the focus is on ascertaining the internal demand for an e-discovery solution across the entire organization. The information in this Top Ten should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or the ACC. This Top Ten is not intended as a definitive statement on the subject addressed. Rather, it is intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.

5 Reprinted with permission from the Association of Corporate Counsel (ACC) 2013 All Rights Reserved.