My firm, Fulbright & Jaworski, has released the findings from our Fourth Annual Litigation Trends Survey. It’s the largest survey of its kind, and this year over 300 general counsel or heads of litigation responded to our questions. I am a principal architect of the survey and always insert a host of questions on e-discovery issues. This year’s findings are quite interesting.
Jury’s Still Out on the New U.S. Rules. In-house counsel say they are not yet seeing much benefit from the amendments to the U.S. Federal Rules of Civil Procedure that went into effect at the end of 2006. Although the rules were ostensibly designed to help opposing parties establish protocols for disclosure and discovery of electronic information, more than half of the Fulbright survey respondents detected no change in how their companies are handling federal litigation; 18% felt the e-discovery guidelines have eased their litigation issues, while 27% said the rules have actually made their litigation lives more difficult. Most of the ten reporting industry segments likewise claimed the new rules have created more litigation hardships than gains. More than 70% of counsel reported that e-discovery issues “rarely” or “never” figured in their litigation matters. Meanwhile, 6% said e-discovery is a frequent component of motions, hearings or rulings in which they’re involved. Thirteen percent of billion-dollar firms said e-discovery plays a frequent role in their matters.
High Cost of Preproduction Privilege Review. So much of the cost of American litigation these days is driven by the page-by-page privilege review that those hapless contract lawyers are doing that I decided to survey our respondents on the issue. More than a quarter estimated that at least one-fifth of their annual litigation expense went toward a pre-production privilege review, including 16% for whom it represented at least 30% of litigation spending. Even for smaller companies, 30% said the pre-production process accounted for a fifth or more of overall litigation costs; for billion-dollar firms, it was 33% of annual spending — vivid reminders that companies might do well to revisit best practices for this critical task. One of our $1 billion+ respondents stated it had spent over $3 million on preproduction privilege review in a single matter!
Loss of the Privilege. Some companies have already been stung by not having a strong handle on their e-discovery methods: 17% reported that they had lost the attorney-client privilege owing to their inadvertent production of electronically stored information (ESI); among U.K. companies, the quotient was an attention-grabbing 40%. U.S. financial and retail firms both admitted a near-40% rate of lost privilege owing to errant ESI practices, suggesting there is much room for improvement in the way many businesses execute retrieval and review of archival electronic records.
Backup Tape Rotation Periods Are Being Reduced. The average business said it retains backup tapes for just two to three months. Thirty percent of the over $1 billion companies retain backup tapes for 30 days or less. 36% keep them for 2-3 months only. This is consistent with our advice, i.e., if your back-up tapes are truly for disaster recovery use only, why keep them for longer than a few weeks? Only 14% of our respondents are backing up for one year or longer; and not a single under $100 million company responding to the survey maintains a back-up threshold of one year or longer.
Litigation Hold Policies. In one key aspect of records retention — responding to a preservation order or so-called litigation hold — businesses have taken heed: 89% of in-house counsel said their companies now have litigation hold procedures in place. For billion-dollar plus companies, the number reaches 98% of respondents. It is noteworthy also that 81% of U.S. companies said they had reviewed their retention policies over the previous 12 months.
Capturing Data in the Workplace – Instant Messages. As instant messaging gains widespread use at many companies — 53% of in-house counsel said employees use IM, while the rate among billion-dollar firms was 70% — businesses have the added burden of capturing and retaining those running online conversations in the event they are needed in a litigation hold instruction. The portion of companies logging employee IMs is considerable — 28% said they retain the messages as routine policy or in certain cases; for billion-dollar firms, the share was 40%. While many companies may archive IMs for only several weeks or a month, 43% keep them for two months or longer, including 15% holding on for at least a year; among large companies, 25% maintain IMs for one year. One-third of all companies permit employees to attach documents to instant messaging — which can take on added significance in light of the extended holding periods in place at some businesses.
Capturing Data in the Workplace – Voicemails. Forty percent of in-house counsel said they have a retention policy for employee voice messages. As with IM, much of the phone chatter is saved for a month or less, but 31% of companies store their voicemail for at least two months, including 9% with a one-year or longer hold policy. The retention protocols become even more complex considering that 37% of companies said their phone systems allow voice messages to be forwarded to others via e-mail, creating a potentially huge web of vocal documentation.
Crossing Personal and Business Boundaries. Further complicating e-discovery and document retention practices is the line that employees regularly cross between their business and personal discourse. Thirty-seven percent of the Fulbright survey respondents said they allow employees to access outside e-mail accounts using company-issued computers; for billion-dollar companies, the allowance rate was 44%; and for tech shops, it rose to 61%. Meanwhile, 74% of companies let employees access the corporate network from their home computers. The high degree of co-mingled communication could lead to unexpected challenges in a litigation context.
Focus on Privacy. Lastly, we were interested to know how much our respondents are concerned about privacy. We found that 39% of our respondents have a full time privacy officer but 60% said they have no current plans to hire one. As might be expected, health care providers reported the highest use of privacy officers (71%), followed by retailers (61%) and financial services firms (59%). Technology firms are not as quick to focus on this factor: only 35% have an in-place privacy officer.