By Brad Harris
The RAND Institute for Civil Justice (ICJ) published an interesting study last week focusing on the costs of electronic discovery in civil litigation. The 131-page report Where the Money Goes: Understanding Litigant Expenditures for Producing Electronic Discovery offers some great insights into the costs of discovery, and perhaps more importantly, the current challenges that corporations face around preservation.
Before delving into ICJ’s findings, first a quick word about the study. The non-profit RAND Institute for Civil Justice, part of the renowned RAND Corporation, was founded in 1979 and is “dedicated to making the civil justice system more efficient and equitable by supplying…objective, empirically based analytic research.” In the case of this report, the research team led by Nicholas Pace and Laura Zakaras used a case-study method by working closely with eight “very large” corporations to examine their costs across 57 e-discovery productions. The identities of the corporations have been kept confidential.
What I found remarkable was the shift in focus of the study based on initial feedback from the respondents. Originally, the preservation phase of electronic discovery wasn’t to be a focus of the study; but when the ICJ researchers spoke with in-house counsel they found many expressing “more concern about the challenges and costs of preservation than about the costs of responding to requests for production.” (p.85) With that realization, a new round of interviews were added to focus on preservation with interviews taking place from October 2010 to June 2011. One of the most telling findings is that two of the three recommendations of the entire report pertain directly to preservation.
Following are the four key takeaways pertaining specifically to litigation holds and preservation of electronic evidence from Where the Money Goes:
1. Preservation costs, although difficult to quantify, represent a significant portion of an organization’s discovery related expenditures (including efforts around implementing legal holds).
In speaking with in-house legal teams, researchers found it difficult to quantify expenses associated with preservation. Preservation costs are largely internal expenses in the form of staff time of the legal and IT staff as well as the distributed effort of custodians, and therefore difficult to track without concerted effort. Even with direct expenses, such as investing in a legal hold management system, the investment is distributed across all “present and future preservation needs” or may be “intertwined with other business purposes” such as records management (p. 86). Further, “softer” costs such as the opportunity cost of lost productivity and inefficiencies due to not adopting improved preservation processes represent a significant challenge to justify expenditures using traditional ROI economics.
2. Better numbers will help build a stronger business case for improving preservation, but corporations that have modernized anecdotally reported cost savings.
In spite of the challenges associated with tracking preservation cost, all participants “reported that expenses associated with preservation now constitute a significant portion of all of the company’s discovery-related activities.” (p.89) Some believed strongly that preservation costs were predominate (p.88). Reasons cited included the burden on staff of managing information under “hold” and the costs of storing data for long periods. The most telling – and the first time I can remember seeing this validated by a third party – are the burdens associated with implementing and auditing legal holds. (p.88) In these larger corporations, some staff are “dedicated to little other than managing preservation chores.” (p.88)
It was clear from the study that more research is needed to truly understand the total cost of preservation. Without question, one of the key drivers is a clear tendency to over-preserve in the face of increasing risk and uncertainty regarding what constitutes reasonable effort. With better understanding of the costs, companies will find it easier and more imperative to invest.
3. Researchers noticed a “greater comfort level” around preservation for companies with an automated legal hold compliance system.
The study explicitly addresses the benefits of having a system like Legal Hold Pro in place. (p. 92) Despite the “potential for over-preservation” and the “awareness that compliance could never be fail-safe,” companies that had invested in an automated legal-hold-compliance system felt better off. As reported, “moving from an ad hoc response for legal holds that depends on individual attorneys to craft and manage both notice and compliance to a process that was more routinized and more consistently documented and auditable was felt to remove some of the danger that the approach would be challenged in the future.”
4. Inconsistency across jurisdictions is compounding costs and illustrates the need for “uniform, transjurisdictional policies.”
As we’ve seen with recent case law, there continue to be conflicting opinions across jurisdictions regarding the scope and mechanics of legal holds and preservation. As the report notes, “in the context of preservation, a world in which IT, corporate policies, and the law all are rapidly evolving in sometimes-different directions, such complaints may have more traction than is usually the case.” (p.94) The participants worry about where they sit on the “continuum between total acceptability and serious sanctions.” (p.94) There is a unanimous and resounding desire for clear guidance on the scope and manner of preservation from the courts – which is one of the clear messages of this study to policymakers.
This post focuses on only one aspect of this important research project. Everyone involved in electronic discovery would be well served in downloading a copy of Where the Money Goes and reviewing the RAND Institute for Civil Justice’s analysis across the electronic discovery spectrum.