How high do eDiscovery costs need to be to start asking questions?

larry davidSometimes the Internet just makes it too easy to be outraged, and this is especially true when you are a technology geek working in an emerging market. Sure, novel technology comes with its mis-perceptions, its drawbacks, its mysteries and what have you, but sometimes it is simply impossible to comprehend what people are thinking.

In the world of eDiscovery, vendors come in all shapes and sizes, and because of the relative novelty of the industry, there are a lot of great pretenders out there. One of my favorite TV show’s is Curb Your Enthusiasm, in particular the episode that finds Larry David as a used car salesman for a day.   “What’s in the engine?” the customer asks?  “Big stuff…big charging…crazy pistons.  Nutty pistons.”  I liken this to some eDiscovery vendors, in that there are many individuals, much like Larry David, who will be all about selling you a product, no matter what your needs may be.  And the most recent ruling on the Tampa Bay Water v HDR Engineering reminds me a little bit about that Curb episode.

You hear Lexus, Lexus, Lexus.  You don’t hear Camry Camry….but that’s what you should be hearing;

The eDiscovery Team recently reported that a vendor fee of $3.1 million during a $30 million case was found to be “reasonable” following the outcome of a case. According to the news provider, the defendant in a trial that involved a major infrastructure project in Florida won the case, and then moved to collect its award of reasonable legal fees and costs from the losing plaintiff.

One of those costs, the one that took up roughly 10 percent of the total award, was directed toward eDiscovery fees. That meant that the plaintiff had to pay the eDiscovery vendor $3.1 million at the demand of the Judge involved. The source explained that while the Judge deemed this expense reasonable, it was one of the only portions of the $30 million that was heavily disputed by the plaintiff.

Even after several components of this lawsuit went back to trial, the award remained the same, the eDiscovery Team noted. The news provider posed the question of whether this could possibly be a “reasonable legal expense” for three years’ worth of projects that almost entirely center around storage and hosting.

What’s the Difference Between the GT and GTS? (Guaranteed Tremendous Safety)

Those of you who frequently read Ralph Losey’s blog (I am one and a big fan), he wrote about this case as well.  His point in summary was;

When using the old style linear review you can expect such million dollar expenses as we see in Tampa Bay Water even if this means you must pay the vendor ten percent of the case value. If you include the attorney fees for e-discovery, the total spend for old-time linear document review was probably more than 50% of the total cost of defense of the case. The court in this case had no problem finding such expenses to be reasonable. The prevailing defendant was awarded over $20 Million in fees and costs to defend a $30 Million case.

This opinion shows once again that linear review, even with contract lawyers, is very expensive. I personally do not think $0.18 per page is all that great a deal for 17 million pages. Plus if you break it down by document (2.7 Million files), which the order did not do, that is $1.15 per document. And again, remember, this is just the charge for processing and hosting the files. We can only guess what the total charge was per page, or per file, after inclusion of attorney fees to actually review the files. But if you assume an industry standard linear review speed of fifty files per hour by contract lawyers billing at $85 per hour, then it would take 54,000 hours to review all 2.7 million files. Plus, the total cost would be $4,590,000, which equals $1.70 per file. (Remember, the total fee award for this case was $9,249,219.85, so this $4.6 Million estimate for review does not seem too out of line.) That would make the total cost of review, both fees and costs, to be $2.85 per file.

Now compare this $1.70 per document review cost with the projected cost of my experimental ENRON review using hybrid multimodal predictive coding techniques, which was $0.07 per document, not page, and assumed an SME billing rate of $1,000 per hour….there is no question that the use of advanced predictive coding techniques can dramatically lower the costs of document review.

You’ll sell a lot of them.  You’re a good Salesman

I’m with Mr. Losey on this one. Avoid the phony cars salesman.  Businesses need to understand that the vendor they choose for eDiscovery services might be the most important component of the entire trial proceeding.  Strategic front-end forensic data collections along with consultative based recommendations on data culling and legal review (such as utilizing technology assisted review) will only help further decrease downstream costs and keep the customer coming back again and again.

References:

http://scholar.google.com/scholar_case?case=15892004406175913180&hl=en&as_sdt=2,10#[8]

http://e-discoveryteam.com/2013/08/04/3-1-million-e-discovery-vendor-fee-was-reasonable-in-a-30-million-case/

http://www.youtube.com/watch?v=neqO5y3Xaq8

One comment

  1. […]   Number 4: How High do eDiscovery Costs Need to Be to Start Asking Questions? […]

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