How to Avoid e-Discovery Disasters
All it takes is one e-mail among a few million under today's rules of e-discovery. Maybe one was an offhand joke about delays or an angry post to the construction manager telling him to buzz off about the crew's safety procedures (before somebody got hurt). Maybe the firm's outdated retention policy has created too many backups, and all that data has to be produced. In a lawsuit, any of these examples could be costly—even a smoking gun.
Firms may have to retain and produce millions of e-mails in addition to an expanding universe of unique file formats, such as BIM, CAD, Primavera, accounting systems and more, depending on the nature of the claim and discovery request.
In a construction industry that has embraced tablets, smart devices on jobsites and sophisticated cloud-based tools, the stakes and costs of complying with the rules of civil procedure are growing alongside the ever-expanding digital universe. For a typical two-year project, that can mean millions of documents to be stored, or roughly 50 megabytes per principal that would be discoverable if necessary. And the costs of retaining, producing and reviewing only the relevant data are skyrocketing.
Research firm IDC estimates that, by 2020, all corporations will be managing 50% more data than in 2010.
Meanwhile, research firm Rand Corp., in a study published in April, says the cost of collecting and processing documents to comply with discovery requests consumes about 8¢ and 19¢, respectively, of every dollar spent on compliance. Once that's done, attorney document reviews can consume 73¢ of every dollar spent, according to the report, called "Where the Money Goes: Understanding Litigant Expenditures for Producing Electronic Discovery."
No question, the shift from paper documents to electronically stored information (ESI) has led to sharper increases in discovery costs than in the overall cost of litigation, write co-authors Nicholas Pace and Laura Zakaras. The cost for litigants can run anywhere from $150 per gigabyte to $20,000 or even $40,000—depending on the nature of the request.
In response, the Federal Rules of Civil Procedure have been amended several times in the past five years, and most states have adopted or amended rules of procedure or evidence to address a range of challenges posed by e-discovery. The 2006 amendments to the Federal Rules of Civil Procedure (FRCP) implicitly called for a higher level of professional knowledge about the technology underlying e-discovery, says Debra Logan, vice president and distinguished analyst at Gartner Research. Yet few have achieved what was envisioned with the rule changes, she adds. (Logan co-authored the firm's 2012 review of major e-discovery vendors, some of which can be seen here, and has also published information governance tips for companies. )
In response, FRCPs keep evolving amid a spate of rulings to address the challenges (see this map courtesy of e-discovery vendor KrollOnTrack). The costs of reviewing the documents are where firms get hit, Pace notes, for the simple reason that human reviewers are highly inconsistent and pricey. "You have attorneys sitting in a room reviewing documents at $200 or so an hour," he says. And techniques for grouping documents are not the answer.
Searching Big Data, Predictive Coding
Semantic search technology, combined with artificial intelligence, has emerged in recent months as a promising tool for slashing the costs of human review. "We believe one way to achieve substantial savings in producing massive amounts of electronic information would be to let computers do the heavy lifting for review," Pace and Zakaras write in their study of machine-assisted search software.
"With predictive coding, humans (i.e., attorneys) initially examine samples of documents from the review set and make determinations about whether they are relevant, responsive or privileged," the report says. "Using those decisions, the software assigns scores to each document in the review set representing the probability that a document matches the desired characteristics."
And on it goes in the process of essentially training the software—such as a spam filter trained to spot similar junk—to narrow down the process of what's relevant to the case. Pace says one study using this approach shaved 80% in attorney review hours. Although the test didn't add up cost savings, the dramatic reduction in time is clear.
Ralph Losey, e-discovery counsel with law firm Jackson Lewis, who blogs regularly about the technology, calls predictive coding "the best answer we have to the problem of the high costs of e-discovery."
Predictive coding is a key emerging trend for controlling the runaway costs of e-discovery, says Chris Cheatham, a construction attorney and a founder of web service provider ClaimKit, which helps collect, organize and deliver documents for sureties and construction firms. "The term 'big data' is often used with marketing and sales as a way of looking at all your customers and spotting trends," says Cheatham.
"You can apply the same techniques in discovery by seeing what you should be diving into in terms of document sets, rather than diving into every single document." He says he is seeing a lot more tools coming into the market that help architects, engineers and contractors manage the data deluge and discovery issues. Two recent federal and state rulings allowing the use of predictive-coding technologies could usher in greater use across the industry.
But as promising as the technology is, it doesn't absolve firms from getting ahead of e-discovery. "The bottom line is, everyone needs to have a document retention policy," says Michael S. Zetlin, a partner with New York City-based construction law firm Zetlin & De Chiara, which advises engineering and design firms on document retention policies. "It's critical. All courts mandate the preservation of documents, so if there is any hint of a claim, you want to be as organized as you can be," Zetlin notes.
Let's say a firm doesn't have any cenralized network for storing documents and has 15 different engineers working on a project, he says. If a whiff of litigation arises from the job and their work is tagged as "custodial parties," then the firm's IT department will have to assemble and harvest all of the relevant documents from each principal, for starters. This may take laptops out of commission while IT takes out the hard drives and goes on a search for other data deemed relevant. "That's why it's worthwhile having documents segregated by project-type folders," Zetlin says.
For a smaller contractor, the cost of e-discovery compliance can hurt, notes construction attorney A. Holt Gwyn. "One of the laws of unintended consequences of the electronic revolution is that, for those firms that are not as sophisticated as others, e-discovery costs can put pressure on them to settle their claims.
"If you have a valid change order for $30,000 and it's going to cost you $15,000 for discovery, which you're never going to get back, plus $5,000 or $6,000 in legal fees just to get to mediation, is [the claim] really worth it?" Gwyn says.
There are steps smaller firms can take to avoid complex searches, Gwyn adds, starting with e-mail. At the start of a project, set up e-mail accounts into folders just as you would with separate manilla folders for change orders, documents, waivers, warrantees, change-order requests—and do it right away so you can keep up, he adds. After all, e-mail files are the first documents requested and often difficult to harvest and produce.
Even when policies exist to keep data locked down, the costs of e-discovery still add up. Take the case of the engineering firm HDR Engineering, which recently prevailed in a civil case brought against the firm by Tampa Bay Water, claiming faulty design of the utility's reservoir. The trial produced over 15 million pages of data to be stored for discovery and three million documents. In the aftermath of the trial, the firm says the cost of copying or obtaining documents came to $1 million and that it spent $2.1 million to electronically organize, store and maintain the documents. "This does not count internal and attorney-fee costs to code the documents, which is hard to separately break out," according to Timothy Connolly, executive vice president of HDR Engineering. He reckons that, on the case, the overall ESI document cost alone was about $4.6 million out of legal costs of more than $20 million, which it currently is seeking in the case.
This is one example of why federal and state judges recently ruled to allow predictive-coding search technology to help firms get a handle on the costs of managing electronic documents.
Dos, Don’ts and Disasters of Retention
E-discovery is easy—as "long as you have a retention policy," jokes Shawn Pressley, senior vice president and CIO for construction management firm Hill International Inc. He says the firm did a study to see how many megabytes of data it was keeping in the "banker's boxes" that often hold the printed versions of the electronic documents. The firm found that, on average, one banker's box holds about 2,500 pieces of paper and roughly 50 megabytes' worth of data. "On a case [of a two-year project], we might average about 40 to 100 boxes. That's about five gigabytes of data. If we take an average company, we're looking at over three million e-mails [in an average discovery request], which equates to about 50 gigs per person to recover," Pressley says. And that's with the backing of IT, legal, HR and senior management.
The costs to store and convert a gigabyte to the right standard file format, such as PDF or TIFF, are all over the map, experts say. Meanwhile, state courts, which historically have fewer e-discovery rules compared to federal courts, are getting tougher with firms that plead ignorance of IT or lack of resources.
Kathleen Seligman, whose firm Cohen Seglias Pallas Greenhall & Furman represents Hill International, says although that's changing, it means that smaller firms who are subpoenaed as a third party to another dispute are on the hook for the costs of producing the data. Judges are evolving on this matter, she notes, but it's still a huge area of uncertainty for third parties whose documents are subpoenaed.
Breaking Down the Basics
Patricia Harris, a Zetlin De Chiara construction attorney who provides best-practice seminars on data retention, says it's astonishing how quickly costs can rise if an e-discovery vendor has to help a party comply with a subpoena, from scratch. "We were involved in litigation where [one of the parties] had never segregated their e-mails by project," she says. The firm in question—a significant name in the AEC industry—eventually unearthed millions of e-mails using generic search words pertaining to the case, a huge project.
Harris' advice to firms is to think through their plans for the basics of data retention: identify records by type; prescribe length of retention; define method of retention; establish access to records; provide authority amid uncertainty; establish destruction policies; and construct rules in the even to litigation. Finally, she adds, communicate.
The truth is, most firms really don't know where all their documents are, and it is a struggle to get ahead of it, says Lorraine D'Angelo, senior vice president of ethics and compliance, Dragados. As AEC firms acquire other firms around the globe, those retention policies become even more complex. "The easy thing would be to go back to using paper," she says with a sigh. But since that's not going to happen and as the digital universe keeps expanding, her advice on best practices is to just think before sending many e-mails.
"It used to be people spent some time drafting a letter, instead of shooting from the hip," D'Angelo says. Also, if you do have a document destruction policy, be consistent about observing it, she adds. Selective document policies can also lead to a sanction in discovery cases.
The bottom line is that all these technologies and policies probably won't save any firm from dirty e-mail jokes on the job or an IT guy who tosses a half-eaten bag of Doritos into a banker's box of change orders headed for a warehouse full of mice.
This is still a rough-and-tumble industry after all, notes Pressley. But tools, techniques and better policies are emerging to help companies get a handle on their data deluge. Hopefully, all that can help them stay out of court.
Scott Judy contributed reporting to this story
