Firms adapt to the age of e-discovery

In the previous installment of this series on predictive coding and its potential effects on the law firm model, I discussed the changing role of the players in the e-discovery process. With the rise of predictive coding in the world of e-discovery, the senior attorney or partner on a case is involved more than ever with the initial training of software. In this final installment I want to analyze the way law firm revenue streams are changing and how predictive coding can be a part of this change.

Economics of discovery

Just as the role of partners in discovery is changing with predictive coding, so too can the way partners view the role of discovery in the larger business strategy of their firms. While the art of the litigator and trial lawyer certainly is not going anywhere, the economic model upon which many law firms have been built is shifting. Pay scales are changing, new billing models are being tested, and the pillar of document review starting to shift.

Discovery has evolved over the past 30 years to include a variety of technologies and personnel that were previously unnecessary. Paper-based discovery has transformed into computer-based e-discovery. This model relies heavily on vendors who service the needs of law firms and clients. These vendors make millions from imaging, hosting, processing and outputting data into a reviewable format for other vendors who specialize in providing document review teams.

Prior to the existence of predictive coding, keyword search was the only reasonable means of culling large electronic document sets. Results from keyword searches had to be reviewed by low cost document review teams because that was the only economically viable option for law firms. Document sets returned from keyword searches were (and are) generally very large. Law firms had a high cost per man-hour that document review vendors could easily undercut. The option to review in-house simply was not cost effective or time efficient. But predictive coding is giving law firms a competitive edge over e-discovery vendors and document review teams.

This edge is a two-fold result of predictive coding. First, the training of software by a senior associate or partner familiar with the case is an initial higher cost input. But those few hours upfront result in a much smaller responsive document set to review. A smaller responsive set can then be reviewed by an in-house team of associates in a much shorter amount of time. This allows law firms to bypass e-discovery vendors and outside document review teams. The same services can be provided to clients at a much lower cost.

Second, by bypassing the outside vendors, law firms can reap the revenue stream that comes from providing this service to clients. Partners who specialize in discovery and litigation strategy can then take on a revenue-generating role instead of being a necessary cost. This adds a layer of job security for partners who specialize in e-discovery. For example, in a large commercial litigation involving hundreds of gigabytes of data, a partner can redirect the client expense of processing and reviews to a revenue stream of billable hours.

Other benefits include more control over the e-discovery process. As many attorneys have seen, the back-and-forth that comes with communicating with outside vendors can be time consuming and costly. Not only do outside vendors have to communicate to lawyers the information that they discover, there will also be a multitude questions asked to fully understand what was and was not discovered. Furthermore, attorneys will need to review the most responsive documents themselves. All of these tasks add up in time and money for the client. Finally, the use of predictive coding will also mean one less conversation with a client explaining why it is critical to hire an expensive outside vendor, and why the client should pay for the added costs of review when they are already paying the firm for the attorneys' time.

Predictive coding can be implemented in a variety of ways, and it is not an all or nothing process. As attorneys and clients get used to the technology, many firms will find that they prefer to implement predictive coding in a step-by-step basis prior to installing it as a full-service enterprise-wide method of managing discovery. This incremental adoption will give attorneys and litigation support staff time to understand predictive coding's usefulness and the revenue streams that come from its implementation. Law firms that fail to account for the shifting landscape will fall behind.

Firm economics and the role of attorneys are changing as predictive coding penetrates the legal profession. Partners that apply the above principles when utilizing predictive coding technology can be more at ease that they are not jeopardizing their career or the case. Law firms that recognize the shifting economic landscape and evolve with it will likely see their firms prosper. While the broader impact of predictive technology is unclear, it is certain that changes at both the attorney and firm level are on the horizon, and it will impact firm structure, career paths, revenue flows and economics.

Daniel B. Garrie is partner at Law & Forensics LLC (formerly FSRDG LLC), a global boutique forensic and e-discovery consulting firm and a chair of Alternative Resolution Center's E-Discovery & Forensic panel. He can be reached at daniel@lawandforensics.com or through www.lawandforensics.com.