Trial Magazine

With the proliferation of ESI that is relevant to litigation and held by individual plaintiffs and corporate defendants, e-discovery can be an expensive endeavor. It encompasses defendant-produced ESI, which you need to analyze for completeness and use to investigate the facts of your case. And it includes your client’s ESI, which you need to narrow down in a defensible, efficient, and effective way to what is responsive, is not privileged, and is proportional for production according to the scope requirements of Federal Rule of Civil Procedure 26(b).

To effectively manage the ESI in your client’s case, it’s essential to understand the various features and pricing models for third-party e-discovery platforms and services. With that knowledge, you can determine the setup you need and budget accordingly.

Think Through the ESI in Your Case

There are multiple ways to accomplish the same end result in e-discovery, and each case will have different ESI production needs. Before you delve into specific features and pricing for an e-discovery platform, ask yourself what approach makes the most sense for your client’s case. (See below for the main stages of the e-discovery process.)¹

Here are a few sample questions you might ask yourself when planning your e-discovery framework:

• Is it best to preserve ESI in place² by alerting clients to their duty to preserve and requesting they retain relevant ESI, as well as put measures in place to prevent loss or deletion? Or is it more reasonable to collect the ESI from them and store it until you are ready to review it for production?
• For the collection of ESI, does the litigation call for a forensic image of mobile devices or is a targeted remote collection appropriate and in line with your discovery obligations?³
• Regarding document review, how much of an “eyes-on-documents”-type review conducted by a person is required? Would, for example, Technology Assisted Review (TAR) be appropriate and save costs?⁴

For these and other questions, the decision may vary for different sources of ESI. For example, for one client, you may decide to collect iCloud photos for an account that is approaching its storage limit but preserve in place a Gmail account with unlimited storage that, through your interview with the client, you determine does not likely contain responsive ESI.

Map out the different methods for preserving, collecting, and reviewing each type of ESI that your litigation requires, and then estimate the costs for each method. Then, fit the costs into the budget by selecting the method that is the most reasonable, defensible, and proportional to the needs of the case.⁵

Understanding Costs

For e-discovery that you outsource to a vendor, you will buy hosting and processing services for the ESI in e-discovery platforms. Any time you negotiate pricing with an e-discovery provider, make sure you understand the product or service you are buying, the units of measurement, cost per unit, and how frequently you are being charged per unit.

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Understand the product or service you are buying, the units of measurement, cost per unit, and how frequently you are being charged per unit.

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Generally, there are two types of e-discovery companies. Software platforms such as Disco, Everlaw, Relativity, and Reveal|Brainspace have developers who create features including viewers, coding panels, analytics, search bars, and even artificial intelligence models.

Then there are service providers. Sometimes the companies that develop the platforms license their software to firms directly, but other times resellers of the software platform also provide project management or consulting services.⁶ For example, the service provider’s project manager may load the data into the software tool and charge an hourly rate for that work. On the other end of the spectrum, the service provider can assist with negotiating ESI protocols for a consulting fee. This makes the service provider a scalable resource that you pay for only when needed.

Pricing components. Typically, costs are based on the volume of data, and the most common unit of measurement is the gigabyte (gig or GB). Knowing the volume of data is the baseline to planning an e-discovery budget—but this may be easier said than done because volume can be difficult to estimate at the start of a case.

For example, with rolling productions from defendants, volume can grow over time. Knowledge is power, so try to gather as much knowledge as you can to predict what your volume will become as the litigation progresses. When possible, look to other representative matters with similar defendants to estimate what you can expect to be produced. Your vendor may have this information, or you may have had a similar case in the past.

For your client’s ESI, a GB count may be lower before processing than after (discussed more later). Your vendor also may have estimates about typical increase in GB count after processing. You can start small with the number of attorneys and staff who have user licenses for the program and add additional user licenses as needed.

E-discovery vendors typically offer pricing options based on GB per month, per document, or per device, as well as user license fees for each person in your firm using the platform and billable hour rates for services such as consulting, project management, and forensic examiner time. You’ll find that e-discovery vendors have a wide range of pricing. How can one company charge $10 per GB and another $40 per GB? There are multiple reasons. Some providers have user fees and others do not, so you may see a lower price per GB coupled with a user fee versus no user fee but a higher price per GB.

Certain software may have higher functionality than others and therefore cost more. However, this is not always the case. In our experience, some of the highest functioning software is also the most favorably priced. Sometimes, technical time (such as time spent formatting load files and data or time spent resolving processing errors) is included in the per-GB fees while others charge this at an hourly rate.

When you are working with service providers to negotiate pricing, it is helpful to comparison shop and communicate. Get quotes from multiple vendors, and compare the line items on those quotes. Then, without divulging competitor pricing (agreements with providers often state that this is confidential), ask questions about the differences you notice. Questions could include:

• “Why do you have user fees?”
• “I see you don’t have user fees, but could you do any better on this per-GB rate?”
• “How many billable hours can I expect per month, and are there any options for managing these tasks internally with my own staff?”⁷
• “Would you offer training to law firm staff to conduct some technical work and what would that cost?”
• “Could I get a volume discount if we go over a certain number of GB, a certain number of accounts or devices, or a certain amount of technical time?”

Use these questions to stimulate conversation and negotiate more favorable pricing. Don’t fall for gimmicks—often, vendors will post a very low sticker price but make up for it in other ways (such as hourly time from analysts and project managers). If prices quoted to you seem too good to be true, it’s worth looking at the underlying fee schedule before committing to anything.

Data management. Your e-discovery budget is not just about getting the best pricing. It is also about managing what is in the platform and how long you leave it there. Controlling costs on a “go-forward” basis is just as important as negotiating initial pricing.

For instance, we once collected data from a client who had 200 GB of photos in her iCloud account. Our service provider alerted us to this high volume, and we did not put the photos in our $10 per-GB hosting platform, which would have cost us $2,000 per month. Instead, we put the photos in a less robust tool already available to our firm for free and saved costs. Her remaining data totaled 20 GB or $200 per month. We put that data into the platform, reviewed it expeditiously, and buttoned up the responsive ESI for production.

If you are not using the data, do not let the meter keep running. Tell your provider, “we have a six-month stay” or “the case is pending settlement,” and they will provide options for managing your data under those circumstances. One option is “near-lining” the data, usually at one-third the price per GB. With near-lining, the vendor will hold all of the data and work product (coding decisions, saved searches, and folder structure) in the platform in a type of “cold storage” where you can’t access it, but you also do not lose any work product and can pick up later where you left off.

When you are ready to work with the data again, you can make it “live.” Or if the circumstances warrant, you can take it down (in other words, store it offline on a hard drive or possibly delete it if there is an affirmative duty to delete defendant ESI under a protective order or a no retention obligation related to your client’s ESI).

For example, for the client mentioned earlier, any data that we did not produce was near-lined for $3 per GB per month until we were satisfied that we didn’t need it. We also turned off the user licenses for the attorneys who were no longer active in the workspace. Later, we pulled the data down to store elsewhere for free, such as on our firm’s shared drive or on a hard drive.

Factors Affecting Costs

Below are common phases of a typical e-discovery project, along with the biggest cost-driving factors for each.

Identification and preservation. If you are using a vendor, these services are charged hourly. While these rates vary by vendor and geographic location, expect to pay at least $300 per hour. Factors affecting the time it takes per project include the complexity and detail of your client’s data (and any IT systems if the client is an entity); number of potential custodians holding ESI; variations in data storage among custodians; and the time frame covered in your lawsuit.

You can save costs by sending out legal hold letters informing your clients of their duty to preserve ESI and by conducting interviews yourself to determine who may hold responsive ESI. This also forces you to learn the details of how and where your clients store their data. This is very helpful if you need to collect additional data later in the litigation. Take advantage of free checklists and use them as a template for custodian interviews.⁸

Collection. Some vendors charge hourly for collection services, some charge flat fees for each device they collect, and some use a combination of both. Knowing the fee structure for every type of data you plan on collecting is key. Factors that affect collections include: GB volume of data to be collected; number of custodians; number of individual devices (including phones and tablets); format of the data being collected (some vendors charge specifically for social media sites on a per-page basis); whether collections need to be done onsite (some vendors charge hourly time for travel); number of pages of paper or bankers boxes (if collecting hard copy materials); and the estimated hourly time needed per custodian or device.

Emails usually comprise the bulk of the data you will be collecting. If you are representing an entity (such as a municipal agency) rather than an individual, you can save costs on collections by coordinating directly with the client’s IT personnel to export part or all of each custodian’s email (including calendar items) to a single container file.⁹ Because they are placed in container files, the emails maintain their original metadata.

Container files, such as .zip and .rar, can take multiple files and compress them into a smaller, single file. Metadata is the data about a file, such as the date it was created or last accessed. If, for instance, you place a Word document in a .zip file, even if you access the .zip file at a later date or move it to a different folder location, the metadata for the Word document will not change from when it was originally placed in the .zip file.

If you know that your project has a date range, you can apply date filters at the point of export to further decrease costs. However, we don’t recommend applying keyword filters when exporting emails. Even robust tools, such as Office 365’s eDiscovery suite, can be imperfect when it comes to text searching, and responsive emails may be missed unintentionally.

Processing. Perhaps the most opaque aspect of an e-discovery project is “processing” and how it is counted for billing purposes. Generally speaking, processing is when documents are converted to .html format for review and their metadata is extracted and organized. Everyone charges by GB, but different vendors slice and dice things in different ways.

Processing costs are affected by whether you’re being charged for processing the compressed volume of data (in a container file) or whether you’re being charged for expanded data volumes. A compressed volume of data (such as in a .zip file) is generally 30%–60% the size of that same data when it is taken out of the container file (in other words, expanded). Whether data is compressed or expanded greatly impacts the volume determination. Some vendors will process incoming data for a nominal fee but charge a large amount to push the processed data onto the actual review platform.

In this instance, spend as much time as needed reviewing the big picture trends in your data, such as key players or time frames with the most communications, to cull irrelevant material before moving as small a subset as possible to the review platform. This trend analysis is often called “Early Case Assessment” or “ECA,” and some providers host data for ECA at a lower rate than full-scale review. Additionally, some vendors will charge hourly analyst time (approximately $200 per hour) on top of the per-GB processing costs.

Document review. Defendant corporations would rather pay the hourly rate of contract reviewers, rather than the much higher billable rates of law firm associates, to conduct document review. Therefore, the staffing and management of contract attorney review has developed as part of the e-discovery industry. Assuming your case merits outsourcing of document review, this is usually the most expensive aspect of an e-discovery project due to the nuance and time-intensive nature of human beings reviewing a document for responsiveness, privilege, and confidentiality issues. While some vendors charge a flat-fee, per-document price, most will use tiered hourly rates. Nearly all reviews contain the following phases: “first pass,” “quality control (QC),” and “management.”

To estimate the costs for review, you first need to know the number of documents that require review. Then, divide that number by the expected document pace per hour, and multiply that by the hourly rate of review. For example, assume that for 100,000 documents at a 40-document-per-hour pace on first pass, it would take 2,500 human hours to complete the review. If first pass is $45 per hour, then it will cost $112,500 to complete the first pass review. Assume that QC time will be roughly 20% of the total first pass time and that management time will be roughly 10% of the total first pass time.

The following factors drive costs during the review phase:

• Complexity of coding decisions.¹⁰ The more you ask your reviewers to look for, the slower they will go. The increased amount of coding choices and issues will necessarily increase QC and management time.
• Redactions. Whether and to what extent your documents need redactions can dramatically impact costs. Redactions are traditionally a discrete workflow, done once review is complete. Depending on the number of pages per document and the substance that requires redactions, pace per hour can be in the single digits.¹¹
• Ramp-up time. If you want to start a large project and have it completed within a week, you will pay a premium for increased QC and management time. With a shortened timeframe for orienting new reviewers, correcting errors, and batching out documents, the number of analyst hours will increase, which in turn increases the overall costs. Conversely, if you start a project with fewer reviewers and a longer time horizon, less management and QC time overall will be necessary.
• QC rate. Generally, about 20% of first pass documents are reviewed for quality control. Although not necessarily recommended, you can request that this rate be lowered and therefore reduce QC hourly time. For example, you might consider lowering the QC rate if you are comfortable with the reviewers’ judgment calls, if most of the data is duplicative or not responsive, or if you are close to the end of the review and the reviewers are well trained.

By considering all these factors and issues, you can create a budget to achieve cost-effective and proportional e-discovery. Of course, as the case evolves, track expenses as you go, and review your budget and associated costs regularly to determine whether you should adjust anything. But understanding these fundamentals will put you on the right path.

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Elliot Bienenfeld and Suzanne Clark are discovery counsel at Beasley, Allen, Crow, Methvin, Portis & Miles in Atlanta and Montgomery, Ala., respectively. They can be reached at elliot.bienenfeld@beasleyallen.com and suzanne.clark@beasleyallen.com. The views expressed in this article are the authors’ and do not constitute an endorsement of any product or service by Trial or AAJ.

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Notes

1. The Electronic Discovery Reference Model offers a standard framework for the stages of the e-discovery process. For more information, see https://edrm.net/edrm-model/.
2. To preserve in place means to “retain the data where it’s actually being used, rather than moving it to a separate archiving solution.” JD Supra, What Is In-Place Preservation and How Does It Affect Your eDiscovery Workflow, June 15, 2020, https://tinyurl.com/356h2bfu.
3. A forensic image will create an exact copy of a custodian’s device. This may include all data, including geolocation and biometric data. This option raises heightened privacy concerns, can generate pushback from your clients, and is generally more expensive and time-consuming. But this method ensures you have collected everything, and if additional material needs to be produced down the line, you have the copy in hand and can easily review and produce as needed—all without asking for your client’s phone again.
4. TAR is a process for prioritizing or coding a collection of electronically stored information using a computerized system that harnesses human judgments of subject-matter experts on a smaller set of documents and then extrapolates those judgments to the remaining documents in the collection. Maura R. Grossman & Gordon V. Cormack, The Grossman-Cormack Glossary of Technology-Assisted Review, 7 Fed. Cts. L. Rev. 1, 32 (Jan. 2013), https://www.fclr.org/fclr/articles/html/2010/grossman.pdf.
5. The proportionality factors of Federal Rule of Civil Procedure 26(b)(1) provide an excellent framework for determining a reasonable amount to spend on e-discovery. The rule contemplates “the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Once you’ve used the proportionality factors and other financial criteria to consider reasonable expenses, you’ll be in a better position to determine the appropriate e-discovery solutions to apply.
6. Even if you don’t purchase additional services, you typically use the service provider to access the license to the software. Generally, you enter a master services agreement (MSA) for the firm as a whole and then statements of work for individual cases, and this gives you a right to use that vendor’s license to the software under the terms of the MSA.
7. Vendors might have to give you special user “permissions” to do this, so you need to know in advance that they will permit it.
8. Tom O’Connor et al., The e-Discovery Checklist Manifesto, Ass’n of Certified e-Discovery Specialists, at 4–7 (2020), https://tinyurl.com/2s6mzv55.
9. These are called Personal Storage Tables (PSTs) on PCs or Outlook for Mac (OLMs) on Macs.
10. This may include responsiveness, confidentiality, privilege, whether and what redactions apply, and whether and what issues or categories a document falls into.
11. As technology improves, tools for auto-redaction of pattern data such as Social Security Numbers, credit card numbers, and personal information (addresses, phone numbers, and more) are becoming available, which can help control redaction costs. CDS, How Auto-Redaction Technology Can Streamline Your eDiscovery, Apr. 25, 2018, https://tinyurl.com/3eszn6vy.