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Legal Process Outsourcing: How to Obtain Professional, Cost-

Effective Services While Maintaining

Quality and Confidentiality

ACI’s 8th National Forum on

Controlling Litigation Costs October 23, 2013

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PRESENTED BY:

Thomas Bender Co-President and Managing Director

Littler Mendelson, P.C.

Janna Lewis EVP and General Counsel

Fay Investments

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Overview

• Recent History and LPO

• LPO today - 2013 Survey by law.com

• Case Study 1: Vendor Management

Program – policies and procedures

from companies that MUST use LPO

• Best Practices for LPO

• Case Study 2: Insourcing – One Law

Firm’s Model

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Historical Development of LPO

1990s The term, “LPO” was coined

2005 "Offshoring Legal Services to India" first LPO report by

ValueNotes Database

2007 India holds 99% of the LPO market

2008

ABA’s Standing Committee on Ethics and Professional

Responsibility issued a blanket endorsement of LPO in Formal

Opinion 08-451

2010 Off-shore LPO industry revenues - $400,000 (130% growth per

annum)

2013

Off-shore LPO industry averages 125% growth per annum

since 2010, but variations on the LPO model are emerging

quickly (e.g. off-shore in house counsel; at home outside

counsel); India holds 64% of the off-shore LPO market 4

October 2013:

Creditworthiness vs. LPO

“Creditworthiness is like

virginity, you can maintain it

for a long time, but it’s

tough to restore once

you've lost it.”

Warren Buffet to CNBC on 10/17/13. “The LPO industry is like sex,

there’s plenty of talk about it,

but no one knows what goes

on behind closed doors.”

David Hechler, “The 2013 Legal Process

Outsourcing Survey” Corporate Counsel,

10/17/13.

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India – Now you can have all 3!

• FAST: – Increase bandwidth to complete large jobs and meet tight deadlines

– Time Zones – New Delhi, India is 9:30 hours ahead of New York, NY, so

your legal work can be completed before the business day begins

– Technology – Automation of systems with modern technology.

• CHEAP: – Seasoned attorneys for $28 - $48/hour

– Fixed rates available

• AND GOOD: – Improved Quality – Six Sigma strategies

– Skilled Attorneys – English speaking, Indian system based upon British

Common Law

– Security – Off-shore centers get ISO 27001:2005 ISMS Certifications,

use thin clients, restrict access to cameras, printers, etc.

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LPO in 2013 – law.com survey

• Why we use LPO, and when?

– Published in Corporate Counsel on October 17, 2013

– 77 Legal Department participants

– 67% were satisfied with LPO

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The LPO Industry in 2013

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LPO Industry Models

• Traditional LPO firms (Providers of legal services)

• Off-Shore law firms (e.g. firm in Bermuda with US and UK lawyers)

• On-Shore Regional law firms (provide oversight or unbundled services)

• BPO firms (providers of non-legal, Business services to law firms and companies)

• Captive affiliates operated by law firms and large companies (not

strictly “outsourcing”, but bound to the LPO industry)

Reasons for LPO’s Increased Complexity,

Diversity and Growth

• Globalization (well qualified lawyers outside the US)

• Better use of Technology

• Economic Environment

The LPO Industry in 2013

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Benefits of LPO Risks of LPO

Cost Savings (outsourced work

can cost as little as $28/hour)

Scalability (ability to focus of

strategy while increasing capacity)

Speed and Efficiency (24 hour

work cycle; ability to staff up

economically for big jobs)

Resources (LPO may have more)

Relationships (Long term

relationships for static services may

improve quality over time)

Distance (time zone, cultural and

language barriers)

Training (steep learning curve;

communication issues; may require

initial investment of time and money)

Information Security (breaches

could violate A/C Privilege)

Strain on client relationship (if the LPO services are not completed

satisfactorily)

Regulatory Issues

Case Study 1: Fay Servicing, LLC:

Using a Vendor Management

Program for LPO Oversight 10

Fay Servicing Fay Investments

What We Outsource in the Default

Department

• 2300+ Active Foreclosure files and 1500+

Active Bankruptcy Files in the 50 states,

Puerto Rico and Washington D.C. that must

be managed b y local counsel

• 1500 Active for which claims and motions

must be made by local counsel

Use of LPO in Acquisition Due

Diligence

• Title work

• Collateral review

• Collection comment review

• Review of Bankruptcy files

• Broker Price Opinions (BPOs)

Why we must manage LPO properly

• OCC Report in 2010

• CFPB oversight

• Client demands

• Reputational risk

• Litigation risk

Why we outsource when purchasing

loans on the secondary market

• Time constraints

• Scalability

• Competitive advantage

• Kick outs/Buybacks

• LPO Vendor Resources

• Cross Checks

LPO at Fay Financial

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Fay’s Vendor Management Cycle

1. Fay would like to use a (new) LPO provider.

2. Fay and LPO provider negotiate a (Master

Agreement and) related Statement of Work (SOW).

3. LPO Provider completes Fay’s Vendor Due Diligence program

(again).

4. LPO provider conducts the work in the SOW and

communicates with Fay via ECM or Google+

5. LPO provider receives guidance and feedback

(scorecard) from Fay until SOW is complete.

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What you need to know when you

consider using LPO:

Best Practices 13

Tips for Companies New to LPO

What to outsource? Consider cost, complexity, duration, potential for repeat business, and risk avoidance.

Which LPO vendor to use? Contact industry peers that use LPOs; check potential vendor’s references;

Consider vendor’s size, technologies, menu of services, expertise and technologies;

Interview vendor’s attorney personnel; issue an RFP if time allows.

Create and implement an LPO transition/management plan. Define the required internal processes and departments required to manage the LPO;

Delegate in-house personnel to manage the project;

Set aside time and money for training;

Hire delegate personnel to manage LPO vendor due diligence;

Consider electronic vendor management software;

Develop a scorecard or other form for rating the LPO vendor’s work.

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Tips for Companies New to LPO

Create and implement an LPO due diligence process. Regulatory Compliance – is there an industry standard the LPO vendor must follow?

Contracts – usually a Master Agreement and separate SOWs for each project. Include clear

provisions for breach, termination. Make sure these are in place before starting the work.

Financial Stability – Documents demonstrating the LPO vendor’s financial stability

(Insurance, financial statements, UCC search

Qualifications – Confirm licensure of LPO vendor and its personnel, check references.

Interview the principal lawyers that may be involved in your matters, conduct background

checks, confirm educational backgrounds.

Mitigation of security risks - Understand the foreseeable security risks of data subject to

LPO. Require production of current industry certifications, insurance policies, technologies

and assurances in the Master Agreement. Conduct a-site visit.

Corporate culture - Consider legal training and judicial systems of attorneys who will

conduct the work you outsource. Review the LPO vendor’s hiring practices (do they conduct

educational and background checks?); and evaluate the quality and character of the

employees likely to have access to client information. Obtain staffing policies (how many

attorneys will be assigned to your project?) and communication systems.

Uniform application and maintenance – Require all LPO vendors to complete this due

diligence at least annually.

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Case Study 2:

The Littler Mendelson Model –

Insourcing 16

Littler made the decision to “insource”

two functions frequently outsourced

• eDiscovery

• “Contract”

Attorneys

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eDiscovery

• A $200-billion-a-year-industry

• One of the top reasons companies and

firms use LPOs

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eDiscovery is about

• $

• Risk-Management

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Coleman (Parent) Holdings, Inc. v.

Morgan Stanley & Co., Inc.

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Quality and Winning Count!

• Handle eDiscovery activities more efficiently and

with better quality!

• Litigation → need to focus on winning the client’s

case! (This is oftentimes overlooked when looking

at eDiscovery services in a vacuum.)

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eDiscovery/Litigation Support

National

eDiscovery

Counsel Paul Weiner, Esq.

Littler National Data

Center

Litigation Support

Regional Services Training Services

eDiscovery Counsel

Managing

Directors/

Management

Committee

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eDiscovery/Litigation Support

eDiscovery Shareholder

National

eDiscovery

Counsel Paul

Weiner, Esq.

Lit Support Data Analyst Level 1



Lit Support QC/Data Analyst

Level 1

Senior Lit Support Data

Analyst

Senior Training Specialist

Training Specialist

Lit Support Specialist (Southeast)

Lit Support Specialist (Cent-Mountain)

Managing

Directors/

Management

Committee

eDiscovery Shareholder Cecil Lynn

eDiscovery Associate

Junior Lit Support Specialist (Dallas)


Lit Support Specialist

(Midwest)

Junior Lit Support Specialist (Dallas)

Director Lit Supp

Regional Services

Director Lit Supp

Centralized

Services

Lit Support Specialist (Northwest)

Lit Support Specialist (Class Action)

Chief Information

Security Officer

Lit Support Services

Coordinator

Lit Support Specialist (Southwest)


Denise Backhouse



Lit Support Specialist (Northeast)

Lit Support Specialist (Allegheny South-

Central)


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Best-of-Breed Technologies

Coupled with On-Demand Training

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Example Wage and Hour Class Action

• Several Thousand Litigation Holds (Facility;

Corporate; IT; Vendors)

• Defendant identified 55 Key Custodians (41

accessible email)/Plaintiff wanted hundreds

• For 41 custodians: 587 GB email data

collected → reduced to 469 GB after de-

duping

Equivalent of over

23 million pages of

documents/

7,800 bankers’ boxes

of documents!

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Example Nationwide

Wage and Hour Class Action

• 5 full-time lawyers l 521 weeks (10

years) l $25 million





Review accomplished in 4 months for

about $600,000 via aggressive meet-and-

confer and search-term methodology

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Summary: Benefits of “insourcing”

• Integrated, turnkey solution for our clients

designed to improve efficiencies and save

money

• Goal of winning their cases is always paramount

• Strategic/legal advice overlays everything

• If clients choose a preferred vendor for discrete

services (processing; hosting; document review)

or has built out those capabilities themselves →

we encourage that

– Flexible

– Case and client specific

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“Contract” Attorneys 29

2010 – Walmart approached all outside counsel

• Challenged to come up with

an innovative way to handle

their work

• Littler designed Littler

CaseSmart – Administrative

• Resulted in Littler being

assigned all administrative

charges

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What is CaseSmart?

• A dashboard that

– Acts as a Case Management system

– Delivers business intelligence

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Who handles the Administrative

Charges?

• Flex Time Attorneys (FTAs)

- Littler Attorneys

-Work from home

- Paid a flat fee for each

administrative charge

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Why FTAs as opposed to

Contract Attorneys

• Better control of quality

• Integrated into the team

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The next steps

• CaseSmart – Litigation

• CaseSmart – Class Action

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CaseSmart Litigation

• Use of FTAs for

- Early Case Evaluation

-Written Discovery

-Research

- Brief Writing

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QUESTIONS? 36

THANK YOU Thomas Bender, Littler Mendelson, P.C.

[email protected]

Janna Lewis, Fay Investments [email protected]

ACI’s 8th National Forum on

Controlling Litigation Costs October 23, 2013