The burgeoning field of litigation technology support is rapidly expanding the scope of investigation for law firms and regulators – with the opportunities come the risk of burgeoning costs – and using cost-effective investigation techniques is critical to success in this new field.
E-discovery, in many cases, is only applied rather late in the course of an investigation or in response to a disclosure request. However, the ever-increasing power of modern techniques makes it arguable that an earlier and wider use of e-discovery that can yield facts cheaply and efficiently should be considered.
Establishing the Facts is Critical
When faced with an international arbitration or litigation matter there are many facts to establish:
- Financial:
- The timing and origin of financial transactions.
- The value of assets in dispute.
- The origin of costs and revenues.
- The ultimate recipient of funds.
- Operational:
- The effectiveness of compliance procedures.
- The management awareness of wrongdoing.
- The timing of decisions.
Traditionally, establishing facts has required painstaking research into the paper documents involved, such as interviews, etc. The good news for traditionalists is that it still does. However, with estimates that over 80% of business transactions are now mediated by electronic communication that never finds its way to paper, an effective litigator must be clear on their approach to e-discovery in all but the most simple of cases.
The ability of the parties involved in a dispute to gather evidence to support their case has always been a critical factor in success. In many arbitration or litigation matters, increasingly, the facts will be contained in a wide variety of electronic records across geographies or jurisdictions. These records may be text based such as e-mails, but are also often based in accounting or transaction records, EDI or XML files and a bewildering variety of other records.
The potential for search costs to spiral beyond the cost of claims must always be weighed against the value that critical evidence may add to the case. When search costs were intrinsically high, a prudent counsel may in the past have sought to tightly limit the scope of any electronic investigation, and planned for such investigation to happen only after other avenues are exhausted.
With increasing processing power and powerful electronic search capabilities, the costs of e-discovery are shrinking. Investigations are now routinely measured in gigabytes or terabytes whereas not many years ago it would have been unrealistic to consider any search on this scale.
The core of e-discovery is in searches of e-mails, files and folders for responsive documents – usually based on free text searching to identify potentially responsive text. However, other data analytic techniques are increasingly being applied on a large scale. For example, transactional pattern matching enables investigations into fraudulent or negligent accounting across large data sets. Analysis of large numbers of financial transactions using a battery of electronically applied tests can rapidly yield a long list of transactions for detailed investigation.
A recent investigation into irregularities in a global chemicals business took this approach and is now being rolled out globally by the company themselves who realized that the search costs could be contained sufficiently low to make a wide scale search feasible.
Are law firms and general counsels using the full extent of what is possible? Generally, in the UK, the answer is no. It is still typical in litigations to find that e-discovery is applied late and on a small scale with a tightly defined scope of investigation.
We would argue that growing search power and the effective reduction of cost offers an opportunity for investigators and defending counsel to bring in e-discovery at a much earlier stage. In the US, where the risks of class action are high, we are seeing a much wider application of e-discovery with large-scale electronic investigations now becoming common.
Conclusion
Litigators need to re-examine their assumptions regarding e-discovery and consider early use of e-discovery techniques to find and preserve relevant material. E-discovery is now more cost effective than it has ever been before and, in many cases, the benefit will easily outweigh the costs.
The scope of electronic investigation also needs to be expanded and litigators and counsel need to consider the potential for automated searching of all forms of transactional information as these can yield powerful insights into a situation where financial or operational transactions are at issue.
So the next time you are involved in a dispute it might be useful to consider the following questions:
- Do you have an effective policy for managing e-discovery during the early stages of a dispute?
- Have you understood the potential costs of early or late e-discovery and weighed these against potential benefits?
- Have you considered all forms of electronic evidence and investigated whether these are amenable to automated searching?