Litigation Burn Rates, Early Analytics & Pricing Models

Litigation Burn Rate Reduction

Corporations are painfully aware that litigation can burn a lot of money. The good news is that the use of early analytics in litigation combined with new pricing models can significantly reduce discovery review costs, usually one of the largest litigation cost elements. Early use of analytics can greatly lower the volume of files sent off for expensive final review and shorten the total time required to conclude cases.

Costs of Final Review Platform

When collecting files to send off for final review, organizations usually make the initial selection based on custodians and basic metadata like dates, file types, and perhaps folder names. The files are then loaded into a final review platform where further culling takes place based on the use of more advanced TAR analytics like concept trees or clustering, email threading and domain name analysis, and advanced search.

The pricing model used for final review platforms makes this approach rather expensive. Hosting providers charge per gigabyte to ingest and then charge hosting fees each month the case is open. Ingestion fees can be $150 to $200/GB with monthly fees of $20 to $40/GB. Having 500 GB ingested hosted for a year can cost almost a quarter of a million dollars for the first year:

Litigation Burn Rates Blog

While final review platforms provide much valuable functionality, e.g., TAR, analytics, tagging, workflow control, QA tools, and exporting, the fact remains that many of the files ultimately eliminated from production using the review platform could have been eliminated prior to being sent to the platform. Litigation Burn Rates and the Tools Needed

Depending on the type of data (e-mail or loose files), there are literally dozens of advanced analytics tools providing comparable or additional functionality that can be applied earlier in the process, from tools that analyze file shares and cluster similar documents to tools that look for behavioral patterns. Intelligent use of early analytics tools can reduce the initially-collected files by 80-90% before going to the final review platform, often by much more.

The key to cost-effective processing is to move away from a per GB pricing model and to use more analytics tools to cull more files earlier in the process. When corporations are buying per GB processing, vendors are economically incentivized to maximize the number of GBs they process. A better approach is to focus on desired outcomes.

Legal cost control pioneer Jeffrey Carr, currently SVP, General Counsel and Secretary of Univar, Inc., has written extensively about performance-based billing and alternative fee arrangements in the context of attorney fees. This is what he and his co-authors wrote several years ago that applies equally well in e-discovery (emphasis added) /*1:

The old adage that you get what you pay for is particularly apt with respect to fees. This adage is really a take-off of the equally old and true adage that money talks. If you pay for hours, that’s what you will get. The new reality has helped clients appreciate that they do not want hours, so they are learning to not pay for them. But what to replace them with? The most common objectives are better results (total costs), reduced costs to obtain results (fees), budget certainty and speed of resolution. The Alternative Fee Agreement system that I will discuss reflects the certainty that lawyers will respond to financial motivation and produce better behaviors when incentivized to do so.”

We’ve developed an alternative to per GB pricing for e-discovery where we bill based on a fixed fee, and we provide the tools most useful to the situation without charging for each gigabyte processed by each tool. To use a simple example, when you take your car to a mechanic you expect him to provide his own basic tools without incremental charges. Fixed fees also provide the budget certainty that clients like, and as discussed below, speedier resolution.

Speedy Resolution

Corporate clients value the speedy resolution of their litigation. Resolution brings an end to ongoing billing for meetings, phone calls, conferences, memos, reports, briefings, discussions, motions, depositions, etc., etc. It also ends the uncertainty around the litigation and ends the need to make ongoing disclosure in public filings. In fact, speedy resolution can be one of the main factors in deciding how much of a bonus law firms receive under some alternative fee arrangements /*2Litigation Burn Rates - Vale-added Billing Models

However, it’s hard to be speedier than normal using conventional approaches. Lawyers who want to use alternative fee or value-added billing models for litigation need to find vendors who provide flexible, powerful tools and who aren’t tied to old pricing models for e-discovery processing.

The value of early analytics is that many of the tools can be deployed quickly to gather and analyze electronic files. In the time it can take to just transfer and load large collections on final review platforms, attorneys using advanced analytics can go through several iterations of things like culling extraneous material, identifying important custodians, and testing and modifying key terms. When content is finally sent out for final review there is much less chance of having to gather further files from the client.

The fact is there is no “one size fits all” for litigation tools. Different cases call for different approaches, and different approaches require different tools. By the end of the litigation you’ll know how good your case was and how good your opponent’s case was. The competitive advantage comes from learning that early on. Early analytics provides that benefit.

References

*/1 “The Disruptive But Inevitable Move to Alternate Fees,” by Jeffrey Carr, Edwin Reeser, Patrick Lamb, and Patrick J. McKenna, as published in the Los Angeles Daily Journal during September and October, 2009

*/2 “Value Practice: Alternative Billing by Paying for Performance: Focus on FMC Technologies’ ACES (Alliance Counsel Engagement System) Program,” Interview of Jeffrey Carr, from the Association of Corporate Counsel website

Further Information

Follow some of the legal cost control pioneers on Twitter:

 
For additional reading from Quantum on saving money during review:
Five Low-Cost, Attorney-Friendly Ways to Cull Email in E-Discovery

Founder & Principal Consultant
Quantum E-Discovery

Jeff believes in saving time and money in e-discovery by applying a variety of analytics tools early in a case, well before moving content to expensive final review platforms. Over the past 20+ years he has accumulated a variety of tools that can be applied as needed in specific situations. Learn about Jeff’s e-discovery philosophy here.