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April 27, 2011

The Ernie Challenge

My friend Ernie is a solo attorney with a general practice in New Orleans. He is very tech savvy and tries to stay on top of e-discovery because Louisiana has a state e-discovery rule that mirrors the federal rule.

In fact, he has commented to me several times on how useful he found the Edna Challenge published last year by Craig Ball in helping him find tools for handling electronically stored information (ESI) in small cases. But he often calls me when he has an e-discovery question involving what we call the “tweener” cases, those that fit in between the small cases covered by the Edna Challenge and the mega-cases suitable for the larger name brand products that dominate the E-discovery world.

Why? Because most of those companies charge hundreds of dollars per gigabyte  for “read in” processing (this is processing which includes all the culling, deduping and denisting of a data set but only paying for the sub-set of that data which is actually loaded to a web site for review) and roughly $50 per GB a month plus monthly “user fees” of several hundred dollars per user for hosting the data. So if a client pays for a  forensically sound data collection and that  data set eventually yields let’s say 400 GB of reviewable material,  a typical e-discovery company will charge somewhere  in the neighborhood of a quarter of a million dollars for the processing and $20,000 a month for the hosting  while attorneys perform their review.  And if we accept the commonly cited statistic that the review process will account for 70% of the total project price, then  we’re looking at a project cost that will eventually be close to $1M. 

Louisiana If the case is only worth $400,000 then we have a problem.  Which brings us back to Ernie.

This week Ernie called to say he that he was working with a regular client of his who is the head  of small business that has been owned by the same family in New Orleans since the late 1800s. They have no inside counsel and Ernie serves as their only legal advisor on all corporate matters.

The company is being sued by an ex-employee who claims he was laid off as a manager because he’s over 60 and Hispanic. Plaintiff seeks $1M in compensatory damages for lost wages and $10M in punitive damages. He had earned $100,000 per year plus performance bonuses but received no bonus in 2010 and Ernie’s client said that they laid off the employee  because of a “drinking problem.”

The business has a net worth of roughly $3.5 million, including bank accounts, real estate, several motor vehicles and inventory. There are 10 employees in 2 locations, New Orleans and  Lafayette.  Ernie’s preliminary technology audit of their computer systems found the following:

1. All employees of the company have desktop PC’s at the office. Three senior managers also have company issued laptop computers which they use when traveling and at home for company business and personal use.

2. The New Orleans location houses corporate network servers used by employees at both locations.  These include a Microsoft Exchange server for e-mail, a file server for business applications including a database  for tracking customer orders, some Excel spreadsheets used to analyze the business performance, QuickBooks (their bookkeeping software), all their internal documents (Word with no document management system) and a number of pictures and videos of company events, trade shows, meetings with clients, etc.

3. The client outsources its  IT work to a New Orleans company that maintains all the computers and does backups onto a local tape system attached directly to the file server, using a weekly rotation with saved tapes for each month and then the year.  There are backup tapes which go back ten years, a period which covers three different network systems and an equal number of tape backup systems.

 4. The total amount of current live data on the system is roughly 1.8 TB. Approximately 60% of that is e-mail (some of which is Outlook e-mail archives on the server; no e-mail is saved locally except on the laptops).

For purposes of the discussion from this point forward, we can make two assumptions:

1.   There is no dispute between the parties as to a litigation hold.

2.   Ernie has successfully retrieved all relevant data from both the active system and the backup tapes.

Ernie believes that the amount of data he will need to review is roughly 200 GB. The majority of that is e-mail with the balance being the various types of financial data.  He feels he needs some form of web review tool because he will need to engage some offsite contract staff to assist in the review as well as share data with the clients insurance carrier. 

Ernie’s problem is that, consistent with the numbers above, he has been given quotes of $100,000 yo 150,000 to process the data and $10,000 to 12,000 per month to host the data. When review costs are added in, Ernie is looking at $500,000 just to handle the e-discovery. After analyzing the case and discussing it with his clients insurance carrier, Ernie believes he cannot spend more than $10,000 for ESI processing and hosting services over the anticipated 19 month life of the case.

When he called me, Ernie mentioned reading a recent E-Discovery Journal interview with Craig Ball in which Craig said,  “…. I’m seeing some behind the firewall products, even desktop products, that are going to be able to allow lawyers and people with relatively little technical expertise to handle small and medium-sized cases.  Some of the hosting services are putting together pricing where [they] are starting to sound rational and less frightening.” 

His next question to me is the essence of the Ernie Challenge: “Where are those programs? Is there really something I can use myself to process or host this data? If not, how can I keep costs down to the budget I have set?”

So then, what advice would you give Ernie? Is there any way to process and review a couple of hundred GB of data for no more than $10,000?  Post your answers here!

Consultant Tom O'Connor is the director of the Gulf Coast Legal Technology Center and a member of LTN's editorial advisory board. E-mail: toconnor@gulfltc.org.

Note: this post first appeared on The Ernie Challenge blog by Tom O'Connor. 

Image: clipart.com

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