Before I limited my law practice to work for courts and counsel, I was a trial lawyer working for contingent fees. For 20+ years, I never charged for an hour of my time. I funded the cases, did the work and was paid only if I recovered damages for my clients. I charged 40% plus expenses; so, for the most part my clients and I shared roughly equally in the outcome. At the time, I thought my fees proper, and they were certainly “industry standard.” Everyone charged about the same, not from collusion but from plagiarism: lawyers didn’t draft fee agreements; we copied them.
But as I look back, I see that I could have charged less—even much less—and still have made a good living. The only limits on what I could charge were the marketplace, where I saw no competition on price, and ethical precepts dictating a lawyer may not charge an illegal or unconscionable fee.
So, as someone who made a lot of money charging more than I needed to, I’m prompted to ask:
What are unconscionable charges in e-discovery?
I’m prompted by an affidavit, a sworn statement of an e-discovery expert leading a national litigation support vendor. I won’t name names, because this post is about practices, not people. But the affidavit shocked my conscience.
It’s no secret that e-discovery vendors can produce three projections of e-discovery costs:
- The lowball projection that gets the business;
- The accurate projection; and
- The grossly inflated projection.
There’s a great deal of uncertainty attendant to projecting costs against unknown data volumes and variable data types. Vendors need leeway to account for unpredictability in data volumes, data density and data complexity. The projection that gets the business may embed the variables in dense contractual prose and present rosy, best case scenarios. The projection of actual cost is the hardest to achieve, and ethical vendors labor mightily to supply reliable projections without losing business to less candid competitors.
But why would a vendor produce a cost projection that’s grossly inflated?
Four possibilities occur to me:
- Vendor doesn’t want the business;
- Vendor is incompetent;
- Vendor thinks the lawyer and client are dumb or desperate enough to overpay; and/or
- Vendor is pulling the wool over the eyes of a judge or master in an effort to curtail discovery.
Let me do the math, and you can comment on which of these (or other) possibilities adhere.
Vendor’s published rates are:
Service Type |
Price |
Deduplicate, De-NIST, Extract Text, Index Text |
|
0 to 300 GB |
$75.00 per GB |
301 GB to 1 TB |
$55.00 per GB |
Greater than 1 TB |
$40.00 per GB |
Post-Processing Upload |
|
0 to 300 GB |
$275.00 per GB |
301 GB to 1 TB |
$250.00 per GB |
Greater than 1 TB |
$240.00 per GB |
Monthly Hosting Fee |
|
0 to 300 GB |
$23.00 per GB |
301 GB to 1 TB |
$20.00 per GB |
Greater than 1 TB |
$17.00 per GB |
Monthly User Fee |
$100.00 per User |
Project Management |
$175.00 per Hr. |
Vendor determines that data volume will be 5GB in “loose” data and documents and 500GB in e-mail messages to, by and between 25 co-workers and subordinates working on a common event/project that is the subject of the litigation. So, the collected data volume is 505GB.
Some further assumptions:
- Custodians extensively communicated with each other.
- Communications were commonly sent to most or all of the custodians.
- Attachments were common productivity file types and scanned documents.
- Scanned documents would not undergo OCR as to do so would add $0.03 per page.
- Collection costs are borne by in-house IT. Data arrives ready for ingestion.
- All volumes are uncompressed.
- The projected volumes are based on solid metrics.
- The court has ordered native production and banned TIFF conversion save for redaction.
The vendor projected costs as follows:
- Data Processing:
o Deduplicate, De-NlST, Extract Text, Index Text = $27,775.00
o Post-Processing Upload = $126,250.00
- Data Hosting
o Hosting for 3 Months = $30,300.00
o Monthly User Fees (2 reviewers) = $600.00
- Project Management (estimated 25 hours) = $4,375.00
TOTAL: $189,300.00
Did you do the math already? Do you see the problem?
The vendor charges $27,775.00 (505GB x $55.00/GB) to process 505 GB of ordinary business data, virtually all of it e-mail. This strikes me as high for work that is handled almost entirely by the machine. Were I to process such data in my lab using, say, Nuix, I would expect it to de-dupe, de-NIST, extract text and index text in perhaps ten to twelve hours of largely unattended machine time. I would also expect to achieve significant reductions in data volumes. The reduction wouldn’t come from de-NISTing (which is wasted-but-harmless effort for this data) but from de-duplication. Many of the e-mail messages and attachments will be held by all 25 custodians. Most will be communications by and between pairs and groups of these custodians. The loose documents will be frequently seen as attachments to the messages. This is classically incestuous data. It’s rife with repetition.
But, what volume does the vendor assume will emerge from de-duplication and de-NISTing?
Why, 505GB, the selfsame volume ingested!
The vendor then charges $126,250.00 (505GB x $250.00) to load the post-processed data set to a hosted review tool. Just to ingest it…again. It is, at most, a day’s work for one technician, with all of the heavy lifting done by the machine while the technician busies himself or herself with other billable work (or Netflix). I grant that it may be a pass-through, marked-up cost from another vendor; but, that doesn’t make it any less a gross overcharge to those footing the bill.
The vendor then assumes that 505GB will be hosted for three months at $20/GB per month or $30,300.00, still using the overstated data volume.
$189,300.00 for this! I think we have just defined “unconscionable charges.”
Are these projected charges 2, 3, 4, 5, 10 or more times what such services should cost if competently executed? You tell me. I charge hefty sums for my services; but, nothing like this. If I charged like this, I’d fear losing my license for breach of professional responsibility.
And remember, this wasn’t just an opportunistic bid in a dog-eat-dog marketplace. It was testimony, sworn to under oath as being true and correct on personal knowledge.
.
.
Jeff Johnson said:
I think this is precisely why big e-discovery vendor days are numbered…they have “teams” of people doing what I do by myself – collection-processing-search-production – I don’t use Nuix (good tool from what I hear), but I do use FTK/Summation Pro in a distributed VMware environment. Very fast processing. Reliable. I can do what they do (big vendor) for a fraction of the cost.
I am working on a case, 6 custodians, 600 GB of e-mail expanded, plus 6 user hard drives. It is a county case that the defendant botched on eDiscovery (we typically are involved in federal suits but I take these smaller state/county cases some times), and I was called in as the 3rd party expert. I am working hourly in an effort to help cut costs and bring sense of eDiscovery sanity to the case. No per-GB fees. I am “charging less” and as you say, Craig, making a good living.
Being the sharpest technical knife in the drawer with no oversight on this case, I could have charged 4x as much and gotten away with it. But I have to look at myself in the mirror each morning.
– Jeff Johnson, CCE, ACE
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craigball said:
I think there will always be a place for big e-discovery vendors who can scale grandly and offer the reputation and cachet underlying the old saying, “No one ever got fired for buying IBM.” They will carry big overheads and large staffs. They will be expensive, and a well-heeled cadre will continue to feed their rapacious appetites. It will even be a source of pride to be able to hire those who charge so much for so little. But all the world do not carry genuine Prada or drive Lamborghini’s–leastwise not my world–and the rest of us need to base our choices on fair value for fair prices. Thanks for the comment.
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Jeff Johnson said:
Scale grandly…maybe I can see that… but to what? I have handled 100+ custodian cases with a very small team. How difficult is it, really?
Negotiating the scope of discovery should be a primary element in the mind of the lawyer conducting e-discovery. The lawyer, aided by a knowledgeable eDiscovery technician should be able to translate the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues into a defensible, cost-effective, and perhaps phased discovery plan.
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stacikaliner said:
But wait, there’s (probably) more…
Next you will get a bill for additional charges for use of any type of near dupe functionality. Oh yeah, we forgot to mention it costs more to turn on our analytics engine, and, by the way, we have to run another process to prepare the data to support that index — that will be $$$. Ah, you wanted to produce from this database as well? We didn’t realize that. That will be $$$$$.
Uncertainty is the nature of the beast, but there are ways to manage that uncertainty, and provide a fair, transparent, and predictable quote that is not Unconscionable!
As always, thanks for your post Craig!
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Jeff Kerr said:
Craig,
Those prices seem absurd to me. I don’t understand how a vendor can charge $30,000 to host $505 GB for 3 months when Dropbox will host 1TB for less than $1,000 per year.
Further, I can’t imagine that any party would want to pay $189,300 for e-discovery except in a case with a very large amount in controversy …
Perhaps there is a comparison between e-discovery and the music industry? Thirty years ago, most music heard on the radio was recorded in studios by trained engineers using expensive equipment that few or no artists could afford on their own. Today, a high percentage of music is produced by the artists themselves in home studios with equipment costing between $1,500 and $5,000. Recording studios across the country are closing down, but more people are recording music than ever before.
I hope that a similar trend occurs in e-discovery and more tools become available that are affordable by ordinary parties in ordinary cases. We lawyers will also have to learn how to use said tools, but hopefully we can overcome our terror of technology and learn something new.
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craigball said:
To be fair, hosting in a quality review tool is not comparable to storing data in Dropbox. There is a SaaS component that adds value.
I suspect the point of the affidavit is to play into the thinking behind your second point, being a tactical assertion of proportionality by casting native production–something that’s relatively easy and economical approached with competence and good sense–as something wildly out of proportion with the amounts in controversy. This is the problem with proportionality as a doctrine applied unilaterally by the producing party: It’s not workable when proportionality decisions fall to those who can’t value the case objectively or approach expenditures competently.
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Matthew Golab said:
I have to laugh at the per GB fees, particularly when you have data in the terrabytes – ie times 1000.
Of course on the flipside, a vendor may be paying licencing fees that are volume based and they also have to store all the data.
We run processing in-house, and as you say, the programme just does its thing and sure we charge a proportion of time to monitor the progress and output, but its miniscule compared with the fees that you mentioned.
Then there is also this interesting development where you can run up an instance of say AWS and process the data (subject to yours and the clients comfort level with the data going up onto AWS) without having to have your own hardware (ie a client could do this themselves):
http://www.nuix.com/media-release-cloud-ediscovery-capabilities
With the interesting new ediscovery developments in Sharepoint 2013, I have to wonder whether it will continue to develop into processing as well – after all Nuix also have an OEM programme and their own API.
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Dera Nevin said:
Great post Craig. Thanks for drawing attention to this problem. We need more people that can really explain the problems with a lot of the evidence proffered for proportionality arguments. It disappoints me that the pricing in our industry is less transparent than airline pricing. I’ve programmed a basic excel calculator which I use to walk consuming clients through quotes like to this show them what the problems are with quotes like these, but there remains a lot of education that’s required.
Dera
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Bill Hamilton said:
Nice post Craig. The irony is that poor eDiscovery management skills have contributed to the chorus for “less” eDiscovery that we’re seeing reflected in the new civil rules proposed amendments–as if a change in the rules can ever solve a competency problem. The next step will be to retreat to pre-1938 practice and eliminate discovery.
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craigball said:
Dear Bill:
You said it, well and succinctly. Thanks.
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The Nuix Team said:
Reblogged this on Unstructured and commented:
In a controversial post, eDiscovery and digital forensics guru Craig Ball wonders if the fees some eDiscovery vendors charge are justifiable … or sustainable.
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Mike Q said:
It is precisely the scenario described above that begs the question why such disparate pricing exists at all. Why haven’t costs for this well-known process been standardized or unified? The fact that we can discuss here the tasks, or subordinate parts of the process, suggest that it could be standardized. Sure, there might be slight variations depending on the overhead of a given service provider, but as pointed out above this is mostly machine time. The scenario laid out purports to be quasi “In and Out” pricing, but it reads here like “In and In” pricing. True In and Out pricing charges a small per GB fee for the ingestion, de-NISTing, de-duplication, and possible some other culling, such as search terms. That’s the “In” charge. Then there’s an output charge, which is a per GB fee for whatever data is left after ingestion and culling. That’s the “Out” charge. Typically, the output is a much smaller data set. If it isn’t you’re doing something wrong. All of this notwithstanding, the truth is that in my view, I have yet to meet a provider who can compete with the in-house model were data is collected, processed, hosted, reviewed and produced by outside counsel.
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Jeff Johnson said:
In 18 years working at the law firm level and as an outside consultant, I have yet to see two cases exactly alike…the data itself, the facts and needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues have been different in every case. Rigid standardization is unrealistic in my view; we need lawyers who can assimilate the issues, articulate proportionality and negotiate the scope of discovery.
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craigball said:
Well, sure we do need competent lawyers like those with the skills you describe. But, back in the day, we didn’t need lawyers to determine the size of the paper used in each case (beyond specifying “letter” or “legal”). There is much that can be standardized and commoditized without sacrificing quality. Someday, lawyers might look past the promise of proprietary “secret sauces” and realize that everyone’s secret sauce is just mayonnaise and Russian dressing or, in the case of e-discovery tools, a savory pairing of DTSearch or Lucene mixed with Oracle’s Outside-In parser/viewer or its ilk.
Extracting and indexing PSTs is rocket science; but, it’s only Estes rocket science.
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craigball said:
I’m certainly glad the restaurant industry hasn’t gone to “in and out” pricing!
In a more serious vein, it’s challenging to make an apples-to-apples assessment of EDD services offered by outside counsel versus a vendor because the decision to build or eschew in-house expertise at law firms is complicated by factors that have little or no connection to pricing and efficiency. Law firms turn to vendors in lieu of developing EDD as a core competency for a host of reasons, e.g.:
1. The firm is irrationally fearful that processing ESI will make them witnesses in the case and might then prompt disqualification;
2. The firm is uncertain how to pass the costs of ESI processing on to clients without running afoul of ethical constraints;
3. The firm cannot maintain so regular and substantial a flow of ESI processing work as to permit them to hire and retain competent personnel;
4. The firm’s finances and politics render them unable to commit the resources needed to stay up-to-date on technology and/or recruit, retain, train and incentivize competent personnel to handle the EDD work;
5. Management feels uncomfortable offering services beyond the ken of its senior lawyers;
and so on….
My friend and colleague, Ralph Losey, makes no bones about challenging the suitability of developing in-house EDD processing capabilities in law firms. Ralph thinks it’s a very bad idea (he may even have likened it to malpractice). I don’t share his view in that regard; but, he is far from isolated in his thinking, and he may influence others to shy away from taking EDD processing in-house.
Though it will take far longer than I think it should, I’m of the view that in-house EDD handling will become as routine as in-house photocopying capabilities. I grant that the differences between the two tasks are considerable; but, I think that the benefits you posit are genuine, and what we regard as hard, risky and exorbitant in 2014 won’t seem so in 2030. Time will tell.
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Peter Garza said:
Craig,
I enjoyed reading this blog post. I think it is a good practice to look issues like ediscoevery fees. As has been pointed out that there are other options besides large scale ediscocvery. Just as a client can choose to hire a law firm with an international presence with their name on a building downtown or a sole practitioner to represent them, there are a range of options for doing ediscovery. I’ve been in this field for some time and feel the estimate you cite would have difficulty standing up to today’s competitive landscape. Sure, during my time in this field I have seen unscrupulous sales staff, from vendors looking for short term profit, write proposals they thought they could sell rather than take a more conscientious approach.
Vendors with longevity in our field tend to take a more competitive and long term view on developing relationships with their attorney clients. Successful ediscovery vendors I work or compete with offer a high level of technical and operational expertise, sound infrastructure, a high level of hands-on support (all matters we get seem to be urgent and need to be done yesterday!) and a budget that must be justified. From small scale cases to bet-the-company litigation, The follow up to that initial call with the law firm and their client is a project estimate. For me, it is always a thoughtful exercise that I must be prepared to defend on the follow up call.
Bringing processing in-house is certainly one option that I’ve seen adopted by some law firms. What I have seem most often, however, is attorneys and support staff with specialized skills are more often the conduit to vending ediscovery projects. These are sophisticated consumers of ediscovery services at law firms and in corporate law departments. The market, to some extent, seems to be addressing this issue of fees for ediscovery services.
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craigball said:
Thanks for the comment, Peter. Most have tended to treat the numbers I shared from the affidavit as a genuine bid for business and, indeed, it may have been just that, albeit one spawning an unconscionable outcome. Another lens through which to view it is as an example of what might happen if a pliant vendor issues an indefensible affidavit in support of a claim of disproportionality. There might be other explanations; but as you note, the estimate would have difficulty “standing up to today’s competitive landscape.” Perhaps it was never intended to stand up to scrutiny, but was trotted out to mislead the Court and rationalized as a plausible departure from reality that might serve as consideration to get the business at more competitive rates. I’ve observed the two-tiered e-discovery bid before: the private one to get the business and the public one for the Court that makes everything seem impossibly burdensome and costly. Perjury is hard to prove, and few judges want to go that way when the lie comes from a vendor. Still, the vendor community needs to remember that there can be consequences for these shenanigans, even if only manifested as a scathing motion for sanctions or a humiliating cross-examination. Unpleasant consequences for counsel and the client, too.
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Suzanne Clark said:
@Mike Q: I noted the same thing. I am in Florida, and the eDiscovery vendor I work with is a Relativity shop out of D.C. They cull down the data, and then processing is charged per gig on the reduced number of gigs, and hosting on that fewer number of gigs, also. (A ballpark figure is that data will be reduced to 30%, but it is unpredictable). So, in Craig’s example the vendor is clearly taking advantage of the ignorance of his audience: both counselors and the court. That is highly unethical and a serious problem, competency-wise, if no one noticed. One of the reasons for culling is that you will have less data to process. Processing the 505 gigs was a red flag for me in the hypothetical above, but managing electronic discovery is becoming a specialized competency within the law dealing with technology and mathematics. We can say all attorneys must learn it to be competent, but another solution is for certain attorneys to specialize and swoop in to deal with it as needed. This is a way for litigators to learn while doing. They can hire a consultant for a few cases, the consultant teaches them, and eventually they can handle it on their own.
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An Angry EDD Guy said:
Props to the guy doing eDiscovery in his basement – you can charge low fees and store data on your Pentium 4 with 7200RPM hard drives and get through a gigabyte in a month.
Guess what guys – the pricing issues have been completely created by the buyers, and you all love colluding with the big vendors to get your lobster roll. We’ve all tried providing quotes that are actually tangible and you have consistently beaten us down and turned the marketplace into a nightmare while your partner lets a first year associate run your multi-million dollar case. Have fun when you do a real case and your Data Analyst is called to the stand and the AGO shows up at your door demanding a chain of custody right now for the 300 drives you have in boxes in your office.
The fact of the matter is that real cases need real vendors. I work with major corporate institutions across the country, and I can tell you they switch law firms because you make ridiculous eDiscovery decisions and leave it up to your paralegals to manage your case. You will lose your one chance at holding on to a real client that knows IT if you trust your internal lit support department. The vendors who you think are the “real” vendors are not, and they are the ones burning you. Find a boutique local vendor and stop demonizing the entire industry.
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