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As Kmart Corp. emerged from bankruptcy on May 6, the lawyers who defend the retailing giant in tort liability lawsuits prepared for their workloads to pick up. Many of their cases came to an abrupt halt on Jan. 22, 2002 when Kmart filed for bankruptcy protection. But the bankruptcy’s end signaled renewed activity for Kmart’s defense team — and for its litigation extranet, the secure, Web-based system the company uses to manage and monitor public liability cases throughout the United States. While Kmart’s reorganization plan has its critics, the company’s extranet roundly wins praise as a model case-management tool. At its busiest, it handled more than 3,500 open cases, in a manner, lawyers agree, that streamlined and simplified their work. Just ask outside counsel Jack “Bobby” Truitt. When Kmart notified him in 1999 that it would henceforth manage all tort litigation through an extranet, he was skeptical. Truitt, managing partner of The Truitt Law Firm in Madisonville, La., had defended Kmart in premises liability and other tort litigation for a decade. He was accustomed to handling cases a certain way. The only technology he liked to use was a handheld Dictaphone. Today, Truitt is so strong an advocate of the extranet that he lobbies other corporate clients to adopt similar systems. And he has not picked up his Dictaphone in three years. Talk to any of Kmart’s outside counsel, it seems, and you hear much the same sentiment. “I thought it would be time-consuming,” says James Balog, a partner at Chicago’s O’Hagan, Smith & Amundsen, who has represented Kmart since 1984. But it turned out just the opposite: “It expedites matters. It allows me to quickly and easily communicate with the client.” “It modernized and speeded up contacts by immeasurable amounts,” says Susan Sherrod, a Kmart lawyer and partner at Edwards, Hale, Sturman, Atkin & Cushing in Las Vegas. “I wish the remainder of my clientele would use a system like it.” The extranet had its genesis late in 1998, when James Defebaugh, now Kmart senior vice president, chief compliance officer, and secretary, began looking for a way to modernize the company’s matter management system. “We had an old system in place that didn’t provide us with the flexibility we wanted to be able to not just track matters, but to produce truly customized reports,” Defebaugh says. His research led him to T-Lex, Inc., a Brookline, Mass., legal extranet company, and its president, Lee Glickenhaus. Glickenhaus is a former litigation partner with the Boston firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo. Several years earlier, in the midst of defending a $50 million lawsuit against a major insurer, he set out to develop a tool to archive the client’s legal briefs. That spare-time tinkering led Glickenhaus to construct his first extranet. He formed T-Lex in April 1997, and left Mintz, Levin soon after to develop extranets full-time. For Defebaugh, Glickenhaus’ paired knowledge of technology and litigation proved the right formula. Within two months of their initial contact, Defebaugh gave Glickenhaus the green light. From the outset, Defebaugh wanted a system that would meet well-defined criteria for case tracking and reporting, but also be sufficiently flexible to adapt to changing needs. He and Glickenhaus worked closely together on the design. They launched a beta version with 20 outside firms in June 1999. By February 2000, the system was fully deployed. (Kmart would not say what it paid to develop the extranet.) The extranet is now the hub of their daily communications and reporting. It is used by 65 private law firms, 60 third-party claims adjusters, and Kmart’s in-house staff of attorneys and paralegals. “We’ve taken great steps toward going paperless,” says Defebaugh. “We previously dealt with huge volumes of paper. Now it is all electronic and can be reviewed online.” “The substance of our cases hasn’t changed,” says Sherrod, “but the extranet has simplified the reporting tasks and sped up response times.” Kmart’s liability team is the largest user of the extranet, but not the only one. Corporate legal staff use it as well to manage litigation and contracts. Two Kmart litigation managers oversee all liability cases, logging each lawsuit into the extranet and assigning it to outside counsel. Once the case is assigned, the system sends notices by e-mail to regional counsel, local counsel and Sedgwick CMS, Kmart’s outside claims administrator. E-mail is an integral component of the system. Whenever something happens in a case, e-mail notifies the appropriate personnel. “It ties in our Kmart folks, our third-party administrators and our outside counsel,” says Mark Kreindler, one of Kmart’s two litigation managers. “It is way more than e-mail. It is an electronic file, capturing all the information about a case.” When a case is assigned to local counsel — who pay a monthly fee of $100-$200 to access the extranet — the timer is set for them to file reports at key intervals. Most critical to Kmart supervisors is the 90-day report — counsel’s initial appraisal of a case and recommended course of action. “The extranet has it in a neat question-and-answer format so you don’t have to do a long-winded narrative,” says Truitt. “It is just meat and bones, but it is very efficient.” If outside counsel neglects to submit a scheduled report, the system sends a reminder. “The extranet is a fabulous baby-sitter,” notes Sherrod. The extranet provides ready access to detailed information on parties, lawyers, venue, medical reports, witnesses and experts. But outside counsel are equally enamored of the noncase information it contains. “Before the extranet,” explains Sherrod, “it was a chore to get copies of policies or verifications of employment status. We had to make trips out to stores. The store manager would try to put his hands on the most current manual.” Now all Kmart policies and manuals, local and national, are available on the extranet, up-to-date and ready to download. “We use it as a repository for all kinds of information,” explains Kreindler. “Our claims examiner manual is online. A lot of frequently requested discovery is online.” The extranet also includes a law library, which contains a variety of pleadings and briefs. “In-house counsel can search pleadings on the system,” explains Defebaugh. “They may want to know, ‘Has the issue of eminent domain been briefed in Tennessee before?’ All this work product is available.” Another favored feature is the witness locator, which local counsel use to track down former and current Kmart employees. They enter a name, and within 24 hours they get back a report with all known information about the employee. With the bankruptcy over, Kmart is preparing to take advantage of a component it has not yet used before — online billing. “This will have two benefits,” says Defebaugh. “It will make the bill paying process quicker and easier, so outside counsel get paid faster. And it will greatly enhance our ability to track legal expenses for a particular matter.” It was this ability to adapt to evolving needs that Kmart wanted in an extranet in the first place. “The best thing about this system is its functionality and flexibility,” says Kreindler. “There hasn’t been anything we’ve wanted to do that we couldn’t do. It’s an always-on system.”

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