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The days of sending underlings to dig through old boxes in giant warehouses for discovery files are over. Electronic discovery has become a crucial part of litigation, and electronic data makes up the vast majority of discovery material in most cases. Unfortunately, along with e-discovery have come sky-high costs and huge time commitments.

“The sad fact is you’re going to spend money on these events whether you like it or not,” says Jeff Beard, an attorney and e-discovery consultant. The ubiquitous question facing in-house counsel, however, is: How can they spend less?

Most often, companies outsource their e-discovery work to consultants or law firms. The extent of outsourcing ranges across the industry-standard Electronic Discovery Reference Model (EDRM), from collecting and processing data on the left side of the model, to review and production of data on the right (see “E-Discovery Model,” p. 54). But recently, more companies have started bringing parts of the e-discovery process in-house, largely through software solutions.

Craig Carpenter, general counsel and vice president of marketing at Recommind, an e-discovery vendor, acknowledges that there’s no one-size-fits-all solution. There are arguments for and against bringing e-discovery in-house, and each legal department must weigh the decision for itself.

“The upside of doing e-discovery in-house is control over the process and an ability to manage costs,” says Karen Stevenson, senior counsel at Buchalter Nemer and a complex litigation and e-discovery specialist. “The downside is exposure to sanctions, spoliation and increased costs if you don’t do it right.”

Successful Strategies

Different-sized companies should consider bringing different aspects of e-discovery in-house. Most medium or small companies with a sizable litigation budget can probably benefit from insourcing the left side of the EDRM. This means collecting and processing data without a consultant or outside counsel.

Done properly, the process can cost significantly less than using one of the major e-discovery consulting firms. It might cost more than using a small startup vendor, but it is probably less risky.

Bringing the right side of the model in-house–i.e. review, analysis and production–happens less frequently. Only companies with frequent bet-the-company litigation or lots of smaller cases should consider insourcing those processes because of the extensive resources needed to do them well.

“[Some companies] will do the majority of the review in-house and then turn over the most relevant documents to their outside counsel,” Carpenter says. “We’re talking about cases where they have between one and 10 terabytes [of discoverable material]. They’re not trying to do the entire review on their own, but they’re trying to get from [something like] two terabytes down to 100 really relevant gigabytes.”

Almost no legal department has the resources to handle the entire e-discovery process alone from start to finish. For many companies, it’s more practical to strategically outsource review.

“A number of companies are using contract reviewers, at least for the first relevancy pass, as opposed to paying associates higher rates at law firms,” Beard says.

Proper Planning

Beard’s future hope for in-house counsel is that “the left-side EDRM tasks will increasingly become part of the regular business fabric.”

For that to happen, legal departments need to complete due diligence before making the decision to insource e-discovery. Companies need to be prepared for significant upfront costs.

“It’s not just software, it’s investing in people, time, training programs and reorganizing responsibilities,” Beard says.

Many experts agree that e-discovery staff should be a separate, IT-knowledgeable group that reports to legal.

And new e-discovery procedures must be airtight because poor planning can send costs soaring. In a worst case scenario, the courts could reject a company’s document production.

“The only thing worse than doing e-discovery the first time is having to do it again,” Stevenson says. “If people think e-discovery is expensive, try doing it twice.”

To stand up in court, a well-prepared, defensible procedure must be transparent and repeatable. “You need to be able to say, ‘Here’s how we did it, here’s why that was reasonable and here are the steps we took,’” Carpenter says.

The Big Picture

Creating a written policy for all employees is a good first step for bringing e-discovery in-house. That way everyone at the company knows what to do with a litigation hold or even how to handle e-mail archiving on a daily basis.

A routine becomes important immediately, Carpenter says, because one of the toughest parts of insourcing e-discovery is having to deal with problems internally.

“If projects are going to have trouble, it’s going to be on the workflow side more often than not,” he says. “Now you need to think about all the things [your consultants] were thinking about before. And you might not even know half the stuff they did.”

Although total savings vary from company to company–to the point where experts hesitate to give quantitative estimates–at moderately sized companies the number could stretch into the millions. But like any new project, in-house counsel looking to bring e-discovery in-house need to decide if they’re ready to make the upfront investment. Often it will quickly pay for itself, but insourcing should never be an impulsive decision. In-house counsel should consider it a months-long endeavor.

“Companies are running lean right now. They don’t have a lot of extra [resources],” Beard says. “Before you start [an in-house e-discovery program], you have to think about who is going to be able to devote a substantial amount of time to this.”