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When it comes to big-case litigation, it would make things so much easier if a law firm could call on one vendor for all of its electronic data discovery needs. Alas, it isn’t that easy. Even companies that hold themselves out as one-stop shops for scanning, imaging, and data storing, harvesting and retrieval are better at doing some tasks than others. Vendors come and go. Today’s e-discovery powerhouse might well be tomorrow’s neglected subsidiary of a business consulting conglomerate. That’s one reason why some firms, including Fenwick & West and Foley & Lardner, have built in-house e-discovery shops. But other firms are leery of investing big money to start and maintain these services. Even with the most comprehensive in-house operation, most firms will inevitably continue to use outside vendors. Foley, with 20 offices and about 1,000 lawyers, outsources some forensics tasks because it prefers to use an outsider who can testify in court on the data collection process, says Bruce Blank, Foley’s director of litigation services and support. Foley also turns to outside vendors when clients use software that the firm doesn’t support and for very large projects or when the firm has too many e-discovery-intensive cases in the hopper, adds Blank. In fact, there is an ongoing debate within many large firms over how much should be kept inside the firm’s doors and what should be sent outside. But neither option is easy. First, there’s a question of human resources. The combination of legal knowledge, project management experience and technical expertise needed from in-house e-discovery staff is difficult to acquire at any price. And sending the work out requires constant vigilance over an army of potential vendors. Betsy Reynolds, director of litigation support at Los Angeles’ Manatt Phelps & Phillips, says she won’t hire copy shops that are new to electronic discovery. “They don’t have the proper skill sets,” she says. “A lot are new to the game and don’t know what they are doing.” She advises any firm that outsources its e-discovery processing to require a potential vendor to prove itself with a small sample data set. “Most will do it for free with the understanding that it will lead to business with the firm,” says Reynolds. Foley uses only national vendors. Blank says he doesn’t like to transport data if he doesn’t have to. Because of that, he looks for vendors with physical sites located near all of Foley’s 11 offices. Smaller vendors, he cautions, do not have resources to keep up with the rapidly changing technology or necessary staffing skills. Smaller shops also might not have experts with the credibility and credentials needed for testifying in court about process protocols, chain of custody issues and all the other criteria about how the documents and data were produced for discovery. Once a firm finds a reliable vendor, it’s also a good idea to have backups in place. Manatt does not maintain a pre-approved list of vendors list simply because companies come and go as they get acquired or go out of business. Even a stable supplier has to be able to work with other outsourcers that might be hired for other parts of the project. Getting vendors, who compete with each other, to work together to process data is an absolute necessity in major litigation cases � but it also difficult to arrange. “Some projects are so large that you need to break it up among vendors to make sure they can meet tight deadlines,” says Reynolds. “You need vendors who are willing to play well together.” Florinda Baldridge, director of practice support at Fulbright & Jaworski, says the leading legal cases involving e-discovery have put law firms on notice that they must conduct due diligence when hiring anyone who comes in contact with sensitive data. In Coleman v. Morgan Stanley, the investment company was ordered to pay more than $1.4 billion in compensatory and punitive damages because it failed to produce relevant electronic information. And in Zubulake v. UBS Warburg, the banking and investment firm was hit with a $29 million verdict after U.S. District Judge Shira Scheindlin in New York sanctioned the company for destroying e-mails and backup tapes pertinent to the case and instructed jurors that they could assume the data would have been unfavorable to the defense. Risk-management issues are also a concern to Manatt, which has been looking into the development of an in-house e-discovery shop. “How far do you really want to go with it?” says Reynolds. “We want to strike as close to that perfect balance as we can get.” The firm currently can handle document imaging and can also code data and create reports based on the data. It outsources the capturing and harvesting of data but is considering adding tools for data analysis to supplement the outsourced work and ensure that the outside work is done correctly. Law firm officials say it is important to be careful when planning an in-house operation in terms of deciding how much and what tasks to keep inside. When Manatt established its litigation support department four years ago, Reynolds says, the firm developed an extensive Request for Information and sent it to key vendors who handle scanning, coding and imaging. At Foley, Blank suggests putting some distance between the firm’s lawyers and the e-discovery technical staff. “It is literally a backroom process,” he says. “The race car driver does not build his car.” Reynolds, likewise, is leery of too much attorney involvement in developing the e-discovery protocols. “They think they understand it but a little bit of knowledge can be a dangerous thing,” she says. “They have high expectations. They are bottom line people. They don’t really want to know the details.” Attorneys also tend to underestimate what Reynolds calls the “soft costs” involved in taking work in-house � costs that the firm cannot bill back to clients. These include the IT person who builds the server to store the client data, the purchase of servers to house data and the staff needed to make sure that new storage can be added at a moment’s notice. One advantage of using outside vendors is that they have all the software and services that might be needed for a particular kind of case but perhaps not for others. And, of course, a reliable, large vendor can be brought in at the last minute. Baldridge says that finding qualified people to oversee a firm’s internal e-discovery center or even to manage outside vendors may be the most difficult task of all. “There are so many moving parts. So many things are happening quickly,” she says. Staff members need to have a solid background in computer networking as well as litigation support, a combination that can be hard to find. Among other skills, e-discovery staff need to be able to work directly with clients and figure out what kind of data is available on all the different types of technology equipment within the client corporation. One of Fulbright’s clients, for example, had 25 facilities, which required the e-discovery staff to figure out how to gather and preserve the data at all of them. “We have to be able to talk the talk,” she says. “You have to ask the right questions. We don’t like to outsource [that kind of client consultation] because we believe it’s important that we develop knowledge about our clients’ systems. Every second and subsequent case is more efficient because you know their structures, their systems and their IT staff. And our lawyers like working with their own staff.” One risk to operating an in-house staff is placing the firm in a vulnerable position if a key staff member decides to go elsewhere. On the other hand, a firm that outsources its e-discovery work can simply take its business somewhere else if someone who works at the first vendor leaves for another job. All that said, outsourced e-discovery work doesn’t come cheap. Even with a little more competition from firms who are doing the work themselves, outside vendors have remained expensive, with some often charging per gigabyte of data or for each page or file that it processes. Reynolds says she doesn’t think the industry has hit its pricing peak yet. But, she adds, “it is moving in that direction.” Marcy Burstiner, a freelance journalist in the San Francisco Bay Area, writes regularly on legal matters for various ALM publications.

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