Controlling Litigation Costs: Managing Your Legal Department for Success

Transcription

1 Controlling Litigation Costs: Managing Your Legal Department for Success

2 Controlling Litigation Costs: Managing Your Legal Department for Success Faced with the rising costs of hefty fees for legal services provided by outside law firms, and the ever-increasing need for discovery capability and storage capacity, businesses are eager to find new and innovative ways to manage their litigation costs while still driving successful outcomes in both the courtroom and the boardroom. Corporate CEOs are pushing their general counsels and corporate legal departments to drive down the hourly rate charges from outside law firms, while still demanding top-tier service and results. Today s general counsel has to look at new and unique ways to work with outside counsel, drive down external costs, and minimize fees for support tasks that can be done by non-legal personnel. Some of those solutions have been to move to alternative fee arrangements, bring e-discovery in-house, or look to non-law firm vendors that can perform functions for a fraction of the cost that law firms would charge. Internal Solutions At a recent panel discussion in Chicago hosted by Big Law Business and Catalyst, Susan Lees, general counsel of Allstate Insurance, noted that she has recently reintroduced timekeeping to her team as a way to track, manage and allocate costs back to the businesses (in this case, the law department s internal customers). By providing solid cost information to her internal customers, she helped them decide whether to pursue certain actions. The additional data also allows her to provide more complete information during the annual budgeting process. Other ways today s general counsels are cutting costs are to bring more work in-house. For example, rather than sending a subpoena off to outside counsel, many businesses now have internal attorneys dedicated to the intake process of subpoenas and other initial matters. Additionally, some businesses, including Allstate, are now building internal e-discovery departments. Using new software tools and platforms, such as those offered by Catalyst, and leveraging internal employees, businesses are finding that they can manage their discovery needs at a lower cost than having to outsource the entire process. Though not always the case, moving services internally can often have a beneficial impact on the overall legal budget. Third-party providers looking to break into a once-closed market are now taking non-lawyer-related tasks, such as e-discovery, and marketing them separately to businesses through Software as a Service (SaaS) offerings and other a la carte services. By allowing businesses to license software to use internally and manage their own storage costs, law departments are able to bring their litigation costs even lower, satisfying budget demands from their CEOs. There are now over 100 companies both in the United States and overseas, lowering costs even further through marketplace competition. Making Your Case: Litigation Management With so many options now in the marketplace, what are the best ways to manage a company s litigation budget? Start with the basics: Outside Counsel Guidelines. One of the most important tools a general counsel or corporate legal department can have in their arsenal is a solid set of guidelines. The guidelines don t need to be excessive, but they do need to cover the key areas that are the most important to the company in terms of costs. Items to consider should include staffing, budgeting & accrual requirements, permitted expenses, and permitted code usage if an e-billing system is used. It s important to reiterate and incorporate the guidelines in each letter of engagement executed with external law firms, even if they ve previously agreed to them, to avoid ambiguity and to keep both teams on the same page. Law Firm Scorecards. Scorecards are relatively new, but are an increasing trend. These can be a powerful tool for a General Counsel to use when negotiating the hourly rates either for a specific matter or at the annual meeting for the next year s anticipated work. By tracking how a law firm is doing against the Outside Counsel Guidelines, the timeliness and quality of the work, and how well the firm stuck to the initial budget and accrual requirements, general counsel can engage in frank and productive conversations with the firm throughout the year and at the outset of new engagements on cost expectations.

3 Scorecards can also help a business determine whether some aspect of the work should be moved from the law firm to save costs by either internalizing the work or outsourcing it to a lower-cost third-party vendor. Matt Miller, deputy general counsel at Groupon, who spoke at the recent seminar Controlling Litigation Costs Managing Your Legal Department for Success hosted by Catalyst in Chicago, discussed the impact of having scorecards for his firms and how it has changed the conversation with his key law firm partners. In the past, firms would know if they weren t meeting expectations only by not getting hired for the next matter. Now, if a firm doesn t meet the company s expectations by returning a document too late to be thoroughly reviewed before it s due, for instance the firm can be made aware of it much sooner, or at least in the post-litigation review/wrap up, so that adjustments can be made without having to scuttle the relationship. Contract Attorneys. Companies are now turning to the use of less expensive contract attorneys to do document review in-house during the initial discovery phases of litigation. By using contract attorneys, companies avoid both the initial overhead costs and the higher first-year costs passed on by law firms for the same work. Companies create a team of contract attorneys that can be managed by an internal associate for a given project. When that project is complete, the attorneys are either released or reassigned to the next matter. Multiple Law Firms and/or Experts. Though many companies have developed good working relationships with a select few law firms, they may not be getting the best pricing model from that firm over time. Have several firms with similar expertise that your company can use for a matter type. By spreading the work around and not relying on one law firm, you can force law firms to continually compete and offer low rates or alternative fee arrangements in an effort to win your business for a particular matter. By using multiple firms, companies are exposed to more experts, and work product remains fresh. While you risk getting poor work from untested attorneys, using well-respected law firms will minimize the risk and can ultimately help keep costs lower than by sticking with one firm. Technology Verdict: Finding Solutions In addition to the internal business methods that can be used to lower and manage litigation costs, new technologies and software options are emerging at a rapid pace to help general counsel and their companies stay on track with their budgets. The key is to find the right mix of technology and vendor that will fit with your company and IT budget. A few must-haves: Matter Management System. A matter management system can provide several windows into the volume, cost and type of work most often performed by inhouse and external counsel. In the past, companies used programs like Microsoft Access, Excel or other database applications in addition to their internal accounting applications to build their own systems to manage their case load and legal invoice tracking. Such systems were cumbersome, time consuming, not always complete, and required multiple reports for a complete picture. Vendors today now offer cost-effective, efficient systems that incorporate accounting, matter management, legal billing, and law firm management. These systems can help cut costs in terms of both time and actual expenses by helping to automate certain bill review functions and centralize reporting, making external software products a better alternative, in many cases, than building a custom internal system using multiple applications. Finding the right matter management system for your company can make all the difference. Many systems not only allow you to store all documents related to the matter, but also have a timekeeping feature, a way to integrate with other programs such as MS Outlook, and an e-billing feature to work seamlessly with your external firms. All-in-one systems streamline the workload, saving valuable time and resources. E-Billing System. Depending on the company, having a separate e-billing system may be more reasonable and cost-effective than a matter management system and provide built-in reporting advantages as well. Smaller, less robust software systems still offer some matter management functions along with the e-billing features.

4 Using a system that can be integrated with a company s accounting system can help reduce the amount of time from approval to payment, and depending on the fee arrangement could help a company capitalize on negotiated early pay discounts. In addition to streamlining the legal invoicing process, having an integrated e-billing software with report capabilities also helps to drive cost efficiencies by providing much-needed data for cross-department reporting initiatives like legal dashboards. Dashboards provide an at a glance look at the current status of legal expenses and forecasting for the upcoming report cycles. Dashboards are becoming an essential tool for General Counsels to use as support during budget discussions and in reviewing the overall success and the total outside legal spend of the law department at any given time. Collaboration Software. Using a collaboration software, either in the cloud or internally on a company s servers, can help reduce costs by allowing the legal team to build a knowledge base of commonly used documents or clauses with the whole team. By giving attorneys a central space to collaborate, time could be reclaimed by not having to re-draft something that has been done before by another attorney in the group. Collaboration spaces also offer a platform to help team members jump-start research or reach out to others on an issue that they may not have dealt with before, thus saving time and money by not having to go to outside counsel first. TAR Software. Technology Assisted Research (TAR) can help drastically reduce the costs associated with the initial phases of e-discovery. By training the computer on what key words, phrases or other tags to look for, the system can process thousands of documents in a fraction of the time, compared to a manual review, in order to determine what electronic files could be applicable to the litigation. Using TAR software, like the Catalyst Insight Platform, internally can eliminate the need for traditional external vendors (typically law firms that would use associates to manually review documents, both paper and electronically), lowering the costs of the litigation process overall. By keeping everything in-house, the company maintains control of all of the documents and the overall discovery process while keeping its costs as low as possible. Mollie Nichols, a senior attorney at Cleary Gottlieb Steen & Hamilton, who also spoke at the Catalyst event, noted that the use of TAR for one of her clients allowed her to reduce the discovery costs for a large litigation matter by 40 percent. In this instance, the client allowed her to use TAR to do a review of a large document load to determine which documents were subject to privilege. By using TAR, the time required to conduct the review was drastically reduced from months to days, contributing significantly to the 40% reduction in overall discovery costs to the client. Once the privileged documents were identified and removed, the remaining items were produced along with the privilege log generated by the system. What s more, new innovations in TAR have resolved concerns that were initially associated with the early version of TAR systems. The result, TAR 2.0, gives corporate legal departments even more advantages, including the following: With TAR 2.0, the system has a capacity for continuous learning. This functionality allows users to feed tags back into the system. The more the system is used, the smarter the system becomes about the relevant documents under consideration. TAR 2.0 training is cost-effective. Under earlier versions of TAR, it was believed that a subject matter expert had to be brought in to train the system. But experts can be costly and time-consuming. Review teams are more efficient, less expensive and less time consuming, leaving the expert to review any outliers that may come up rather than training the system as a whole. Language barriers are coming down. Many TAR 2.0 systems are now able to tokenize a process where the text is first broken into individual word segments allowing for the system to work with other languages such as Chinese, Japanese, and Korean.

5 Training can begin any time, not just when you have all of your documents. With the capacity to handle big data, TAR 2.0 systems can process documents as they are continually added to the system. Though there may be additional rounds of training required, the process no longer has to start from the beginning each time new documents are collected. Random document selection is no longer needed for training. Under TAR 2.0, you can submit as few or as many documents to the system for training purposes as you have or need. Documents can be selected through diversity sampling, systematic sampling, or simple random sampling. The more relevant the documents, the better the results. The Future of Technology According to a recent report by Gartner, new technology advancements and the growing popularity of cloud computing (think Office 365, Box, cross-platform data) have begun to drive new innovations in e-discovery systems. Microsoft has made changes to Outlook and SharePoint to make it easier for legal holds and document preservation requests to be put into place. E-discovery vendors are beginning to deploy more sophisticated systems to deal with the security and privacy concerns that corporations face when aggregating documents from the cloud and local sources. Of significant consideration in this new world are the costs associated with the management of the ever-increasing store of data. One way that companies are working to decrease those costs is to first examine, then revamp, and finally enforce the retention policies. What is required legally? Depending on the type of business, how long are documents legally required to be held either by regulation or by statute? Write policies that strictly mirror those requirements and then strictly enforce those policies. The more a company keeps, the more the company needs to review in the event of litigation and produce during the discovery process. Those extra document costs increase the overall costs both in retention costs and in the litigation itself. Where are documents stored? Does the company keep everything in the cloud or is document storage mixed (laptops, shared network drives, jump drives, portable hard drives, etc.)? Consider limiting the number of places that electronic documents can be stored to minimize the amount of time needed for collection of the documents and the review process. If there are multiple sources of documents, costs will increase depending on the number of locations required and type of review needed. What software works best for multiple platforms? If the company stores data in multiple locations, look for a vendor or software that offers a more comprehensive solution for the price. Keep in mind that a less expensive option might look good on paper, but could end up costing more in the long run if multiple passes are required. A system that covers more platforms and is fully integrated may be a more economical solution, both in time and overall cost savings. Success! In-house law departments today face pressure from their businesses to provide top quality legal services at ever lower costs. That pressure conflicts with the reality of needing to use outside law firms for legal services that most internal law departments just aren t staffed to handle on their own. How to manage that conflict can be challenging at best, but with the right mix of business and technology solutions, it can be done JO-23936