How to Budget for E-discovery: The Big 5 Expenses

Managing a budget in the unpredictable world of complex litigation challenges even the most experienced among us, demanding both flexibility and turn-on-a-dime responsiveness. The unprecedented capacity to collect terabytes of data, burdens imposed by unreasonable opponents, and aggressive scheduling orders are just a few factors that can send discovery costs skyrocketing.  For those who lack confidence in their discovery know-how, we’ve put together an introductory guide to navigating the Big 5 expenses of document review:

(1)   Collection and Processing Fees – Technology vendors typically charge from $200 – $700/GB for initial native file processing. Counsel would be wise to solicit numerous bids from a variety of vendors that include the collection and processing costs. As you can see, this cost can quickly escalate depending on the amount of data collected.  Aggressive negotiation with opposing counsel at the onset of litigation to narrow the scope of collections is your best bet to minimize these collection and processing fees.

(2)   Management of Document ReviewRegardless of how the managerial role is staffed, document review project management is a full time job for the duration of the review. Billable hour rates can range anywhere from as low as $60/hour for a project manager from a staffing company to as much as $450/hour for a law firm associate.

Your project manager must effectively organize and lead the review. Her tasks may include: tracking collections from a variety of sources and locations, helping to design the review protocol, training the document review attorneys, monitoring the review progress and budget, performing quality control, working collaboratively with technology vendors, supervising privilege review, and drafting privilege logs.

A law firm associate may have the experience and client knowledge to be an effective choice, but she will also be, by far, the most expensive option. Additionally, the associate will likely be pulled in many other directions during the course of the litigation.

A manager provided by a staffing agency will be a less expensive option, but may cause other complications.  A recent opinion by the D.C. Committee on the Unauthorized Practice of Law stated that project managers working for staffing companies may only handle the administrative aspects of supervising a document review, and may not provide any supervisory activities requiring the application of professional legal judgment, regardless of their individual licensure. So, even if a project manager from a staffing company or technology vendor is managing the review, it will still be necessary for the law firm associate to devote time to oversight, quality control, and final privilege review.  Indeed, as the J-M Manufacturing v McDermott e-discovery malpractice case illustrated, the overseeing law firm may still be liable for errors made by the attorneys provided by staffing agency.  The oversight management provided by the law firm must be factored into your overall cost projections.

(3)   Attorney Document Review – The rates for contract attorneys typically range from $50 – $80/hour depending on the nature and complexity of the review.  The pace of review, measured in average documents reviewed per hour, may also vary significantly.  Complex reviews requiring numerous issue codes, redactions, and multiple layers of confidentiality coding are often reviewed in the 40 documents per hour range, while other less complicated reviews can often be performed in the 100+ documents per hour range. During the budgeting process, the project manager should calculate different review and quality control rate scenarios, offering slow pace, moderate pace, and fast pace estimates.  The client must always balance the need to review the documents quickly and efficiently with the need to include enough discrete issue codes to avoid any future need to re-review documents.

(4)   Technology Vendor Consulting Fees – Technology vendors typically offer consultants who are versed with their review platform and software at rates ranging from $200 – $400 per hour. Costs will be incurred for any assistance provided to prepare the review workflow including the creation of production sets. These vendors may also assist in technological efforts to isolate subsets of documents or perform other complicated analysis. Clients should factor in technology vendor consulting time for each collection and production when estimating discovery costs. Ask prospective vendors how much time is required to run typical productions – you will need to take the associated fees into account for each production in your project cost estimate. It should be noted that many attorney project managers have the requisite knowledge to complete tasks such as creating document folders, setting up workflows, and preparing production sets, often at lower billable rates than their technology vendor counterparts.

(5)   Technology Vendor Hosting Fees – Data hosting and storage fees typically range from $20 – $35/GB per month. This is a significant expense particularly since complex litigations may last for years, and clients may be obligated to keep the database active through final resolution of the case. This cost, which could be in tens of thousands of dollars per month, will continue so long as the database is online, even if the actual case is in a state of inactivity. Clients will want to aggressively shop this cost among vendors and inquire if tiered pricing based on GB or case activity is available.

Complex document reviews have thousands of moving parts and endless pitfalls to avoid.  By focusing on and containing the Big 5 expenses, you can ensure your clients are minimizing their exposure to the greatest extent possible.

3 thoughts on “How to Budget for E-discovery: The Big 5 Expenses

  1. Ed Schoenecker says:

    Interesting, but I wonder how different DC opinions regarding contract attorneys are from other states

    1. David Tanenholz says:

      Ed, thank you for your comment! DC UPL 21-12 opinion is based on DC Court of Appeals Rule 49 which prohibits people from engaging in the practice of law unless enrolled as an active member of the DC bar, subject to certain exceptions not relevant here. I’m sure that every state has some version of Rule 49, requiring state-specific bar membership as a prerequisite to practicing law in that state. Opinion 21-12 analyzes the complicated issue of which document review duties comprise “practice of law” and under what circumstances. Unfortunately, there appear to be very few, if any, opinions from other jurisdictions similarly offering specific guidance on this issue. Certainly, as Discovery Counsel, we believe the review of documents for factual and legal issues pursuant to subpoenas or litigation document requests comprises the practice of law in virtually all circumstances.

      David Tanenholz, Hardinger & Tanenholz

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