E-Discovery Costs and Benefits, Part 3 of 6: Legal Costs

E-Discovery Costs and Benefits,

December 4, 2011 | Law & Forensics
Part 3 of 6: Legal Costs

Daniel B. Garrie, is the  Senior Managing Partner  at Law & Forensics LLC and works out of the Seattle, Los Angeles, and New York offices. He focuses on e-discovery, digital forensics, cyber security and warfare, data privacy, and predicitive coding working with law firms, governments, companies, and non-profits globally. 

Ninety percent of US corporations are engaged in some type of litigation.  This suggests that e-discovery is an ongoing process for companies—not a onetime event.  Indeed, there are at least 20,000 compliance requirements worldwide and about 10,000 regulations that impact data management in the United States alone. A single hard drive can easily contain up to 1.5 million pages of data and one corporate backup tape can contain 4 million pages of data.  To put this in context, one can store more documents on a ten-square-inch hard drive than can be kept as hard copies in an entire story of a building.  The task of looking for one document among all active and archived files often becomes overwhelming and expensive, as more documents = more time = more dollars.

Cost estimating relationships usually rely on a “sizing” parameter.  For ESI, a measure of storage capacity is frequently used: a gigabyte (GB) or 109 bytes (characters) of data.  IT managers can readily furnish the storage space in GB utilized by a set of document files.  For Microsoft® Word® documents, the page equivalence is about 65,000 pages/GB.  However, page equivalence is very much application dependent.

Although costs depend on a variety of factors, the following list highlights important elements needed to estimate an organization’s costs of discovery:

  • Preservation of documents under legal requirements to retain evidence for pending or anticipated litigation and/or regulatory inquiries, or to prove or defend a claim;
  • Retrieving and processing documents for litigation, including documents which have been retained longer than records retention policies require;
  • Information restoration and collection tasks measured in gigabytes (GB) of storage space;
  • Average volume of information per discovery request measured in GB per request; and
  • Document review burden for a range of analytical needs measured in labor resources per GB.

An in-depth analysis of these elements will allow an organization to estimate the range of actual processing and legal costs when outsourcing the task of responding to a discovery request.  The costs can reach unexpectedly high levels.  One major Fortune 500 Corporation found that an average litigation discovery request produced 100 – 150 GB of information.

No shortage exists of third-party companies that can assist an organization in the discovery process.  There are now reportedly about 600 companies offering e-discovery services.  A recent survey reports that e-discovery services are currently a $3 billion market which is growing by 15-20% a year.

In seeking to estimate the cost of an in-house response, your organization must utilize appropriate internal labor rates along with the pro-rated cost of requisite technology investments (see Technology e-Discovery Costs section).  An in-house solution becomes more attractive as e-discovery becomes a more consistent and predictable cost burden.

** This is the first part in a six-part series which comprise an abridged version of the article “eDiscovery Costs and Benefits,” written by Daniel Garrie and published in the Los Angeles Daily Journal.