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Surprising Revelations About E-Discovery Preservation Costs

Created on July 14, 2014


By: Scott Giordano

mastering-costs-doodadESI preservation during the course of e-discovery is an unavoidable reality for all large companies. However, the means and strategies by which organizations preserve data and the costs associated with those practices varies greatly across organizations.

Earlier this year, Professor William H.J. Hubbard from the University of Chicago Law School published his Preservation Costs Survey, which provides deep insight into how companies are meeting their e-discovery preservation obligations and at what cost. Hubbard collected data from 128 companies ranging in size and spanning several industries.

Hubbard spoke on Exterro's recent webcast, "Survey Says…Insights into the Latest Litigation and E-Discovery Cost Trends," the first webcast in Exterro's five-part E-Discovery Masters series. Watch the on-demand webcast here.

I had a chance to speak with Hubbard about the survey and some of its findings.  

Scott Giordano with border
Scott Giordano

Giordano: Your table of descriptive statistics show some very big disparities between the mean and median in areas such as active suits and open matters with holds, implying that a small portion of the respondents are involved in most of the litigation and other actions. Is this a function of company size, industry, or something else?

Hubbard: This is primarily a function of company size. Larger companies face more lawsuits and bigger lawsuits. It is also a function of industry, given that different industries face different litigation profiles.

Giordano: You identify the respective components of infrastructure and human time and effort in the overall costs of preservation. What role does preservation strategy play in this and what potential does it have to reduce those costs?

Hubbard: A lot can be done here, in terms of (1) legal reforms, such as amendments to the Federal Rules of Civil Procedure, (2) technology, which can help reduce the cost of preservation, and (3) preservation strategy, which can make organization's preservation methods more efficient. One of the patterns I observed when interviewing various companies was that they were engaged in a continual process of reviewing and adjusting their use of technology and their overall approaches to preservation--trying to find ways to preserve more effectively while also controlling the cost of preservation. I think perhaps the most surprising finding in my Preservation Costs Survey is that the cost in terms of lost employee time from preservation activities can be enormous, even compared to spending on technology. Reducing the cost from people's time is key.

Giordano: Many organizations cite over-preservation as a major e-discovery frustration. Does the survey shed any light on its root causes?

hubbard-william-hj
William Hubbard

Hubbard: Uncertainty appears to be the primary driver here. The law governing preservation is in flux and changes from court to court. Preservation decisions often have to be made before a lawsuit is filed, and thus the preserving party doesn't know what rules will be applied and can't ask a judge for guidance! Companies report that, in response to this uncertainty and the huge reputational and monetary consequences of spoliation sanctions, they take an extremely cautious approach, deliberately preserving more than they think would otherwise be sensible.

Giordano: The table of Preservation-Related Problems By Data Type indicates that email and hard drives consistently present the most problems. Is this because other types, such as backup tapes, are not (or no longer) routinely implicated?

Hubbard: I think this is partly because email and hard drive data represent the two types of data that are most dispersed in companies, and most voluminous. And although backup tapes were the subject of the most famous e-discovery case, Zubulake v. UBS, it is worth noting that backup tapes only were implicated in Zubulake because there was a serious claim about deletion of emails. So even that case goes back to email. Still, it is worth noting that survey respondents, on average, indicated that all data types (including backup tapes) raise preservation-related problems at least sometimes.

Giordano: You state that “Five percent of litigation matters account for more than half of all litigation hold notices issued.” To what do you attribute this?

Hubbard: The distribution of litigation matters is highly skewed. There are a small number of huge cases, involving lots of people and high stakes, and much larger number of cases that implicate fewer people and lower stakes. You see this same pattern in preservation activity as you do in litigation activity. In court, you might have 100 individual lawsuits that each cost $100,000 to litigate, and one class action that costs $10,000,000 to litigate.

This doesn't mean that costs are or aren't too high in small cases or in big cases--after all, we expect bigger disputes to have higher preservation costs. But it does mean that we can't simply look a the median case and say, "Hey, costs here aren't super high, so who cares about preservation costs?" Instead, we have to recognize that the median case is a case with relatively low stakes and relatively low litigation costs, and then we have to ask whether the preservation costs for this median case make sense. And we also have to recognize that looking at the median case won't tell us anything about the big cases: in designing rules or strategies for preservation costs, we have to pay particular attention to their effects on big cases, because big cases are the source of most costs.

Giordano: One industry commentator stated that, “the incidence of spoliation sanctions in federal court is historically less than the national incidence of death by lightning strike.” How does this square with the arguments by proponents of an amendment to Rule 37(e)?

Hubbard: Spoliation sanctions are indeed rare in federal court. But the "lightning strike" analogy doesn't end there. Getting hit by severe spoliation sanctions, like getting hit by lightning, may be rare--but it is also devastating and unpredictable. Spoliation sanctions can lead to dismissal of your claims or default judgment against you, yet some courts will award severe sanctions based on merely negligent loss of data, while other courts require bad faith before doing so. Thus, a rules amendment that attempts to create some uniformity and predictability in this regard seems like a step in the right direction.

Giordano: Do you believe that the proposed amendment to Rule 37(e) offers an incentive to organizations to be less diligent in their preservation practices?

Hubbard: No, I don't. The proposed amendment begins with the language, "If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve the information..." Thus, curative measures and sanctions under this proposed amendment are only available if there was a failure "to take reasonable step to preserve." So organizations always have an incentive to be diligent with their preservation practices.

 

E-Discovery Masters SeriesProfessor William H.J. Hubbard from the University of Chicago Law School published his Preservation Costs Survey earlier this year. He spoke on Exterro's recent webcast, "Survey Says…Insights into the Latest Litigation and E-Discovery Cost Trends," which is the first webcast in Exterro's five-part E-Discovery Masters series. Watch the on-demand webcast here.