the internets + lawyers = danger
The big data dump
Technology, business and the law
Aug 28th 2008
The Economist
A deluge of electronic information may overwhelm American civil justice Dawn Beye's teenage daughter suffers from anorexia nervosa and had to be treated in hospital at a cost of about $1,000 a day. Horizon Blue Cross Blue Shield of New Jersey, the Beyes’ insurance company, covered one month of the bills but then balked, demanding evidence that the affliction was “biologically based” rather than psychological. So Ms Beye got together with parents of other anorexic and bulimic teenagers and sued. Horizon immediately asked to see practically everything the teenagers had said on their Facebook and MySpace profiles, in instant-messaging threads, text messages, e-mails, blog posts and whatever else the girls might have done online.
The Beyes’ lawyer, David Mazie at Mazie, Slater, Katz & Freeman, objected on the grounds that Horizon’s demands violated the girls’ privacy. He lost. So hard disks and web pages are being scoured in order for the case to proceed. Gathering and then sifting through all the electronic information that a few teenage girls have generated is excessive and daunting, says Mr Mazie.
And yet almost all information today is electronic, and there is ever more of it. “Things that we would never have put in writing are now in electronic form,” says Rebecca Love Kourlis, formerly a justice on Colorado’s Supreme Court and now the director of an institute at the University of Denver dedicated to rescuing America’s civil-justice system.
This system, she says, was already a “sick patient”-with crowded dockets and understaffed courts-but electronic discovery now threatens a lethal “spike in fever”. She has seen ordinary landlord-tenant disputes take three years, and divorce cases that might have been merely bitter, but are now digital wars of attrition. She sees cases that are settled only because one party cannot afford the costs of e-discovery: whereas in the past 5% of cases went to trial, now only 2% do. She knows plaintiffs who cannot afford to sue at all, for fear of the e-discovery costs.
For large companies, these costs now run into many millions. Patrick Oot, a lawyer for Verizon, an American telecoms giant that gets sued a lot, says that at the beginning of this decade e-discovery presented “a one-big-case, once-a-year problem”. In most cases information was still on paper, and its volume thus limited. In the rare event that electronic evidence was requested, 100 gigabytes (GB) was considered a large amount. Today, says Mr Oot, almost every case involves e-discovery and spits out “terabytes” of information-the equivalent of millions of pages. In an ordinary case, 200 lawyers can easily review electronic documents for four months, at a cost of millions of dollars, he says.
This has led to a new boom industry of specialised e-discovery service providers which merrily charge $125-600 an hour. George Socha, a consultant, estimates that their annual revenues have grown from $40m in 1999 to about $2 billion in 2006 and may hit $4 billion next year.
The process of e-discovery starts when the adversaries in a lawsuit demand to see all sorts of information in their search for relevant nuggets. Each side then has to identify all the laptops, smart-phones, memory sticks, network servers and back-up tapes that might store data created by the people in question. It probably also has to request logs from online-service providers, if those people used web-mail or similar services. The results then have to be indexed and reviewed by humans. This usually falls to the junior staff at law firms, some of whom are so fed up with the drudgery that they have quit the profession altogether.
For firms that find themselves in court a lot, it makes increasing sense to bring this entire process in-house, rather than farming it out. Verizon, for instance, has been using outside firms such as Kroll, but found them “really expensive”, says Mr Oot. So Verizon has established a dedicated internal e-discovery group which Mr Oot oversees and which will gradually take over all e-discovery using its own software and staff. Mr Oot reckons this will save Verizon $11m in costs over three years.
But even as huge companies such as Verizon learn to cope, the civil-justice system as a whole threatens to get bogged down. Stephen Breyer, a justice on America’s Supreme Court, recently expressed concern that, with ordinary cases costing millions just in e-discovery work, “you’re going to drive out of the litigation system a lot of people who ought to be there” so that “justice is determined by wealth, not by the merits of the case.”
This is overwhelmingly an American problem. In countries such as France and Germany that have an inquisitorial legal tradition, e-discovery tends to be proportionate to the case, because judges largely determine what information is relevant. By contrast, in adversarial common-law systems, it is the opponents in a case that decide how much information to peruse before picking out the evidence. But most countries within this tradition, such as Britain, Canada and Australia, have recently moved towards inquisitorial systems to minimise the threat from e-discovery.
As a result, American civil law is now “way behind” the rest of the world, says Ms Love Kourlis. New federal rules that took effect in 2006 included guidelines for electronic data. But they have not changed a fundamental aspect of America’s brand of adversarial law, which places almost no limit on the information that the plaintiff and defendant may seek from each other.
So Ms Love Kourlis suggests some new rules. Judges in civil cases, she says, need more power to assess and define the appropriate amount of information that can be sought in each case. Civil cases ought to require both sides to disclose what information they have, as in criminal cases, thus ending the game of hide-and-seek that makes both parties ask for more, for fear of missing something. And shifting lawyers away from being paid by the hour (see article - [I pasted it below]) would mean that they no longer had an incentive to add to the process.
http://www.economist.com/business/displaystory.cfm?story_id=12010377
Killable hour
Is time almost up for clockwatching lawyers?
Aug 28, 2008
The Economist
Of all the tedious tasks that lawyers have to do, time-recording is perhaps the most deadly. Private-practice lawyers account for their time in increments of 15 minutes, or even five or six minutes at some firms, and then send the bill to clients. This structure has been in place for decades. But cost-cutting has put a squeeze on companies’ legal budgets, and there is growing interest in doing away with the “billable hour” approach in favour of other pricing schemes.
It is not hard to see why. The hourly rate for a newly qualified lawyer at a big firm can reach £235 ($425). Most big British and American firms set targets for all their lawyers, from 1,300 billable hours a year to 1,800 hours and beyond. Lawyers who exceed their targets often get a bonus. But clients complain that this practice values the quantity of hours billed over quality and encourages padding.
If the billable hour does perish, it will be at the hands of the clients, rather than the private-practice lawyers themselves. Some companies are starting to switch to fixed fees, with a performance bonus related to results. Tyco, an American conglomerate, took this approach with Eversheds, a British firm, in a deal signed earlier this year. The firm has taken on Tyco’s commercial legal work for a fixed fee, and will receive a bonus if it improves its client’s satisfaction by 35% and reduces litigation against Tyco by 15%.
High-volume legal matters, which rely on precedents and templates, are the most obvious targets for fixed fees. Set prices can be put on anything from commercial contracts to trademark filing and personal-injury work.
Litigation is less suited to fixed fees, however, because of its unpredictability. Some firms provide upfront estimates, whereas others charge a “blended fee” based on a combination of hours worked and a fixed fee. In America some companies take a share of the settlement. Wiley Rein & Fielding, a firm in Washington, DC, used this to great effect in March 2006 for NTP, a small firm which won $613m from Research In Motion, in a patent-infringement case over the BlackBerry e-mail device. The firm got $200m, which it shared among all its employees.
Finding a new model to price legal services is no easy task. A lawyer’s skill, knowledge and experience are hard to quantify, as is the importance of a legal matter to a company. The fixed fee at least gives in-house lawyers certainty when budgeting and confidence when explaining that budget to the board.
But the legal industry is not known for welcoming change. Whatever it turns out to be, the billable hour’s replacement must be easy to use-and must strike a compromise between clarity for the client and profits for the law firm.
http://www.economist.com/business/displaystory.cfm?story_id=12010385
Technology, business and the law
Aug 28th 2008
The Economist
A deluge of electronic information may overwhelm American civil justice Dawn Beye's teenage daughter suffers from anorexia nervosa and had to be treated in hospital at a cost of about $1,000 a day. Horizon Blue Cross Blue Shield of New Jersey, the Beyes’ insurance company, covered one month of the bills but then balked, demanding evidence that the affliction was “biologically based” rather than psychological. So Ms Beye got together with parents of other anorexic and bulimic teenagers and sued. Horizon immediately asked to see practically everything the teenagers had said on their Facebook and MySpace profiles, in instant-messaging threads, text messages, e-mails, blog posts and whatever else the girls might have done online.
The Beyes’ lawyer, David Mazie at Mazie, Slater, Katz & Freeman, objected on the grounds that Horizon’s demands violated the girls’ privacy. He lost. So hard disks and web pages are being scoured in order for the case to proceed. Gathering and then sifting through all the electronic information that a few teenage girls have generated is excessive and daunting, says Mr Mazie.
And yet almost all information today is electronic, and there is ever more of it. “Things that we would never have put in writing are now in electronic form,” says Rebecca Love Kourlis, formerly a justice on Colorado’s Supreme Court and now the director of an institute at the University of Denver dedicated to rescuing America’s civil-justice system.
This system, she says, was already a “sick patient”-with crowded dockets and understaffed courts-but electronic discovery now threatens a lethal “spike in fever”. She has seen ordinary landlord-tenant disputes take three years, and divorce cases that might have been merely bitter, but are now digital wars of attrition. She sees cases that are settled only because one party cannot afford the costs of e-discovery: whereas in the past 5% of cases went to trial, now only 2% do. She knows plaintiffs who cannot afford to sue at all, for fear of the e-discovery costs.
For large companies, these costs now run into many millions. Patrick Oot, a lawyer for Verizon, an American telecoms giant that gets sued a lot, says that at the beginning of this decade e-discovery presented “a one-big-case, once-a-year problem”. In most cases information was still on paper, and its volume thus limited. In the rare event that electronic evidence was requested, 100 gigabytes (GB) was considered a large amount. Today, says Mr Oot, almost every case involves e-discovery and spits out “terabytes” of information-the equivalent of millions of pages. In an ordinary case, 200 lawyers can easily review electronic documents for four months, at a cost of millions of dollars, he says.
This has led to a new boom industry of specialised e-discovery service providers which merrily charge $125-600 an hour. George Socha, a consultant, estimates that their annual revenues have grown from $40m in 1999 to about $2 billion in 2006 and may hit $4 billion next year.
The process of e-discovery starts when the adversaries in a lawsuit demand to see all sorts of information in their search for relevant nuggets. Each side then has to identify all the laptops, smart-phones, memory sticks, network servers and back-up tapes that might store data created by the people in question. It probably also has to request logs from online-service providers, if those people used web-mail or similar services. The results then have to be indexed and reviewed by humans. This usually falls to the junior staff at law firms, some of whom are so fed up with the drudgery that they have quit the profession altogether.
For firms that find themselves in court a lot, it makes increasing sense to bring this entire process in-house, rather than farming it out. Verizon, for instance, has been using outside firms such as Kroll, but found them “really expensive”, says Mr Oot. So Verizon has established a dedicated internal e-discovery group which Mr Oot oversees and which will gradually take over all e-discovery using its own software and staff. Mr Oot reckons this will save Verizon $11m in costs over three years.
But even as huge companies such as Verizon learn to cope, the civil-justice system as a whole threatens to get bogged down. Stephen Breyer, a justice on America’s Supreme Court, recently expressed concern that, with ordinary cases costing millions just in e-discovery work, “you’re going to drive out of the litigation system a lot of people who ought to be there” so that “justice is determined by wealth, not by the merits of the case.”
This is overwhelmingly an American problem. In countries such as France and Germany that have an inquisitorial legal tradition, e-discovery tends to be proportionate to the case, because judges largely determine what information is relevant. By contrast, in adversarial common-law systems, it is the opponents in a case that decide how much information to peruse before picking out the evidence. But most countries within this tradition, such as Britain, Canada and Australia, have recently moved towards inquisitorial systems to minimise the threat from e-discovery.
As a result, American civil law is now “way behind” the rest of the world, says Ms Love Kourlis. New federal rules that took effect in 2006 included guidelines for electronic data. But they have not changed a fundamental aspect of America’s brand of adversarial law, which places almost no limit on the information that the plaintiff and defendant may seek from each other.
So Ms Love Kourlis suggests some new rules. Judges in civil cases, she says, need more power to assess and define the appropriate amount of information that can be sought in each case. Civil cases ought to require both sides to disclose what information they have, as in criminal cases, thus ending the game of hide-and-seek that makes both parties ask for more, for fear of missing something. And shifting lawyers away from being paid by the hour (see article - [I pasted it below]) would mean that they no longer had an incentive to add to the process.
http://www.economist.com/business/displaystory.cfm?story_id=12010377
Killable hour
Is time almost up for clockwatching lawyers?
Aug 28, 2008
The Economist
Of all the tedious tasks that lawyers have to do, time-recording is perhaps the most deadly. Private-practice lawyers account for their time in increments of 15 minutes, or even five or six minutes at some firms, and then send the bill to clients. This structure has been in place for decades. But cost-cutting has put a squeeze on companies’ legal budgets, and there is growing interest in doing away with the “billable hour” approach in favour of other pricing schemes.
It is not hard to see why. The hourly rate for a newly qualified lawyer at a big firm can reach £235 ($425). Most big British and American firms set targets for all their lawyers, from 1,300 billable hours a year to 1,800 hours and beyond. Lawyers who exceed their targets often get a bonus. But clients complain that this practice values the quantity of hours billed over quality and encourages padding.
If the billable hour does perish, it will be at the hands of the clients, rather than the private-practice lawyers themselves. Some companies are starting to switch to fixed fees, with a performance bonus related to results. Tyco, an American conglomerate, took this approach with Eversheds, a British firm, in a deal signed earlier this year. The firm has taken on Tyco’s commercial legal work for a fixed fee, and will receive a bonus if it improves its client’s satisfaction by 35% and reduces litigation against Tyco by 15%.
High-volume legal matters, which rely on precedents and templates, are the most obvious targets for fixed fees. Set prices can be put on anything from commercial contracts to trademark filing and personal-injury work.
Litigation is less suited to fixed fees, however, because of its unpredictability. Some firms provide upfront estimates, whereas others charge a “blended fee” based on a combination of hours worked and a fixed fee. In America some companies take a share of the settlement. Wiley Rein & Fielding, a firm in Washington, DC, used this to great effect in March 2006 for NTP, a small firm which won $613m from Research In Motion, in a patent-infringement case over the BlackBerry e-mail device. The firm got $200m, which it shared among all its employees.
Finding a new model to price legal services is no easy task. A lawyer’s skill, knowledge and experience are hard to quantify, as is the importance of a legal matter to a company. The fixed fee at least gives in-house lawyers certainty when budgeting and confidence when explaining that budget to the board.
But the legal industry is not known for welcoming change. Whatever it turns out to be, the billable hour’s replacement must be easy to use-and must strike a compromise between clarity for the client and profits for the law firm.
http://www.economist.com/business/displaystory.cfm?story_id=12010385