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It’s every company’s worst litigation nightmare. Midway through a billion-dollar trial, crucial documents surface that were not produced during discovery. This is what happened in December of 2003 to DaimlerChrysler AG and its outside law firm. Midway through the trial, held in a Wilmington, Del., federal court, handwritten notes from Gary Valade, the Chrysler Corp.’s chief financial officer, emerged. They had been taken during key meetings on the merger between the Chrysler Corp. and Daimler. Since the case focused on the parties’ assumptions about whether the transaction was truly a merger of equals or an acquisition by Daimler, these notes from one of Chrysler’s main negotiators supplied relevant evidence. The trial halted while an investigator determined whether the documents were intentionally withheld. While the court never could determine, based on the facts presented, why the documents were not produced, it did conclude that there was no evidence that either DaimlerChrysler’s law firm (Skadden, Arps, Slate, Meagher & Flom) or the witness had withheld the documents intentionally or in bad faith. The facts of the case present a cautionary case study for all companies with substantial litigation, as well as their outside counsel. Even when well-trained, competent lawyers in well-managed law firms work very diligently, weaknesses in the discovery process, especially in document review, can produce embarrassing and potentially costly results. What are some of the most common risks and the best practices to manage the costs? 1. Avoiding transmission errors. Expect mistakes. Documents will get lost or mislaid. Duplication errors by copy shops, incomplete delivery of copies, and inaccurate tracking of stored documents can occur. Remember, the more often documents are copied and transported, the greater the likelihood of errors. One way to reduce these risks is to scan documents at the start of the production process. Scanning eliminates the risk of copying errors and can also make it easier to identify mislaid documents earlier. Scanning costs are comparable to those for copying. Ken Shriber, principal at Ditto Document Solutions in Pittsburgh, suggests that scanning and OCR can be done for less than 15 cents a page in large cases. Photocopying hard copy pages and keeping them in original format with staples and clips typically might cost around 13 cents a copy for each set. 2. Using knowledge management principles. Knowledge management involves developing a process to capture and record relevant information as work is being done so that it can be retrieved faster and more efficiently when it is needed later. Significant unnecessary risk arises when knowledge management is put off until after the production is completed and trial preparation has begun. David Cohen, a partner in the litigation group at Kirkpatrick & Lockhart and past chair of the American Bar Association Litigation Technology Subcommittee, has been a longtime advocate of using knowledge management principles at the beginning of a document review. According to Cohen, “Clients can spend a lot of time and money on document imaging, OCR, coding, and privilege review, but none of these processes automatically identifies the most important documents for resolving the key disputed issues. If lawyers are going to be reviewing the documents for privilege or other purposes, it usually is beneficial and cost-effective to have them identify ‘hot’ documents at the same time.” How much knowledge management is needed? A knowledge management strategy can be as involved as reviewing documents and using a database and issue codes so that reviewed documents can be easily be identified when particular issues are examined over the course of a case. It can also be limited to hot document coding during the more basic document reviews for relevance and privilege. The risks associated with the litigation and the client’s litigation budget usually are the two primary factors that determine how extensive the coding will be in each case. Clients and law firms might view knowledge management as an expensive task best left until the documents are selected for production. This is a valid concern, given the cost structure of many large law firms. These firms can bill associates at hourly rates approaching $300. One highly effective response to clients’ concerns about costs is to use contract attorneys and paralegals with hourly billing rates that typically range between $40 and $125. What are some of the hidden costs of weak knowledge management? Here are some of the most common ones in document-intensive litigation: • Staff disruptions caused by contract legal staff leaving or being removed from a project or the normal rotation of law firm staff to other projects. • The tedium that can arise from the detailed nature of a seemingly endless number of documents. • The limitations of human memory to recollect and retrieve highly specific facts from a specific document. Strategies can be devised over the course of a project to cut some costs if both clients and law firms recognize that the costs are there. One of the main benefits of knowledge management is that a law firm can advise the client early on in a case whether the relevant documents strengthen or harm the case. This allows the law firm to begin to refine its strategy earlier. The client is able to make an informed decision about whether to settle early, when the terms will usually be most favorable. 3. Avoiding unnecessary duplication. Multiple examinations of each document are common in law firm document review and production. Yet these extra steps can produce unnecessary work for the firm and unnecessary cost for the client. Such examinations can include reviews for: relevance, privileged documents, redaction to protect sensitive information, a deposition preparation, research to draft briefs such as for summary judgment, and trial preparation. With better planning, a law firm can combine some of these reviews early in the process, thus devoting more time and effort to the most important documents and to quality assurance. Even clients with the deepest pockets usually want to minimize the costs of working with a large pool of mostly irrelevant documents. There is always a temptation to take short cuts. Doing a relevance review, for example, without taking time to capture the attorneys’ or document reviewers’ thought processes, might save time and money on the irrelevant documents. However, it can ultimately cost the client much more if relevant documents appear at a later stage. 4. Staffing appropriately to reduce costs and increase productivity. Are full-time associates the best choice for massive document production projects? Consider this: Contract attorneys can cost law firms 50 to 80 percent less than full-time associates. According to Richard Dandrea, chair of the mass tort practice group at Pittsburgh-based Eckert Seamans, “We have successfully employed teams of contract attorneys on several large-scale document projects in recent years, enabling us to significantly reduce billing rates for big-case discovery.” In addition, a dedicated contract attorney will usually produce a better quality product for the client, with fewer errors, than a law firm associate who juggles other responsibilities. A large document-intensive case frequently produces staffing challenges, even in a large and well-managed firm. The firm usually must ask associates to volunteer long hours to handle the document review projects, while at the same time keeping up with other demands. In fact, if any other assignments come up at the same time, associates may find reasons to tend to the new assignments. Document-review projects seldom give associates an opportunity to stand out. In fact, associates seldom make partner at large law firms primarily based on their document-review expertise. Contract attorneys and paralegals, dedicated exclusively to document review, are usually the better staffing choice. They can concentrate exclusively on doing a thorough job. In addition, their paychecks depend entirely on their performance. 5. Adopting a methodology. In addition to saving money and improving reliability, contract staff allows the firm to offer its clients a total project management solution. Working without distractions from other matters, contract attorneys can be more productive and accurate. They can be deployed, reassigned, and managed to work within limited budgets. A project management methodology also better supports the use of simple, reliable performance measurements, which spot potential problems early. This approach of “just the right person just in time” is almost impossible when document review staff must divide their time and attention among other projects. 6. Finding the lowest-cost, best-qualified discovery team. Law firms, contract attorneys, and support staff can also be sourced away from the largest, most expensive markets to cities and regions where professional costs are substantially lower. These markets may be smaller, but they are nonetheless large enough to have a trained, sophisticated talent pool to handle discovery tasks. They can also offer significant savings. According to the Altman Weil 2003 Survey of Law Firm Economics, legal billing rates in the Midwest, for example, can be 20 to 40 percent less than the billing rates in New York City, Washington, or the Silicon Valley. With document scanning and Web-based litigation management software, this strategy is not difficult to implement as geographic location becomes less relevant. There are clearly better ways to improve reliability, reduce cost, and deliver important strategic information to trial lawyers earlier in the case than by using the traditional methods for document review. Clients and law firms who take the time to evaluate how to handle their documents in litigation can build a more reliable process and gain advantages in case preparation. Clients and law firms can also use more efficient staffing methods. The client can then decide if these savings are better spent within the company or can be focused back into the litigation to hire the best legal talent needed to staff other parts of the case. Karl Schieneman is a shareholder in Legal Network, a Pittsburgh-based, attorney-owned and -operated legal staffing and consulting company specializing in document review cases. He can be reached at [email protected]. Norman Clark is a partner with Walker Clark LLC, a Miami-based international legal management consulting company. He is also a vice chair of the Practice Management and Technology Committee of the International Bar Association.

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