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March 27, 2013

Managing outsourcing and eDiscovery (Part 2 of 2)

By Matt Hassett, Jim Hassett, and Mike Egnatchik

 

The oversight of outsourcers can be complex.

We will illustrate this with an example from eDiscovery, which includes outsourcing to a software team. Consider the eDiscovery technique of predictive coding. Unlike simpler forms of eDiscovery—such as keyword search, concept searching, and looking for clusters of similar document groups—in predictive coding attorneys train software algorithms to find the most relevant documents by using samples of documents called training sets. According to Predictive Coding for Dummies:

Training the predictive coding system is an iterative process that requires attorneys and their legal teams to evaluate the accuracy of the computer’s document prediction scores. If the accuracy of the computer-generated predictions is insufficient, additional training set documents are selected from the document population being considered. Multiple training sets are reviewed and coded until the required performance levels are achieved. Once the desired performance levels are achieved, decisions can be made about which documents to produce.

The great advantage of this approach is that attorneys will be able to explain the decisions made by the computer, since they worked to train the computer algorithms. This can satisfy the obligation of competent representation, so long as things are properly done. But there is always the danger that things will not be properly done. Predictive Coding for Dummies goes on to say:

Understanding how to use predictive coding tools properly is critical for several reasons. First, predictive coding is relatively new to the legal field and introduces additional complexity to the eDiscovery process. Second, many different predictive coding solutions are available on the market that vary in quality and approach. Third, even though predictive coding solutions can be difficult to use, clear instructions and training are often lacking, which can increase the risk of error. These and other factors have combined to create confusion about the proper methodology for using predictive coding tools.

The message is clear: A firm that uses predictive coding cannot rely on it as a black box that gives right answers at all times. Not all providers are equal. There must be a procurement process that evaluates and selects the best provider.

Competent representation includes understanding and monitoring the provider’s work. If that does not happen, the law firm may be at risk.

Due to the growth in outsourcing, in 2008 the ABA Standing Committee on Ethics and Professional Responsibility issued an opinion to provide ethical guidance to lawyers about how to outsource in a manner that is consistent with the profession’s core values.  State and local bar associations have also offered guidance in this area.

In August 2012, the ABA Commission on Ethics 20/20 concluded that outsourcing did not require changes to the Model Rules of Professional Conduct.  However, it did propose new Comments to identify the factors that lawyers need to consider when retaining outside lawyers (Model Rule 1.1) and non-lawyers (Model Rule 5.3) to assist on a client’s matter. The Commission also proposed a new sentence (for Comment 1 on Model Rule 5.5) to clarify that lawyers cannot engage in outsourcing if it would facilitate the unauthorized practice of law.

Like many obligations described in the Model Rules, these proposals were intended to be “rules of reason” and were not intended to preclude consideration of broader legal concerns, such as malpractice and tort liability. But they did reflect the fact that new trends in outsourcing place new demands on the supervising lawyers. A recent lawsuit has highlighted some of the potential risks of failing to manage outsourcers properly.

According to a report in the Wall Street Journal:

An increasingly contentious lawsuit by a former client against law firm McDermott Will & Emery LLP is putting a spotlight on the legal industry’s widespread use of itinerant “contract” attorneys who review documents for lower hourly wages… The case “may well be a harbinger,” said Jonathan M. Redgrave… There could be more disputes between clients and law firms over work performed by contract attorneys and outside vendors as they are used more in the pre-trial discovery process.

The Wall Street Journal also alluded to the underlying economics that are driving the move to outsourcing: “McDermott’s own attorneys billed J-M at ‘rates as high as $925 an hour’ [and paid]… $61 an hour to staffing firm Hudson Legal.” Hudson, in turn, hired the lawyers who did the work for even less.

According to Mark Ross’s description of this suit:

J-M Manufacturing alleges that McDermott failed to adequately supervise contract review attorneys who inadvertently produced privileged documents to the government. The documents were subsequently handed over to a third party who refused to destroy the documents, arguing that J-M waived attorney-client privilege when it produced them to the government.

McDermott has vigorously defended itself against these allegations. According to a firm spokesperson quoted in the Wall Street Journal article, “J-M keeps changing its story.”

Ultimately, the case may be decided for McDermott or against them. From our perspective, the way this particular lawsuit turns out is far less important than the simple fact that a client has sued its law firm for failing to adequately manage its outsourcers. As Ross summed it up, “While this may be the first e-discovery malpractice lawsuit specifically dealing with the issue of lack of supervision of contract lawyers, it surely won’t be the last.”

Firms that decide to use outsourcers will therefore need to develop effective management processes, policies, and techniques for this type of work.

 

This post was adapted from the forthcoming third edition of the Legal Project Management Quick Reference Guide, which will be published on May 20.

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