Over the last twenty years, drastic changes have taken place in the way parties meet their discovery obligations. Historically, broad discovery rules resulted in companies paying extraordinary fees to their trial firms for associate review of voluminous materials in response to subpoenas, litigation document requests, and other demands for information. It was not uncommon to have dozens of high-priced associates from around the country travel to another city for months on end, racking up travel and meal expenses on the client’s dime, while reviewing documents for relevance and privilege. The discovery spend was usually astronomical for these cases and the work product was often average at best. Many of these associates resented the work—feeling it was beneath them—and gave only enough effort which they deemed would keep them on the project. The work was, and often still is, seen as “grunt” work by most large firm lawyers.
When the United States economy hit hard times in 2008, clients lost their patience with this model and its outrageous costs, and began to look for other ways to meet their discovery obligations. The desire to find new models since the late ‘aughts has led to several phenomena in the e-discovery and document review space: (1) the rise of non-law firm managed review vendors; (2) the practice of offshoring document reviews to foreign corporations providing non-US lawyers; (3) the expansion of clients’ own in-house discovery and review capabilities; (4) the development of document review centers within large law firms staffed with temporary project or contract attorneys; and (5) the Discovery Counsel law firm.
Here I will discuss the benefits and risks of each of these different models and why, when looking at all factors, using a Discovery Counsel law firm provides clients with the best of all worlds—U.S. licensed attorneys, managed by lawyers at a law firm authorized to practice law, focused only on the discovery process, producing superior work product at significantly lower overall costs.
The Risks of Using Domestic or Foreign Vendors to Manage A Review
The only alleged benefit of using a non-law firm vendor or overseas review company is their low billing rates. These companies typically bid the lowest price and market themselves as the cheapest model for reviewing documents.
What are the cons? Simply put, these vendors are not law firms. They are not authorized to practice law. As clearly stated by the District of Columbia Court of Appeals Committee on the Unauthorized Practice of Law in Opinion 21-12 (Issued January 12, 2012): “discovery service companies that are not otherwise authorized to practice law in the District of Columbia may not provide legal advice to their clients, nor may they hold themselves or any attorneys on their staff as authorized to practice law in the District of Columbia.” (21-12 at p. 8). The opinion also provides that “discovery service companies” are “limited to the non-legal, administrative aspects of document review and discovery projects” and these companies should not market themselves as able to manage the entire document review and/or discovery process, otherwise there is a “serious potential to mislead.” (Id. at 9). See also Peerless Indus., Inc., v. Crimson AV, LLC, No. 1:11-cv-1768, 2013 WL 85378 (N.D. Ill. Jan. 8, 2013) (Court granting plaintiff’s motions for sanctions because defendants did not perform an adequate document collection and instead took “a back seat approach” and let the process “proceed through a vendor”).
The decision on whether a party’s documents are relevant, confidential, or privileged in response to a request for production of documents or a governmental subpoena is sine qua non in terms of the ability of a party to defend itself or prove its claims in litigation. The decisions made during the discovery period sculpt the litigation thereafter, and in many cases, ultimately determine whether parties settle, bring dispositive motions, or proceed toward trial. Clearly, the review and assessment of a party’s documents, and the ultimate decision on whether to produce them, is the practice of law.
The same argument applies to companies overseas that market themselves as viable document review alternatives—but with an even heavier caveat that most of these companies staff their reviews with non-U.S. licensed attorneys. Thus, their cases are staffed by reviewers who are not even recognized as attorneys by U.S. Courts, many of whom have been educated in countries whose legal systems do not have a similar system of discovery as we have in the United States.
An equally important reason to avoid using these companies is that their “lowest price” rates generally result in additional legal fees for the client down the line, related to quality control and final privilege review by the client’s trial firm at their higher rates. A vendor also comes with additional hidden costs, including the need for the trial firm to devote a significant amount of time to vendor oversight. Taking these factors into account, vendors are simply unable to provide the lowest cost for the entire project. Since they are not law firms and are neither willing nor able to practice law, they are rarely capable of completing a discovery project—and usually can only commit to a review for potential relevance or potential privilege.
At the end of the day, what this really means is that the client will be billed additional hours by the trial firm to complete the tasks left undone by the cut-rate review vendor. Typically these tasks include:
- Quality controlling the documents marked potentially relevant and making final relevance and confidentiality determinations;
- Reviewing and finalizing issue determinations;
- Finalizing and quality checking the production set;
- Making final privilege determinations and drafting and/or finalizing the privilege log; and
- Evaluating key and hot documents to determine how the pertinent documents fit in to the case.
By the end of the process, a client who pays a low rate to the managed review vendor for the first stage of the project can end up paying equal or higher amounts to its trial firm for the second stage tasks, typically resulting in a high overall legal spend. This piecemeal, duplicative review process completely erodes the purported savings promised by the vendors and promoted by their low billing rates. If a company reviews its discovery-related bills from start-to-finish, it should be clear that any up-front vendor cost savings are lost as their trial firm begins to bill time for finalizing the vendor’s work product.
The Trial Firm Electronic Discovery Review Center
Some large trial firms have tried to wise-up to client demands for outsourced discovery, creating their own internal discovery centers that provide managed review capabilities. Large firms now market themselves as having the ability to keep fees low since they have project or staff attorneys on-site for document review at rates lower than their full-time associates. This is clearly a step in the right direction from the historical model of having full-time trial firm associates performing document review for hundreds of dollars an hour.
However, clients should examine the process big firm discovery centers will use for their document review projects. Who is managing the project? Is it a full-time associate billing at his or her normal associate rate? How much, and which work is completed by the staff attorneys at their lower rates versus work done by the regular associates? What is the turnover of staff attorneys from the beginning of a project to end? How much of a savings does the use of staff attorneys really generate? For example, if a client pays $150/hour for staff attorneys to perform a review and $400/hour associates to manage the review, perform quality control, run reports and track metrics, manage the technology vendor, perform final privilege review and privilege log, and oversee the productions, etc.—how much of a cost savings is the client actually realizing? These questions are key when clients analyze their overall discovery spend.
The In-House Discovery Option
Some companies have decided to expand their own in-house legal departments so that they have the resources to manage document reviews from within. If a company has the budget and flexibility to hire enough attorneys to perform its own discovery, the benefits can be great, and include greater institutional knowledge of internal documents and the ability to control costs directly. However, this is often not economically or logistically feasible, as litigation workflow is generally erratic and the demand on resources can swing wildly as cases vacillate between active and dormant.
Additionally, a recent trend in the case law shows that courts are wary of this practice and still think parties should allow their outside counsel to provide legal input into the discovery plan and process. See, e.g., Nat’l Day Laborer Organizing Network v. U.S. Immigration and Customs Enforcement Agency, No. 10 Civ. 3488, 2012 U.S. Dist. LEXIS 97863 (S.D.N.Y. July 13, 2012) (Parties conducting their own e-discovery must at least consult with an attorney specializing in electronic discovery and data management issues to avoid costly duplication of efforts and/or sanctions); Carrillo v. Schneider Logistics, Inc. 2012 WL 4791614 (C.D. Cal. Oct. 5, 2012) (same). A party should be aware of these cases and make sure that whatever process they use is transparent and defensible in light of the trend in the law.
Why a Discovery Counsel Law Firm is the Best of All Worlds
A Discovery Counsel law firm is a boutique firm focusing only on the pre-trial process and fully authorized to practice law. A discovery counsel partners with the trial firm—acting as co-counsel—and can manage the entire process. Clients that use a Discovery Counsel law firm to manage and complete their discovery from start-to-finish have the following assurances:
- Their discovery is completed by U.S. licensed attorneys at a law firm authorized to practice law, render legal advice, and advocate on their behalf;
- Project managers and review attorneys are focused only on completing their discovery, with the fiduciary obligation to act in their clients’ best interest and on their behalf;
- Their discovery is streamlined, with a law firm providing relevance and confidentiality review, issue coding, privilege review, a constant quality control process, finalization of the document production and privilege log, and a transfer of knowledge to the trial firm on all things important about the case in one efficient process. Companies utilizing a discovery counsel law firm can avoid the common and costly practice of piecemeal, duplicative review and assessment of materials, where the trial firm will spend countless hours at their higher rates to “finalize” the project; and
- They receive legal counsel for all of the above at significantly lower rates than a trial firm, with the confidence that duplicative discovery bills will be minimized once Discovery Counsel has completed its work.
Of all of the current models for completing discovery, engaging Discovery Counsel provides clients with the best value. It is the gold standard during the discovery process—cost effective, efficient legal work performed by attorneys competent and authorized to practice law. By choosing to fulfill discovery obligations through Discovery Counsel, clients can obtain a fully integrated work product and significantly lower overall discovery spend.