Corporate Legal Budgets are getting Squeezed – How to Reduce eDiscovery Costs (with Cloud Archiving)
- Bill Tolson|
- October 26, 2020
Corporate legal budgets are being tested, thanks to the COVID-19 pandemic. According to the July National Law Review, 190 class-action COVID-19-related lawsuits had been filed, including cases based on the Cares Act/Payroll Protection Program, debt relief, education-related, and employment. By August 28th, 2020, that number had grown to 4655 COVID-19-related lawsuits already filed across the country. And this number is sure to climb dramatically before year end and into 2021.
Thanks to this growing wave of lawsuits and the spiraling costs associated with eDiscovery, many CEOs are putting pressure on the company GCs to reduce legal spend by becoming more efficient in their eDiscovery practices. The leading causes of legal department eDiscovery overspend are 1) the total reliance on external counsel for all/most of the eDiscovery process and 2) over-collection (conservative stance) of content. Let's take a look at the consequences of these two strategies.
One of the eDiscovery traps many GCs fall into is relying on their outside legal counsel to perform the entire eDiscovery process for them, including completing the entire on-site collection. Alternatively, they instruct their IT departments to collect all documents/files/emails for a specific set of custodians (with little or no processing/culling) and send it to their outside counsel for eDiscovery processing. The reason for this practice is that the legal department doesn't have the personnel, experience, or tools to conduct even the most rudimentary eDiscovery collection/processing. The other reason is companies continuing to take a very conservative stance in their eDiscovery response and so ask their external law firm to do it all on their behalf.
The obvious issue with this "let the law firm do it all" strategy is that it drives up the total cost of eDiscovery (TCeD). Let’s take a look at the math. TCeD is based in part of the volume of documents included in the eDiscovery process. If you rely on your law firm for complete eDiscovery processing and review, you may be looking at 1,000,000 documents. Versus performing some of the early eDiscovery processing inhouse beforehand and only sending them 300,000 documents. That amounts to paying your outside law firm $1 per document to process and review 1 million documents versus paying them $1 per document for processing and reviewing 300,000 documents – a difference of $700,000
Even the most conservative GC, using already existing or inexpensive tools, can collect and cull a large data set to a much smaller (and less costly) data set quickly. One such tool could be your cloud archive. Some cloud archiving platform already include the needed search and culling tools required to initially identify potentially responsive data and allow you to import data sets into the platform for pre-discovery processing. Bottom line: consolidating much of your company's data into a single repository/archive dramatically reduces eDiscovery response costs while also providing greater accuracy and speed of response.
Data over collection is another practice that conservative GCs rely on to reduce their risks in the eDiscovery process – mostly to ensure they didn't miss any potentially relevant contact. The eDiscovery collection process is defined as the acquisition of all potentially relevant electronically stored information (ESI), which could pertain to the specifics of an eDiscovery request. Generally speaking, the organization being discovered must collect (and protect) all ESI, which could be responsive to a case – no matter where that data may reside. However, the 2015 amendments to the FCRP, Rule 26, potentially reduced the collection burden by enhancing the proportionality instruction:
Under amended Rule 26(b)(1), information is discoverable if it is relevant to any party's claim or defense and proportional to the needs of the case, with several proportionality factors now stated in the rule. The amendment factors are shown below:
Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.
For example, the proportionality instruction could call into question the need to find, restore, and search hundreds of backup tapes – based on the time and cost of restoring that many backup tapes instead of the likely benefit to the case.
The current estimated cost of collection in 2020, based on recent market modeling by Complex Discovery, amounts to approximately 13% of the total cost of eDiscovery. However, this estimate accounts for only the cost of actual data collection - not the associated costs of additional processing and review of non-responsive documents collected as part of a conservative strategy. The cost of collection by an outside law firm or independent forensic examiner in 2020 is between $250 and $350 per hour. In contrast, the cost of collection by internal employees could be a quarter or less of that.
Over collection happens when conservative General Counsels cast a vast net to ensure they don't overlook any potentially relevant content. It many cases, the GC will instruct the legal and IT departments to collect all data, email, files, social media, etc. from specific custodians between target date ranges with little thought given to the cost of their external attorneys' processing and review billable hours.
Why is over-collection an issue? It comes down to paying outside review attorneys to read every collected document to determine responsiveness, non-responsiveness, privilege, confidentiality, etc. Looking back at the Complex Discovery survey, the average cost of employing eDiscovery review attorneys is in the $40-$50 per hour range. However, some law firms may utilize their own staff for review at a much higher rate - $150/hour or more.
With the cost of review attorneys established, the next logical costs-related question is: how many documents can an attorney review per hour?
The accepted industry average is 40-50 documents per hour. This translates to an average cost per document of review attorneys to read and make a legal decision on its relevancy (assuming 1 page per document) of approximately $1.00. This suggests that a results set comprising 100,000 documents would cost $100,000 to review.
What if that results set could be culled locally to a more acceptable 70,000 or even 50,000 documents before it was sent to outside counsel for processing and review? This is easily achieved by performing file deduplication, removing computer system files, and content that is highly unlikely to have evidentiary value Additional first pass culling can focus on filtering out obvious non-relevant content such lunch invitations, email with family photos attached, yoga classes, wedding plans, or golf-related email..
The savings on a single eDiscovery response could amount to $50,000 on a 100,000-document data set. Additionally, what if your organization averaged 11 eDiscovery requests per year? Your company could realize an annual eDiscovery savings of $550,000 just by performing the data collection and some pre-discovery culling instead of sending unprocessed data sets to your outside counsel.
Let's take a look at a typical scenario of relying on outside counsel for the entire eDiscovery process using industry-standard variables – a practice many GCs still use. Table 1 below lays out a typical corporate eDiscovery scenario.
|Total number of discovery requests per year||11|
|Number of custodians per eDiscovery event||15|
|Data per custodian per eDiscovery event (in GBs)||3.00|
|Total data per eDiscovery event (in GBs)||45|
|Average number of documents per GB||3500|
|Total number of documents per eDiscovery event||157,500|
|Documents/hour view rate||45|
|Hourly billing rate per viewer||$50|
|Estimated costs for eDiscovery per eDiscovery event||$175,000|
|Annual estimated costs for eDiscovery collection and review||$1,925,000|
Table 1: The majority of eDiscovery costs are made up of processing and review process.
If the review data set can be reduced before transfer to outside counsel,
the overall eDiscovery cost can be significantly reduced.
The standard variables used in the above example include the total number of eDiscovery requests per year that the company responds to, and the average number of employees typically involved in the average eDiscovery response.
Additionally, the average number of gigabytes (GB) of potentially responsive data per employee combined with the average number of documents per GB allows us to calculate the total average number of documents per eDiscovery response that must be reviewed.
And finally, the "documents per hour" variable is a specific number that tells us the average number of documents a review attorney can review in one hour for responsiveness and privilege. This, combined with the hourly billing rate for a review attorney, will allow us to calculate the total cost of review for a given data set.
With the above variables, we can calculate that, in this example, the cost of processing and review of a standard eDiscovery response is $175,000 or multiplied by the average total number of eDiscovery events per year gives us an estimated annual cost of $1,925,000.
Now let's look at the same case study (Table 2 below) and add the inhouse processing and culling to reduce the size of the data set before transfer to outside counsel.
|Total number of discovery requests per year||11||11|
|Number of custodians per eDiscovery event||15||15|
|Data per custodian per eDiscovery event (in GBs)||3.00||3.00|
|Total data per eDiscovery event - pre-culling (in GBs)||45||45|
|Average culling percentage||0%||40%|
|Total data per eDiscovery event - post-culling (in GBs)||45||27|
|Average number of documents per GB||3500||3500|
|Total number of documents per eDiscovery event - post-culling||157,500||94,500|
|Documents/hour view rate||45||45|
|Hourly billing rate per viewer (domestic)||$50||
|Estimated total discounts per eDiscovery event - post search/culling||175,500||94,500|
|Manual review hours per eDiscovery event||3,500||2,100|
|Estimated costs for eDiscovery review per eDiscovery event||$175,000||$105,000|
|Annual estimated costs for eDiscovery collection and review||$1,925,000||$1,155,000|
|Cost Savings Summary|
|Total projected cost savings per eDiscovery||$70,000|
|Total projected annual cost savings per eDiscovery||$770,000|
|Cost savings as a percentage||40%|
Table 2: The cost of eDiscovery with inhouse process and culling included
As previously stated, processing and document review make up most of the cost of eDiscovery. If the size of the data set sent to outside counsel is reduced, the overall cost will also be reduced.
By utilizing eDiscovery search, processing, and culling capabilities present in some cloud archiving solutions, corporate legal departments can perform much of the collection, processing, and culling on an eDiscovery data set before transfer to their outside counsel. With this in mind, line 6 in table 2 above provides us the ability to estimate a reduction or culling factor based on the cloud archiving application's built-in search capabilities. Needed search capabilities for culling include keyword search, proximity search, fuzzy search, metadata search, and search within a search. By zeroing in on specific characteristics of content based on the specifications in the eDiscovery request, a more focused (and smaller data set) can be achieved. The line 6 culling percentage in table 2 above lets us estimate how the company would be affected based on past feedback from prior eDiscovery processing, either in house or outside counsel.
With this single estimated data set reduction factor, the rest of the table can be updated to provide an estimated eDiscovery cost savings. To reiterate the point of this blog, by performing some of the eDiscovery processes inhouse before transfer to your outside counsel, your overall eDiscovery spend can be markedly reduced.
The term “pre-discovery” refers to the corporate legal department's processes, procedures, and early data work on an eDiscovery response before transfer to outside counsel. These processes and procedures include data mapping and potentially relevant data collection, early case assessment, and data set processing/culling to weed out probable non-responsive or duplicate data.
The Archive360 cloud archiving and information management platform, Archive2Azure, provides a single, secure, and managed repository to consolidate eDiscovery data sets in which to perform pre-discovery tasks. Archive2Azure offers the ability to import eDiscovery data sets from other repositories and provides a complete eDiscovery/case management module including industry-leading security with on-premises encryption and key management/storage, granular access and capability controls, powerful elastic search, review, audio/video transcription, document translation, tagging, and data set export in the most popular formats.
Archive2Azure provides the perfect secure eDiscovery storage and processing platform which can protect and manage your legal department's eDiscovery data sets for extended periods, mitigating the risks associated with storing eDiscovery data on less secure department file shares.
Does your organization utilize Office 365 for email? Is your organization required to journal email for compliance, legal, or business requirements? Do your Attorneys complain about the time it takes to find information for an eDiscovery request? If the answer is yes to any of these questions, then keep reading.
Bill is the Vice President of Global Compliance for Archive360. Bill brings more than 29 years of experience with multinational corporations and technology start-ups, including 19-plus years in the archiving, information governance, and eDiscovery markets. Bill is a frequent speaker at legal and information governance industry events and has authored numerous eBooks, articles and blogs.