Arms Around the Tempest: E-Discovery, Cost Control and Legal Project Management

Kim J. Myrdahl SUPERVALU INC. Vice President, Litigation, Regulatory and Compliance Minneapolis, Minnesota

Peter H. Walsh UnitedHealth Group Incorporated Senior Deputy General Counsel – Chief Litigation Counsel Minnetonka, Minnesota

Shari L. J. Aberle Dorsey & Whitney LLP (612) 343-8267 aberle.shari@dorsey.com Minneapolis, Minnesota

Caroline B. Sweeney Dorsey & Whitney LLP (612) 340-2983 sweeney.caroline@dorsey.com Minneapolis, Minnesota

Thomas P. Swigert Dorsey & Whitney LLP (612) 492-5677 swigert.tom@dorsey.com Minneapolis, Minnesota

Contents

(available on www.dorsey.com)

1. PowerPoint

2. Legal Project Management: An Old Way of Doing Business Thomas Swigert, Kirsten Schubert and Caroline Sweeney, Dorsey & Whitney LLP November 3, 2011

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Arms Around the Tempest: E-Discovery, Cost Control and

Legal Project Management

Kim J. MyrdahlVice President, Litigation, Regulatory and Compliance

SUPERVALU INC.

Peter H. WalshSenior Deputy General Counsel – Chief Litigation Counsel

UnitedHealth Group Incorporated

Shari L. J. AberleCaroline B. SweeneyThomas P. Swigert

Dorsey & Whitney LLP

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E-Discovery Crossroads

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CLOUD COMPUTING

SMART PHONES & PDAs

SOCIAL MEDIA

E-DISCOVERY VENDORS

GLOBAL DATA

EXABYTES & ZETTABYTES

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E-Discovery Expense

• Expected costs for a large (50 custodians) e-discovery case: – $1.5 million or approximately $30,000 per custodian

• Expected costs for a medium (11 custodians) e-discovery case: – $332,750 or approximately $30,250 per custodian

• The biggest costs are associated with collection and review.

http://www.mimosasystems.com/html/ediscovery_worksheet.htm

• Industry analyst Gartner predicts that 50% of all companies will be required to produce social media evidence by 2013.

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E-Discovery Expense

• Symantec Second Annual Information Retention and E-Discovery Survey – September 18, 2011 – Survey of legal and IT personnel at 2,000 enterprises – Ranked the production of ESI in response to discovery

requests as follows: • Production of files/documents – 67% of data produced • Production of database/application data – 61% of data

produced • Production of email data – 58% of data produced

http://www.clearwellsystems.com/e-discovery-blog/2011/09/18/email-isnt-ediscovery-top-dog-any-longer-recent-survey-finds/

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E-Discovery Curve

• How many of you believe we are getting ahead of the e-discovery curve?A. We are figuring it out and sanctions are holding steady.

B. We are clueless and sanctions are on the rise.

C. We are lawyers; we know what we are doing and sanctions are decreasing.

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E-Discovery Costs: Sanctions

• Gibson Dunn 2011 Mid-Year E-Discovery Update: An increase in sanction cases has lead to an increase in the number of cases in which sanctions were awarded. Monetary sanctions were the most frequently awarded type of sanction in the first half of 2011.

• Lee v. Max Int’l, LLC, 638 F.3d 1318 (10th Cir. 2011) – Court noted “there is such a thing as discovery karma,” and

affirmed the sanction of dismissal for the plaintiffs' repeated discovery misconduct.

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E-Discovery Costs: Sanctions

• Duke Law Journal Review article:– Recent study found defendants are sanctioned almost three

times as often as plaintiffs. – The most common type of misconduct to receive a sanction

was failing to preserve relevant information.– December Kroll OnTrack analysis of significant cases from

2010 found that 49% of significant cases addressing sanctions involved preservation and spoliation issues.

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The Cost of Not “Getting It Right”Preservation

• Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, 685 F. Supp. 2d 456 (S.D.N.Y. 2010)– Plaintiffs failed to institute timely written litigation holds and

engaged in careless collection efforts.– Court found plaintiffs engaged in negligent and grossly

negligent discovery conduct so imposed monetary and adverse inference sanctions.

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The Cost of Not “Getting It Right”Failure to Uncover/Disclose

• Qualcomm Inc. v. Broadcom Corp. (S.D. Cal. Jan. 7, 2008)– Failure to search led to $9.2 million sanction in attorneys’

fees for “suppressing” 46,000 electronic files.

• In re A&M Florida Properties II, 2010 WL 1418861 (Bankr. S.D.N.Y. April 7, 2010)– Broad instruction to perform “company-wide” search and

failure to communicate with key employees led to discovery failures that were remedied only after months of delay and forensic examination.

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The Cost of Not “Getting It Right”Privilege Waiver

• Mt. Hawley Ins. Co. v. Felman Production, Inc., 2010 WL 1990555 (S.D. W. Va. May 18, 2010) – Discussing the reasonable precautions standard behind Rule 502,

the court found privilege waived due to negligent review before production.

• In re Fountainebleau Las Vegas Contract Litig., 2011 U.S. Dist. LEXIS 4105 (S.D. Fla. Jan. 7, 2011) – Finding privilege waiver where party responding to subpoena

“dumped” 3 servers with 800 GB of data.• J-M Mfg. Co. v. McDermott Will & Emery (Cal. Super. Ct.

June 2, 2011)– Legal malpractice suit brought for failure to adequately review

work of e-discovery vendor’s contract attorneys after law firm disclosed 3,900 privileged documents to federal government in investigation of whistleblower suit.

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The Cost of Not “Getting It Right”Production Errors

• Jannx Medical Systems, Inc. v. Methodist Hospitals, Inc., 2010 WL 4789275 (N.D. Ind., Nov. 17, 2010) – Converted all data to .pdf form before supplying it to the

Defendants, making the data unsearchable.

• Bray & Gillespie Management, LLC v. Lexington Insurance Co., 2009 U.S. Dist. LEXIS 21250 (M.D. Fla. Mar. 4, 2009)– Sanctioning plaintiff’s counsel for failing to produce ESI with

metadata intact as requested by defendant. Law firm partner heldpersonally liable as well as jointly and severally liable with his firm.

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• In re Fannie Mae Securities Litigation, 552 F.3d 814 (D.C. Cir. 2009) – Office of Federal Housing Enterprise Oversight spent

more than 9% of its annual budget (over $6 million) to respond to a third-party subpoena.

– Counsel did not understand systems and location of records.

– Motion for civil contempt granted; OFHEO’s efforts were “too little, too late.”

The Cost of Not “Getting It Right”Poorly Planned Process

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The Pain of E-Discovery

• What is your biggest e-discovery “pain point”?A. Cost

B. Ensuring a consistent, repeatable, defensible process

C. Internal resources

D. Diverse and dispersed data

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What is Legal Project Management and How Does it Apply to

E-Discovery?

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Legal Project Managementand E-Discovery

• Cooperation– The Sedona Conference Cooperation Proclamation– Seventh Circuit Pilot Project Proportionality

• Proportionality– Rimkus Consulting Group, Inc. v. Cammarata, 2010 U.S.

Dist. LEXIS 14573 (S.D. Tex. Feb. 19, 2010)• “Whether preservation or discovery conduct is acceptable in a

case depends on what is reasonable, and that in turn depends on whether what was done–or not done–was proportional to that case and consistent with clearly established applicable standards….”

– Pippins v. KPMG LLP (S.D.N.Y. Oct. 7, 2011)• Declining to apply proportionality test as related to

preservation.

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Legal Project Managementand E-Discovery

• Appropriate expertise

• Process management but a flexible process

• Ability to measure results

• Documentation and transparency

• Proactive

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How are you adapting tomodern e-discovery?

A. Bringing certain aspects of e-discovery in-house while standardizing on e-discovery vendors and law firms

B. Using predictive / automated review technology

C. Requiring e-discovery budgeting and regular reporting

D. All of the above

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Can There Be Predictability in E-Discovery and, More Generally,

in Litigation?

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Budgets Anyone?

Do you require budgets from your outside counsel?

A. Always

B. Usually

C. Once in a while

D. Never

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Who Needs Task Codes?

Do you require outside counsel to use task codes?

A. Always

B. Usually

C. Once in a while

D. Never

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AFAs as Project Management

Do you prefer alternative fee arrangements to the billable hour?

A. Always

B. Usually

C. Once in a while

D. Never

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Dorsey Dashboard:Baseline Budget

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Dorsey Dashboard:Monthly Progress Report

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Questions

Legal Project Management: An Old Way of Doing Business

Thomas Swigert Kirsten Schubert Caroline Sweeney

Dorsey & Whitney LLP

What is “Project Management?”

Project Management is a formal discipline widely used across most modern industries to plan, organize, and execute projects efficiently and successfully. The purpose of Project Management is to increase predictability of costs, time, and quality by deploying resources in the most efficient manner possible and by undertaking an ongoing assessment of actual experience against an initial plan. Through this process, managers can make consistent and informed judgments that lead to a pre-determined result. Many of our clients use Project Management in their businesses every day.

Project Management includes defining and maintaining the scope of the project, identifying necessary resources, estimating cost, time and effort to complete the project, creating channels of communication, anticipating potential risks and ways to mitigate those risks, analyzing data as it becomes available, and measuring progress against pre-set targets. Project Management may be used for a wide range of projects from building a stadium to setting up a business or organizing a relief effort.

Project Management is designed to address one-time, discrete projects that have a beginning and an end, and that a well-defined objective. Project Management is not designed to improve the ongoing operations of a business or a general process. (For that, see Six Sigma). Thus all projects to which Project Management principles will apply are, by definition, unique.

What is “Legal Project Management?”

Legal Project Management is the application of Project Management techniques to litigation and transactional matters handled by attorneys for their clients. Traditionally, the legal industry has not made a significant effort to adapt Project Management to the practice of law. Recently, however, “Legal Project Management” has become a hot topic among those who think about the evolution of the legal services business. While most would agree on a general definition, there is substantial debate over the specifics of Legal Project Management and how to translate principles into practice and better results.

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Why is Legal Project Management emerging now?

Two words: Client Service. Sophisticated consumers of legal services are seeking ongoing assurances, based on measurable data, that their lawyers are making an effort to manage their cases in an efficient and cost-effective manner. Clients also crave predictability of costs so they can better plan within their own budgets, and so they can provide reliable information to their business partners for better business planning. Legal Project Management, correctly implemented, can address those concerns.

Is Project Management just another way to describe Alternative Fee Arrangements?

No. While Alternative Fee Arrangements, such as fixed fees, arose as a proxy for case management, they are not the same as Legal Project Management. The theory behind fixed fees is that by shifting budget risk to the law firm, the law firm will find a way to manage the case efficiently. Fixed fees also provide substantially more cost predictability than an hourly fee arrangement.

While fixed fees can be extremely useful (we enter into fixed fee agreements frequently), they have limitations. For example, some clients feel that fixed fee arrangements do not provide the proper incentives for lawyers to spend time on a case. Other clients feel that fixed fees create barriers of communication between the lawyer and the client when discussing strategy. Other types of AFAs such as success fees and partial contingent fees can be combined to mitigate this perception; however, AFAs are not a panacea for managing overall cost and quality.

So what can Legal Project Management do to help?

To answer this question, we must first provide more substance around the meaning of Legal Project Management. While there is no standard in the community, here’s what Legal Project Management means to us:

Legal Project Management is a repeatable process applied to individual litigation or transaction matters that requires attorneys to engage in up-front organization and resource planning, including a baseline budget, and to monitor progress on a regular and ongoing basis in order to generate meaningful information that we can use to communicate openly and transparently with our clients throughout the matter about fees, strategy, expectations, and potential resolution.

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What is Dorsey doing to implement Legal Project Management for its clients?

Dorsey has developed internally a system that allows its managing lawyers to easily and efficiently create, with the advice and input of their clients, a baseline budget and case strategy at the beginning of the matter, and to generate periodic reports that provide a dashboard of meaningful information about the status of the case, progress of the case against budget, scope changes to the budget, and what to expect going forward.

The baseline budget and periodic reports are intended to provide a framework for and facilitate discussion between the managing attorneys and their clients, to identify strategic and cost issues, and to increase the client’s visibility into the manner in which the case is being managed. In addition, the client may access a secure extranet site hosted at Dorsey that will allow the client to review pleadings, correspondence, calendars, contact information, or any other data relevant to the case. Finally, Dorsey is developing a set of best practices as a resource for attorneys to implement Project Management techniques into their daily practice.

What is the future of Legal Project Management?

We believe that Project Management techniques will play an increasing role in facilitating the communication between lawyers and their clients, and that as lawyers gain more experience in Project Management techniques, they will be able to increase predictability and transparency in their matters and ultimately improve their most important client relationships.

Further Reading:

Levy, Steven B., Legal Project Management: Control Costs, Meet Schedules, Manage Risks, And Maintain Sanity. Seattle: DayPack Books, 2009.

Legal Project Management: Thoughts, tips and discoveries related to the management of legal projects. http://legalprojectmanagement.info

Gawande, Atul. The Checklist Manifesto: How to Get Things Right. New York: Henry Holt & Company, 2009.

Podcast interview with Susan Lambreth of consulting firm Hildebrandt Baker Robbins: http://legalcurrent.com/2011/03/09/podcast-project-management-for-law-firms/