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The Changing Business of eDiscovery: How Managed Services Is Reshaping the Legal Landscape

This post originally appeared as an article in the October 2015 Los Angeles Paralegal Association's Reporter newsletter.

Ever since the changes to the Federal Rules in 2006, eDiscovery has emerged as a major source of cost in litigation.  In the midst of the financial crisis, Fannie Mae spent 9 percent of its operating budget on eDiscovery on just one matter. In Re Fannie Mae Securities Litigation, 2009 U.S. App. LEXIS 9 (D.C. Cir. Jan. 6, 2009). Data security and operational inefficiency are other issues that arise when dealing with a case-by-case approach. The eDiscovery industry has taken notice of these issues and created managed services offerings: long-term, direct relationships between corporations and eDiscovery vendors that make dealing with legal data more efficient and cost-effective. Below is a break down of the major differences between the traditional and managed services approach.

The traditional eDiscovery approach reacts to demands for electronic data in the case of litigation or internal investigations by finding relevant data on a case-by-case basis. The process typically involves eDiscovery vendors identifying data held by custodians and then using technology partnered with human review to identify relevant data. 

Fannie May spent 9 percent of its operating budget on eDisocvery on just one matter

Costs under the traditional eDiscovery model are high because it does not leverage knowledge gained from each case. In the traditional approach, once the matter is resolved, the work-product is useless and money invested cannot be repurposed or recycled.  If one custodian’s data is relevant across multiple matters being handled by different outside counsels, the costs for that custodian’s data will be incurred in each matter. Also, the knowledge and technical infrastructure built for each case (the process of mapping a company’s data and collecting it) is costly in time and money.

The managed services approach addresses the weakness of the traditional approach by working off the principle of direct and sustained relationships between eDiscovery companies and organizations subject to regular litigation. The advantages of managed services are many. (1) Sustained relationships mean that data is already mapped out in advance of eDiscovery requests, saving time, and allowing for quick gathering of data. (2) Already processed and reviewed data from other matters can be used across multiple cases, saving time and money. (3) Working consistently with a single vendor utilizes institutional knowledge developed from case to case, therefore saving time. (4) Direct relationships between eDiscovery providers and organizations save on outside counsel billable hours spent on managing eDiscovery. Outside counsel benefits by focusing on high-level work like brief writing, and avoiding eDiscovery headaches. (5) By having all data handled by a single vendor, rather than having different vendors for different cases, managed services reduces data security issues that could arise when important case data is spread across multiple vendors.

E-STET has doubled-down on managed services as the future of this industry, investing heavily in its Insight Accelerator approach to managed services. While transactional eDiscovery will still be a major part of the industry, organizations dealing with sustained litigation should look into managed services as better alternative to the status quo.