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New federal e-discovery rules require companies to detail their ILM policies and procedures at the outset of litigation.
U.S. companies with gross revenues of $1 billion or more are currently fielding 556 lawsuits on average, according to the latest edition of Fulbright & Jaworski's "Litigation Trends Survey." Almost half of those companies face 50 new lawsuits annually, a number that many large firms expect to increase in the coming year.
And the vast majority of reporting businesses say they are not prepared to handle an e-discovery challenge.
"The new rules really go to the heart of information lifecycle management and expose the wound that we see," says Rick Wolf, former head of global compliance at Cendant Corp., the $18 billion hotel and travel services conglomerate that dismantled itself earlier this year. He sees a "global information-management crisis," brought on by years of corporations throwing more cheap, multitiered storage and processing speed at the burgeoning glut of informationparticularly unstructured data such as e-mail, instant messaging and Web pageswithout regard to the business value of the information or the cost of locating it when needed.
"It's analogous to the Industrial Revolution, when companies manufactured at a rapid pace irrespective of the effects of that activity on the environment, and we're still cleaning it up today," notes Wolf. "In the Information Age, the way to compete is through the Internet and e-mail. And there's been no regard whatsoever to where all the information is going."
Wolf sites statistics that show more than 84 billion e-mails being sent and received each day by businesses worldwide, almost triple the volume only four years ago. "It's like we need an Information Superfund," he adds. His dire assessment was echoed in a survey of senior corporate executives published in September by the nonprofit Business Performance Management Forum, an industry group. Nearly half of the 400 executives surveyed across North America expressed concern that the failure to effectively archive and manage their electronic content was a critical liability for their companies. A third of respondents to the survey, conducted for compliance software maker AXS-One Inc., said they have no corporate policy covering electronic records management, and another 20 percent said they didn't know if they even had a policy.
The cost of processing data that is subject to discoveryby using a litigation-review tool to preserve it and present it for legal reviewcan range from $1,200 to $2,500 per gigabyte, estimates Laura Bandrowsky, the practice support manager in the IT department at Duane Morris LLP, a law firm based in Philadelphia. But that's just the cost of using the software tool to cull potentially relevant data for lawyers to review, which is only the tip of the iceberg. The big expense is having that subset of data reviewed by high-priced lawyers to determine what's relevant to the case at hand. Some e-discovery practitioners peg the cost of sifting e-mail for relevant information at about $2 per message, which adds up quickly when archives total in the hundreds of thousands, or millions, of messages.
"The volume of data that must be managed or handled for litigation directly affects the cost of discovery," cautions Bandrowsky, who is also chief operating officer of Wescott Technology Services LLC, a Duane Morris unit that provides technology consulting and e-discovery services to clients and other law firms. She estimates that the discovery costs for a recent client that started with roughly 300 gigabytes of raw data, which was then winnowed to about 150 gigabytes produced for litigation, totaled about $4 million, including lawyer review time.
Do we have effective systems for archiving business records and other electronic content?