What are the costs associated with different phases of e-discovery production? How are these costs distributed across internal and external sources of labour, resources, and services? And how can these costs be reduced without compromising quality? The Rand Institute for Civil Justice’s April monograph, “Where the Money Goes: Understanding Litigant Expenditures for Producing Electronic Discovery” explores these issues, highlights the main challenges related to preserving electronic information and provides some recommendations on how to address complaints of excessive costs and uncertainty.
In the Rand study, the researchers collected data from eight major corporations across 57 cases and interviewed key legal personnel from these companies. The companies represented in the study include one in each of the communications, electronics, energy, household care product and insurance fields, as well as three from the pharmaceutical/biotechnology/medical device field.
Although the researchers cautioned that their case study approach did not permit them to draw generalizations that would apply to all corporate litigants or all discovery productions, their findings still provide a detailed account of the resources required by a diverse set of very large companies to comply with e-discovery requests.
The researchers found:
- The review of documents for relevance, responsiveness and privilege was the major cost component one-discovery production, typically about 73%
- Collection consumed about 8% of e-discovery expenditures
- Processing costs consumed 19%
These costs broke down into the following, by source:
- Expenditures for the services of outside counsel consumed 70% of the total e-discovery production costs
- Internal expenditures were 4% of the total (even adjusting for under-reporting)
- Vendor expenditures were 26%
In terms of potential avenues for cost reduction, the researchers observed that although significant reduction in current labour costs is unlikely and that increasing the rate of review has its limitations, they were cautiously optimistic that computer-assisted categorization of documents may assist in reducing costs:
Finally, some important generalizations emerged regarding the main challenges faced by corporate counsel related to preserving electronic information in anticipation of litigation. In particular:
- Companies are not tracking the costs of preservation
- Preservation expenditures are significant
- There are complaints about the absence of clear legal authority about what strategies are defensible for preservation
To address the complaints of excessive costs and uncertainty, the researchers recommended:
- Adopt computer-assisted document categorization (predictive coding) to reduce the costs of review in large scale e-discovery efforts
- Improve tracking of costs of production and preservation
- Bring certainty to legal authority concerning preservation
Our observations are consistent with the conclusions in the Rand Report. We have found that, historically, the greatest proportion of costs was attributable to document review, even where this was contracted out to external document review entities. However, recently we have seen some developments that have lowered the overall cost of electronic document production including the cost of review.
- Companies have invested in information systems and record retention protocols, which result in the rapid and effective identification of potentially relevant documentation. As a consequence, there are fewer examples of over-collection, and the corresponding costs of processing and review
- Technology for identifying relevant documents at source has improved dramatically in the past four years. This technology now also permits greater, and cheaper, de-duplication of files, reducing overall volume for review
- The increase use of technology within the document review phase is increasing the speed and accuracy of the review, while assisting in the identification of wholly irrelevant documents without the need for human review
We remain cautiously optimistic that computer-assisted review will lower the overall cost of pre-disclosure document review. However, computer-assisted review is not a substitution for human involvement in process design, including for the careful direction in the preservation and collection of records, the analysis of the issues involved in a dispute, and a co-ordination of document management with the overall litigation strategy. A number of factors can improve outcomes and lower costs, and each of these should be evaluated and applied in every case.