Strategic Legal Technology

This is a two-part, joint blog post. I recently spent some time looking at Xerox’s new CategoriX EDD tool and writing a post about it. After reading it, I realized it would be helpful to set my discussion in a broader context. So I turned to my friend and e-discovery expert Tom O’Connor and author of the docNative Paradigm Blog . What follows is a combined post; we wrote each section individually and are cross posting this. 

Xerox CategoriX and Musings on the Best Approach to EDD Search
by Ron Friedmann

In early October, Xerox Litigation Services released a new e-discovery search and review tool called CategoriX. How should EDD professionals think about this and other new search technologies?

A Xerox PR firm offered me phone time with the CategoriX product manager, Svetlana Godjevac. Always curious about new litigation document review tools, I accepted. I also read the CategoriX product sheet and a statistics-heavy Categorix white paper explaining how Xerox tested the product.

The CategoriX approach sounds interesting and useful. Xerox R&D in Grenoble developed the product and the company appears offers it beyond the litigation market (see the page
Text Categorization and Clustering housed under Xerox Technology and Brand Licensing.) The product combines ‘probabilistic latent semantic analysis’ (document clustering) with iterative machine learning.

It sounds powerful but I can’t evaluate its effectiveness. This is by no means a criticism. Both search approaches have been around for years so it’s hard for me to assess how they work in CategoriX. Learning more about Caterorix confirms what I’ve suggested before: mere mortals can no longer evaluate EDD platforms, at least not by assessing the underlying algorithms.

I lament that I don’t know enough statistics to fully comprehend the white paper but Xerox appears to have tested the product (though the nature of the 2 document sets studied and human reviewer groups is not described). One finding I did focus on is that Xerox used this tool to quantify inter-reviewer variability. Not surprisingly, humans are not all that consistent, a fact that lawyers routinely overlook. In my conversation, Ms. Godjevac reports that Xerox does explain the statistics to lawyers and works with them to understand the problems of human review.

How a litigation team should choose among the available advanced tools is a real quandary. The investment to run a “bake off” among competing choices is enormous; moreover, the outcome may well depend on the nature of the documents. What does this say about defensibility in general? Would it be defensible to use product A if an objective study showed that product B was 20% better? And what exactly does 20% better mean anyway?

Courts seem a long way off from considering this question but the leap from the current standard to one that requires comparing tools seems more a matter of degree than of kind. Are litigation support professionals obliged constantly to evaluate new tools to make sure what they now use is adequate?

Of course, I may be way off base here. Which is why I am surprised and dismayed that I haven’t found much commentary on this tool. Many other bloggers comment on EDD but I did not find much blogging (or Tweeting) about CategoriX. I would like to see more discussion of products, comparisons of them, and the future standard of what courts will rule is defensible.

[I felt this did not stop at quite the right spot so am glad Tom stepped in….]

The Challenges of Evaluating EDD Search Tools
by Tom O’Connor

Ron, your comments about the problems facing anyone attempting to evaluate ED applications are right on target. First of course is the fact that one needs an engineering degree to even read some of the white papers in this field. But it seems to me that the problem starts even before that with several fundamental problems.

The first, as you mention, is that there is never enough detail given about the document sets being studied. Understanding the documents is a crucial part of any automated litigation process and evaluating products which don’t sufficiently describe the universe of documents they are working with is simply impossible. This is not a failing of Xerox alone but really all the reviews I have seen. It is nearly impossible to cross compare applications if they are “tested’ on widely divergent data sets.

In addition, some search engines use a standardized thesaurus such as the publicly available WordNet Lexical database, an open source thesaurus from Princeton University. It has over 100,000 English words and associations. As an open source resource, the WordNet database is available for download and examination if needed for litigation validation purposes. If, however, the comparison is between one program using this database and another one that uses an internal or closed database, does that really help us?

Even the widely touted TREC (Text Retrieval Conference) study suffers from this failing in my opinion. The TREC study used a test set of 7 million documents available to the public pursuant to a Master Settlement Agreement between tobacco companies and several state attorneys general. Attorneys assisting in the study drafted five test complaints and 43 sample document requests (referred to as topics). The topic creator and a TREC coordinator then took on the roles of the requesting and responding counsel and negotiated over the form of a Boolean search to be run for each document request.

The problem is those documents were not in native format and did not include attachments. Given that typical collections today consist largely of massive volumes of e-mail, many with attachments (and attachments to attachments), this is , a huge issue when evaluating search capability for email.

A second problem I see concerns what type of search is best. We all agree that computer searching is more accurate than human review. The Sedona Conference Commentary on the Use of Search and Information Retrieval Methods in E-Discovery, released in August 2007, states that “Human review of documents in discovery is expensive, time consuming, and error-prone. There is growing consensus that the application of linguistic and mathematic-based content analysis, embodied in new forms of search and retrieval technologies, tools, techniques and process in support of the review function can effectively reduce litigation cost, time, and error rates.” So the assumption that concept search is better than Boolean searching, although widespread, may be wrong.

In Disability Rights Council of Greater Wash. v. Wash. Metro. Area Transit Auth., 2007 WL 1585452 (D.D.C. June 1, 2007) Federal Judge Facciola stated that “concept searching, as opposed to keyword searching, is more efficient and more likely to produce the most comprehensive results.” Judge Grimm made a similar statement in Victor Stanley, Inc. v. Creative Pipe, Inc (Civil Action No. MJG-06- 2662 (D. Md. May 29, 2008).

The TREC study results, however, don’t seem to support these judicial positions. In that study, computer scientists from academia and other institutions attempted to locate responsive documents for a number of topics using 31 different automated search methodologies, including concept searching. The result? Boolean searches located 57 percent of the known relevant documents. None of the alternative search methodologies had better results.

In fact, a Boolean search generally equaled or outperformed any of the individual alternative search methods, but those alternative searches also captured at least some responsive documents that the Boolean search had actually missed. The lesson? Manual review misses many documents but so does keyword searching, Boolean searching and concept searching - but they all miss different documents. The best approach is to use multiple applications to do iterative searches which winnow down to the best possible results.

This isn’t late breaking news. Ron, you started a discussion in May 2008 in Concept Searching in E-Discovery. Some of the info above I gleaned from reports on web sites and reports by people like Herb Roitblatt or Gene Eames who know a whole heck of lot more about this than do I. But the point is, one product isn’t going to do the job, no matter how good the product or convoluted their documentation. And irrespective of the tool, the “operator” better be well trained or who knows what the results will be.

I share Ron’s concern about emerging standards of defensibility. Given the technical complexities and the lack of statistical certainty, I don’t see how a clear, stable defensibility standard will emerge other than what we’ve seen, namely, have a plan, apply some smarts, and document what you do. As we’ve seen in other arenas, developing standards by judicial opinions is a long and messy process. Well, I suppose the upside is that consultants will stay busy!

From a private large law firm knowledge management gathering, here is a near real-time report on Engaging Lawyers in KM. 

What motivates lawyers to participate in KM efforts? Research shows that extrinsic motivators (e.g., money or recognition) do not lead to better results for cognitive work. Instead, you need to focus on intrinsic motivators, for example, purpose, mastery, and autonomy.

What are the intrinsic motivators in a law firm? Examples might be
- working on a project of one’s own choosing
- exploring a new interest
- opportunity to get deeper expertise
- psychic reward of teamwork (for anyone who is social)
- doing the right work because it matters

So, the answer to get content is not offering Starbucks cards. Use extrinsic motivators for adding content and reviewing document; use intrinsic motivators for creating content and revising documents.

An alternate theory is that the environment affects behavior and so you have to create an environment that encourages engagement. For example, consider grocery store lay-out (staples at back so you have to walk through store or shelving sweet cereals at child eye level). Are there variables one could change in law firm environment that would encourage KM engagement.

Yet another theory is tha the interface affects behavior. See for example thefuntheory.com by Volkswagen.

A different perspective, from a 2nd panelist: Need to use extrinsic motivators with lawyers: fear, humiliation, shame, sense of crisis, desperation. Bottom line: wait until lawyers are in a panic or in a jam, help them, then they will seek you out in the future.

From a private large law firm knowledge management gathering, here is a near real-time report on a competitive intelligence (CI) in law firms by Ann Lee Gibson, who blogs at Law Firm Competitive Intelligence. 

Peter Drucker said that 90% of info used in organizations is internally focused only 10% externally. It should be the other way around. So, CI is not competitor intelligence; it is information that allows firms to be more competitive. Information sources are a prelude to CI. CI allows making an informed decision. But CI is not predicting the future - it does help narrow the options and decide which future to aim for. Given that goal is to make informed decisions, it makes sense that CI should be directed at decisions with the biggest impact on the law firm.

The ‘intelligence cycle’:

• Planning and direction. Understand the goals of the decision-makers.
• Collect data (primary or secondary) and do research. This may require personal networking and conduting interviews
• Analyze, synthesize, and produce. Good CI is not just a book report. It is forward looking and analytic.
• Disseminate to decision makers
• Take action

Don’t bother with CI if no one in your firm is actually making decisions. Audience member suggests that it can be helpful to queue up info for decision-makers in hope that they will focus on the issue. A CI assignment anticipates specific questions and decisions. [RF comment on that: beware the managers want information without having a clear idea of how that will change their decision. It’s costly to collect information is I agree info and analyzed must be geared to change or at least consciously deciding to keep status quo and reject the alternatives.]

Many Fortune 100 companies have established CI functions; likewise leading service organizations such as Deloitte, Ernst & Young. Potential drivers for starting CI include: changes in pricing, competing for new business, expanding into new markets. How do you start a law firm CI function? Find a champion with clout, stay close to the revenue, focus on deliver analysis not just info, actively market the CI function, build a network of primary sources, and emphasize early warnings. It’s better to know what other firms are about to do rather than what they are doing.

What are the skills and attributes of a good CI professional? Factors include: broad background with multiple points of view, curious, comfortable with amiguity, looks for patterns, has lived in multiple places, skeptical, read voraciously, elicitation skills (can get info out of people by asking smart questions and listening well - also means providing info back), tech and KM focused, build human networks, and listens well.

Law firms need to ask clients questions. [I comment that partners seem not to understand or believe that asking clients simple favors builds relationship capital rather than diminishes it.]

Some typical law firm CI assignments….
1. A law firm wanted to find ‘the next Vioxx litigation’. Look at what PI are doing, read medical journals, download adverse event reports from FDA database, read more on FDA website, interviewed ex-FDA employees, create list of clients who had drugs that might be subject to massive litigation. This CI led firm to winning major engagement for Avandia litigation.
2. CI led a firm to identify issue with OTC drug. Firm called the drug company and got meeting. The company said, “we know we have problem but we didn’t think others did”. The firm went in, not with qualifications but with an action plan reflecting the law by jurisdiction.

From a private large law firm knowledge management gathering, here is a near real-time report on a relatively unusual KM topic, usability issues. 

A usability expert from one of the attending law firms presents. Her prior job titles include include Visual Designer, Interaction Designer, Information Architect, and User Experience Researcher.

She starts with an illustration from the “real world", a car dome light (in a rental car) with no obvious way to turn it on. That’s bad! Likes the usability of DropSend web interface because it make very clear what it does and how to use it. In contrast, she shows a PeopleSoft interface, which she calls ‘horrifying.’ There is a science behind usability; for example, many studies look at where to place labels on a page, how to design forms, whether to use check boxes or radio buttons. All of this falls under the rubric of “interaction” usability.

Quantitative research is one approach to improve usability. Studies look at timed tasks, eye tracking, observing behavior from behind a 2-way mirror. Qualitative research, another approach, includes recording in-depth interviews (suggests recording interviews and transcribing because certain issues jump out in transcript in a way they don’t in interview). Some leading KM practitioners have, in prior meetings, talked about field anthropology; this sounds quite similar. Metrics tie together the quantitative and qualitative.

Who can do usability work? Qualifications include

• Ability to withstand looking like an idiot”. Lesson: identify the nice people in an organization who will help you learn gently
• Genuine fascination with human behavior
• Can balance focus with flexibility. (AKA knowing when to take a stand)
• Good at building and maintaining relationships
• Customer service oriented
• Eye for detail
• Draw towards complex problem-solving

I ask how do you know when a site is sufficiently usable? There may be some users who ‘just don’t get it.’ The general rule is 80-20. You may never be able design to meet 100% of the need - 80% is likely good enough. In a law firm, one approach is to design the interface for the most senior people likely to use the system (assuming the more junior ones are more likely to be able to learn quickly).

So what can a typical KM professional do to improve / work on usability?

• Don’t fear white space on a page.
• Not enough a white space is a huge problme - it leads to clutter.
• Don’t assume that ‘easy to build’ means ‘easy to use’. It takes a lot of work to make something easy.
• You are no your audience.
• Research first, then build prototypes. Consider agile design.
• Test with users.
• Use wireframes to test
• using Net Promotor score to assess web site usability.
• “Card sorting”. Put names of pages on index cards, ask users to group and order. If you do this with multiple people, you will see patterns. There are online tools to help with this.
• Use personas to make sure you have the right design target. Have a picture and top level demographics of a typical user. This helps communicate to developers who the end user is. For example, have personas for senior lawyer, junior lawyer, secretary.

From a private large law firm knowledge management gathering, here is a near real-time report on knowledge management (KM) and Return on Investment (ROI) by Joshua Fireman of ii3. 

Here are some of the highlights I find most interesting:

• Given that law firms can barely do profitability analysis on their own matters, practices, or clients, it is odd that firms would ask about the ROI of knowledge management
• Firms focus today on cost cutting, profit improvement, and productivity enhancements. KM is a cost center and thus it is hard to link KM to profitability. So, can KM projects be tied to either cost savings or improve productivity.
• What do we mean by ROI though? It has different definitions across industries. For our purposes, we should view it as ‘earnings per dollar of investment’. Don’t focus on intangibles such as work-life balance or does it make our lives easier. So, for example, an ROI of 25% means that you get back your investment plus an additional 25%. Another way to define it is ‘(net solution benefits / solution costs) x 100′.
• How do you articulate cost savings from process improvements? This is an especial challenge where firms pay workers a fixed salary (exempt staff) and there is no marginal cost for an extra hour. So you need to view cost savings from process improvement as allowing knowledge workers to re-focus their activity to higher value activity.
• I ask whether this a game of “whack a mole” because how do you measure the value of hours freed up? If lawyers could bill they would. And most firms don’t do ROI on biz dev or other uses of time. Joshua argues that there is still good discipline in being more explicit in prioritizing time and allocating hours. [I agree with this.]
• Participant points out that if you free up enough hours, then you can avoid another hire. That’s real money. So if KM can avoid need to hire more PD or risk management professionals, that’s a real savings. But others argue that this too is just moving dollars and time around from one group to another. But if fee-earners are freed up to do billable work, they can generate more work. If, however, lawyers don’t have enough billable work, then “freeing them up” has no value.

My view is that trying to figure out ROI on KM in a law firm is a losing battle in a typical law firm environment that does not measure most of what it does. One audience member points out that firms spend huge amounts on marketing, hiring laterals, opening or closing offices, all without ROI. So why should KM be subject to ROI analysis. I agree. It’s not clear that much has changed over the last few years in dealing with this conundrum.

Sometimes answers just fall into your lap unexpectedly. That happened to me today about Twitter.  

I attended a lunch today of local legal knowledge management professionals. We meet monthly and at our last meeting, Twitter came up. One thing led to another I agreed I would demo Twitter today. After a quick orientation to Twitter, I said “Let’s see if we can find the answer to a key question about Twitter using Twitter” so I Tweeted:

• I am at DC Legal KM lunch demo’ing Twitter. Any comments on the single best reason to use Twitter?

Within the space of about five minutes, I received the following replies on Twitter. Both the substance of the answers and the fact that I got so many answers so quickly was quite a good demo of the potential value of Twitter:

• CarlJacobsen Best thing about twitter is the unexpected. I love the serindipity nature of it – finding things I never knew I didn’t know
• jeffrey_brandt Its a great resource for whats happening, stimulating questions and links to more indepth information
• IntegreonEDD Twitter is a great medium for building relationships with other people and organizations that share like interests
• stevematthews Best twitter use is asking questions & getting answers from those you choose to follow. A personal advisory board.
• KMHobbie 1 Replace Google Reader as the best way to find the good articles on #km in law and business. 2 Make nice with @VMaryAbraham.
• bobambrogi Single best reason is to monitor the buzz, see what colleagues are talking about.
• bschorr Colleagues I respect often Tweet articles or ideas that I might otherwise have missed.

In fairness, I explained that not every question I asked on Twitter elicited so many answers so quickly (I think my ‘followers’ understood the demo circumstances). But I’ll let the self-referential nature of this post speak for itself. And also for how one can integrate blogging and Tweeting.

A.B. Culvahouse, Jr., the chair of O’Melveny & Myers, has piece in Corporate Counsel today called A Shift That Can Benefit All of Us. He writes “reports of the demise of “BigLaw” have, in the immortal words of Mark Twain, been greatly exaggerated.” Yet reading the rest of his commentary, I wonder… 

I think BigLaw has a future, but one very different from the past. And I think his commentary supports that view. So let’s consider the rest of Mr. Culvahouse’s remarks in detail.

Mr. Culvahouse acknowledges that “many aspects of the law firm business model that created tension between law firm interests and those of their clients are rightly being reinvented” and observes that both the market and his firm are moving toward alternative fee arrangements. I interpret his comments about OMM billing, in my words, ‘we were offering risk-sharing arrangements but now the market is forcing us to offer fixed fees.’

Mr. Culvahouse then addresses the recruiting and staffing model. Training costs are shifting from clients to law firms. These changes create value for both parties but only with trust. I interpret his comments, my words, ‘this is a drastic change and the system will break if clients don’t step up to plate and help resolve the market issue of training new lawyers.’

He also points out the important role that law firms play first as trusted business advisers, confidants to executives, and sounding boards to manage corporate change and second as “guardians of the ‘rule of law’ both at home and abroad” through pro bono work. I interpret this, my words, ‘for all the complaints about BigLaw, remember we serve a critical role in commerce and society that is not easily replaced.’

In sum, I read his commentary more as a plea to preserve BigLaw than as support for the idea that BigLaw demise is greatly exaggerated. That said, I do believe BigLaw will survive, in part for the reasons Mr. Culvahouse explains. But I think it will be a very different BigLaw. Whether it becomes a cylinder instead of a pyramid is too early to say, but the shape and operation we have known in the past likely cannot continue into the future.

This morning at the The Masters Conference, one of the leading e-discovery conferences, taking place in Washington, DC, I sat in on the first half of Early Case Assessment: Looking to the Future - From Early Assessment to Early
Awareness. Here are notes from the first half and some comments.  

What is ECA? It’s getting an early look at the facts of your case and at the scope of discovery. Goal: understand the matter risk profile and the cost to defend so that counsel make informed decision about settlement or moving forward?

Where are the immediate savings; how is this different than past? It’s not a tool per se, it’s a method (a process, the right people, and technology). ECA does not generate savings very early - it’s not about upfront savings. You have to invest at the outset to learn about the case. Clients typically want to delay spending, so ECA is counter-intuitive to many lawyers. Lawyers need to spend more upfront but this creates significant savings over the life of the matter. As important, it prepares lawyers to argue their case more effectively.
The vendor challenge here is that clients are reluctant in this environment to spend upfront. So you need to educate your client - let them know that ECA will reduce the volume of documents that require human review. For a DC practice, dealing with agencies, lawyers have cordial relationship with adversaries. ECA works better with agencies than private parties because of the cordial relationship.
Another benefit of ECA is as an “early warning system.” But from an antitrust perspective, this is less of a factor. Benefit may be greater in securities or fraud matters.
When lawyers offer search terms, they often don’t know the impact on the case. ECA let’s you understand the impact of the search terms that you select. But ECA is still aspirational - uptake is still slow.
Need to emphasize the doc review cost savings.

Other than cost, are there other limits that hold back ECA? Clients are the main barrier. We are moving beyond linear review and search terms to a more subjective approach. If you can do that quickly and iteratively - as you can with ECA - you have a powerful approach, one that is much better and cheaper than collecting too much data. So ECA is less about the tool than getting real insight into data and let that drive decision making and strategy. It gives you more control over the process, with objective insights into the data, so it’s more defensible.
The early adopters are likely to be lawyers or clients who regularly deal with key word searching (RF: suggesting serial litigants I think).

Tools that are better at ‘understanding’ data are in the ECA bucket… how do these emerging technologies affect the process, especially if clients bring the tools in-house? To start, who should operate the tools? It depends on organizational structure. It can be IT, Legal, Info Security, other corporate departments. Depends also on budget. Companies must make conscious and considered decisions about the process. Legal is the ultimate stake holder and should drive the process. Purchasing is beginning to fall into the model of enterprise software acquisition. As for running the software, this is still an emerging area because the processes are still evolving. This too requires work, for example, defining workflows.
There are risks in moving away from lawyers supervising the process. First, you can lose attorney-client privilege. And second, without lawyer supervision, problems in data collection or custodian selection are more likely.

[End session notes]

[Begin comments]

Unfortunately, I had to leave at the half-way mark. What struck me most about this discussion is how much education is required. Already 20 years ago, it was obvious that upfront investment and planning in assessing discovery materials was a good decision. That is, it always makes sense to invest and plan. Sometimes cases do settle and it feels like you’ve over-invested. But that confuses decisions and outcomes. Frankly, I just don’t understand the reluctance to invest. Perhaps if lawyers thought more carefully about the full life-cycle cost of litigation and kept historic data (imagine that!), they would understand.

Further, it was also obvious two decades ago with the earliest full-text databases, built form scanning and OCR’ing documents, that iterative search was an absolute necessity. By 1992, there was a decent selection of conceptual and Boolean search tools. Tool selection did not matter - iterative search and analysis was critical and obviously necessary to anyone who gave the matter any thought.

I find it distressing that there is still a need to discuss this. This is not a knock on the panel, which, unfortunately appears to be a necessary discussion. It does not speak well, however, of lawyers and the legal profession that two decades is not enough time to ‘get it.’

This is a near-real-time post from the The Masters Conference, one of the leading e-discovery conferences, taking place in Washington, DC. This session is How Defensible is Your E-Discovery Process? 

Panelists:
Dean Gonsowski, Esq., Vice President of E-Discovery Services, Clearwell Systems
John Loveland, Managing Director, Navigant Consulting, Inc.
Bruce Markowitz, Director of Litigation Support with McKenna Long & Aldridge LLP
Sonya Thornton, Manager, Legal Discovery / Compliance, Sprint Nextel Corporation

Defensibility is not a recipe, it’s a process. What is defensibility? It is based on a “reasonableness” standard for the entire EDD process. Several triggers raise this issue:
1. Preservation: When did you know litigation was likely and what did you preserve.
2. Search: Lawyers cannot just design key word search by the seat of their pants - that’s not defensible.
3. Inadvertent privilege

How Does Collaboration Play into Defensibility? Law firms need to understand client structure and staff and where information resides. To have collaborative conversation - with vendor, client, third party, opposing party - lawyers must understand what data clients have and don’t have and what is reasonably accessible. If collaboration is handled right, it makes process more defensible. Where parties are in agreement, judges rarely will intervene. Of course, reaching consensus is hard. Need to focus on the “end result:” lawyers need to start from what they want to prove and work backwards to search terms and negotiation over process. Then collaborate to try to achieve your desired end result.

Question: In collaboration, how much should you educate opposing side about your data?
Answer: If you don’t educate other side, they will make mistakes and then seek continuances. So it can work against you if your opponent is not smart enough about search and process. Absent education, you face too many iterations. Giving other side a bunch of data that neither helps nor hurts does not serve anyone’s purpose. Doing Early Case Assessment (ECA) helps refine search terms. A collaborative approach to term selection does not give away that much. Not dumping useless data on opposition is probably ultimately more defensible because it is more reasonable.

Question: Should each side give other side the “word wheel,” which is the list of all unique words (aka inverted index)?
Answer: Panelist says this does give away too much. Another panelist took opponents proposed term and gave stats on percent responsive and percent non-responsive. This can get to consensus faster.

Law firms can gain client “stickiness” once they learn their clients’ IT infrastructure and where data are stored. This lowers the cost, makes the process repeatable, and improves defensibility.

Question: How do you define one or more workflows?
Answer: It takes time; at Sprint, it’s taken well over a year to map data, gather retention schedules, assessing which firms really understand e-discovery. Sprint will have distinct workflows for data management based on type of law (e.g., employment v IP). There may be variations, but company starts with a baseline process.

Question: What is responsibility of inhouse counsel v law firm with respect to responding to a subpoena? Law firms may change scope based on less complete understanding.
Answer: Outside counsel is on the hook in court, their license is on the line. So firm has to be very educated about client’s data and the issues in the case. If firm is educated, inside and outside counsel should be very closely aligned in responses. In practice, firms tend to add, not subtract terms. Also, firms need to show what search terms will yield and discuss results (iterate) with the client.

Question: Is there a single, perfectly defensible process?
Answer: Unanimously: no. Need to understand, you can never spend enough to eliminate all risk. Clients should be conscious about what level of risk they are willing to accept. Also, with case law changing, this is not a static question. Lawyers must constantly re-evaluate law, case, and risk level of current process.

Question: Are there specific practices that are an especial danger or risky to defensibility?
Answer: Sprint: one big concern is data mapping. We have 1000s of apps running and to figure out where all data resides is hard. We have created system profiles for various apps: one for judges, one for lawyers, one for the IT staff. These all help define reasonableness. Plan in advance to define reasonableness (e.g., you can’t stop your billing system).
Law firm: what are risks of self-collecting - this depends on nature of case but can be risky. Clients must way costs of self-collection versus vendor collection with the risks of self-collection.

Question: How transparent should collection and hold be? Are clients in danger if they present data collection as a “block box”
Answer: Yes, every judge wants process to be completely transparent. To be transparent, lawyers must be sure to understand how IT, HR, and other departments operate and manage data.

BigLaw economics likely have changed permanently. Is the same true for the consulting companies that advise large law firms? 

Consider that virtual law firms and boutiques now compete effectively with large law firms for a wide range of matters. This is true because

• Cost pressures force general counsels to consider lower cost alternatives to BigLaw
• Smaller firms offer world-class capabilities through technology and informal or formal alliances (e.g., Meritas)
• GCs demand alternative fee arrangements (AFA) and smaller firms, with their much lower overhead and more flexible thinking, are more willing to offer them
• BigLaw benefits have likely been over-rated all along. Need a global footprint? Just how effective are multi-office firms in utilizing their global offices? And, if as GC argue, they hire lawyers and not firms, why does a global network or having multiple practice areas matter?

In my anecdotal observation, similar forces operate among law firm consultants. My sense is that 2 or 3 consultancies dominated legal consulting circa 1990 but that they have since lost significant relative market share. Perhaps it’s just because I’ve been around a while and know more firms, but I do think there are many more solos and small consulting firms today than even 5 years ago.

BigLaw and the consultants who serve both are in the business-to-business market. B2B marketing has shifted and continues to shift to the web and social media where scale matters much less. For example, consultants such as Rees Morrison, Bruce MacEwen (aka Adam Smith, Esq, Jordan Furlong (new to the consulting this month), Patrick McKenna, or Bruce Heintz illustrate how blogging can either establish or maintain thought leadership, a key consulting selling point.

Of course, the solos and small shops have no monopoly on using social media to build their brand. At Altman Weil, consultant Tim Corcoran blogs extensively and Pam Woldow writes an outstanding Twitter feed @pamwoldow.

With the rise of web-based marketing and low cost technology, brochures, tech infrastructure, office space, acquiring support…. all the requirements to operate a business have become easier to acquire. And branding is now a whole new game open to anyone with a PC and net connection.

I am not suggesting that BigLaw or big consulting firms will go away. Rather, the ecosystem is becoming more diverse, meaning players of all sizes can thrive and the environment keeps changing. The “new normal” is likely to be much less stable than the old one, so get ready for an interesting ride.

Large law firms historically have not spent much energy managing overhead cost. To be sure, BigLaw lay-offs are rampant but these have been aimed mainly at lawyers; staff have been cut in rough proportion to typical support ratios. News last week, however, suggests that firms may now target overhead per se. 

The Recorder reported on Friday (2 Oct 09) that Cooley Lays Off 58 Staffers. These “cuts represent about 5 percent or 6 percent of the firm’s staff… and the majority were secretaries. The information services and marketing departments also took a hit.”

In general, several reasons explain why a big law firm might lay-off staff and not lawyers:

• To correct prior over-staffing.
• Support needs have declined; for example, technology substitutes for humans or a new practice mix reduces support needs.
• The firm outsourced support.
• Lawyers become more self-supporting. Self-support might not require extra time because of process improvements. If self-support does require lawyer time, however, query whether this implies working longer hours, billing less time, or working more and billing for work previously performed by staff.

In this instance, Cooley explains. Cooley Chief Operating Officer Mark Pitchford said “This is recognition that we were overstaffed in certain areas.” A confidential firm memo posted at Above The Law explains “we have streamlined, and in some cases reorganized, several firm functions, invested in new technologies and endeavored to implement attorney staffing ratios commensurate with our attorneys’ changing support needs.”

Will other firms take a similar step? In January 2009 I suggested in Law Firm Staffing Reference Model that few firms consciously decide on appropriate staffing and that support ratios seem random. Then in May, in Cost Control as Part of AmLaw 200 Turnaround Strategies I analyzed BigLaw support cost per lawyer. Making some assumptions, I found that the median AmLaw 200 support cost per lawyer in 2008 was around $170,000.

In this analysis, Cooley’s overhead per lawyer was about $210,000, well above the median. So these cuts may reflect a “move to the median”. Draconian and painful as the cuts are, however, they don’t move the economic needle much. Assuming average compensation of those cut is $60,000/year, then in my analysis, Cooley overhead per lawyer drops by about $4,000. (We cannot simply apply the 5% staff cut directly to the $210k overhead number because it includes fixed costs such as leases, IT, and malpractice premiums.)

To reduce Cooley overhead per lawyer to the median of $40,000 would require much larger cuts, perhaps close to an order of magnitude larger. My analysis likely does not hold up for such dramatic changes; nonetheless, we know overhead is enormous and hard to cut. A major overhead reduction likely requires a re-think rather than incremental cuts.

Do other firms now have “permission” to make similar cuts. Remember, by definition, half the firms spend more than the median. So that leaves 99 others who could cut to get closer to the median. And I’m not even suggesting the median is a good target. In fact, I suspect it reflects more than a modicum of bloat.

Since not everyone reads Twitter, I reproduce here a selection of my recent Tweets. 

@ChristianUncut How much longer before fax dropped from contact info? First dodo, then telex, fax soon? US doctors still rely on it - ugh 10:54 AM Sep 4th

RT @EDDUpdate The Death of Imaging http://bit.ly/KNzxi || Forensic disk imaging cannot keep up with ever bigger hard drives

Eight basic categories of legal department software. Blog post by @ReesMorrison at http://bit.ly/zEeF9. Succinct overview / categories.

Bloomberg on lawyer social nets http://bit.ly/rpiaZ. If GC serious about change, why aren’t more rushing to Legal Onramp or other nets? 3:36 PM Sep 9th

@tcorcoran outsourcing more than moving bodies: improve process, deploy tech, use metrics, set SLA, match supply + demand, deeper expertise1:46 PM Sep 10th

RT @OneSpot_Law Eversheds Mulls.. Layoffs, Plans to Outsource Secretarial Work to save $3.3M http://bit.ly/1884EH || Outsourcing outed? 5:19 PM Sep 10th

‘Fresh US backing for legal outsourcing’ IP Review Online re Ohio ethics opinion http://bit.ly/OvGDx 3:27 PM Sep 11th

‘Chicago law firm Seyfarth Shaw has become a Six Sigma devotee’ Biz Week 6 Sigma Comeback http://bit.ly/2OK4xB || a law firm; who’d've thunk 9:21 PM Sep 12th

@reesmorrison questions ACC value challenge: slants to meet law firms needs more than law departments’ http://bit.ly/DhPgD

RT @tcorcoran chat with Biglaw partner: “We get the need for change” but STILL unwilling to go 1st - clients must ask || Market share opp?

If you blog: are you getting more e-mail from PR agencies pushing products, books, etc? Volume I get is way up over last 18 months. 12:37 AM Sep 18th

Hildebrandt on BigLaw: ‘Are We On The Verge of Revolutionary Change?’ New LawVision ™ service http://bit.ly/Vcpv8 4:17 PM Sep 18th

More detail on Rio Tinto legal outsourcing deal and Leah Cooper role in Metro Corp Counsel http://bit.ly/4nsKbj | LPO going upscale? 1:42 PM Sep 20th

@reesmorrison on Rio Tinto LPO details http://bit.ly/NQmT7
- 120 projects to India since May 1; $4 mil saved; avg quality 7-8 of 10 11:34 PM Sep 27th

Do virtual law firms and boutiques threaten BigLaw? Or will their rise provide real choice for GC? Contemplating blog post. 1:29 PM Sep 28th

YouTube for lawyers? www.LegalTube.com. Meant for consumers but will corp counsel someday choose outside counsel by video? 10:16 PM Sep 28th

Welcome to the Future: It’s all about Quality by @PaulLippe at AmLaw Daily http://bit.ly/Zuxs0 || Law firms, outcomes, economics 7:35 PM Sep 29th

RT @glambert Reading: “Legal Project Management Goes Viral!” - http://bit.ly/12gHpy (maybe not… but it should!) || Here here!

RT @VMaryAbraham New Post: Using Technology to Manage Costs http://bit.ly/CYIg9 (includes great list of tools) #ilta09 #KM || Go BI and PM!

RT @AmLawDaily Hard Times for Harvard Law Students http://bit.ly/YQSPP || legal outsourcing affecting even the Ivies

RT @jordan_law21 Citi GC’s top 2 concerns: managing outside counsel + crafting sensible risk-reward ratio http://bit.ly/3cCGSv || 30% AFA