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Litigation Costs: A 1,000:1 Ratio

December 20, 2010

If the numbers in a 2010 litigation cost survey are correct, the amount of evidence preserved, collected, and reviewed in e-discovery is much larger than what is actually produced in the litigation itself. Better information governance can help companies reduce the amount of information that needs to be processed for litigation purposes.

The study was conducted by a Civil Justice Reform Group working at the request of the Advisory Committee on Civil Rules, Standing Committee on the Rules of Practice and Procedure, Judicial Conference of the United States. The survey was administered and data compiled by the Searle Center on Law, Regulation, and Economic Growth.

The study, which focused on Fortune 200 companies, is one of the first efforts to compare the costs of pursuing litigation with the utility of the discovery activities. According to the survey results, in 2008, on average, 4,980,441 pages of documents were produced in discovery in major cases that went to trial – but only 4,772 exhibit pages actually were marked. Hence the 1,000:1 ratio – for every document page actually produced, companies are protecting, collecting, reviewing, and preserving 1,000 pages. And, this is a substantial outlay of time and money.

The study further concludes that litigation costs are higher in the United States than in other countries, and roughly 60% of U.S. tort costs are involved in conducting the litigation. Only 40% benefits the claimants. This will no doubt generate much discussion in the legal community, which is already concerned about rising costs of litigation, and among corporate executives who are concerned about these expenditures.

So, how can better information governance help? Effective information governance requires coordination of efforts among records and information management professionals, legal counsel, and IT specialists to:

• Establish enterprise-wide information management policies. Such policies will define the organization’s expectations from its employees regarding the proper handling of information. Enterprise-wide policies establish consistent practices across the organization.
• Minimize creation of duplicate records through effective use of information technology.  Effective search techniques and centralized storage for electronic records can minimize the need for duplicate records to be created in the first place. Minimizing the need for duplicate records reduces the overall costs of managing records, whether they are needed for litigation or not. And if they are needed for litigation, you have reduced potential costs even more.
• Routinely dispose of records according to the retention and disposition schedule. The schedule is the organization’s policy for how long to keep records in order to meet its legal, financial, regulatory, and business operating obligations. A consistent practice of ensuring records are disposed of in compliance with that policy will reduce the total volume of records being retained, and therefore, the costs of managing those records.
• Assign accountability for information governance to a properly qualified, management-level individual. Managing the organization’s information assets is as critical to overall success as managing any of its other assets. An enterprise-wide focus on information governance policies and implementation will contribute to the organization’s overall success and ability to defend its actions if they are questioned.

A PDF version of the complete study is available here: http://bit.ly/cLWD6F. More information on ARMA International’s approach to information governance can be found at www.arma.org/garp.

Diane Carlisle, CRM

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