Each year for the past 11, Norton Rose Fulbright has gauged the temperature of global litigation with a far-reaching survey of corporate counsel from all over the world. This year, 800 lawyers from 26 countries participated -- about two-thirds from billion-dollar organizations.
Collectively, they reported a steep decline in data volumes, an easing of regulatory pressure and less societal appetite for frivolous class actions. "I sleep like a baby," one general counsel said.
Just kidding. Here are six key takeaways from the 66-page report, which you can download here.
1. Pairing low barriers to filing with high litigation costs is a recipe for quick settlements
Global titans of industry may make for unsympathetic characters, but it's hard to ignore the rising fear of "extortionate" -- as one GC put it -- class actions and the increasing ease with which prospective litigants can organize and sue. Crowd-sourced lawsuits, anyone? Stir this trend with soaring litigation costs, particularly discovery-related costs, which were again identified as a top concern, and you have a cocktail for swift settlements of -- again, corporate lawyers say -- meritless claims.
This pretty much sums it up:
“I think (my biggest concern) is probably the class action litigation particularly in the US. A lot of the times it is without foundation, (but) you end up tackling it just to avoid the ongoing cost of being involved in the process. It is a pretty unsatisfactory global system for class action in that regard.” ~ Australian Technology and innovation company GC
2. General counsels want predictable costs
More than half of respondents said they used alternative fee arrangements, and of those, 66% said they preferred fixed fees. 78% said fixed fee arrangements had been effective or very effective in helping their company achieve financial goals, and -- here's the kicker -- 97% of respondents who had used AFAs were satisfied with the work performed under them. The bigger the company, the more likely to use AFAs.
Discovery costs are a wildcard, and smart corporate legal teams will do whatever it takes to lock them in as precisely as possible. It doesn't look good to the rest of the C-suite to come in way over budget -- or way under budget for that matter. Fixed fees promote efficiency because they disincentive feet-dragging on work that would otherwise be billed by the hour, and help eliminate "make work" advising.
3. When outsourcing, corporate is cutting out the middleman
In addition to demanding more alternative fees arrangements to lock in costs, an increasing number of organizations are turning to legal process outsourcing to withstand the avalanche of legal work they're facing from increased regulatory scrutiny, internal investigations, M&A and litigation. What's perhaps most interesting, though, is that while 21% of respondents said they worked with law firms that hired their own LPOs, a full third of respondents reported either working with the LPO directly or using their own shared or captive service centers for elements of legal work.
Nearly half of respondents indicate it is “Very Important” or “Moderately Important” that outside counsel demonstrate cost-effective sourcing of legal services. In other words, on the whole, organizations that are large enough to need to outsource work in the first place are showing more willingness to own the LPO relationship or do the work at a service center they control. But as the size of the corporate legal department increases, so does the likelihood outside counsel owns the outsourcing -- and the likelihood corporate is demanding that money is well spent.
4. 'Employees don't understand the impact of spoliation'
That's a direct quote from a US-based GC and it speaks to the fact that:
- You can't always trust individual custodians
- Self-preservation increases risk
- IT is best positioned to collect and preserve at legal's direction.
Relying on busy employees to know what's relevant and what isn't when a preservation notice comes down the pike is like poking a firecracker with a bum fuse. It probably won't blow up in your face... but it might. Most custodians, along with not having any context for the litigation beyond what's in the hold notice, assuming they read it, are not in a position to ensure the integrity of relevant materials. Custodians are busy. They make mistakes (ask yourself how many times you've accidentally deleted an important email). And rank-and-file employees don't necessarily understand the importance of a lawsuit -- or care one way or the other. Self-preservation invites spoliation, not because custodians are untrustworthy, although some could be, but because they're apathetic. They have better things to do: their jobs.
Only 22% of respondents who don't self-preserve said they used an outside vendor to do so -- meaning this is the domain of internal IT. As one 15,000-person company recently told us, "IT pulls PSTs from our company servers and drops them right in our discovery platform so legal can see what it has immediately -- and start whittling down the collection." (note: in this case the tool was Logikcull, but there are other good ones). What's important is to limit the number of hands in the preservation cookie jar. Control is key.
5. TAR users are in the majority (well, maybe)
43% doesn't constitute "more than half" in my experience, but setting that aside, the growth in use of predictive analytics is notable. For comparison, 35% of respondents reported using TAR in the 2013 report. What's impressive, though, is that the vast majority (79%) of the largest businesses are TAR users. This makes sense for two reasons:
- You need to have deep pockets to afford the high upfront and infrastructural costs to support a TAR platform -- premiums for proprietary software, multiyear contracts, users licenses, training costs, handholding/consulting fees, etcetera etcetera.
- Businesses with a lot of high-volume discovery matters are most likely to benefit from the cost-savings TAR can deliver in the long run if implemented correctly (although, interestingly, we talked to a law firm today that said it recently used TAR for an internal investigation with 30,000 documents).
6. Mobile data is a staple of the litigation ecosystem
The doomsayers predicting mobile data would be the next house of horrors for corporate legal were right on the money. More than half of total respondents, and about two-thirds of US-based respondents, said they'd been "required to preserve or collect data from a mobile device" in the past 12 months. And of those, a third said they have mobile discovery data at issue in more than 50% of their cases. The phrasing of the question -- "required to preserve" -- is interesting, and suggests that more preservation and document requests, including those from regulators, are specifically demanding mobile data. Three points here:
- If you're a company facing significant litigation and don't have a bring-your-own-device policy, fix that now.
- Enforce your BYOD policy.
- Make sure your employees understand that their personal devices are fair game in litigation, especially if they're used for any work purpose at all.
Robert Hilson is a director at Logikcull. He can be reached at email@example.com.