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Pricing: The Small Case E-Discovery Dilemma

Major vendors aren't interested in small profit cases, but web-based technology options are emerging

Tom O'ConnorAll Articles

Law Technology News

January 25, 2012

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In 2010, e-discovery consultant Craig Ball wrote a fascinating article in Law Technology News called "E-Discovery for Everybody."

The article came to be known as the "EDna Challenge" because in it, Ball posited a solo practitioner named Edna with an e-discovery budget of $1,000 and asked how she could possibly perform any e-discovery on that amount. The problem as Ball defined it was simple:

"The vast majority of cases filed, developed, and tried in the United States are not multi-million dollar dustups between big companies. The evidence in modest cases is digital, too. Solo and small firm counsel like Edna need affordable, user-friendly tools designed for desktop e-discovery -- tools that preserve metadata, offer efficient workflow, and ably handle the common file formats that account for nearly all of the ESI seen in day-to-day litigation."

With the high number of electronic data discovery vendors and the seemingly endless number of EDD conferences, webinars, seminars, and online training venues, you might think the challenge has been met. But those offerings are almost always packed, evidence that lawyers are not yet confident on how to handle EDD.

Why? Call it the "small case dilemma." While it is not automatically true that small cases require different tools for managing EDD, the fact is that small cases often mean small technology budgets. Unless your practice is sufficiently mixed with big budget cases so you already have a full complement of litigation support tools to use, you probably don't have the necessary technology to handle anything but the smallest e-discovery matter. And the small budget means you can't engage an outside consultant or vendor. But help may be on the way, from new web-based e-discovery options.

Of course, EDD rules at both the federal and state level don't apply to just large cases. They force civil litigants into a compliance mode with respect to the retention and management of electronically stored information. The risks that litigants face as a result of improper management of ESI can include findings of spoliation of evidence; summary judgment findings; and sanctions -- including adverse inferences and jury instructions, and even complaints filed with state bar associations.

Let's start with several basic assumptions about small cases. First, we assume you will be working with copies of live data in native format -- and that the types of files you are dealing with are typical files created by common programs used for email, word processing, and other office functions. The more file formats, the more likely it is that you need more sophisticated (and more expensive) technology.

Another assumption is that you want to host the data yourself, and that you have the equipment and skills to do so. There are many good internet-based hosted programs that can fill your needs, with widely varying costs. However, typical storage fees charged for a case that exists for any length of time can bust a modest technology budget. So small cases demand applications that can be installed on one computer for processing and review. Typical examples would be files burned to CDs or DVDs, or produced on an external storage device, such as a thumb drive or external hard drive.

We're also assuming you are not dealing with terabytes of information. Small cases typically involve smaller volumes of ESI. Finally, we're assuming you have a cooperative relationship with the other side, at least in terms of dealing with EDD. The single most effective way to keep e-discovery costs low is to work with your opposition in a cooperative manner so you can stipulate to the use of low-cost technology.

But where are the small case programs? Is there really a way to process and review a couple of hundred GB of data for a reasonable price? Are there low-cost but technically adept applications that attorneys can use themselves to host and review that same data? And if not, why?

The first problem is current pricing in the market. Why? Because as we have pointed out before, many, if not most, EDD vendors have their roots in the per-unit commodity pricing days of photocopying and imaging. The standard practice for years now has been to charge hundreds of dollars per GB each time data is handled.

So for each step of the Electronic Discovery Reference Model process, an exorbitant per GB price is charged -- and as a result, a simple license-plus-annual-maintenance plan, or a monthly subscription fee model, doesn't exist. Instead, we must sort through hundreds of products priced by varying and often widely divergent methods.

$X per GB for processing, $X per page for OCR, $X per document for near duplicate detection, $X per page for Bates numbers, $X per user, and per GB to host, and so on. Each is performed for different units with different unit pricing that can run from a penny to $500 per unit.

So if a forensically sound collection of 800 GB (the size of the hard drive of one typical computer) and that data set eventually yields 200 GB of reviewable material, a typical EDD company will charge $200 per GB for the processing ($160,000) plus $50 per month per GB ($10,000) and $90 per month per user for the hosting. If the case lasts 18 months, this cost alone will be just under $350,000. And if we accept the commonly cited statistic that the review process will account for 60 to 70 percent of the total project price, then we're looking at a project cost that will eventually be close to $1,000,000. For 200 GB of data!

As you might expect, at this low price point traditional vendors have simply not been interested in 200 GB cases. Big EDD companies don't want this business -- we've been told that directly by sales managers at two separate top-tier companies.

Why? Because the simple fact is they can't support themselves on small jobs. Large companies have large overhead and need large revenue amounts to support that infrastructure. These companies may have spent millions of dollars developing software or, more commonly, acquiring another company with existing software. When this cost is added to their mindset of unitized pricing, they are locked into a system of set monthly costs and simply cannot, from their perspective, give away services to small firms with small cases.

The technology for e-discovery was developed initially for large cases with large data sets. Companies with revenue streams based on processing or hosting terabytes of data cannot easily adapt to projects consisting of several hundred gigabytes; much as you cannot expect a 747 jumbo jet to be used as an effective or cost=efficient means of transporting commuters during rush hour traffic.

Finally, products that have been designed to work with immense data collections cannot easily scale down to small sets of information. A SQL-based product working with terabytes of data on a distributed internet framework needs a certain hardware and software infrastructure to operate. That type of system can't be scaled down to load on a laptop or iPad.

So these big products have big prices and both the products and the prices are beyond the scope of most small firms and small case budgets. Those cases might be small to an international corporate service provider, but they mean everything to the persons involved in the lawsuits and the lawyers who represent them. And if your case is only worth $40,000 -- and after analysis and discussion with your client, you believe you cannot spend more than $1,000 for ESI processing and hosting services over the anticipated 18-month life of the case -- you have a problem.

That's the bad news. The good news is that low-cost programs designed for small cases have begun to appear. These products are, for the most part, modestly priced, given what they can do. In fact, in several cases the cost is low enough that it could justifiably be passed on to the client directly rather than being absorbed as overhead. Functions may be somewhat limited for each product as compared to higher end but similar options, but they all do a good job for the specific task at hand, and may suffice for your particular needs.

A quick Google search reveals some of the options, including eDiscovery DIY, from ie discovery; Lexbe e-Discovery; Bit-x-bit in-a-box; and LexisNexis Total Litigator. Digital Reef offers a free (but time limited) early case assessment service. (No endorsements should be inferred). The same Google search generated links to blogs, podcasts, and articles offering advice for small firms with small cases. With a little elbow grease and chats with colleagues, you will find even more choices.

More products are on the way. Given the emergence of these new applications and the upswing in attention to the small and midsize firm market, we predict that 2012 will be the "Year of the Small Case in E-Discovery."

Tom O'Connor (toconnor@gulfltc.org) is the director of the Gulf Coast Legal Technology Center, based in New Orleans. He has just accepted a job as director of professional services with Avansic E-Discovery & Digital Forensics. Bruce Olson (bolson@onlawtec.com), president of Onlaw Trial Technologies, contributed to the story.

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