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Trials & Litigation

E-Discovery Fears May Explain Why Recession Didn’t Spur Litigation

Posted Aug 18, 2009 6:22 AM CST
By Debra Cassens Weiss

Litigation usually increases during recessions, but this one appears to be different.

Several surveys show that litigation is flat or declining, the National Law Journal reports. One of the major reasons, the story says, is that general counsel don’t want to spend money on litigation, partly because they fear the increasing cost of electronic discovery.

“Right now, general counsel are trying to operate in zero-risk mode, and this is something we have not seen in many, many years," said Michael Rynowecer, president of the BTI Consulting Group, in an interview with the publication. A survey of general counsel at Fortune 1000 companies by BTI found that legal departments spent an average of 1 percent less on litigation during the first half of this year.

Elizabeth Scully, a partner at Baker Hostetler experienced in e-discovery, told the NLJ that the discovery process is much more expensive than just a few years ago. "It makes logical sense that the cost associated with e-discovery may be one of the things changing the numbers."

The article cited this evidence of a declining appetite for litigation:

• New civil filings in federal courts dropped more than 2 percent in fiscal 2008.

• The Hildebrandt International Peer Monitor Economic Index found demand for litigation services in the top 200 law firms was flat in the year’s first quarter.

• An Altman Weil survey late last year found that 75 percent of general counsel faced 2009 budget cuts.

Comments

1.

Lee
Aug 18, 2009 10:05 AM CST

While it may seem tempting to blame the digital age for the dearth in litigation, perhaps the reason for said dearth is that many clients are broke, or, in the alternative, are going broke.  Clients are getting more savvy about the pointless pursuit of obtaining worthless judgments against deadbeat adversaries.

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2.

Janet
Aug 18, 2009 11:30 AM CST

The truly sad part is that the reason ediscovery is so expensive is there are still far to many attorneys who refuse to do it correctly.  It doesn’t have to cost a lot if they plan and communicate.

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3.

Greg
Aug 19, 2009 8:36 AM CST

Janet is absolutley correct.  The tools that have come to the market recently were created to lessen the amount of attorney review hours, thus lowering the total cost for the client.  However, law firms depend on those billable hours.  This is where rock meets the hard place.  It will take a further education of the corporations to play a role in how their ediscovery is managed to their best benefit.

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4.

Donald
Aug 26, 2009 6:11 AM CST

We’re going thru some ediscovery issues right now.  Frankly, as one attorney in a very small inhouse shop we don’t have enough litigation to invest in any of the ediscovery tools that have come out so we have to rely on the firms we use to handle this.  To me, it’s damned if you do, damned if you don’t.  Either way, you pay.  The worst part is most of what gets pulled as electronically stored info isn’t at all relevant to the case at hand, but the fear of sanctions is such that you err on the side of caution and produce more than necessary.

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5.

David
Aug 26, 2009 10:26 AM CST

There is no doubt that e-discovery has played a role in the decline of litigation.  In the old days, litigation was not nearly as disruptuive,.  You didn’t have to send out freeze-hold notices to nearly everyone in the company (including senior offiers), or image servers and laptops, make sure back up tapes are not destroyed etc.—all for some of te most mundane litigation.  Both sides run striong searches and generates boxes worth of emails and other documents that must be reviewed.  The other side can too easily demand and obtain more searches, or production of metadata, or recovery of archived.  There is a reason the e-discovery industry—whcih didn;t exist 10-15 years ago—has come into being, adding more costs to litigation.  It is simply too dispruptuive and too costly and too risky (God forbid you miss an email) to litgation today, and in m,y experience magistrates and judges are not eager to hear e-discovery disputes o=or sympatheic to efforts to keep e-discovery costs under control.  So both sides get boxes and boxes (or CDs) of documents that cost oo mucch money to produce, review, and utilize.  Discovery needs to be reformed—and fast.

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6.

Bob Garrey
Aug 27, 2009 12:00 PM CST

The cost of e-discovery certainly may be a factor.  But, the primary reason for the decrease in suits is that this economic downturn did not hit one or even a few industries.  It was widespread.  With companies going under, there are fewer big, cash rich targets for plaintiff’s lawyers to target.  Fortune 100s with excess cash are either saving it and shoring up their bottom lines or taking advantage of excellent buying opportunites.  Spending on costly litigation does not make good business sense when dollars are scarce.  What we are seeing is a reduction in frivolous or non-essential litigation.  It is not necessarily a bad thing.  It will be interesting if cases get to trial faster in the next 12-24 months.

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