Is the Wickedly Long Train of E-Discovery Finally Breaking Up?

Topics: Billing & Pricing, Corporate Legal, ediscovery, Law Firm Profitability, Law Firms, Legal Innovation, Legal Managed Services, Thomson Reuters

The e-discovery space seems surreal. It is a huge business for everyone but the consumers of legal services—namely, companies. For them it is just a massive, costly pain. Whether e-discovery has actually done any good to the civil justice process is for others to speculate and opine upon. Undoubtedly, though, for the last 15 or so years it has created a legal income safe haven for private practice lawyers and large law firms, especially. They have made out like bandits on this development, but how much longer that will continue depends on when the long, long train of e-discovery breaks up. And in years to come we may be looking at the summer of 2015 as the time when the back of the train finally came loose.

What is the long train of e-discovery? It is powered by the relentless engines of technological advancement, surging societal and economic complexity, and the concepts of civil justice due process. These factors pull along what seems like hundreds of cars representing different elements of the e-discovery process—with the most proficient parties at the front and the antiques at the end, slowing down the entire train.


What is the long train of e-discovery? It is powered by the relentless engines of technological advancement, surging societal and economic complexity, and the concepts of civil justice due process.


At the helm we find the improving deployment of artificial intelligence—i.e., predictive coding—as a way to reduce the e-discovery burden. Few courts and judges understand it thoroughly, while probably only 5% of lawyers are reluctantly embracing it. And yet it is poised for growth nonetheless because it just makes too much sense. The technology will continue to improve at an exponential pace now that is has broken the barrier of recognition by the civil justice system. We also find at the front of the train the new federal civil procedure rules that institute proportionality of discovery and other long-debated means to contain the excesses of e-discovery.

Right behind the front cars follows a myriad of better ways to conduct e-discovery: improved processing technology, better review technology, new quality-centric processes for manual review, using legal process outsourcing (LPO) firms to do the work faster, better and cheaper, etc. Although all of these improvements aid the e-discovery process and help to alleviate some of the pain, the furious growth of e-discovery volumes has clouded their benefits.

The long, long tail of the e-discovery train is where the nasty stuff is coupled. Here we find buyers of legal services—because they don’t know better—continuing to fork out billions of dollars each month for overpriced in-person document review, performed by otherwise unemployed (or unemployable?) attorneys who get paid as little as $25 per hour while the law firm collects 5-, 10- or even 15-times that amount from the unaware client. This is the “bottom-of-the-barrel” end of large law firms’ offerings and yet it remains hugely profitable.

This long tail could finally be coming off, leaving law firm economics stranded with nowhere to go but to look for true efficiencies in their work. The beginning of the decoupling may well be seen in the recent decision of Lola v. Skadden, Arps, Slate, Meagher, & Flom by the U.S. Court of Appeals for the Second Circuit, decided on July 23, which was preceded by a far less well known decision by the Pennsylvania Supreme Court regarding the suspension of Benjamin Hart Perkel on May 1.


If you are a client who has been paying your law firms these kinds of rates for this kind of work, you must now realize that you are being ripped off.


The Second Circuit decision deals a double-blow to the commonplace law firm practice of hiring attorneys temporarily to conduct document reviews. While the court’s decision is narrow—relating to the laws of South Carolina—and vacated a dismissal of the original complaint, it contains two prima facie statements that may finally pull up the wool from the clients’ eyes. On the one hand, the court confirmed that the work of document review performed by Lola in 2012-‘13 at $25 per hour was not the practice of law, thereby suggesting that the person doing it deserved to be paid overtime under the Fair Labor Standards Act. On the other hand, the court also stated (or better: reiterated) what Lola, the document reviewing attorney, and Skadden, the defendant law firm, had agreed upon: the document review activity performed could have been accomplished by a machine. In a way the court is leaving all document reviewers in a conundrum by saying to them: “You ought to be paid more for your work, but, at the same time, your work has very limited value.”

In light of this, one needs to re-read the coverage of the Perkel case which related to document review work performed in 2011-‘12. The national and prominent law firm Drinker Biddle charged its client $245 per hour for Perkel’s review work while it paid the lawyer $40 per hour. (Pricing for document review work has deteriorated in recent years and today often pays as little as $25 per hour to the lawyer, even in major markets like New York and Washington D.C.).

Drinker Biddle’s chairman went on to defend his firm’s 500% mark-up by pointing to overhead—although that probably raised more questions than it answered. Others in the legal industry suggested that the mark-up was justified, at least in part, by the firm needing to supervise the contract attorney. That, however, doesn’t make much sense because the firm, without a doubt, also charged for that supervision by billing the supervising attorney’s time. Anything else would be contrary to a large law firm’s DNA. So it is double-dipping at extremely rich margins.

If you are a client who has been paying your law firms these kinds of rates for this kind of work, you must now realize that you are being ripped off. Now you know that you are hanging out at the end of the train and there is a better ride available near the front. These recent decisions must give you the impetus to head forward and leave the bandit cars behind, either by demanding more from your law firm or getting a new firm.

For the firms themselves, you must also realize that the train is about to become undone and it is in your best interest to start providing real, meaningful advice to your current clients on the best way to handle documents, before those clients become former clients. It can’t be soon enough that this long train will decouple, resulting in a shorter, faster train on a smoother ride for clients who are paying for all of this. And we may be able to thank the Second Circuit Court of Appeals’ decision for causing this.