As I wrote in this column last month, in-house legal departments are more pressed than ever to control legal costs, while at the same time they are being charged with assuming greater risk management responsibilities that come with increased government regulations and compliance workloads.
In June, we announced the results of a recent LexisNexis CounselLink study conducted by Corporate Counsel and published by Incisive Media, which found that 68 percent of in-house legal professionals feel pressure to reduce the law department budget, and nearly 59 percent of them already have experienced actual reductions in total budgets.
Meanwhile, a 2009 study by Corporate Executive Board found that in-house law departments at major corporations are thinly spread across multiple jurisdictions. On average, companies represented in the prestigious General Counsel Roundtable operate in 55 countries, but only 18 countries have an in-house lawyer present. Perhaps this is why more than half of them (55 percent) reported having a problem in a foreign market - because they didn't have the resources to employ an in-house lawyer in that country, even though 60 percent said they were receiving pressure from their board of directors to better monitor emerging risks in foreign jurisdictions.
Therefore, the conclusion is that many in-house law departments are facing the seemingly paradoxical challenge of being told to make do with a tighter budget while simultaneously being placed under greater pressure to better manage global risks for their companies. What's a general counsel to do to make sense of this dilemma?
The Litigation Train
It's no secret that the recession has led to a slowdown in the overall U.S. legal services marketplace, but what is interesting is that the specific legal area of litigation has shown no such decline itself. In fact, BTI Consulting reported a strong 8 percent growth in U.S. corporate spending on litigation in 2008 and projected a modest increase again in 2009. At these consistent growth rates, litigation now accounts for roughly 71 percent of the total legal spend at large U.S. companies.
This increase in corporate spending tracks with the steady growth in the volume of litigation entering the judicial system as well. Last year, there was a 17 percent increase in cases filed in the federal courts and an 8 percent increase in cases filed in the state courts.
So with the litigation train continuing to steam ahead, creating ever-increasing risk management challenges for large corporations, many corporate legal executives have come to the conclusion that their best option for survival is to wrest back control over their litigation portfolio. This may be a bit of a hyperbole - few companies ever actually ceded their litigation management to outside law firms over other service providers - but it seems clear that the balance of power in the control over how litigation is managed is swinging back toward the corporate law office.
One important metric that benchmarks the industry trend of more legal work moving back in-house is the shift in hiring plans this year. According to an Inside Counsel survey reported in the March 2009 issue, 48 percent of corporations plan to reduce the number of outside law firms they use, but a nearly identical 49 percent plan to increase their number of in-house staff attorneys. Clearly, the trend is toward companies exercising greater control over their litigation portfolio.
It's no surprise to readers of this publication that the fuel behind this need for in-house counsel to regain control of litigation has been the explosion of electronically stored data. Most industry observers will concede that the problem of managing electronic information associated with corporate litigation has not only spiraled out of control, but actually continues to get worse. Many companies have seen their e-discovery expenses rise by 50 percent or more per year while they helplessly watch acceleration in the growth of the volume of electronic data.
The culprit, of course, is email. One industry newsletter, Qubit, reports that there are an estimated 100 billion email messages sent each day and that this number will likely increase by 50 percent over the next decade. When one also factors in the serious regulatory constraints over how quickly e-discovery must be conducted and how punitive the sanctions are for making errors in the process, it becomes even more obvious why so many in-house legal executives are deciding to take back control of the litigation train by first putting their arms around the runaway car known as electronic discovery.
Discovery And Early Data Assessment: The Demand For Self-Managed Solutions
E-discovery reaches and cuts across business, technology and legal segments - creating a complex and iterative process that can quickly initiate litigation holds, early data and case assessment, processing and discovery, case strategy and litigation. In the past, corporations have typically outsourced the e-discovery process to legal service providers and law firms, but as part of their efforts to take back control of litigation, there has recently been a significant change in that traditional e-discovery paradigm, and many corporations are now bringing e-discovery in-house.
By doing this, corporate counsel gain complete, accurate, relevant and timely information up-front. Moreover, when required, a relevant subset of data can be created by analyzing, reviewing and culling down the electronic data to be sent to legal service providers for further detailed or advanced review. By taking back responsibility for these initial steps, in-house legal departments can begin to regain control over the costly and risk-intense e-discovery process.
One of the key implications of this trend is that in-house legal departments are discovering they are in a much better position to conduct early data assessment by bringing e-discovery back under their own management. Early data assessment is the ability to look into a large data set and quickly search through it in order to identify key documents. This was the topic of intense discussion at a session, "Building a Smart E-Discovery Plan," at the InsideCounsel SuperConference held in Chicago in May of this year. In-house counsel from several large U.S.-based corporations shared a common goal - to reduce the amount of documents that are sent to outside counsel for review, starting with litigation holds, and then focusing on early search and culling of the data. The speakers agreed that reducing the amount of custodians as a result of a legal hold was critical to controlling costs.
In addition, early review and assessment of electronic evidence in a matter empowers corporate legal executives to make better business decisions early in the litigation process about which cases they are more inclined to litigate and which ones they are not. In many instances, the costs of settlement are less than the actual costs of e-discovery were they to use the traditional approach of offloading and sending data to legal service providers.
Of course, legal needs vary among corporations; just because there is a trend among legal departments to bring more parts of e-discovery in-house doesn't mean it's the right solution for every company. However, many legal departments in companies of all sizes are finding that they are able to significantly lower the costs and reduce the complications of e-discovery by performing certain phases of the work in-house with the aid of self-managed technology solutions.
At LexisNexis, we saw this writing on the wall a few years ago and set out to put in place a suite of "best-in-class" tools that would collectively empower in-house law departments to self-manage their electronic discovery. We acquired three products to help create this suite - CaseMap, the market-leading case assessment and analysis software; Concordance, the market-leading electronic discovery and litigation document management software; and LAW PreDiscovery, the market-leading early data assessment and electronic discovery processing software. We have now integrated these products in order to offer in-house law departments an end-to-end solution for the self-management of their electronic discovery requirements.
Our operating premise with the development of this strategy was that our customers in corporate legal departments needed "The Three Cs" of technology tools: Choice, Control and Confidence. The LexisNexis self-managed discovery solution provides choice to in-house legal departments because the tools in the suite are integrated but not interdependent, so users are free to plug in other legal applications they prefer for specific tasks. Our suite also delivers control back into the hands of the corporate customer because we give them a variety of "on ramps" to the LexisNexis discovery management workflow tools, allowing them to decide for themselves how they want their solution to be deployed.
Most of all, however, the LexisNexis suite provides users with maximum confidence in the technology tools they're relying upon in order to conduct their own e-discovery processes. The reality is that corporate legal departments who choose to self-manage electronic discovery are typically assuming the responsibility for a process that had been essentially outsourced to law firms and legal vendors over the course of the past decade. Having confidence in the technology solutions put in place to carry out this transition to self-management is a crucial consideration for any corporate legal executive.
Corporate legal departments are looking for ways to reduce costs while somehow enhancing their global risk management capabilities. One strategy for pursuing this difficult goal is for in-house counsel to increase their control over litigation facing the company, including exercising greater control of the data that emerges from litigation during the discovery process.
By deploying technology tools that fuel the early assessment of data and enable them to bring discovery in-house with self-managed solutions, corporate legal departments are finding that they can reduce costs while increasing control over their litigation portfolio. This promotes greater efficiencies and, ultimately, can enhance the department's global risk management preparedness.
Craig Bennett is Vice President and General Manager of litigation workflow solutions for LexisNexis. Mr. Bennett has over 20 year of experience in business operations and risk management with a broad range of companies and assignments for Fortune 100 companies.