Five Tips for Saving Money on E-Discovery (Part 1)

The explosion in volume of electronically stored information has changed the face of litigation. Just a few years ago, law firms sifted through boxes of paper documents relevant to their clients’ cases. Today, they rely on technology worthy of the Department of Homeland Security as they mine gigabytes or even terabytes of data stored on hard drives, servers and backup tapes.

The volumes of information are such that, if printed, they could easily fill the halls of the office or even spill out to the parking lot. The costs associated with this time- and labor-intensive process have increased in tandem—at some companies, e-discovery-related outlays now account for a large portion of the entire litigation budget.

Naturally, getting a handle on this line item is a major priority for chief compliance officers, general counsel and other executives at corporations of all types and sizes. Meanwhile, the risks associated with poor handling of e-discovery are a mounting concern, as courts continue to fine companies for delayed or incomplete compliance with their e-discovery obligations.

While the challenges associated with e-discovery are significant, with some advance planning companies can make major dents in their e-discovery outlays—without raising risk. The key is to develop smart strategies and policies for document storage and retrieval, to use workplace technology wisely and to take maximum advantage of those who can offer the technical and legal know-how needed to get a handle on these issues.

Here are five tips for sound litigation-response planning in the era of e-discovery.

No. 1: Implement a defensible document retention and destruction policy.

Just as a thorough bookkeeper might be reluctant to throw old files in the trash, some companies are loath to delete any data that might one day be of use in litigation or strategic planning.

“We want to keep all of our records, all of the emails people send—everything,” the thinking goes. Holding onto this information does offer certain potential benefits. A records analysis of that project from back in 2009, for example, might yield some helpful dos and don’ts for future undertakings.

Nonetheless, from a cost-containment standpoint, a “keep everything” data policy can come back to bite the company in several ways. For one thing, data storage is not free. Whether the company has a few dozen or a few thousand employees, the daily volume of email alone—Microsoft Word and Excel documents, Adobe PDF files, JPEG images and the like duplicated in “reply all” messages and stored in email accounts across the enterprise—adds up to real volume. Over time, storage of that data also costs real money.

The same is true of searching through all that data—the backup tapes containing data from that 2009 project will likely be offline and, as a result, unsearchable without substantial effort and cost. But even if every byte of information could be kept live and accessible from the moment the company went into business, the litigation costs associated with “keep everything” strategies can make such approaches expensive.

If that 2009 project triggered a lawsuit, for example, the company might suddenly be legally bound to determine which employees worked on the project and then search their hard drives for potentially relevant emails and other documents. Those 500,000 or 5,000,000 files might then have to be indexed and searched for specific keywords. These policies will likely yield lots of irrelevant information that someone needs to sift through even as it overlooks files important to the case.

From both a cost and a legal defensibility perspective, the downsides here are clear. Several times a year, a corporation in a highly regulated industry might spend $1 million or more to pay a team of document reviewers to review potentially relevant files for multiple lawsuits. Other organizations might spend half a million dollars each year for document review.

Yes, software can help, but technology is not free, either. How much cheaper would it be if the company had a policy that said “we will automatically delete data for certain types of projects every year or after 45 days”? When documents are gone, in other words, so is the cost of sifting through them. Think of it as good “information hygiene.”

As far as the discovery law is concerned, companies only have a duty to preserve information if they reasonably anticipate litigation or a government investigation related to that information. So long as they can show a valid business purpose for a document deletion policy, they are on solid legal footing—and saving money is a valid business purpose.

In addition to the preservation laws related to discovery, there are other local, state and federal laws that require certain categories of documents to be retained for regulatory purposes. For example, some states and localities may require a sanitation company to keep all records on where it collects and dumps trash for a period of time; financial firms might be required to record and store all broker transactions, etc.

No. 2: Know where your documents are located.

An e-discovery attorney’s worst nightmare is to be led to a closet somewhere in the company—in effect, a graveyard where old hard drives go to die—and shown stacks of dusty backup tapes and long-disconnected servers.

“Which of these might be relevant to the litigation?” the attorney asks. “We have no idea,” says the client. When a corporation is hit with a lawsuit or faces a government investigation, the deadline for finding and producing relevant documents might be anywhere from 30 to 90 days. At that point, the company and its legal team are in reaction mode. Fast-paced triage of this sort tends to be both legally risky and more expensive.

Rather than scramble at the last minute, companies should work with their legal counsel and IT staff to develop an action plan for how to produce documents as quickly and efficiently as possible. What document categories would be expensive to sift through and yet not terribly helpful to the case? Rather than turn over the whole database to the opposing party, can reports be run instead? Putting in the time upfront to develop a discovery response plan can save a lot of money.

Likewise, many companies allow their employees to take a helter-skelter approach to data: Individuals store data on CDs and DVDs piled in desk drawers, on flash drives dangling from their car keys and even on desktop hard drives back at their apartments.

Companies should think carefully about the implications of this. Do you want to send somebody out to collect documents or image the home computers of everyone in the accounting department (at several hundred dollars per machine)? Or would it make more sense to have a policy against storing material on non-corporate computers in the first place? Advance planning here can provide much needed clarity during the crunch time of a lawsuit or government probe.

Tomorrow, in part two, we’ll take a look at the final three tips.

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About the Author

Daryl E. Shetterly is a Richmond, Va.-based partner in the Discovery Solutions Practice of national law firm LeClairRyan.

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