Cutting-edge technology is providing quicker access to electronic documents – but are law firms up to speed? Neil Hodge reports

Given that the overwhelming majority of documents produced these days are computer-generated and electronically stored, it would seem obvious that law firms would have systems in place to file, record and retrieve that information quickly and cost-effectively.

However, anecdotal evidence suggests that the legal profession has been slow to take advantage of the latest cutting-edge technologies that can help speed up e-disclosure.

This is partly due to a reluctance to be early adopters, partly due to cost, and partly – some lawyers acknowledge – to a reluctance to dump a pricing model – the open-ended billable hour – that can generate substantial fee income.

Disclosure of documents is a feature of most common law jurisdictions. But discovery increases case costs because the opponents need to be able to see each others' evidence, and can also have a say in how that evidence should be retrieved.

And because of the explosion in data volumes held on computers, laptops, telephony systems and mobile handheld devices, traditional linear or 'page-by-page' review practices have been exposed as inefficient, costly and inconsistent.

Consequently, says Chris Dale of the e-Disclosure Information Project, which promotes the better use of technology for disclosure for the legal sector: "There is active interest in improving the process in England and Wales, the US, Australia, Canada, Singapore, Hong Kong, New Zealand and Ireland."

All systems go?

Law firms are already using targeted collection and keyword-searching techniques to narrow the 'document universe' to address these problems.

However, massive amounts of irrelevant documents usually remain for manual review and coding. Furthermore, some items can remain hidden until the last days of review.

As a result, some high-profile judges – including Steven Whitaker, Senior Master and Queen's Remembrancer at the Royal Courts of Justice – have publicly supported and pushed for the greater use of technologies such as predictive coding to cut costs and improve efficiencies.

Predictive coding allows lawyers to prioritise documents in order of importance – responsive, privileged or key – so that the software can learn from previous search terms and suggest new, similar documents that might be relevant.

For example, once a reviewer has coded a group of documents as responsive, the predictive coding process analyses references in the text for themes and concepts that are then used to identify further concepts of the same type.

The accuracy and consistency of category decisions improves on linear review, allows lawyers to target key documents more quickly and enables more consistent calls.

However, experts point out that technology is not a catch-all solution for legal document research: predictive coding is not automated coding, and while the technology offers suggestions regarding documents similar to those coded by lawyers, the litigation team is not required to accept the computer's suggestions without legal analysis.

Yet even with these caveats, the days of poor record retrieval – particularly of electronic documents – are numbered, say experts. Peter Lyons (pictured), managing director of CPD Training UK, says: "Lawyers need to get to grips with better electronic document retrieval, especially if they are likely to be sued or if they want to sue someone.

"Around 95% of documents that organisations create now are electronic – such as Word files, PDFs, spreadsheets and emails – and the metadata within them is gold dust because it shows the times and dates when they were created, if they have been modified, and when they were last accessed.

It is simply crazy for lawyers to suppose that clients will continue to pay large fees per billable hour for information that should be readily retrievable."

"There have already been steps in the UK to improve e-disclosure and reduce the costs for document discovery. Relating to 'multi-track' cases, Section 31b of the 2010 E-disclosure Practice Direction (Disclosure of Electronic Documents) sets out "to encourage and assist the parties to reach agreement in relation to the disclosure of electronic documents in a proportionate and cost-effective manner".

It adds that "electronic documents should be managed efficiently in order to minimise the cost incurred", and that "technology should be used in order to ensure that document management activities are undertaken efficiently and effectively".

Moreover, it points out that "disclosure of electronic documents which are of no relevance to the proceedings may place an excessive burden in time and cost on the party to whom disclosure is given."

Courtroom battles
Recent developments in the US courts also suggest that technologies such as predictive coding should be used more readily, and lawyers in the UK believe that they will need to follow suit for their clients.

On 24 February, Magistrate Judge Andrew Peck of the US District Court for the Southern District of New York issued an opinion that effectively approved of the use of computer-assisted review in electronic data discovery.

In the case of Monique Da Silva Moore, et al, Plaintiffs, v Publicis Groupe & MSL Group, Defendents, 11 Civ 1279 (ALC)(AJP), Peck wrote that "computer-assisted review is an available tool and should be seriously considered for use in large-data-volume cases where it may save the producing party (or both parties) significant amounts of legal fees in document review"so long as there was also appropriate quality-control testing.

He added that the decision to allow computer-assisted review in that case was relatively easy as the parties had agreed to its use (although disagreed about how best to implement such review).

And there are further incentives coming up in the UK that will encourage firms – rather than force them – to adopt predictive coding. Firstly, Lord Justice Jackson's reforms aimed at controlling litigation costs will come into force as of next April.

There have already been pilot schemes set up at the technology and construction courts (TCC) and mercantile courts, where lawyers are being asked to explain their budgets at the outset of the trial. Also from next April, judges will be docketed to manage their own cases, including disclosure costs.

His Honour Judge Simon Brown QC, Specialist Mercantile Judge at Birmingham Civil Justice Centre, believes that Jackson's reforms will spur on the need to cut costs, while clients will increasingly question charges for document disclosure.

"As a docketed judge sitting in the Birmingham Mercantile Court, I have been costs managing all cases in the court for nearly three years now. At first, I found that firms were reluctant to issue their claims because they were afraid that their costs would be capped," he says.

"It was also evident that in a number of cases the budgets were disproportionately high for the costs being sought – I am aware of one instance where a law firm estimated that disclosure costs would amount to around £4m while the case was only worth £1m – and were not sufficiently detailed about how these figures had been arrived at.

"More worryingly, it appeared that clients had not been told what their own lawyers were proposing to spend on their behalf, let alone what bill might be landed upon them, if unsuccessful, by an uncontrolled budget on the other side."

In short, says Brown, "from next April, it will no longer be tenable for lawyers to present budgets for document disclosure that far outweigh the merits of the case. Charging up to £500 per hour for document searches is out – no one using civil courts can afford it."

Brown says that civil litigation practitioners will have a "nasty shock"next year if they turn up for a routine case management conference expecting the judge to rubber stamp their draft directions.

"Lawyers will find themselves in front of a docketed judge who will stay with the case from start to finish and who will be trained in case management.

"As a result, the judge will want to know how the parties justify the proportionality of their costs and budgets, and if he is not satisfied, he will not approve them unless they are properly revised," he says.

There are already some dedicated software vendors in the market that can provide predictive coding solutions, such as Recommind, FTI Technology, and OrcaTec, and the use of the technology – particularly in top-tier firms – is growing. Howard Sklar, senior consultant at Recommind, a company that produces predictive coding software, argues that the market has now matured.

"We are past the 'early adopter' stage, and more and more law firms are considering using the technology, even if just on a case-by-case basis. We expect take up of predictive coding to increase as clients push for lower costs and the legal industry pursues greater efficiencies,"he says.

Several of the global top-tier law firms are already using predictive coding. Mark Surguy (pictured), litigation partner at Eversheds, says that the firm started using predictive coding last year and hopes to use it more frequently.

He believes that such technologies will become more readily used by law firms as enforcement agencies – such as HM Revenue & Customs, the Serious Fraud Office, the police, and the Financial Services Authority – want more assurances from lawyers about how thoroughly document searches have been carried out, and how that data has been interrogated.

"The quality of the information search is as important as the quality of the information itself. Regulators and clients want more assurance about how documents are being discovered,"he says.

Client power

The push for predictive coding is also coming from clients, according to Surguy: "Document searches can add significantly to a client's costs, particularly if the law firm charges per billable hour, so it is not surprising that clients want certainty about how much the work is going to cost beforehand.

"If technology can reduce these costs, then clients are going to demand it, as well as an end to the hourly fee arrangement."

Vince Neicho, litigation support manager at Allen & Overy, says that the firm started using predictive coding on some of its cases three years ago. It realised the benefits of the technology.

"We first used predictive coding in a commercial court case where we identified 60,000 documents to review and prioritise. The technology carried out the work in a fraction of the time we would normally allocate to do such a review. We also used predictive coding in a regulatory case where finding relevant documents can be very difficult and time-consuming.

"The business case for the technology became evident when we found that predictive coding could locate a relevant document every 17 minutes on average, as opposed to the five hours it was taking an associate to find one."

But Neicho adds that predictive coding "is only as good as the people that train it".

As he points out: "Putting a paralegal or junior solicitor in charge of training the software is not going to result in the same quality of document prioritisation as would be the case if a partner or associate was in charge of the process.

"Law firms therefore need to recognise that senior lawyers need to be involved from the start to ensure effective delivery, and not think that the technology can simply develop on its own."

At the moment, though, law firms are reluctant to buy predictive coding technologies to roll out across their offices.

"Most law firms are reluctant to become early adopters and buy the software in, and so far vendors seem to support that view and are able to offer the software on a 'pay as you go' basis," says Surguy.

"This provides law firms with a more flexible approach so that they can use different software packages depending on their needs, and it also allows mid-tier law firms to offer the same kinds of services to their clients without having to pay for a huge technology investment upfront."

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Herbert Smith Freehills – Predictive coding case study

Following an initial trial during July to September 2011, Herbert Smith Freehills (HSF) partnered with Recommind that December and began to use its Axcelerate Review & Analysis predictive coding tool from February 2012 in the law firm's Belfast office.

Libby Jackson (pictured), the office's director, says that the firm first successfully used predictive coding technology on a confidential internal investigation carried out across the Belfast and Hong Kong offices in February and March after a client specifically requested its use.

Working from a universe of 200,000 documents, HSF used predictive coding to reduce the number of documents for review. This included using Recommind's 'smart filters' to identify documents passing between specific individuals and emails sent from specific domains. The filters were also used to exclude frequently occurring irrelevant documents, which was one of the client's key objectives.

The team then used the predictive coding function to review the documents, training the system to find additional documents for review and also as a quality check. The end result was that less than 20,000 documents were reviewed – less than 10% of the potential review pool.

Jackson says that "using the predictive coding functionality on this review saved the client up to 25% in review costs". However, despite the use and adoption of such technologies by top-tier law firms, Jackson does not believe that the legal services market is at a "tipping point" yet.

She adds: "Clients, lawyers and the judiciary are showing great interest, with some high profile thought-leadership, such as HHJ Brown and Senior Master Whitaker. But, quite naturally, it will be a little while before predictive coding technology becomes routinely considered as an option in managing disclosure. 

"It will take time before lawyers on either side of a dispute begin to regularly discuss it as an option during the early stages of a dispute, and then to bring it to the Courts for the judiciary to approve."

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Key recent decisions on disclosure

Earles v Barclays Bank [2009] EWHC 2500 Mercantile (8 Oct 2009)
In a dispute over the management of Barclays customer Timothy Earles' accounts, e-disclosure was not discussed before or at the case management conference despite the fact that the bank's e-mail and telephony records were highly relevant.

The bank's solicitors, Simmons & Simmons, had decided it was not proportionate to retrieve and disclose them.

The judge, HHJ Simon Brown, disagreed and, although the bank ultimately won the case, awarded it only 25% of its costs because the proceedings might have been avoided if the rules had been properly followed. He also said that it was "gross incompetence"for any lawyer not to know the rules on e-disclosure.

Digicel v Cable & Wireless [2008] EWHC 2522 (23 Oct 2008) (ChD)
In a complex commercial claim, Slaughter and May – acting for Cable & Wireless – decided what would be a reasonable search of its client's e-documents and carried it out at great expense.

The claimant disagreed and sought further disclosure. The defendants had spent £2m on disclosure, gathering 1.1 million electronically-stored documents, including 85 email accounts. After eliminating irrelevant sub-folders and duplicates as well as 10 keyword searches and a lawyer review, C&W disclosed 5,000 documents.

Digicel argued that the keyword searches had not been agreed with the claimant. It requested a further 19 keyword searches from the court, which granted eight – at an extra cost of £2m to the defendants.

The judge held that the parties should have collaborated over what was reasonable from the start and, if they could not agree, the court would decide.