What Are Your (Legal- and Business-Related) New Year's Resolutions?

OK, this is just a different (some might say lame) way of asking what your goals are in 2010… but ‘tis the season, eh?

There’s never been more at stake in the legal profession than there is now. There’s a palpable sense of change in the air… especially concerning the new legal model of law firms and the impact it will have on the way law is practiced and billed. But I’m not one to wait around for that to truly happen, so why not start moving forward? Here are just a few of the things attorneys have to tackle in 2010:

True cost containment of legal expenses … If you’re one of the thousands of in-house managers who has taken the reigns of your budget, designed new processes, brought more work in-house, cultivated new outside counsel relationships, and engaged alternative legal services providers… well, here’s hoping that you get more sleep in 2010, because you’ve likely been busier than ever. Those who’ve undertaken the commitment to cost containment should be applauded and hopefully the work they’ve done will make life easier down the road. This process will continue to evolve for these good people, and thousands more will start down this path anew in 2010. The point: This is the new way of life for corporate legal departments.
 

Alternative Fee Arrangements … Many of you have spent the last few months working on new billing structures with outside counsel, and many are still in the process. There are scores of conflicting reports about these arrangements, so it will be interesting to see how it plays out. My guess is that we’ll hear plenty about the arrangements that work – after all, law firms have wonderful PR people – and we won’t hear much about the efforts that fail. But here’s the key: AFAs must be mutually beneficial, or they simply won’t work long-term. A certain amount of risk-sharing must take place and there must be value. I think AFAs have the ability to change the age-old approach utilized within law firms – and who handles what -- but a lot of the AFAs in use might really just be window dressing.

The Document/ESI Retention Policy… Interest in the design of document retention policies (or ESI Management Policies, as Barry likes to say) exploded in 2009. There’s just so much data now that companies are overwhelmed, and everyone is leery of 1) the smoking gun e-mail that’s been sitting in someone’s inbox for six years and 2) getting exposed for not implementing a solid policy. There is an obvious marriage between these two fears that in-house lawyers must officiate, and there’s no sign this responsibility will ebb in 2010. The key is in the implementation, and as our wise scribe Barry likes to say: “If you’re not enforcing your ESI policy, you have no ESI policy.”

Consistency, Process Across the EDRM… Everyone is dealing with e-discovery at some level, and many companies already have created some sort of approach to the actual review of documents when litigation hits. At the same time, most have spent their time and resources trying to figure out the document retention policy first before fully diving into project management, software and the attorney review. But this is where real dollars are saved and the spotlight will continue to shine on the processing, review and production of documents and creating a cohesive model encompassing all phases of the discovery process.

Convenience Versus Cost … Ah, the age-old question! Traditionally, when an in-house department has overflow work, it’s sent to outside counsel. Litigation, due diligence, employment work and other heavy lifting might also be completely turned over to the law firm simply because a department doesn’t have the resources. This approach is being evaluated, to say the least. But it doesn’t end there; many in-house departments now seek unit pricing that blends services (software + attorneys) for e-discovery matters because it makes budgeting easier and there is (or should be) some risk-sharing with the partner. The key for those who must closely monitor their legal spend is to understand that some providers don’t exactly assume any risk in this scenario because of the excessive padding they’ve built into their per-unit price. A general rule of thumb: if you can’t buy a super-value meal for the price you’re paying per-document, you’re paying too much.

Of course there are myriad other issues that in-house managers must create goals around in 2010, and we look forward to discussing many of those in the coming months. In the meantime, I hope you have a wonderful and prosperous 2010.

Two Words For E-Discovery Savings: Less and Faster

There’s a very good post on Clearwell's e-discovery 2.0 blog, "How To Reduce Electronic Discovery Costs," that breaks out the discovery process into sections of potential cost savings. It’s a good overview and it’s evidently the first part of a series.

The post reinforces a few of the issues we’ve discussed here, mainly that to reduce discovery costs, you should focus on trying to review less data and review that data faster. There are a couple of recent examples I’d like to share that show just how much money can be saved in implementing this approach.

First, a client called with what seemed like a good-sized matter – more than 70 gigabytes of collected ESI that needed to be reviewed and produced on a tight deadline. The reality was that the data had not yet been processed, culled, or de-duped; so we immediately knew that there were opportunities to dramatically reduce the amount of data to review. The combination of the right technology (coincidentally, it was Clearwell’s early case assessment tool), the right hosting company and good project management paid off on that case. The original 70 GB was reduced to less than 5 GBs of data that required review – a 93% reduction. Our team of attorneys was able to complete the review of this data within days versus weeks and the law firm was able to meet its production deadlines at a fraction of the cost of traditional methods. Success stories such as these are very common when it comes to reducing data.

The other example is a client whose discovery we’ve handled for the last 12 months. We have project managers and several attorneys dedicated to their matters, and what we’ve seen is that with each matter that comes in the door, the process has become increasingly efficient. Because the review and quality control workflow had already been mapped out, and because the team was already familiar with the client’s data, and the project manager had established relationships with the company’s internal IT contact as well as the company’s preferred review software vendor, those usual start-up measures and learning curves are consistently avoided. The result has been a repeatable process, a shortened timeframe to begin the review and higher review rates once the review begins; in fact, review rates on the first matter were more than double what the company was accustomed to and have increased an additional 50% from the first matter to the most recent. The best result was that the client saved more than $1.5M during this handful of matters.

These examples show that if you have the right processes in place, the knowledge and expertise of the right technology, and the relationships with superior hosting companies and vendors, you can save the time and expense of reinventing wheel for every matter.
 

Recap: Working With My Law Firm(s): The New Dynamics

This was probably the most animated session during the two-day event - maybe it was the cocktail reception and songwriter's night that was to follow.

More likely, it was the issue at hand. The in-house attorneys in the room were all under at least a minimal amount of pressure to contain costs, and everyone had clearly examined their outside counsel relationships recently. The panelists had each taken different steps to modify their relationships with outside counsel, and each seemed to be pleased with the direction these relationships were heading.

Working With My Law Firm: The New Dynamics
Panelists: Senior attorneys from International Paper, SunTrust Banks, CVS Caremark
Moderator: Candice Reed (Executive Director, Counsel On Call)

Summary of Dialogue
Themes: Make your voice heard with outside counsel; We hold the power; We often know more about e-discovery than law firms do; Law firms need to budget/plan and work with the vendors we choose

Panelists began the session detailing how they, and many in the legal profession, believe that the law firm model is broken. The dialogue with the audience began immediately once this subject was broached, and many shared anecdotes about their relationships with outside counsel.

With that framework, one panelist said it’s important for a law firm – even firms you’ve been working with for years – to know you will walk away if their pricing or services are not inline with your needs. His department has moved to bidding out all of its work, and every law firm knows that there are at least two or three other firms bidding – and this has changed the way law firms look at the company (in a positive way). It has not changed the quality level of the work they receive (also positive).

Another panelist took this further and stated that involving her law firm in the decision-making process on the company’s e-discovery was not the best decision. The firm’s e-discovery committee was not up to the task, they did not have a disciplined approach and said that no matter who reviewed the company’s documents (namely: discovery attorneys), they were going to re-review them in order to sign off on the agreement.

Panelists them reiterated that in-house counsel must be willing to say, “Give me what I want” and stand up to law firms when necessary.

One specific anecdote that was shared with the group involved a recent conversation with a law firm partner, who was leading a company’s litigation strategy. The attendee loved the value he was getting from that partner, even at $500 per hour. But what he did not like – and what he wanted the partner to understand – was that along with every hour in that partner’s time came another $600 per hour in two junior associates a paralegal.

Another panelist said that we are in an evolutionary period right now, and that law firms must get their value proposition in order. He calculated that his company pays its in-house attorneys $150 per hour; if a law firm associate is doing work for his company, it needs to be at that price or less or it’s not worth it – they will do it in-house or use another vendor. Another panelist said a good practice is to staff a department at 80% of volume at $150 per hour.


From the audience, an attendee stated that she feels like she is educating law firms on every new case; they don’t know what a review protocol is, they don’t know how to track efficiency, and they are “very unsophisticated” when it comes to discovery. The group agreed, with one attendee stating that the way law firms manage a case and approach the discovery process is “with Concordance and brute force.”

The conversation then turned to law firm discovery centers. Several examples were provided, with one attendee citing one in which she “never saw the documents, but hasn’t heard anything bad” and a second matter in which she reviewed the documents and “it was horrible.” Another attendee said she had a good experience with one such center, but it was at three to four times the price she can do it for with Counsel On Call. One panelist remarked that the mark-up on these centers is ridiculous and sometimes uses the exact same attorneys as a company like Counsel On Call, which charges a very minimal mark-up.

One panelist said his department has the following requirements of law firms:

  1. No more than one lawyer at a deposition, hearing or event … he gets lots of pushback on this from the firms. (“Who will handle my papers?” I will, he says.)
  2. No first-year associates

Another panelist likes to budget matters over 90-day periods, and by asking law firms to do the same, the in-house department is able to determine what work can be done in-house that the law firm is budgeting. Another panelist stated that this approach – asking the law firm to plan – is a very positive step. The panelist also stated that staffing on any matter has to be approved and that the firm has to work with any third-party vendor the in-house department chooses (discovery attorneys or otherwise).

Discovery Symposium 1.0 Promises To Share Best Practices

Next week, we will have the pleasure of welcoming 35 senior in-house litigation managers, representing 25 companies, to our home base in Nashville for the inaugural Counsel On Call Discovery Symposium 1.0. It’s very exciting for us, as it provides the opportunity to get several of our clients in a room together and talk about best practices in discovery and litigation support.

We tried to limit the event to about 30 attorneys to foster a healthy environment for exchanging experiences, and we’re pleased that the demand has been so high. It's a great program – discussing all areas of discovery – that is completely led by the attorneys who are in the trenches and dealing with these challenges on a daily (hourly) basis. We’re proud to be by their side, but in this instance we’re merely facilitators and believe that’s going to help generate the best possible dialogue among some of the brightest minds in the in-house profession.

Here are a few of the session titles:

  • “Good Policies for Retention and Holds; Standards of Care in Preservation and Collection”
  • “De-dupe, Near Dupe and Being Duped: Software Decisions Good and Bad”
  • “Working With My Law Firm: The New Dynamics”
  • “Creating Your Own Discovery Team”
  • “Budgeting for E-discovery: Not a Pipe Dream”

We will likely produce a recap that shares some of the best practices discussed during the event, and if you’re an in-house attorney interested in reading it, please send us an e-mail and we will add you to the distribution list. Also, based on the response this year, we are considering opening up the event to non-clients in 2010 (event will be in Atlanta or Boston), so please indicate if you would like to receive information when it becomes available.

And if you like Twitter, we’d recommend following Dennis McKinnie, formerly a general counsel of two publicly traded companies, formerly with PoGo’s IP litigation group, and a past Staff Counsel to the Supreme Court of the United States … he’s been the Executive Director of our Atlanta office the last four years, and he just got his Twitter account up and running and will tweet during the program. Dennis is well-known for his txt/Blackberry skills, so we’re going to put him to the test.

Richard Stout will also post on this blog from the event, so don’t forget to check back May 13-14. Subscribing to the blog (on the right side of this page) is the easiest way to make sure you don’t miss an expanded update.


 

Maximize Resources, Achieve 'Value'

You can’t scan a legal rag nowadays without seeing an article predicting the end of the billable hour, or the revamping of the business of the practice of law, or some other projection of how the practice is going to look at the end of this recession. Some insights are better than others, like the recent Law.com article about in-house departments requesting their outside counsel to reduce rates or present an alternative fee arrangement. Patrick Lamb’s commentary on the matter on his blog also really drew my interest – I think he hits the nail on the head.

Undoubtedly there is some room for firms to reduce rates and I believe, in time, the market will bear that out (I love the anecdote from a lawyer who told Susan Hackett at ACC that $700/hour was a “suicide” rate). But what’s more central – and the article skims over this while Patrick calls attention to it – is that hourly rates are really only a small part of the equation and that efficiency and quality are the key elements. I'd add one more factor to this cost-saving/value formula: maximizing resources.

Based on hundreds of conversations I’ve had with in-house attorneys in recent months, there really isn’t as much pushback on the partners’ high hourly rates. Sure, clients would like them to be lower, but they also understand you have to pay for great legal counsel. The real problem is at the associate level, where it’s much tougher in some instances to defend the value received. In many cases they’ve turned to smaller or regional firms to get the rates they seek across all levels.

But where we’re seeing in-house departments achieve budgetary success is in conducting an audit of the work that needs to be done and overlaying that with the available resources. Here’s a rudimentary example of how the process works for a fictional department that has (only) three operational units: litigation, contracts and labor and employment:

Litigation

Old Way
Call outside counsel to handle; review might be outsourced and marked up, then the documents re-reviewed by first-second year associates; law firm controls the entire process

New Way
Call outside counsel and discovery team for a planning session; discovery team controls costs and productivity in a transparent manner, liaises with technology vendors, and works closely with law firm(s); law firm handles strategy; in-house department controls the process

Savings: 30-75% or more, typically in the millions annually

Contracts

Old Way
All matters that can’t be handled in-house are sent to outside counsel, including simple matters, such as routine leases, costs $300+ per hour, 10-15 hours of work per week


New Way

Most complex matters are still handled by outside counsel; routine matters like leases and overflow work handled by experienced contracts attorneys billing less than $100 an hour, supervised by in-house attorney(s)

Savings: $150,000+ per year

Employment

Old Way
Routine and EEO matters and trainings are handled by law firm associates for $400+ per hour; such work is sporadic, but typically averages 10 hours of work per week; monthly trainings are required in different areas of the country


New Way

EEO matters are handled by attorneys with 10+ years of experience for less than $100/hour; trainings are conducted by the same attorney(s), who know the company’s policies well, for the same hourly rate or an agreed-upon flat rate

Savings: $150,000 per year on EEO matters; $35,000-$50,000+ on trainings


So while this is far from a detailed example -- and many in-house teams have more than three operational units -- it provides a glimpse of how many of our clients are approaching their legal work now. There is always going to be a significant amount of work that needs to go to outside counsel; there is always work that will need to be done in-house; and there's a growing recognition of this middle ground of work where costs need to be cut, and that's where a lot of value is being discovered.

It also shows that it doesn’t take wholesale changes or eliminating outside counsel to achieve significant cost savings – just maximizing resources and reaping the resulting value.

In E-Discovery, It's Not About The Hourly Rate

The billable hour has received a lot of attention in recent months as it relates to associate salaries and the value the client receives, among other issues. But it has been especially relevant in the e-discovery field in recent years, as more in-house departments have realized that much of their discovery work can be done for under $65 an hour versus the $200-400 they were accustomed to paying.

So now that this is the norm in our profession – paying $45-65 an hour for e-discovery work – the real question becomes, ‘What am I really getting for that money?’

Once you’ve driven down costs to the $45-65 per hour level for e-discovery, I would argue that the hourly rate makes little, if no difference, on your bottom line. The most important factor is the review rate of the attorneys. In fact, it’s really very simple math.

Let’s take a medium-sized matter: 30 gigabytes of data, or 400,000 e-mails.

Using a traditional (linear) review tool, an average review rate would be approximately 50 document decisions per hour for an attorney. By increasing the attorney review rate by 20 decisions per hour, the cost savings over the life of the project would amount to $125,000 and cut the project’s time by 25-40%. That more than compensates for a $20 per hour difference in an attorney's hourly rate, too.

That’s also a very conservative answer, because many companies now utilize a content analytic review tool that clusters documents together by topic versus a linear tool that only organizes data chronologically. Using the content analytic tool is likely to produce a 300-500% increase in the review rates, which saves in excess of $300,000 and 70% in time on that same 30GB of data. Content analytic tools cost more, but you can see where that difference can be accounted for.

So if you can accept this concept, it truly becomes a question of what you’re getting for your money. Many in-house departments have $48 an hour attorneys handle their e-discovery work, but ultimately the work is re-reviewed by outside counsel, there’s no fluid process in place and the client has no idea what kind of productivity the attorneys are generating. How would they know if they could be doing it better?

The question really becomes about how to increase review rates and thus productivity. There are many ways to do this, but it starts with experienced attorneys who know e-discovery and the technology. It’s supported by proven processes and talented project managers. Everything must be transparent: work closely tracked, benchmarked and learned from. It’s a collaborative, highly communicative process with outside counsel. And it can be repeated from matter to matter, creating more opportunities for learning and efficiency.

Focusing on the process and maximizing productivity -- not the hourly rate -- is where money is truly saved in e-discovery. The math really will speak for itself; all a client has to do is ask for it.
 

E-Discovery Pet Peeves

I attended a CLE recently that dealt with the topic du jour -- e-discovery. Seems you can’t pick up a CLE calendar without seeing at least two sessions dedicated to the subject, which I guess speaks to just how much it's dominating our thoughts these days.

I must admit this particular program was pretty good, however. At the end of one of the panels -- dealing with corporate costs for e-discovery -- someone asked the question, “What are some of your pet peeves?” The list was insightful so I thought I’d share the panelists' thoughts:

  1. Do not overpromise what you can deliver.
  2. You cannot approach discovery, particularly e-discovery, as a risk-less enterprise. That only creates unnecessary costs and burden and it will never be risk-less.
  3. Don't charge me for “futzing” with the technology. You should know the technology and if you don’t, learn it on your own time.
  4. Every case is matter-specific. It is ridiculous to say “this is the way we do e-discovery” and apply it to every matter.
  5. Clients pay for experience. You better have some.

And last but not least amongst the peeves was:

      6.   Lack of Predictability.

This last one we hear all the time and Counsel On Call has spent a lot of resources creating procedures to address. Our repeatable litigation support processes, and the data that we track and gather on each project for a client, enables that client to better budget each project going forward. In addition, we have done so many of these projects that our experience can add a large degree of certainty with respect to projected costs for even that first engagement.

I was glad to hear some interesting discussion on this subject, and it's clear that a larger percentage of in-house counsel are really taking control of their e-discovery matters -- and, whether working with their internal team or with their legal service partners, are developing progressive concepts of what they want their litigation processes to look like. We're fortunate that we have many clients that fit this mold, and it's exciting to see the results that some of these great concepts produce.