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.

Ascending to the Cloud Creates Negligible E-discovery Risk

Cloud computing platforms (a set of pooled computing resources that are powered by software and delivered over the Web) have been generating quite a bit of press in the last year. Indeed, just recently computing giant Microsoft launched its Microsoft 365 cloud computing platform, designed to rival Google’s "mega-cloud" platform, which launched in May 2010. Since the release of the first commercial cloud computing platform by Amazon in 2006, cost-conscious companies have been racing to evaluate the pros and cons of moving their computing operations to “the cloud.” According to the Booz, Allen, Hamilton technology consulting firm, “Cloud computing may yield:

Life cycle costs that are 65 percent lower than current architectures

  • Benefit-cost ratios ranging from 5.7 to nearly 25
  • Payback on investments in three to four years."

Notably absent from that cost-benefit analysis, however, is the effect cloud computing may have on the costs and risks associated with conducting electronic discovery. Those engaged in such activities may well ask the question, “Will the savings companies expect from moving their data to the cloud be absorbed by the additional costs/risks created by conducting e-discovery in the cloud?”

The short answer is no. Although there are risks associated with conducting e-discovery from the cloud, they are remote, manageable and eclipsed by the savings companies should expect from cloud computing. Some of the riskiest aspects of conducting e-discovery in the cloud are:

  • The loss/alteration of data and associated metadata
  • The potential violation of international data privacy laws by illegally disclosing data in the jurisdiction in which the cloud is located
  • The unintentional waiver of the attorney-client privilege by co-mingling data or disclosing attorney client communications to third parties
  • The failure to properly and timely implement and monitor litigation holds

Fortunately, companies can easily manage the risk of altering metadata and the risk of violating international data privacy laws by insisting the service agreement with their cloud provider:

  • State that none of the company’s data may be stored outside the United States
  • Provide a detailed mechanism for how the cloud will implement litigation holds
  • Address how metadata will be created and stored in the cloud environment

Similarly, companies can minimize the risk of waiving the attorney-client privilege by including “no waiver” language in their cloud computing service agreements and establishing security protocols to prevent the inadvertent disclosure of communications to the administrators of the cloud or any other third party.

When the technology has improved and cloud computing administrators have developed expertise at responding to e-discovery requests, companies might even enjoy e-discovery cost savings by moving their data to the cloud. “If the cloud fulfills its promise and supplants the hodgepodge of local hard drives, LAN servers, and removable storage that now house our data, the cloud will emerge as the simpler, ‘one-stop shop’ for preservation and search in electronic discovery,” Craig Ball, an expert on trends in e-discovery, predicts.

In fact, that technology already has been developed and is in use for other applications. In late 2010, Facebook (currently the largest functioning equivalent to a cloud computing environment) added to its regular user interface a one-button preservation tool for capturing user content. Now, by simply clicking the “Download Your Information” button (and providing the appropriate password), Facebook users can request a neatly packaged zip file containing all of their videos, messages, wall posts, friend lists and other profile content — it doesn’t require a professional background in information systems to comprehend how similar technology can be applied to collect corporate data stored in the cloud.

Furthermore, cloud administrators saddled with the responsibility of responding to many subpoenas or production requests on behalf of myriad clients will, in time, develop an expertise in culling, processing and producing data. In turn, cloud users will undoubtedly benefit from advances in technology as well as the experience that cloud administrators have gained in responding to e-discovery requests.

The hope is that these efficiencies will translate directly to the end-user. At the end of the day, in-house counsel should be confident that (if managed properly) the benefit of moving a company’s data to the cloud outweighs the risks and costs associated with producing data from the cloud as part of a lawsuit.

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