Striking a Balance: Controlling E-Discovery by Combining In-House Resources with Outsourced Experts
By Greg Buckles
When it comes to e-discovery, corporations are increasingly trying to manage two competing and sometimes contrary needs. On the one hand, corporations want to call the shots when it comes to their processes, their sensitive data, and ultimately, their legal bills. On the other hand, corporations do not want to keep a stable of subject matter experts in-house if the litigation workload fluctuates dramatically throughout the year. Even for those Fortune 500 companies in highly litigious industries such as financial services, energy, pharma and high tech, this can be a wasteful use of resources.
Increasingly, corporations are taking control of their e-discovery process and striking a balance between in-house and outsourced resources. There are benefits to keeping a network of trusted advisors for large volume cases or specialized legal matters. Additionally, controlling one’s own discovery process does not require building an internal processing center. Rather, corporations must look to maintain power over the decisions involved in the discovery process.
This whitepaper is a best practices guide on the mechanics of effectively and efficiently balancing in-house control with outsourced execution.
CONTROLLING THE DECISIONS
The management of electronic discovery has transformed from an ancillary consideration in case administration to an essential component of litigation success. Corporations spend billions of dollars in annual software improvements, IT consultants, tech-savvy attorneys and hardware upgrades. This spending, coupled with the recent data explosion and new federal rules, has fueled a drive by corporate America to seek greater control over their sensitive corporate data.
The era of outsourcing the management and execution of pre-defined goals to an outside legal team has passed. Today, in-house attorneys realize that they are best positioned to make initial strategy considerations for the organizations they serve. Consequently, if those decisions result in errors in substance or process, in-house counsel and the organizations themselves can be held legally responsible in court.
That said, while internal legal teams want to own the decision-making aspects of e-discovery, they recognize that they cannot undertake this responsibility alone. To account for the ebb and flow of work volume, as well as the periodic need for outside expertise, internal legal teams are seeking more streamlined and transparent protocols with external vendors.
TRANSPARENCY & UNDERSTANDING
Understanding the cost and consequences of electronic discovery has become as important as executing on court-mandated obligations for the processing of electronically stored information. As a result, many in-house lawyers and paralegals are working to become veritable experts on the rules governing e-discovery. They are, in fact, partners in the effort to resolve disputes within budget and with a high level of success.
These internal legal teams need transparent communications to enable collaboration, rather than simply reporting. Parties can achieve transparency by jointly creating strategic plans with scheduled milestones and routine reports.
CAPACITY & EXPERTISE
External support provides corporations with the ability to select an offering or service that matches the particular needs of a case. For example, Acme Corp. can work with one consultant on an anti-trust matter and contract with another company to help with an international trade dispute.
External support also enables a team to manage multiple concurrent cases. A properly maintained and trusted partner relationship is advantageous in these circumstances as the vendor’s team can begin immediately with minimal preparation. The experience with prior cases gives members of the vendor’s team an intuitive understanding of the corporation’s IT infrastructure and key personnel, both legal and non-legal.
Most importantly, the increased frequency of public e-discovery sanctions have wakened corporate counsel to the risks and pushed them to retain expert advise. Corporations that rely solely on internal IT employees without expert validation of process are more likely to be held responsible for spoliation.i
THE COMPROMISE BETWEEN THESE FACTORS
When these factors converge, organizations find themselves presented with a key dilemma: how much control to sacrifice in favor of turning to a vendor and expanding their capacity and enhancing their level of expertise. It is important for corporations to remember that they are the client in these matters and ultimately, the decisions and any consequences rest with the corporation.
“INSOURCING” CERTAIN OPERATIONS
A large percentage of matters do not result in litigation. These are often confidential in-house investigations and it’s common for corporations to limit external involvement with these sensitive matters.
INTERNAL EARLY CASE ASSESSMENT
Throughout the early case assessment process, internal decision-making teams should include key business division leaders who can quickly identify critical facts. These individuals understand and can assist in valuing early settlement versus long-term litigation, with a sense of ownership in the outcome. Moreover, they understand that timely internal investigations can often escalate into true discovery projects. Accordingly, all potential evidence must be collected with appropriate means to be subsequently admissible.
Since technology plays a key role in early case assessment, counsel should consult with internal IT experts and trusted external specialists as necessary. These non-legal department players may be able to offer insight on products that can hasten the evaluation process, as well as make recommendations about a uniform technological platform that will help create an effective workflow. The investment in tools to help identify areas of concern as well as personnel skilled in using them can offer repeat value far greater than initial costs.
The importance of a knowledgeable team comprised of internal and external partners who regularly interact is essential since the duration of a case does not generally correlate to its likelihood of success. Such a team can understand a case’s various nuances to ensure that the most relevant data is preserved and collected. Doing so helps reduce the risk of a spoliation claim, or worse, a defeat based on process failure rather than merit. The critical factor is having the right resources to resolve internal issues without outside exposure.
Group leaders should be prepared to complete a preliminary report within 60-90 days from receipt of notice of a court-based matter. A government investigation could accelerate this process to 30 days or less. These accelerated deadlines require a level of burst capacity well beyond the average corporate demand.
INSURANCE COVERAGE & E-DISCOVERY
Although insurance covers the most significant litigation costs, corporations must be able to justify their spending or risk a coverage action. Insurance companies are taking an increasingly hard line on the level of electronic discovery used in litigation and have rejected certain digital efforts by successfully arguing at trial that the burden outweighed the benefit.ii In fact, AON Consulting even established a separate unit to focus solely on electronic discovery in May of 2006.iii
For this reason, litigants who expect to exceed their deductibles need to have a deeper understanding of their obligations under the Federal Rules of Civil Procedure (FRCP). These deductibles generally range from $750,000 to $1 million, and it is extremely easy to exceed this in the vast majority of commercial matters. Litigants must also be familiar with any potentially responsive material and its state of organization, as well as, their insurance coverage and their history of making claims.
Parties should be prepared for their insurance carriers to evaluate the costs associated with an insured’s inability to preserve or properly produce electronically stored information and then build those inefficiencies into premiums.iv
The insurance carrier will also evaluate the company’s document-retention and e-mail-retention policies and procedures, as well as the company’s electronic discovery readiness plan.v Other considerations may include the company’s record in previous cases requiring e-discovery, the total amount of ESI generated, and the sophistication of the company’s information technology support (both internally and externally).vi
Given the likelihood that an organization’s responses to these questions will affect the cost and scope of its liability coverage, partnering with a trusted external source can yield significant advantages. It is likely that the large carriers will soon have lists of e-discovery vendors whose methods and costs have been pre-approved for use by the insured. In addition, those carriers may want regular reports for large ongoing cases, rather than simply a bill at the conclusion of a particular matter.
The central point in this consideration is that electronic data discovery encompasses a variety of areas of expertise and, therefore, has no set rate or industry average for billing. Accordingly, a comparison of estimates from different companies in various industries is complicated. Some vendors charge by gigabyte, others license their products and still others have user fees. Additionally, outside law firms are often tasked with deciding on the pricing structure for e-discovery review, further adding to the inefficiency of the process.
To provide some perspective on the size of the electronic data discovery market, in 2006, overall revenues rose to almost $2 billion industry wide, up 51 percent from 2005. While vendors accounted for $1.6 billion, law firms and companies, shouldering work they otherwise would have sent to a provider, only represented $130 million.vii These numbers do not truly reflect the largest cost in the overall discovery process, the item level review of all potentially relevant corporate ESI.
SCALE POINT OF INTERNAL MANAGEMENT
Despite the cost considerations, maintaining in-house capacity beyond a sensible point is generally inefficient. An internal IT team may have the ability to compile archived e-mail and server-based files. However, it is uncommon that such a team would possess not only the capability, but also the qualified staff to restore data, re-image drives and forensically cull potentially responsive evidence.
MORE EFFICIENT TO SEEK OUTSIDE EXPERTISE
Given the level of expertise that most cases require from the outset, most corporations may find it more efficient to engage outside resources while they develop defensible discovery operations. While internal discovery experts may be critical during corporate crises, those same specialized employees could spend 50% or more of their time sitting idle when cases do not call for their participation.
The modern trend is to employ a single authority in electronic discovery operations who can serve as the liaison between in-house counsel, outside legal teams, and trusted technology partners. These data discovery managers bring an intuitive understanding of the internal operations of an organization and knowledge of leading experts and tools needed to enhance competence.
E-DISCOVERY IS NOT A PROFIT CENTER
As e-discovery, like most legal operations, is an expense, its sustenance has to be balanced against the average need of the company. Given that these same tasks are the competitive profit center of the specialized legal vendors, it is logical to leverage their knowledge and efficiencies for tasks with irregular demand or risk. For instance, some companies focus only on the collection of data, while others provide tools to help with the review and analysis of the material collected.
In the current era of spoliation, however, efficiency and cost are not the only concerns. Courts are increasingly sensitive to even the most minimal effort to preserve profits in favor of underperforming specified e-discovery obligations. Corporate counsel is well advised to document the decision process in order to defend their reasonable good faith effort.
RISK MANAGEMENT IS A COST CONSIDERATION
For this reason alone, a company should carefully evaluate tasks for defensibility and to avoid errors in process. Certain situations may require outsourcing to insulate the company from any possible allegations of deliberate spoliation. There are occasions, particularly those that have the potential of bringing culpability to the entire company, when management may want to outsource the entire discovery operation, or at least engage an outside expert to monitor the process.
In the past, when executives took such a step, they left the full undertaking to the vendor(s) and outside counsel. Today, however, it is a true collaborative partnership regardless of the party that takes ultimate responsibility for the outcome. This new standard makes risk management determinations easier and more effective.
STANDARDIZING THE PROCESS
Historically, litigation management accepted corporate counsel’s abdication of control or knowledge of the process to outside lawyers. However, this is now no longer acceptable. Those who permitted their outside attorneys to comprehensively evaluate the need for certain tools, select vendors, and supervise the implementation received legal bills that exceeded their expectations. The outside counsel is obligated to apply their absolute best efforts, while only the corporate counsel can make the final risk versus cost decisions.
The industry has eliminated this flawed practice in favor of one that requires outside counsel to follow a standardized process developed and monitored by their in-house counterparts. This results in more effective discovery management, as well as predictability and reassurance that the practices are aligned.
THE ROAD TO PROCESS STANDARDIZATION
Standardization requires an analysis of past and potential discovery actions. One of the most complex and sensitive areas of litigation in the digital age is the treatment of legacy data. Conversely, with the explosion of the market in the last decade, wading through the potential technology offerings at every step of the discovery process from the initial collection to the final production, selection of the right tool (and even version of that tool) could have a substantial impact on trial tactics.
To make an appropriate evaluation, a company should ideally begin by internally assessing the state of its potentially discoverable material and developing a data map for easier access and review. The creation of a corporate data map will enable the legal department to determine the volume and location of potentially relevant ESI. Ultimately, however, the corporation may need outside technology and expertise to create a searchable archive of historical data that can be seamlessly cross-referenced with their existing record systems. That expert can also assist with the creation and implementation of a records management plan to delete irrelevant and unnecessary information according to accepted protocols. These policies govern the preservation of necessary records and destruction of those of no consequence.viii Given the possible repercussions of ESI destruction, engaging an external expert demonstrates the corporation’s due diligence in the process.
THE ELECTRONIC DISCOVERY REFERENCE MODEL
When George Socha and Tom Gelbmann launched the Electronic Discovery Reference Model (EDRM) Project in May of 2005, they did so to provide the electronic discovery market with a standardized structure and vocabulary. This model has given both vendors and the legal community a platform on which to forge longstanding relationships built on a uniform understanding of the costs, benefits and legal nuances of choosing one option over another.
The EDRM also provides a framework for the development, selection, evaluation and use of electronic discovery products and services.ix That standardization allows external experts to offer quantifiable and sustainable support for internal benefit.
EDRM OFFERS A UNIVERSAL VOCABULARY
While IT-speak is accepted between technologists, it can intimidate or confuse lawyers that work on e-discovery matters. The EDRM has helped to eliminate the disconnect between experts and the lawyers who hire them by creating structured discovery phases that include: identification, preservation, collection, processing, review, analysis and production. For each phase, the EDRM provides guidelines and accepted vocabulary to describe and measure the cost, time and volume of discovery steps.x
With the ability to uniformly track time, output and expense, internal teams can measure the performance of their external counterparts. It also allows for accurate comparisons between projects and vendors. This enables more effective planning and enhanced efficiency.
Given the limited amount of time parties have to meet and confer on the scope of the electronic discovery obligations under new federal rules, in-house and outside counsel must understand the client’s technology and data management structure and composition. Proactive summarization and documentation of the corporate data map and ESI landscape is critical to prevent delays that too often result in motions to compel and countermotions to resist production.xi
Corporations no longer have months to research, evaluate and select litigation support service providers and establish a framework for a secure relationship after the first demand is filed. Transparency is only possible when firm guidelines are in place for processing initial requests, producing a complete collection, conducting thorough review, and establishing a defensible production of all electronically stored information.
CASE TYPES DICTATE DISCOVERY MANAGEMENT
In corporate America, litigation is part of the cost of doing business. Some cases require teams of outside lawyers and consultants to ensure that the company’s business operations continue to run smoothly and without interruption. Others, such as the random slip and fall claim of a single individual valued under $10,000 may only require the attention of in-house counsel.
Lawyers within organizations that feature well-structured records management systems and reasonable coordination between the legal and IT groups can generally manage typical civil discovery without the assistance of an external partner (or even outside counsel). This presumes an investment in documented protocols, appropriate legal technology and qualified support personnel. However, inside counsel gains an advantage when it has pre-qualified vendors available to step in and quickly assist with discrete processes or lend expertise for specific types of litigation.
In addition, when a presumably small matter grows into a company-wide crisis, the litigation readiness quotient considerably impacts the outcome. In fact, the preparedness of a group is directly related to the size of the matter it can handle alone. Well-prepared teams can typically administer larger and more complex matters, while unsophisticated in-house counsel must seek support on everything save for the most insignificant and straightforward claims.
The discovery management preparation equation directly impacts the threshold balance. To be effective in litigation, an organization must measure its ability to manage the process in-house, understand the capacity of its resources, and set limits on handling certain tasks. Ultimately though, an organization must know the point at which to seek assistance. The difference between success and failure often comes down to identifying this point before it is too late.
EVALUATE AND MEASURE THE PROCESS
Discovery teams should regularly review their effectiveness and key metrics at the conclusion of key matters. This enables them to develop stronger benchmarks for their system and make any necessary changes to their processes or tools. The corporate discovery system should utilize quality improvement methodologies to continuously monitor and improve their process.
Using the phases outlined in the EDRM, litigants can identify key areas of electronic discovery and quantify the success of each phase. The phases that rank lower should be closely monitored and evaluated for adjustment.
CREATE STANDARDIZED GUIDELINES
As the monitoring process evolves, parties should establish best practices for the management of electronic discovery broken down by matter size and type. Those that are expected to breach the threshold should be treated on a more macro scale. Those small enough to be managed in-house can follow a micro approach. Public corporations have risk and reserve reporting requirements that can be used to set thresholds.
Regardless, each step should be uniformly applied and established as part of a prerequisite examination of the matter and its components. Findings should be reduced to a written memorandum that is distributed among various team members for comment and follow-up. In addition, impose deadlines and strict timeframes for completion of each step and require accountability for any delay.
TRAIN YOUR TEAM ON THRESHOLD ANALYSIS
Once an organization establishes its guidelines, it must require universal understanding and compliance. While routine training is essential, it must be combined with practical application and regular updates. Individual team members must recognize matters that call for internal support, and those that mandate external supervision.
Because of the relative newness of electronic discovery and the rapidly escalating volume that must be managed, corporate discovery teams often are challenged to create protocols and documentation systems. The pace and priority of the ongoing cases will always take precedence over long term projects. Corporations are engaging outside consultants to assess the existing processes and draft the initial protocols to give the discovery team a starting point to work from.
Instruction should include: early case assessment; post case evaluation; market surveys; technological appraisals. Additionally, instruction should include interaction with trusted vendors and expert consultants. Consultants should also receive training on the company’s IT infrastructure and data management procedures.
ESTABLISH AN ELITE TEAM OF VENDORS
Some companies and their counsel are forced to cobble together a disconnected team of vendors when reacting quickly to a matter. However, those companies that most effectively manage litigation proactively add partners who will work well in concert with the company’s culture and objectives. They take the time to meet prospective product specialists and authorities in their field prior to action. Ultimately, these companies seek individuals they can trust and who bring a wide scope of understanding to their work.
Once established, these teams can be ready to assist on little notice and with almost no preparation. They are familiar with the architecture of the records and the key personnel who can support their efforts.
Vendors understand that no company can rely exclusively on one service provider. Corporate purchasing policies should require regular requests for proposals so that they know that the pricing is in line with the market. Price should never beat out quality, but the company should not be paying well above the market.
There are three critical factors for evaluating e-discovery management: (1) the type of claim at issue; (2) the volume of material under consideration; (3) the complex nature of the data itself. Like cost and internal capabilities, these factors can have a substantial impact on the outcome.
When an organization is facing bankruptcy and its executives are seen as potential criminal defendants, few factors matter other than winning. As such, the determination of whether a matter has civil or criminal implications will indicate the extent of specialized forensic analysis that is necessary.
The greater the specialization, the increased likelihood that an outside vendor will be needed to help the legal team argue before a jury that there was no unlawful conduct. The early entry of an expert to help build a persuasive argument will alleviate burdens associated with subsequent litigation brought by government agencies, shareholders and employees.
Gauging the volume in a particular matter can be an immensely difficult task. One may suspect that there are a handful of custodians with a few gigabytes of discoverable material only to learn, upon initial inquiry, that a foreign office and various former employees are also involved. If this is unknown at the outset, the short-sighted strategy based on the initial assessment could cause a substantial delay requiring a court-mandated extension.
Once the volume of potential discovery is assessed, however, it is a relatively easy to determine whether internal resources can manage the process or if outside support will be needed.
Finally, organizations with serial litigation may have standard discovery responses and an internal team with intuitive understanding of the process. As such, outsourcing for common matters may be inappropriate.
Yet, in cases with anomalous material, the evaluation process is generally more detailed. In fact, if the situation involves the chief executive officer or another founding member of the management team, it may add to the complexity.
Decision-makers must make an honest assessment of how deeply a case or series of claims could impact the operations and personnel of the business. There should be a predetermined threshold. If there is potential for a breach, those responsible for strategy should seriously consider outside expertise. At the very least, they must explore the prospect to provide insulation from accusations of deliberate malfeasance.
Like volume, complexity can present itself by surprise. The legal team may conclude that the complications, which exist in every case, are reasonable, but then uncover damaging information, which will transform the pace and scope of the process. In such an event, protocols must be in place for a proactive, rather than reactive, response.
While the focus on electronic discovery can appear to new entrants as unusual and noteworthy in light of FRCP and certain high-profile cases, many involved in this sector have been focusing on the evolution of the law and technology for years. These individuals are the thought leaders on the convergence between process and practicality. It is this insight that comes with specialized expertise.
Rather than relinquish control of e-discovery to these experts and their firms, in-house legal teams and their executives are trending toward retaining control of decision-making and acting as collaborative partners throughout the life cycle of a particular matter.
It is this equilibrium that will dictate the growth and development of electronic discovery in the years to come, and not simply technology or regulatory guidelines. Those who embrace the internal/external partnership will streamline progression and enhance their readiness for favorable outcomes.
i Ann G. Fort, Are E-Discovery Requirements Creating More Litigation Risks?, Fulton County Daily Report, March 20, 2007,
ii National Union Fire Insurance Co. v. Clearwater Insurance Co., 2007 U.S. Dist. LEXIS 52770 (S.D.N.Y. July 19, 2007). (Court rejected elements of electronic discovery holding that plaintiff was not required to restore backup tapes at a cost of $80,000 because the data was not reasonably accessible under Fed. R. Civ. P. 26(b)(2).)
iii Aon Consulting Launches Full Suite of Electronic Discovery Services, May 22, 2006,
iv Edwin M. Larkin, Insurers Taking Stock of E-Discovery Costs, The National Law Journal, August 22, 2008,
vii 2007 Socha-Gelbmann Electronic Discovery Survey Report. See also, George Socha and Thomas Gelbmann, EDD Hits $2B in Socha-Gelbmann Survey, Law Technology News, August 2, 2007,
viii Arthur Andersen v. United States, 544 U.S. 696 (2005). (Court held that compliance with a valid document retention policy is acceptable under ordinary circumstances.)
ix Socha Consulting LLC and Gelbmann & Associates, http://edrm.net.
xi John Ruhnka and John W. Bagby, Litigation Support and Risk Management for Pretrial Discovery of Electronically Stored Information, The CPA Journal, May 2007, http://www.nysscpa.org/cpajournal/2007/507/essentials/p50.htm. See also, Zubulake v. UBS