E-Discovery: Cutting Costs with Predictive Coding

The cost of e-discovery is forcing good companies to settle bad cases—but not for long. If your litigation budget had ears, “predictive coding” would be music to them.

How it works

Predictive coding is a “technology-assisted classifying process” in which “a human reviewer codes documents the computer identifies (as responsive)—a tiny fraction of the entire collection. Then, using the results of the human review, the computer codes the remaining documents in the collection for responsiveness.” There are four phases to the predictive-coding process:

  • Phase 1: A senior lawyer chooses the responsive electronic documents based on his or her review of a sample of the electronic documents
  • Phase 2: Phase 1 is repeated with senior lawyers until the computer is sufficiently “trained” to apply their conclusions across a wide set of documents (or the whole document set)
  • Phase 3: The predictive coding software is deployed against the entire document set and will distinguish between relevant and non-relevant documents, or prioritize the documents on a scale of one to 100 (depending on the software you select)
  • Phase 4: The documents that are machine-coded as responsive are subjected to a final human quality review and produced to the opponent

How it saves your company money

Using predictive coding software replaces the once overcrowded rooms of contract attorneys who pored over millions of records and billed by the hour. Rather than hiring 15 $80-per-hour reviewers working 40 hours per week for three weeks for a total review cost of $144,000, your company could conduct the same review with three senior lawyers at $600 per hour for eight hours at a total labor cost of $9,600, saving $134,400 without the cost of using the software. Furthermore, the empirical data on predictive coding confirms “the levels of performance achieved by ... technology-assisted processes exceed those that would have been achieved by ... the law students and lawyers employed by professional document-review companies — had they conducted a manual review of the entire document collection.”

So, why isn’t anyone using predictive coding yet?

No one wants to be the guinea pig. To date, no court has evaluated (or endorsed) the use of predictive coding.

However, a forceful judicial “endorsement” has been asserted by Andrew Peck, U.S. Magistrate Judge for the Southern District of New York:

I know what you’re waiting for: You think one day a judge will deliver an opinion or a judgment which says in terms that a particular kind of technology is approved by the court. ... Perhaps you have a mental picture of the occasion: “It is the opinion of this court that the use of predictive coding is a proper and acceptable means of conducting searches under the Federal Rules of Civil Procedure. ...” Perhaps the judge will go on to praise the car which he or she drove to work, offer an endorsement of the floor polish used in the court, and give a quick puff, as it were, for his own favorite brand of cigarette. IT’S NOT GOING TO HAPPEN!

Take advantage of predictive coding now

Given that both counsel and clients risk hefty sanctions (including default or dismissal) if the predictive coding software fails to “predict” the relevance of an important document, it is wise to be cautious. Litigators, however, can and should take advantage of the cost-saving benefits of predictive coding now by involving the court and the opponent in the predictive-coding process.

1. Learn about predictive coding technology and select a vendor;

2. Seek the opponent’s agreement to use the technology after fully disclosing the risks (in writing);

3. If the opponent agrees, identify to the opponent the documents you have identified as relevant that will guide the software;

4. If the opposition does not agree, run a demonstration on a sample set to prove to the opposition the validity of the software and method;

5. If the opposition still does not agree, move the court to compel your opponent to pay for the cost of a manual review.

Predictive coding is far too enticing a cost-saving mechanism to remain in the shadows for very long. Use the above approach to introduce predictive coding into your cases, and your outside counsel will be able to get back to spending your litigation budget to win bad cases instead of settling them.
 

 

This article was originally published in Inside Counsel.

Nine Points Impacting E-Discovery Costs

There was a time when state court civil disputes did not involve the risk of astronomical e-discovery costs. That time has passed. Just as e-discovery in federal courts reaches some semblance of uniformity, the fifty (very independent) states have begun to realize that discovery in the Digital Age will necessarily involve "staggering" amounts of electronically stored information (ESI).

Since 2003, 30 states have adopted rules or enacted statutes that specifically address ESI management, preservation and production in civil disputes. New York and seven other states have developed their own methods for managing e-discovery, while California (and 21 states like it) generally follows the Federal Rules of Civil Procedure. The remaining 20 states (e.g., Illinois) have yet to adopt any e-discovery rules, but most recognize "the increasing reliance on computer technology," and some explicitly (by judicial interpretation of existing discovery rules) obligate civil litigants to produce ESI as part of their state's existing discovery obligations.

Although all 50 states have somewhat different approaches to managing e-discovery, there are a few trends in how states treat e-discovery that impact costs.

Some of the important trends include:

1.   Discretionary Cost-Shifting. While the federal rules are silent on who should bear the cost of retrieving "inaccessible data," certain states (e.g., Texas) require that a judge order a party requesting inaccessible data to incur the cost of producing it. Other states (like California and Mississippi) give the judge the option to shift the cost of producing "inaccessible" ESI. Given that the retrieval and production of "inaccessible data" can easily cost hundreds of thousands of dollars, the discretion (or obligation) to shift those costs can have a significant impact on the litigation budget.
 

2.   The Meet and Confer. Some states (like New York and Delaware) have made the "meet and confer" the cornerstone of their methodology for managing e-discovery, while other states have abandoned the requirement altogether. Do not miss this opportunity to seize control of the e-discovery process. Skipping an early “meet and confer” may appear to save money and avoid the aggravation of dealing with the "unreasonable" opposition; however, more progressive literature on e-discovery suggests that the "meet and confer" actually saves costs in the long-run and helps insulate the parties against the risk of e-discovery "do-overs" and even more severe sanctions.
 

3.   Safe Harbor. Federal Rule of Civil Procedure 37(e) forbids a court from ordering sanctions against a party who has destroyed potentially relevant ESI "as a result of the routine, good-faith operation of an electronic information system." Although practitioners debate how "safe" the harbor really is in federal courts, several states have eliminated the "safe harbor" altogether. This means that litigation holds in state courts should be implemented as soon as litigation is reasonably anticipated.


4.   Sanctions. It also is important to know what activities (or failure to act) will prompt the court in your jurisdiction to levy sanctions. Counsel should not assume (especially in states that don't follow the federal rules) that state courts will levy sanctions in the same manner and for the same conduct as federal courts. This analysis will inform your discovery strategy and help insulate against the risk of state court sanctions.

 

Although there is no substitute for becoming familiar with each state's e-discovery rules before formulating an e-discovery plan, there are a few fundamental practices that will help manage e-discovery costs (and help avoid sanctions) regardless of your jurisdiction.  Savvy litigants should:

1.   Budget for e-discovery costs in every case (based on the rules of the jurisdiction where the dispute is venued) so that you (and your outside counsel) are forced to address how the state's approach to e-discovery might affect your case.


2.   Discuss e-discovery issues and attempt reach agreement about the parameters of ESI preservation and production as early in the case as practical regardless of whether your jurisdiction requires a “meet and confer.” If the state court rules do not require a “meet and confer” and the opposition refuses, ask the court to order the parties to meet and discuss e-discovery.


3.   Know the most likely circumstances where the jurisdiction has awarded sanctions in e-discovery cases.


4.   Oversee the data collection process in your cases, but try to avoid having your internal IT department collect the data.


5.   Document the steps taken to prevent the destruction of potentially relevant ESI
In additional to local counsel, good resources to check on current state court discovery rules and decisions are maintained by Kroll Ontrack.
 

This article was originally published by Steven Hunter, a Quarles & Brady partner, in Inside Counsel