Companies Need to Control eDiscovery Costs

Companies that are successful in managing their enterprise information will reduce their litigation risks and costs in addition to maintaining compliance. For many companies, discovery costs are increasing. There are several factors causing these costs to escalate including an increase in the number of lawsuits and new regulations that organizations have to comply with in the aftermath of Enron and WorldCom. One of the primary reasons legal discovery costs are increasing is due to the rapid proliferation of electronic data that is generated by companies as a result of their business operations. Not unsurprisingly, the majority of this newly generated information is unstructured and unmanaged. Unfortunately, many companies simply do not have effective information management policies in place to manage all this data. Without these policies in place, an organization responding to an eDiscovery request would expend more resources searching voluminous amounts of information and consequently incur higher litigation costs.

An additional concern is the advent of the proliferation of data in combination with the amended Federal Rules of Civil Procedure (FRCP). This creates a potentially high risk situation. The Courts are enforcing the amended FRCP’s and companies need to be compliant or face the prospect of huge sanctions. The threat of sanctions is real and two companies, UBS Warburg and Merck, paid $29.2M and $253M respectively for non-compliance relating to eDiscovery of documents.

Ideally, organizations need to put information management processes in place so the company can classify, organize, and manage its information including the retention and deletion of its obsolete information. Consequently, if a company is involved in a lawsuit, it would be in a position to respond quickly and at a reduced cost. An integral factor which will significantly reduce a company’s risks and costs, is to dispose of old and obsolete data that the company is no longer required to retain. This is absolutely essential if a company desires to achieve litigation readiness. The deletion of obsolete information highlights the importance of a company adopting an approach that takes into consideration effective information management practices and best eDiscovery practices. These two concepts are closely interrelated and must be used in conjunction with one another..

Information Management Policies
It is important to reiterate that a company must establish retention and deletion policies in line with its corporate or industry-specific compliance mandates as part of an effective information management strategy for its enterprise. Then it should automate policy enforcement across all data sources enterprise wide. Companies need good records management policies that systematically expire and purge obsolete documents. When an organization reduces its storage content, this results in a reduction of its storage costs but also it has a direct cost savings impact on the company’s eDiscovery obligations which may manifest at a later time.

eDiscovery Best Practices
Typically, one of the highest eDiscovery costs is the legal review process. Some estimates indicate this component comprises in excess of eighty percent of a company’s e-discovery costs. It is in a company’s economic best interest to reduce the volume of data it sends to attorneys who charge $300 - $400 an hour to review that information. From a legal perspective, the objective is to collect the smallest legally defensible data set.

In summary, a company should first consider putting in place effective information management strategies. It is imperative the organization knows where its data is, how it’s organized, and how to find it. Also, the company should know when to automatically delete its obsolete information as a best practice. This ensures the collection of a smaller legally defensible data set. Ideally, the company should use its information management practices in conjunction with eDiscovery best practices to reduce litigation risks and costs.