Strategic Legal Technology

How should lawyers deal with the ever growing volume of digital data in e-discovery? The answer likely involves far more extensive use of statistics. 

Do Your Searches Pass Judicial Scrutiny? by Wayne C. Matus and John E. Davis of Pillsbury Winthrop Shaw Pittman (New York Law Journal, 31 Oct 2008) offers an excellent paradigm for how to use concept search in EDD. Both implicit and explicit in their suggested approach is heavy reliance on statistical analysis.

The authors suggest sampling data: “Counsel should isolate a random and statistically significant sample of the relevant datasets…” This is not as easy as it sounds. Philosophically and mathematically, “random” is a difficult concept; choosing a truly random sample turns out to be difficult.

Practically, a “statistically significant sample” requires an appropriate sampling technique and defining the sample size. The latter is easier than the former; at least for well-distributed populations, the “central limit theorem” says that sample sizes do not scale linearly with the size of the population. In English: valid samples are not a fixed percent of the population. (Note that many polls of US citizens sample around 1500 people.)

The problem is that most populations are not well-distributed; instead, they are lumpy. Huh? Think of these questions: how do you know if you should sample uniformly across a data set or more heavily in key custodian files? What date range should the sample cover and might it be appropriate to over-weight certain ranges? Should you sample more from e-mail than from Word files? How do you sample Excel files, which may consist mainly of numbers. [In this political season, consider just one of the problems of sampling voters: more younger than older voters have only mobile phones and there is no way to sample mobile phones. What gottchas like this lurk in EDD?]

In all the recent cases and articles about EDD and search techniques, I believe that judges and lawyers have overlooked a critical question: how do we know if a document is responsive or privileged. Medical trials compare a new therapy a proven one, the so-called gold standard. Reproducible tests such as blood chemistry or imaging establish standards. How do lawyers know what the right designation for responsiveness and privilege is for any given document?

I’ve not seen any data I’ve seen on how reproducible lawyer designations are. Do we rely on the judgment of a contract lawyer who may not know the case that well? Is the partner in charge the authority on document designations? How many lawyers have run a document through two or more lawyer reviews and compared results? Until we can agree on a method to reproduce reliably document designations, it’s not obvious to me how we can compare search techniques. [This goes back to my prior blog posts pointing out that it’s a mistake to assume that human review gets the designations right.]

To untangle this mess, lawyers should call in the statisticians.

My previous post discussed best practices and applying data analysis to questions of law practice and practice management. Subsequently I read an article by Ben W. Heineman, Jr., former General Counsel of General Electric. In Big Isn’t Always Best in Corporate Counsel (Nov 2008) he explores reasons why “One-stop shopping at giant global firms isn’t necessarily wise." 

I know the arguments favoring mergers - scale, cross-selling, follow our clients, etc - but have never seen good data to support the assertions. The questions he raises about why big firms may not be the best solution for many problems dovetails nicely with my assertion that lawyers need to stop operating on instinct and start paying attention to facts.

He raises enough questions about BigLaw that it should cause managing partner contemplating mergers to pause to collect the empirical data and asses it carefully. His questions include:
- Does globalization create higher costs?
- Do higher costs (and increased risk) pressure lawyers to bill more hours?
- Why do firms view productivity so narrowly in terms that benefit firms but not clients?
- How can giant firms avoid a large “mediocre middle”
- Will accounting rule changes that require deals to be expensed increase sensitivity to cost?
- Can conflicts be resolved and managed?

Heineman practically invented the the role of the modern GC and built the GE law department into one of the best. He does not present data but given his historic role, I’ll treat his assessment as sufficient to rebut undocumented presumptions of the value of mergers and shift the burden of proof back to the merger proponents.

So law firm management consultants, do you have the data to support that mega-mergers really make sense? Don’t be shy. We know that behind every big merger lies one or more consultants. Or are you just telling your clients what you know they want to hear???

How much longer will lawyers resist the idea of best practices? Perhaps they can learn from baseball. 

I frequently write about ”evidence based law“, an extension of the idea of “evidence based medicine.” Last week, Billy Beane (GM of Oakland A’s), Newt Gingrich And John Kerry co-authored an Op-Ed in the New York Times (24 Oct 2008), How to Take American Health Care From Worst to First. This article could portend what lawyers may someday face:

“In the past decade, baseball has experienced a data-driven information revolution. Numbers-crunchers now routinely use statistics to put better teams on the field for less money. Our overpriced, underperforming health care system needs a similar revolution…. Remarkably, a doctor today can get more data on the starting third baseman on his fantasy baseball team than on the effectiveness of life-and-death medical procedures. Studies have shown that most health care is not based on clinical studies of what works best and what does not — be it a test, treatment, drug or technology. Instead, most care is based on informed opinion, personal observation or tradition…. [A] health care system that is driven by robust comparative clinical evidence will save lives and money”

Lawyers, like doctors, rely too much on tradition, hoping for good outcomes. This is true for both law practice and firm or department management. Lawyers do not systematically compare notes within firms / departments much less across them. Legal best practices are typically defined by what the top NYC and London firms do because they are the top firms. Would evidence-based analysis support this tautology? Might it be true that firms outside the top tier have, in fact, developed better substantive approaches to law practice? How would we know other than by tautology and the propensity of inhouse counsel to rely on top firms for their brand names?

Lest lawyers view this fearfully, the authors note: “Evidence-based health care would not strip doctors of their decision-making authority nor replace their expertise. Instead, data and evidence should complement a lifetime of experience, so that doctors can deliver the best quality care at the lowest possible cost.” Substitute “lawyer” for “doctor” and BigLaw partners can rest easily.

Developing the evidence would be hard: characterize matters, compare outcomes, and analyze processes. The legal profession should have dialogue about improving how it practices.

Think this is fantasy? Think again. See the professional services management consultancy KermaPartners article Moneyball Indeed. It describes empirical research to help a large law firm identify and attract “graduate recruits who not only have the credentials to enter the firm, but also possess the ’stuff’ to thrive at the firm” based on statistical analysis. This analysis sets the stage for the firm to hire lawyers who will be significantly more profitable to the firm.

I am at the ALM / Incisive Law Firm Leaders Conference. This session is the Growth Strategies for Success. Here are real-time notes. 

Panelists:
- Aric Press, Editor in Chief, The American Lawyer [moderator]
- Francis Burch, Jr., Joint Chief Executive Officer, DLA Piper, LLP
- Steven Nataupsky, Managing Partner, Knobbe Martens
- Greg Nitzkowski, Managing Partner, Paul, Hastings, Janofsky & Walker LLP

Francis Burch remarks

• Easier to grow by mergers than by acquisitions of groups, and less expensive
• DLA has been “following the money”
• DLA pay attention to what clients do and what they are likely to do and position the firm to the evolving client. This is different than listening to what they do because what they say and what they do is different.
• Lawyers don’t want to take risk until they have to; once they get to this point, the risk - return trade-off is not good. We are therefore very direct about risks and rewards. “The time to trade is when the currency is high.” Heller Ehrman is the example - it could have been part of a very powerful law firm. Not clear why they did not move when the value of their currency was high.
• We have 120 lawyers in Mideast today; zero two years ago. This is most dynamic market in world right now. If we were still just Piper Marbury, we would be reading about Mideast, not operating there right now.
• Pre-merger, Piper assessed itself. Had an uncharacteristically good corporate practice for a firm of its size and had anchor client in Alex Brown & Co. Being at bottom of AmLaw 100 was good for a Baltimore firm. But we did not think we could continue to play the same game successfully. Maryland companies were being acquired and we could not compete up for the work with the new parents. Being a regional firm would not allow success in future. Technology was driving much growth. Looking at these trends, we decided we had to change dramatically and that we had to move before everyone else figured it out. We understood that incremental change was not enough. Is skeptical of idea of “vision” but firm articulated the position the firm would like to occupy. Wanted a credible but aspirational plan. Firm outlined a 2-page plan that the firm still follows today. In this process, we are very explicit with partners about risk.
• We think that with global scale and scope of many transaction, only large firms will get the representation. We have achieved the scale we need to serve global clients. Our goal was not size for its own sake but because it’s required to serve global clients and remain competitive. AmLaw 100 data show that the biggest firms have done best. Plus, our diversification mitigates the risks of changing market conditions and provides better stability in revenue base.
• Thinks that having multiple related legal entities under one brand is necessary and inevitable in global law firms, so long as they are operationally integrated.

Steven Nataupsky

• We have prospered and grown by keeping our focus on IP only. Within this sphere, there is a lot of diversification across industries. Plus prosecution and litigation do not move together.
• We offer a structure dramatically different than other partnerships: we are lock-step for partners. We don’t track originations, we don’t track office profitability. We track only that lawyers bill at least 1640 hours. That’s the only metric. So how do we keep our stars? We need to keep people who believe in our systems. So we hire only a lateral every couple of years. We lose less than one partner per year. So we mainly grow organically.
• Our new lawyers are older on average because they have advanced degrees beyond JD. We can select out those that do not fit with our culture. For example, we have a large group of lawyers who meet 530am every morning to surf. So lifestyle helps sell our brand.
• At five years, lawyers became equity partners. All partners meet monthly and vote on a range of issues regularly. This instills a sense of ownership, engagement, and pride. This helps retain people. Our attrition is typically 4%.
• We intentionally keep our starting salary at $10k below market. This helps us make sure lawyers who join us buy into our vision. This helps self-select for the balance we want.

Audience Q&A

• How should firms match structure to their vision? Burch of DLA thinks law firm structure needs to change materially in near future. “Look out the window” and it’s clear. We need to borrow less, have more paid-in capital, retain more earnings, have a more equity focused partnership, have a smaller base of pyramid, use more contract lawyers [he may mean staff lawyers?]. Clients will demand that we disaggregate services. All the basic work needs to be done by people other than our core lawyers. We will see a radically different business model. This means big change.
• Given size of US law firms, why are US law firms smaller than their peers in UK. Why aren’t US law firms bigger? Ansers: consolidations is occurring now.

I am at the ALM / Incisive Law Firm Leaders Conference. This session is the Passion, People and Principles: Building Success from the Bottom, a presentation by well-known consultant David Maister. Here are real-time notes. 

It’s one thing to set a strategy, it’s another thing to execute. We can know what’s good for us, we can know how to do it, but yet we still don’t do those things. So most law firm strategic planning is a waste of time. Law firms can do the analysis, but will they take the action it implies? If it’s hard for individuals to do hard work today for benefits tomorrow, can institutions do so? The problem is that benefits don’t correlate linearly with the effort expanded. You have to take all the actions to get results but most people become discouraged along the way.

So what distinguishes winning law firms from the others? The competitive drivers are: drive, determination, discipline, energy, excitement, enthusiasm, engagement, passion, and ambition. Can better hiring provide these attributes? Not really, leading people is very hard.

Consistent excellence in serving clients is the key to profitability. The only way to achieve this is to generate enthusiasm, energy, and excitement in the troops. And the only way to do this is to manage the troops so that they are doing excites them.

If you divide partners into dynamos, cruisers, and losers. Dynamos are those who know what they want to next and who work to long-term goals. They actively build their own future. Cruisers are the ones who do the work and do it well, but they don’t have a personal plan for their own career. Losers are doing neither; they are not meeting the basics. Audience agrees that the dynamos are at most 20%. David says strategic plan is meaningless if only 1 in 5 partners know where they want to go. Management’s challenge is to help make more partners cruisers.

How many firms choose practice group leaders (PGL) based on their interest and passion on helping others and leading. He finds that 90% are chosen because they are stars in doing work, not for any people skill. Moreover, most firms don’t evaluate PGL on basis of group performance, so most focus on their individual performance. So firms don’t choose the right PGL and then evaluate them on the wrong basis.

If you want an effective practice group, you have to evaluate the leader based on group performance. It’s easy to do this: evaluate leader based on total hours and profits of the group. If the leader does not like this, he or she should not be the manager or leaders.

An effective leader does not expect perfection. She seeks year over year performance improvement. If the only attribute that a firm cares about in leaders is billing hours, then “I quit” - don’t bother trying to improve the firm. Real management means helping people do their work and fostering collaboration. This helps ensure quality work and service. In turn, that means happy clients and repeat business. And that in turn results in higher profits. But all of this is already in every law firm strategic plan. Law firms, however, don’t have the guts to enforce what they say. Management goes for volume (hours), not standards. Managing people for performance require selecting managers who want that job, who will help everyone perform, and who will encourage others’ performance. If law firms focus on management, standards, and fostering enthusiasm, the profits will follow.

I am at the ALM / Incisive Law Firm Leaders Conference. This session is the The Current State of the Legal Profession. Here are real-time notes. 

Panelists:
- Richard Rosenbaum, Greenberg Traurig, LLP
- Dan DiPietro, Client Head Law Firm Group, Citi Private Bank
- Aric Press, Editor in Chief, The American Lawyer

Opening Remarks by Richard Rosenbaum:

• Sloppiness in management works during the good times. Now in the bad times, the problem shows.
• Too many firms follow the pack in opening new practices instead of anticipating future client needs.
• Is money the only organizational glue that holds together some firms today? Recruiters will tell you that many groups have been at the firms only a short time. What will happen when the money is not as good?
• The idea of merger as the savior of firms is not the answer for most firms, especially in this cycle. Too many firms have protracted discussions, which then break down, and then partner groups splinter off. Expensive leaseholds will be a problem in mergers because firms will want to avoid that overhead commitment.
• Management always need to focus on minding the business. That just becomes very apparent in tough times.

Conversation between Dan DiPietro and Aric Press (and potentially audience): Dan and Aric have identified several questions to discuss.

What lessons do we learn from 2000 to 2007 that will help law firms cope with 2009?

• This period characterized by aggressive growth and rate increases, with control on expenses
• Partners see an 11th commandment that equity partners per profit should grow by 10% + per year.
• The good news, however, masked the gathering storm clouds. First, growth in per equity partner profit was dramatically slowing growth in the number of equity partners. You can only do that once. Second, expense began to grow, mainly in rising associate salaries. Third, leverage changed: post-2000, leverage increased. This works when demand is strong but is bad when demand shrinks. So firms go into current downturn with higher leverage. Leverage also became more “top heavy,” meaning that the numbers of income partners and counsel increase disproportionately. This groups has not been as productive (that is, they have billed on average 200 hours per year less than other lawyers). Fourth, profit gap across firms grew noticeably. That was not a huge problem with profits going up all around. Now, this disparity will be a problem
• Aric: from my conversations with law firm leaders, I see that many firms are preparing for very tough times, eg, not making any new partners

How different will 2008 be from 2007?

• Rates did not to go up as fast.
• Some practices disappear.
• Partners will still make healthy profits.
• First six months of 2008 has weakest revenue growth in this decade. Expense growth is significantly higher than revenue growth. So margin compression is significant. This is all demand driven - demand is falling, gross hours are falling. The old cliche that law firms are recession-proof has been de-bunked.

Which firms will get hit the hardest?

• The most profitable firms will be hit the hardest. Top tier was driven by Wall Street practices, so not surprising, with economic disruption, that these firms would be hardest hit
• But Main Street firms will be hit too in near future
• The increase in associate salaries has not bought large firms much. Loyalty and retention are not up. Firms need to consider how they manage their labor costs.
• Firms have a chance now to align associate compensation with performance instead of following the traditional lock-step model. This would help with margin compression

Is a global footprint making a difference in 2008?

• It looks like yes, especially for the leading UK global firms. It has taken a long time for UK firms’ investment to pay-off. These are firms with roughly 2/3 of their lawyers outside of London. Last year, for first time, more than 1/2 their revenue is non-UK.
• But London firms face big challenges because of financial market turmoil. The global platform may not suffice to hedge against the local problems. But the UK firms are better hedged than US firms. Us firms have a much smaller “hedge” outside US.
• Citi tracks global, international, national, and regional firms. Global firms have outperformed the others. Some of this driven by exchange rates but much by demand outside of US. This year, however, the picture is more nuanced. Firms doing business mainly in US, UK, and Europer ("international” firms) have not done as well as those truly global (with offices in Asia). But now, the slowdown appears to be truly global, so a global footprint could end up hurting firms near term. But the solution to the problem - a coordinated global regulatory response and changes in how M&A will work - will make the global footprint much more valuable going forward.

Q&A

• How should firms view alternative staffing models?…. Some firms have used contract lawyers to grow their businesses. This trend will increase in importance. Reliance on temp lawyers eliminates need to invest in space, technology, and headcount. It provides more flexibility. Properly done, not only will law firms but also clients, will want to rely more on flexible resources.
• Contract attorneys and others “off track” will grow beyond litigation. Some firms will use non-traditional staffing models for lower margin practices. There are several “off track models” (ways to employ lawyers other than supposedly partner-track associates)
• Firms that can go to GCs and say, “we can disaggregate our services to apply different cost resources to different parts of your problem” will be the ones that win. this includes offering up services in India. Applying the right resources at the right cost to different elements of the work will be the most valuable offering.
• If there are some permanent trends to emerge from this crisis… One big one will be clients taking greater control of their matters… If you accept that you need to be more responsive to clients…. If you believe that top quality means the ultimate competitive factor is controlling delivery costs… How do you think most firms are set up to delivery high value service and to respond to these trends? Also, would you undo some recent trends if that were possible? In a lot of matters and for a lot of clients, controlling cost is paramount but there is still an elite group of matters (e.g., investigations), where litigation budgets still will not matter very much. But many firms have grown so much that they really cannot focus on this sweet spot. So some larger firms find that they have to compete on cost. But surveys show that while GC complaining is universal, their will to act, to change, to exercise control is far from universal. Many clients are not willing to act on costs if they get decent service and results. If you look at the current crisis, clients have had a flight to quality (that is, high price firms). So cost-sensitivity may not be as acute as some think or say.
• If firms do anything different this year, they should go talk to clients. It’s surprising how few firms - in spite of all the talk - actually talk to clients.

I often write about working virtually. Some lawyers object to it because they think it detracts from collaboration. But does anyone really have good data on what it takes for lawyers to collaborate? 

I was intrigued to read Share and share alike (Lawyers Weekly, Australia, 26 Sept 2008). It describes how several large firms, including Mallesons, are beginning to experiment with lawyers sitting in open-plan arrangements. That means no private offices. This is an important read for anyone thinking about law firm design and lawyer collaboration. As usual, Australian law firms are leading the innovation charge.

The article quotes some lawyers as saying the open seating arrangement promotes sharing, training, and mentoring. It also discusses potential issues such as noise.

If in-person collaboration is indeed important (and thus a barrier to working virtually), then should law firms move to open seating? I suspect most lawyers and manager will recoil even more at this than at lawyers working from home or from satellite offices. I, however, remain convinced that the question is as much empirical as it is cultural. What goals do firms and law departments want to foster and what working arrangements best support those goals? Collecting data to answer this may be hard. But simply dismissing the alternatives as unworkable is medieval.

[For the record, I personally worked in an open plan for three years at Bain & Company. And the separation between any two desk was often just enough to accommodate a chair moving back by about 1 foot.]

The Financial Times (London) has published its annual Innovative Lawyers edition. There is much in this collection of articles worth reading. 

Thought leaders is the lead item. For me, two findings stand out:

• Legal process outsourcing is among the leading trends and top of mind in the market.
• “Careers for lawyers and non-legal staff are already changing… Several firms also put forward entries that recognised that non-legal talent has a valuable contribution to the way a legal business is run.” Note the use of the term “non-legal staff”. I consider this term much better than the demeaning “nonlawyer” (see my post Musings on the Law Firm Caste System).

Taking Charge reviews billing practices and the billable hour but I was most interested in its what it had to say about a leading online legal service:

“Allen & Overy has created an online subscription service… Its Diligence product is a database of legal memoranda… The service has a fixed annual fee of $3,000-$4,000 per jurisdiction and has attracted 11 subscribers since it was launched in August 2007. It needs about 15 subscribers to break even and has a target of 48 within five years… Marc-Henri Chamay, head of e-business at Allen & Overy, says subscription products typically require a large upfront investment in the first year before becoming available to clients in the second year and starting to make money for the law firm in the third year. ‘This means that we are carrying the commercial risk, which is pretty unusual for a law firm’ he says. ‘But this is increasingly what clients are expecting from us to drive their costs down. Diligence is still in the investment phase but some products launched five or six years ago are extremely profitable for us.’ ”

Use IT or lose it reports on interesting legal technology developments. Cleary Gottlieb features for “knowledge engineering techniques to capture the expertise of senior staff, embed it in a computer system and pass it on to junior lawyers online.” The firm created “graphic presentations of how to perform key transactional processes, with each stage backed up by extensive documentation.” Sure sounds like best practices to me!

Other interesting reports in “Use IT":

• Madrid-based Garrigues has create an e-sign system
• ReWord from Reynolds Porter Chamberlain automates service delivery with “an electronic reviewer that quickly scans reinsurance contracts for legal risk.” The system analyze re-insurance contracts to identify automatically biases toward either the reinsurer or the reinsured.
• Baker & McKenzie’s “combined outsourcing and offshoring” creates an ‘insourcing’ hybrid in Manila, where the firm’s “Global Services Manila, accounts for about 5 per cent of the firm’s total staff and is linked to the rest of the firm by technology, culture and reporting lines.”
• Allen & Overy, CMS Cameron McKenna, and Latham & Watkins also feature in the article

Structural engineering reviews recent significant improvements in law firm management. FT research finds a common theme, namely “finding ways to address their ‘glue’ problem by seeking to break down internal barriers and to strengthen internal alliances.”

The article picks up on two themes common in this blog. It recognizes Freshfields integration of knowledge management and business development. “Bringing these functions together into a single operating unit has made it easier to anticipate the services that clients are likely to require and to deploy the relevant expertise more effectively.” And separately, it recognizes Clifford Chance for taking “two vital but relatively routinised support functions ‘information technology and finance’ and centralis[ing] them in one place: India.”

I am at the Masters Conference, a leading e-discovery conference. This a real-time report on the session Challenges Faced by Inhouse Counsel in the Pharmaceutical & Healthcare Industry. 

Panelists:
- Bernard Ford, Navigant [moderator]
- Peter S. Spivack, Hogan & Hartson
- David Z. Seide, WilmerHale
- Geoffrey R. Kaiser, Navigant

[Notes on this session: (1) the one in-house counsel schedule for this panel could not be present; (2) most of this session focuses more on regulatory and litigation issues than EDD so I have limited my reporting to elements of particular interest to EDD community.]

Q: What are the top three challenges inhouse counsel fact today?
A:
Kaiser: (1) The cost of managing discovery, including outside counsel review fees, data collection costs, and integrating records in acquisitions. This will continue to be - and the trend has been - to rely less on outside counsel to review docs that were over-collected in the first instance. They will invest a bit more upfront to scoping the collection, the GC can control costs. (2) Dealing with strict liability, including criminal liability, for arguably ordinary corporate actions. Cites Oxycontin case as example of execs pleading guilty to a mis-branding charge [ed. note - stemming from what is frequently called off-label use]. Thinks the misbranding issue net will expand to medical device makers.
Spivack: (1) Agrees that misbranding liability is a huge issue.
Seide: (1) Risk management and assessment is the biggest challenge. GCs have to figure out “what the hell happened”. It’s often to figure out what happened given the numbers of custodians and volume of data. Need to manage the story over the course of what may be year+ investigation as understanding the data evolves. (2) Cost is another big issue. It’s very expensive to figure out what’s in the mountain of data and documents. There is no magic way to understand data and docs - someone has to read the documents and data. (3) GCs want closure; they don’t want multi-year investigations. But EDD is very hard to do quickly and efficiently.

Q: I ask: what are GCs doing to address, other than whining?
A: Review counsel bills. Compliance systems. Active monitoring and internal audit program that goes beyond the finances (e.g., audit against procedures). Need to recognize the challenge of managing risks in globally diverse companies with so many employees. There is a lot of fear among GC of off-label use. Sales team has to be trained for this but company needs an active monitoring program to control this. Selling prevention internally is not easy.

I am at the Masters Conference, a leading e-discovery conference. This a real-time report on the session Helpful Insights & Observations from the Corporate & Government Perspectives. 

Panelists:
- David Shonka, FTC
- Paul J. Bohr, SEC
- Fred Block, SEC
- James Maroulis, Oracle
- Wendy Butler Curtis, Orrick
- Monica Palko, BearingPoint

Q: Do companies treat government requests differently?
A: It depends. Factors: is it an investigation or about a contract, which agency, scope of request. A company may more willingly turn over certain docs to government to than to commercial party. With government, less likely to fight to not turn over certain docs.

Q: Government, please comment on above.
A: As investigators, we don’t always know what we need at outset. Being understaffed, we may start with broad requests to start because we don’t have resources to narrow. Call us to discuss - we will negotiate our document requests, in all types of matters (antitrust second requests, investigations, and commercial matters). Companies should make available their IT experts, lay out how they store date, provide org chart, and a plan of how to approach the matter. Agencies look for helpful guidance from litigants. Especially in HSR matters, companies need to cooperate to close deals quickly.

Q: How many companies come to government meetings properly prepared?
A: Some staff won’t come to a meeting unless company brings the IT people.

Q: To gov’t lawyers: are you receptive to cost considerations in doc productions?
A: Yes. SEC is supposed to consider cost-benefit in its investigations. SEC will look both at dollars at stake and the programmatic goal in an investigation. SEC will provide resources in some instances to get access to data (e.g., if it is investigating a “pump and dump” operation, it might offer to image drive and review it, segregating any privileged docs). But Oracle has found that as third-party witness to insider trading cases has found some government document requests extremely burdensome.
At FTC, proportionality is a big consideration. For a mega-merger, agency cares less about production costs. The best way to control cost of production is with upfront negotiations.

Q: What happens to data once turned over to the government?
A: FTC: We provide instructions on how to produce. For example, Excel in native file format. Sometimes we have agree to having a hosting company provide access to documents. Internally, we use Summation and Concordance. Once matter ends, we return or dispose of materials unless they have become a government record. We work with parties on disposition. But there are regs that do allow for other agencies to gain access to records.
SEC: We have standard data delivery guidelines. For review, we use Concordance. Then we start reviewing. [Ed. note: Why doesn’t the government use concept search tools?]

Q: How important is it for private parties to document their production efforts?
A: FTC: It’s critical. The requirement is reasonable steps. You have to show you were reasonable. This includes litigation holds, production efforts, and chain custody. Oracle: document your “blind alleys” and why you might not have collected certain documents. Know why you did what you did. Have an audit trail of all your actions. That can be critical to show, for example, that you might have overlooked a critical doc because it was reviewed early in case before anyone could have understood its true import. Consensus of both private parties and agencies: document as much as you can about the entire discovery process (including lit hold notices and search terms).
The more you can document, the easier it will be to show that you took reasonable steps. Monica of BearingPoint points out that this is one value of using a vendor: the vendor is accustomed to documenting; moreover, vendor can testify with an expert who knows how to do this.
SEC rep says that it makes him nervous when a private party uses more than vendor because vendors take different approaches. So it’s not enough just to document, consider who is doing the work.

Q: Does government have tools beyond Concordance and Summation?
A: SEC: in certain instances, we can use systems that do more than Concordance and Summation.

Q: Do you struggle with ongoing preservation costs when cases go quiet.
A: Audience member: we had a case go quiet when we were spending $80k/month on preserving data. We went to an archiving solution. Outside counsel did communicate with the government, which was comfortable with the archive solution
FTC: Don’t assume that government will just forget about the case. But sometimes attorney may forget to send letter to close matter. So private side should check.
Oracle: We don’t want to take chance of reminding agency that a matter may still be open.
SEC: We may decide not to take action against the company. But that could put at risk ongoing investigation of an individual involved. We consider company requests to archive or change how it saves data to reduce cost as long as it’s preserved for the ongoing investigation.
Oracle: If you do get a closing letter, then take the opportunity to destroy records. But audience member suggests that matter could still come back to life.

Q: What is gov’t perspective on advanced searching tools?
A: It goes back to early discussions about data production. FTC is not likely agree to search terms at the outset because it does not have a good sense of the playing field. But if party is prepared to talk about searching custodians, specific terms, and sample results and can then show how this has been tested, then we might sign off on concept or Boolean searching. FTC is looking at new tools.

I am at the Masters Conference, a leading e-discovery conference. This a real-time report on the session The Positive Impacts of Records and Information Management on E-Discovery. 

Panelists:
- Courtney Ingraffia Barton, Crowell & Moring
- Laura A. Zubulake, Consultant and Author
- Donna Vitalie, AOL
- Maura Dunn, Duff and Phelps
- Christina Ayiotis, CSC [moderator]

Donna Vitalie presents:

• Business runs on information: decision making, develop new products, collaboration, customer information, staff management, etc.
• An active records management (RM) program helps move from the ocean of information to meeting e-discovery requirements
• RM is critical to EDD preparedness; in addition, it can help business with quick access to operational information, reduced costs of IT, consistent treatment of recrods (including destruction), and legal hold management.
• To illustrate how RM can work at its best, consider a structured scenario for procuring vendor services:
  - Check a contract management system (CMS) for approved vendors, MSAs, other useful docs or information
  - Use the CMS to build the request for proposal, distribute to vendors, and collect responses online
  - Capture final contract in CMS - now vendor work is underway
  - The actual work and invoices will be tracked in an ERP (enterprise resource planning) system
  - As long as workers use these two systems, managers and auditors only have to look in two places for all relevant information [As a records manager, you have to make sure above systems work or managers will work outside the systems, leaving records in many different places]
  - In this scenario, the “records footprint” is limited to two systems.

• In reality, some work will probably occur out of these two systems. But with a structured solution like this, in e-discovery, you can limit where you have to look.

Maura Dunn presents on RM under litigation, audit, or investigation:

• In a structured program as described above, you know where data and docs reside

• In reality though, there may be many places to look. Business applications include desktop apps, e-mail, ERP, CRM, and imaging systems. At the enterprise level, there are many separate systems.
• In the old days, RM was an afterthought. But now, with all these systems in use, RM had to occur in real time. But in stealth manner because workers don’t want actively to participate in RM. So RM has to fit in seamlessly with the varied systems in use.
• Records destruction is hard today. Paper is easy - just shred it. But what is a record today? Do we delete just one record in a database? Records managers need to understand all the systems in use. And you need a plan for holds and destruction.
• EDD has a series of separate tools. These are not designed for daily business operations. Nor should they be. You need a strategy of holds or freezes to use these appropriately.
• Once an e-discovery need arises and you need a hold, you must identify custodians and storage locations. Then collect, preserve, and review.
• One challenge is that data moves over time. Between archival processes, employees leaving, and normal operations of IT migration processes, data created in one place may eventually reside elsewhere. Typical stats: software upgrades very 18 months and hardware upgrades every 3 years. Another rule of thumb: you can’t open files after two major versions forward. Even if you can, you are likely to lose data and/or formatting. So to say 5 years later that you have an authentic representation of the original is very hard.
• It’s one thing to start a litigation hold, it’s another to release it. You need a plan of what to do with records post-release.

Courtnoy outlines three main challenges for clients:

• 1. Getting money to fund RM programs. But consider that a cost of EDD is the possibility of court sanctions if you don’t do RM right. Unfortunately, proving cost of this is hard. It’s easier to quantify the cost of dealing with the volume of data. By having a good RM program, you can demostrate savings in processing

• 2. Where do you start? Just start - put a program in place. Improvise as you go is better than not starting.
• 3. How do you implement and enforce? You need good program and managers. If not, you have to think how your organization works best at enforcing other policies. Training will be key, as will the right technologies.

Laura Zubulake (plaintiff in eponymous case). How knowing how your business actually runs can help you locate important records.

• From various records management requirements imposed by regulators, she knew that records had to exist (or were supposed to).
• Product v. country reporting lines. Knowledge of the management structure help illuminate where records would lie.
• From daily business operations, knew how reliant entire organization was on e-mail. So knew that there was a large corpus of message. Similarly, there was instant messaging (IM), then called chat.
• Chat tools were known not to be very private. So understood that any written communication about here would almost certainly be conducted in e-mail, not IM / chat.
• Understood a bit about back-end technology. Limited server space meant limits on inbox controls. Being away two weeks would fill inbox and restrict sending outgoing messages. Seeing this helped figure out back-end RM.
• There was a “double delete” process. User delete did not really delete files. There were additional steps required

If I were still a Big Law CIO going into budget season now, I’d have strong views about how to present my 2009 budget proposal to management. 

This is a tough year for many law firms. Only desperate law firms will short-change critical IT infrastructure and staffing. Merely cautious firms, however, might postpone non-critical spending. CIOs should go be ready to discuss which line items can be cut or postponed. Proposing the bare minimum may not be politic but know how to answer questions about business value, urgency, and priorities.

If you think you don’t need to worry, think again. The current issue of American Lawyer is full of doom and gloom articles.

• One Side of Midnight is sub-titled “With revenue down, firms pin their hopes to the expense side of the balance sheet”.
• The Going Rate is sub-titled “With the economy down, will fees go up?” Fee increases will likely be smaller than in years past.
• Advisers Advance is sub-titled “Tough sledding for firms, good for consultants”.

Your partners read American Lawyer and even if your firm is not hurting, expect management to be cautious or worse.

[A caution if you read The Going Rate. Don’t go on record, as one BigLaw co-chair did with a statement “Law firm partners and managers need to spend a lot more time talking about fees with their clients and less time talking about fees with each other.” Conversations about fees with competitors might be of interest to the DOJ or FTC as an antitrust violation. In fact, don’t talk about your law firm’s pricing with your peers.]

A few items about e-discovery caught my eye recently: corporate insourcing, a high profile move, a tech item on MD5 hashes, and comments on the cost of privilege review. 

Insourcing EDD Keeping EDD In-House Could Contain Costs (Law Technology News, October 8, 2008) by Patrick Oot of Verizon presents the case for companies to insource EDD. I see the merits in his arguments but suspect that few companies have the scale generally or depth of expertise in EDD specifically to do this successfully.

Another High Profile EDD Move. “Julia Brickell, former associate general counsel of Altria Client Services and deputy general counsel of Philip Morris USA, has joined H5 as executive managing director and general counsel” according to an H5 press release.

Lurking E-Discovery Nightmare? The MD5 hash is detects duplicate files in EDD. Blogger Greg Duncan wonders, however, if someone could force an “MD5 collision”. A collision means identical hash values for different files. Someone with bad intent could, perhaps, in theory, make a “bad” file look like a common file such as notebook.exe. Will a judge rule now that we cannot rely on MD5 hashes to de-dup? Let’s hope not.

The Cost of Privilege Review. My Integreon colleague Chris Egan blogs on the cost of privilege review. Citing Fulbright’s Litigation Trends Survey, he points to a survey finding that suggests priv reviews may cost less than commonly thought.

The 2008 Am Law Tech Survey is out. It’s a good read for law firm CIOs and IT directors but I would not rely on the year to year comparison. 

The article Am Law Tech 2008: IT in the Balance (Law Firm Inc., 9 Oct 2008) analyzes the survey results. My reaction was simultaneously: “Wow, there’s a lot new and nothing new.” It suggests that law firm IT and legal technology has come of age and that CIOs have big and high-paying jobs. The analysis does deep dives on VOIP, Web 2.0 (aka Enterprise 2.0) technologies, and the deluge of data. Nothing really that new but good confirmation for those struggling with these issues daily.

The article also links to detailed findings (tables). Lots of good stuff there but use caution in comparing 2008 results to 2007. The AmLaw Tech Survey Budget chart shows that IT operating expense per lawyer dropped from $33k in 2007 to $25k in 2008. That’s big and inconsistent with what I know. Keep reading to see that 90% of firms report an increase in operating budget. Unless I’m missing something, this means the survey respondents in 2007 and 2008 are simply not directly comparable and year to year changes reflect different samples rather than trends.

[For other data hounds out there, this also explains a sentence in the article: “While capital outlays are up a whopping 36 percent over last year – $5,310,494, on average, compared to $3,902,145 in 2007 – spending per lawyer has remained flat ($8,496 compared to $8,500).” Reading that I thought, how can that be unless lawyer headcount changed by as much, which is has not to my knowledge. Again - I don’t think it’s safe to compare the two years.]

The AmLaw Tech Survey software chart lists EDD vendors used by firms. I was a bit surprised at the top vendors in this list: Kroll Ontrack, Lexis Nexis (LexisNexis Applied Discovery), IPRO Tech, FTI Consulting, and Zantaz.

If you are looking for benchmarks on staffing ratios, see the operations chart. More than 80% of firms responding have fewer than 30 users per IT support person.

There’s an old adage “the great thing about standards are there are so many to choose from.” Similarly, it seems there are more than a few questions you should ask when selecting an e-discovery vendor. 

Finding the Right Five Questions for EDD Vendors (Law Technology News, 6 Oct 2008) asks numerous EDD experts to answer the question “What are the five most important questions that any organization should ask of vendors before signing the contract?”

The range of suggested questions is staggering. Some overlap, especially if you abstract to a higher level, but I saw less commonality than I would have expected. Topics include pricing, vendor capabilities, capacity, references, project management approach, software features, resumes of key players, turnover among executives, and very specific tech questions.

My take-away is that selecting an EDD vendor cannot be reduced to five easy questions. The list of varied questions explains why EDD RFPs are often quite long. Given the complexity of e-discovery, I suppose this is not surprising. Were I novice though, I think I’d read this article and conclude that I need an expert to help me select a vendor.

I am at a large law firm knowledge management conference. The morning session was Does Enterprise 2.0 = 2 Knowledge Management 2.0 and featured Dan Keldsen, Director of Market Intelligence and Carl Frappaolo, VP Market Intelligence, both associated with AIIM. This was one of the more interesting KM sessions I’ve attended in a while. 

Here are highlights of the session:
  Interesting group exercise to define themes  [conference organizers take note - this is a great approach]
        i. Split into 2 groups
        ii. Write terms on Post-It Notes - keep to 1 or 2 words - to describe E2.0 and KM2.0
        iii. Put all the Post-It Notes on a wall
        iv. Each group de-duplicates Post-It Notes and organizes by theme
  Enterprise 2.0 Themes
        i. Collaboration
        ii. Social networking
        iii. Knowledge sharing
        iv. Search
        v. Virtual organization
  KM 2.0 Themes
        i. Training and PD
        ii. Forms and precedents
        iii. People and processes
        iv. Taxonomy, content organization
        v. Sharing, gathering, and re-using
  Comments on excercise
        i. Paper exercise illustrates the wiki approach of group authorship
        ii. Exercise shows that tools do not help reconcile differences of views in groups
  Commonalities across the KM and Enterprise 2.0
        i. Search, collaboration
        ii. People
        iii. Technology
        iv. Sharing information
  What’s new if we accept premise that the basic tenets of KM don’t change because of Enterprise 2.0?
  Four elements of KM, irrespective tools and jargon
        i. Business strategy and purpose
        ii. Process
        iii. Technology
        iv. People (allegiances, incentives, inclinations, respect, trust) - this does not go away, irrespective of technology.   Open access to technology does not mean everyone has an equal voice.  
  Legacy technology and KM
        i. Intermediation - Groupware, profiling, e-mail  [sharing views and info]
        ii. Externalization - doc man, visualization, portals [to capture explicit know-how]
        iii. Internalization - search, taxonomies, agents [to help users find info]
        iv. Cognition - workflow, decision support [to help drive decision making]
  New tech and KM
        i. Intermediation - wikis, blogs, social network analysis [sharing views and info]
        ii. Externalization - wikis, blogs, podcasting [to capture explicit know-how]
        iii. Internalization - RSS, mashup, search, social tagging  [to help users find info]
        iv. Cognition - RSS mashup [to help drive decision making]
  New in technology (From Q1 2008 research available from AIIM).
        i. Low barrier and ease of implementation
        ii. Web and widely accessible
        iii. Lean
        iv. Low cost
        v. Agile
        vi. Emergent and heuristic [drastically reduced delivery time for new applications]
  Critical to understand if an organization is ready for a new technology.   You cannot use new technology to drive organizational change