Do You Like Podcasts?

We're trying to gather some anecdotal information on the popularity of podcasts... internally, people either love 'em or hate 'em, are regular downloaders or seemingly allergic to an mp3 or Real Time player. It's pretty interesting, actually.

This is an very brief and informal survey, but it would be a big help if you could take two minutes to complete the seven questions:


Lessons Learned Can Benefit Chinese Drywall Defense

Asbestos then tobacco then pharmaceuticals. Each an extensive and expensive litigation. Now comes Chinese drywall, which could very well be the next tidal wave.

We have already been out in the field working on the Chinese drywall matter and have spoken to several clients that are in the beginning stages of strategic development. If you aren’t familiar, the issue involves the installation of drywall imported from China during the housing boom from 2004 to 2008, as well as after hurricanes Katrina and Rita. During that time, there wasn’t enough supply of U.S.-manufactured drywall to meet demand, so builders were forced to import it. The Chinese drywall in question has proven to be high in sulfur compounds that could potentially cause property damage, emit a “rotten egg” odor and be hazardous to one’s health, although there is undoubtedly much debate to be had about the claims. Initial estimates say that it costs more than $90,000 to rid a residence of the drywall and/or its toxins; as many as 100,000 homes are estimated to contain it (at least partially).

The lawsuit is multi-district litigation; since May 2009, more than 20 defendants have been named in more than 1,000 civil actions filed by homeowners. These are mainly the builders at this time, but everyone from insurance companies to architects to suppliers are likely to be involved at down the road. So this is almost assuredly just the tip of the iceberg, although it’s hard to imagine it being as large as the tobacco litigation.

So what have we learned from past civil actions such as these? I was fortunate (or unfortunate, depending on the day) to work on both the tobacco and pharma litigations, and what we’ve done for our Chinese drywall clients is take a comprehensive view of the past to see what worked, extract best practices, adapt them to the current circumstances, attack the problem and, we anticipate, build some repeatable processes.

One thing I witnessed during both the tobacco and pharma cases was the inefficiency of having dozens of law firms requesting, processing and reviewing the same data; millions upon millions of dollars were likely lost during the process. Constant education of reviewers and outside counsel, no chain of information and consistency were constant concerns. All of this can be easily avoided in the Chinese drywall matter.

Here is a glimpse of the comprehensive planning that’s required as well as a few of our recommendations:

  1. Be proactive. Decide early on to handle the documents head-on and upfront. Don’t wait to start because you think it might go away; it won’t and you’ll only be behind.
  2. Create efficient processes. The proliferation of technology is a true aid versus prior civil matters of similar or larger size, but working with partners who have repeatable, proven protocols is also key.
  3. Budget properly. This is tied closely with #2. With the implementation of repeatable processes, accurate budgeting is a wonderful byproduct.
  4. Collaborate. There is no substitute for collaboration between the discovery team and outside counsel (as well as the client). If it’s not a central component of your planning, then it’s next to impossible to build the processes that are essential in achieving consistency and efficiency.

Streamline, budget, collaborate. These are a few of the hallmarks of successful document management in these large cases. These steps certainly put the client in the best position to handle the many multi-jurisdictional lawsuits.

As I mentioned, we are already working on this matter and will have a lot to report back in the coming months as this issue heats up even more. We anticipate a lot of redundancy and that our discovery team is going to provide efficiency and streamlined processes to each of our clients that face this litigation.

A Valuable Attorney: The Meaning Is Changing

Last week, I met with a wonderful attorney who has been in-house with one of our clients for several years, doing primarily employment work. She said she was recently offered a position to lead a new business unit that will require putting together processes and managing 30-plus attorneys – a very significant position within the company.

After offering my congratulations and discussing a little more about the position, we left on this note: attorneys who can manage processes and people are going to be vital to our legal profession -- and their company/clients -- moving forward. There are many smart attorneys and there are some who are true specialists in a niche area; but finding attorneys who understand business, who understand the importance of a repeatable process, and who are able to create, modify and manage a process and then bring in the people and manage them as well … is a unique skill set for an attorney. Those with these skills will be immensely valuable as we continue to forge through the changes that we're upon in our profession.

Everyone is being asked to do more with less – from our home life to our professional life. We are in a time that requires all of us to examine our expenditures, what value we are getting for what we spend and whether there are more cost-effective ways to get some, if not all, of our tasks done. This is true in the life of our clients, both law firms and corporate legal departments. Within our company, one question that I encourage people to always ask themselves is, “What can I do that no one else can?” The answers to that question are the real value that you bring the company. If there are things that you are doing that can be done by someone else at a reduction in cost – then let’s look to shift that work to that resource. This is just step one in determining whether you are really getting value for what you are paying. In this economy, everyone selling their services needs to be sure that they are providing that real value.

Susskind: Why Law Firms Have To Change

Richard Susskind has been one of the more outspoken voices on the economies of the legal profession in recent years, authoring two books on the subject. Today, he has a post on the ABA’s Legal Rebels site that’s an interesting read.

He hits several nails directly on their respective heads, as he has similarly in the past, reiterating that “new methods, systems, and processes will emerge to reduce the cost of undertaking routine legal work” and “new ways of sourcing will emerge … and these will often be combined in the conduct of individual pieces of legal work.”

I don’t disagree with anything that he writes -- and we’ve written about these issues for some time -- but I do think his timeline for these changes to occur is on the ambitious side. Lawyers are typically slow adopters; I’m not sure the types of collaborative communities he outlines have enough time to form and truly share new and best practices that have been vetted and tested, especially on complex matters… even though there’s more communication than ever before among in-house colleagues on well-established communities like Legal OnRamp (and other various organic online connectors of in-house counsel). But his point is that the time is now, not down the road, to understand and address these issues.

Regardless, there’s little doubt the legal world is no longer considered flat and the new frontier is upon us. We know that there are some great ways everyone can work together to contain costs and generate the best possible results. Susskind’s post is a good read if you have a few spare moments today.

Pricing In The Alternative

The “alternative” in an Alternative Fee Arrangement (AFA) can be defined as “affording a choice between two or more things…mutually exclusive so that if one is chosen the other must be rejected.”

In the arena of legal fees, the alternative is compared to the standard billable hour. One potential alternative is a fixed fee. For other AFAs, see this interesting article where Pat Lamb argues that the “real point” should be to “shift risk from the client to the firm,” among other things.

The questions to ask are: what is the goal? What is the incentive and who should have it? Who takes the risk? Who should benefit from taking that risk?

Blended rates and known budgets provide predictability. Is that the real issue for clients? Is the debate between low cost and predictability versus unknown budgetary costs, or does it involve the ability of the legal provider to use reproducible cost-effective services over time for the benefit of the client?

I would argue that these types of arrangements will have a short lifespan. After a certain period of time, all a fixed fee arrangement offers is what the cost is going to be, not how the work can be done more efficiently, for less money, more intuitively, or in a manner in which you can best meet your goals. It also encourages a law firm to use minimal staff or attorneys billing at the lowest hourly rate, which may or may not be in the best interest of a client. The lack of value will be exposed at some point.

The bottom line is to define the goals you are trying to achieve. Is it predictability? Cost savings? Particular expertise? Time reduction? Maximum manpower? All of the above?

This is the point I was attempting to make last week: it’s imperative to think how these arrangements can work for both parties, because if it’s tilted one way or the other, it’s not a great system. Someone loses. And there’s just not a great understanding in the marketplace of how these “alternatives” truly function or if value is really received.

So I like to look at what I know. I know my company’s costs of doing business. I have a pretty good idea how long it takes for attorneys to review a gigabyte of data on most software tools. I know a lot of different ways we can reduce the amount of data to review. I know how we create efficiencies throughout the discovery process. Knowing all of this, I feel very confident we can provide several different pricing options for our clients, whether it’s per document or per gigabyte (the ‘fixed fee’ options, more or less), by the hour, or some other structure. (Although I’m talking about discovery here, the same basic principles apply to different types of work that might see alternative fees, like contracts, employment matters, IP issues, etc.)

If I didn’t really know all of what we know about our business, well … I would be basing everything on a lot of subjective data. That’s simply not necessary in today's marketplace. But because we do have the objective data and we understand our capabilities and costs, the client gets a great work product at a low cost, achieves measurable efficiencies, and ultimately the predictability and consistency that are sought. That’s a win-win arrangement, which is a great goal to shoot for from the beginning.

Alternative Fee Arrangements Need Precise Understanding

There’s little question Alternative Fee Arrangements (AFAs) have gained in popularity in recent years, and that interest seems to only be increasing. In a recent survey of in-house attorneys we conducted in Atlanta, 46% of those who planned to implement new strategies in 2010 said they planned to use AFAs. After all, what in-house department wouldn’t want cost certainty in a time when most are being asked to reduce costs?

However, it’s a difficult matter to pin down and price properly. Today’s post from the 3 Geeks and a Law Blog says it very well: you have to understand what goes into your costs before you can manage or reduce them, and thus create a valuable proposition for both you and your clients. And therein lies the rub.

For many matters, there are way too many variables to be able to create a fixed cost forecast that benefits both you and the client. That’s a terrifying predicament for a law firm to be in and roll out on a pricing platform to a client. But is that really the issue? I agree with the 3 Geeks post: many lawyers just don’t understand how these arrangements can (or do) work, and I’d add there’s a question whether they should even be pursued at all if that’s the starting point of the discussion.

I have previously worked on these types of arrangements prior to joining Counsel On Call, in particular, data mapping and record retention projects– two areas in which we had a pretty good understanding of the time it took to create the work product necessary to implement. And ultimately our clients understood and appreciated the certainty of the fixed cost. But the interesting thing was that when we would initially provide the fixed fee amount, our clients would sometimes balk, shocked at the total amount staring them in the face. But then when we broke it down on an hourly rate basis and they realized they were getting a significant discount, they were all for it. (It would often go like this: Us: “The cost is $75,000 for the work on a flat fee basis.” Client: “That much?!??! Are you kidding?” Us: “OK, tell you what, we’ll do it for $250 per hour and it should take at least 300 hours.” Client: “Great! Let’s do that!”)

So for many, certainty outweighs cost, even though they think it’s the opposite. Many law firms cater to that notion, which allows them an easy way out when trying to determine actual costs and value. It’s pretty simple to estimate how long certain projects will take, and then multiply that number by an hourly rate, provide a small discount and come up with an “alternative” fee; but that’s not really very creative and doesn’t truly solve the cost/value challenges the client is facing. In fact, one can argue that deriving a flat fee from this foundation actually de-incentivizes a law firm; it’s going to get paid that amount no matter the quality of the work or how long it takes to complete. That being said, a strong case can be made that AFAs should be incentive-based as a core feature, and we know several clients who are utilizing those types of models. When everyone has a skin in the game, priorities become a lot more transparent. Value is, at a minimum, more apparent in that model.

At Counsel On Call and especially in my role in the E-Discovery Division, it’s pretty simple: We have to understand all of the costs of a typical project and how to make the work product better and operate more efficiently. If we don’t do that, it’s not going to matter how we package our costs because we wouldn’t be providing value to our clients. You have to take care of the former to be able to create options for the latter.

(I'd also be remiss if I didn't at least mention Patrick J. Lamb at Valorem, who posts often on the subject of AFAs.) 

Pilot Program to 'Play Nice' in E-Discovery

As we all know by now, in 2006 the Federal Rules of Civil Procedure were amended to standardize how litigants should deal with their electronically stored information (ESI). Soon thereafter, courts at both the Federal and State levels started putting out their own rules (See Tom Allman's Article and a listing of links to state e-discovery rules.)

In addition to the rules themselves, the various courts are trying to find implementation language and protocols that govern the specifics of what the opposing sides must actually do. One example is the 2007 Administrative Order 174 in the Middle District of Tennessee, which spells out what the judges want to see happen at the meet and confer and during the whole discovery process.

Then in 2008, The Sedona Conference published its Cooperation Proclamation in an attempt to codify the steps that opposing counsel should take on the intricate and expensive matters related to identifying, preserving, collecting, searching, reviewing and producing ESI.

Now the 7th Circuit has taken the next step and announced a Pilot Program to last from October 1, 2009 to May 1, 2010, whereby selected cases will have to follow specific principles of cooperation.

The stated purpose is to assist the courts to, among other things, “promote…the early resolution of disputes regarding the discovery of electronically stored information (“ESI”) without Court intervention.” Basically, the Courts are tired of dealing with the lawyers who don’t play nice on matters of e-discovery.

The proposed standing order contains the following (paraphrased) duties: (1) Attorneys not cooperating will be sanctioned; (2) ESI requests should be proportional to the case; (3) Duty to meet and confer, including discussions on identifying ESI and format of production; (4) Identification of an e-discovery liaison to handle disputes; (5) Creation of appropriate and specific preservation requests; and, interestingly, (6) a friendly reminder that the attorneys should become familiar with ESI prior to filing an appearance in one their courtrooms.

First came ESI and the high cost of e-discovery; then came the rules; now comes cooperation and specific actions to follow … all in an attempt to lower costs, deal with the huge influx of discovery disputes and have lawyers play nice.