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5 Reasons to Outsource Litigation Support
Law Technology News
I joined Jackson Lewis in May 2010, as a partner and the firm's national e-discovery counsel. We have built a major electronic data discovery program that includes the assignment of a trained e-discovery liaison attorney in each office, systemic quality controls, practice standardizations and extensive training for all lawyers and paralegals. The office liaisons receive extended training; and all associates must complete eight hours of mandatory training (also recommended for all partners).
After nine months of research and preparation, this June, we decided to outsource to a vendor all of our nonlegal electronic data discovery work that our litigation support department had been providing to our clients. Because Jackson Lewis is a national labor and employment law firm with 49 offices, we needed a vendor that served the entire country and had the capacity to handle high volumes of work. We were also looking for simple, one-stop shopping to handle all of our nonlegal e-discovery needs, including our forensic investigations, collections of electronically stored information, processing, hosting, and advanced software. The review software had to include predictive coding features, and be affordable for all size cases, not just the biggest. We invited bidding from a number of top vendors and received many excellent responses to choose from, e.g., Business Intelligence Associates Inc. and D4 Discovery were finalists, but at the end of the day we had to pick just one vendor and decided to hire Kroll Ontrack.
Based on our experience, here are five reasons why your organization should consider outsourcing.
1. Core Competency
Your organization is a law firm, or law department of a corporation. Your lawyers are trained and engaged in the practice of law that is your mission. Why should you own and operate a nonlegal e-discovery business within your walls under the guise of a litigation support department?
Although some litigation support departments in very large firms are staffed with lawyers who do render actual legal services such as document review, most do not. Even in big-firm litigation support departments, most of the services are not legal review, but rather nonlegal services provided by technicians, such as collecting and ESI processing, forensic analysis, storage, database creation, hosting, software configuration, management and nonlegal expert advice. These are not the practice of law under anyone's definition, including the courts.
Many courts have now addressed the issue of legal versus nonlegal services in cases construing 28 U.S. Code §1920. Outside of the question of contract review lawyers (and we are not speaking here about that kind of outsourcing), few would contend that the over $1 billion a year e-discovery market is engaged in the practice of law. These are computer-related technical services. That is the core competency of e-discovery vendors. It is not the core competency of any law firm or law department.
Nonlegal e-discovery services are difficult to perform correctly. They require a high degree of skills and training. ESI processing and forensic work are technical; it is easy to make mistakes if not done properly. So is management of these large projects. We are living in an age of information explosion and rapid technology advancements. The only norm in technology is constant change. This e-discovery work is not equivalent to making copies, as some lawyers think, and should not be done in-house, especially when there are so many good companies that specialize in this kind of work.
3. Cost Savings
Litigation support departments, like any business, are expensive to set up and operate, and an e-discovery business requires a large initial investment. Not only must expensive hardware be purchased and continually replaced, but the software is in a state of near-constant change and ultimately usually proves to be more expensive than the hardware. Specialized employees are costly as well, and need expensive training to use these tools. And the best staff may be quickly cherry-picked away by competitors.
If you continue to keep your e-discovery work in-house, you have no choice but to keep writing big checks for the latest technology and staff. You cannot give lawyers yesterday's technology and expect them to compete. Your lawyers, and most importantly the clients they serve, need the cost-saving benefits of the latest technology and software. Outsourcing is a cost-effective option to the dilemma of constantly changing technology.
And then there is the issue of what costs get passed on to your clients. Often the expenses charged by firms to their clients for these nonlegal services are far more than vendors charge. That's another argument for outsourcing to a single vendor: you can leverage your mass buying power and negotiate a low rate for all of your clients who use that vendor. Outsourcing, if done right, results in cost savings for law firms and their clients.
Errors are inherent in the complex, nonlegal e-discovery services that any litigation support department renders. The exposure for these risks is hard to quantify. For instance, what would be the damages for the accidental loss or disclosure of your client's e-discovery data? (How many terabytes of client data are you holding right now? How much of that is confidential?) What if there is an ESI processing error? What if attorney-client emails were not processed and screened properly? Mistakes can happen, especially when a firm is operating outside of its core competency. What if an error requires a complete redo of a project? What will that cost the firm? (You cannot bill for that.) Are errors made in nonlegal services covered by a firm's malpractice insurance? Is it insured in any way? Do you have an agreement with the client regarding the provisions of these services? Is there any limitation on liability, or are these services rendered under a lawyer-client fiduciary relationsip? Is the risk priced into your charges, into your fees? Is that fair to your clients who might not use these nonlegal services as much as others, if at all?
There are a host of ethical issues involved in a law firm's rendering of nonlegal e-discovery services. These are likely to be treated as "law-related" services and, as the Comment to ABA Model Rule of Professional Responsibility 5.7 says, "When a lawyer performs law-related services or controls an organization that does so, there exists the potential for ethical problems." If such services are offered by a firm, absent special disclosures and consents, the full gamut of professional responsibility rules apply, even though the work is largely performed by nonlawyers. There are even more general issues regarding whether a law firm should be engaged in a side-business at all? Especially when the side operations have been set up to service its clients' needs in litigation? Is this an inherent conflict of interest? It probably is not, after all, everyone does it.
EVERYONE DOES IT, BUT. . .
Many thorny ethical issues are raised whenever a firm bills its clients for nonlegal services. For instance, is it consistent with the lawyer's ethical duties for the firm to make a profit in this business? If so, how much? (I have had some attorneys tell me privately that their litigation support department is a major profit-center in their firm, but more frequently I hear that the departments just break even, or lose money.)
Do you disclose the profitability or not of the litigation support unit to your clients? Do you provide full disclosure and get consent from clients before the costs appear on your bills? If you make a profit, or try to, is it the same profit margin for all clients?
If the idea is to just break even for the benefit of clients, or even to lose money and absorb losses (no firm intends to lose money from its litigation support department, although many in fact do), does that plan work out evenly to the benefit of all clients? Do some get a free ride at the expense of others?
If that is part of the firm's general overhead and is priced into hourly rates, is that fair to all clients, or does it benefit the heavy users of nonlegal e-discovery services? What about clients who never use these services at all? What happens to the idea of cost-savings to the client, if a vendor could in fact provide the same services for less? Do your clients know the price comparisons? Do you bid out all projects to multiple vendors or just automatically award them to your own captive business?
A new set of ethical issues is raised by outsourcing, but there are always ethical considerations in any profession. But for our firm, these issues are easier to deal with. We do not have a referral relationship with our preferred vendor. We do not control the vendor. We recommend them if we think that it is in the best interests of our client to do so. Otherwise not. Our clients choose.
We use whatever vendor the client wants. Further, clients pay the vendor directly. We are not part of the billing, or the contract. We receive no compensation from the vendor or any referrals. We do all of the legal work ourselves, and the vendor only does the nonlegal work. If the client would like us to use outside review lawyers, we will do so subject to the state bar rule constraints of close supervision of their work. For me, these issues are easier to deal with than the issues raised by running a side-business, even if it is often a de facto not-for-profit.
This article originally appeared in Law Technology News.