Law firm lateral hire and merger rumors seem to be almost as constant as the latest NBA trade rumors.  There’s even a webpage devoted to lateral hire announcements on The American Lawyer site, aptly called The Churn.   As firms try to grow revenue in 2012, they plan to poach talent with abandon to get into that new market or amp up a promising practice group.

Sometimes law firms buy a player, and sometimes they buy a whole team and its offices to get ahead.  Law firm mergers and acquisitions were up 54% in 2011, compared to 2010 levels, according to an Altman Weil survey. And the hunger to bring in partners, along with their client portfolio, in lateral hiring isn’t letting up either,  with 82% of law firm leaders in The American Lawyer, Law Firm Leader Study saying they expect to shore up their litigation ranks with lateral hires. Corporate is another sweet spot—74 percent plan to add lateral partners in this area.

Attorneys moving from one law firm to another don’t just bring a few duffle bags of gear and performance workout togs to their new facility.  They bring reams and reams of client and personal files that are no “swish” to properly integrate into the new firm.  The new attorney personal and client files can bring unwanted liabilities and potential conflicts with your own client base.  Having a game plan and some X’s and O’s for dealing with all this transfer of information is a good idea.

So if you haven’t already, why not establish protocols for handling information transfer related to lateral hiring and M&A activity?   If you decide to tackle these issues, here are some things to consider:

• Unify now.  Before you get hit with an onslaught of incoming information with new attorney arrivals, be sure you have a unified paper and electronic records policy.  You are going to get plenty of each format. And, according to a recent Iron Mountain survey,  31% of law firm that have a policy for handling paper records, don’t’ have one for electronic files.  Managing the new information volumes for efficient access and application of retention and disposition values will get real messy real fast if you lack an electronic policy.

• Don’t fall into Ad Hoc Chaos.  Develop written policies and procedures for handling all incoming files from lateral hires or mergers, as well as information leaving your firm with departing attorneys.  This way you’ll have an efficient process for these increasingly frequent events, and can minimize disruptions.

• Identify (and resolve) potential conflicts or liabilities. Make sure new hires don’t just bring in a thumb drive full of client and personal data and start downloading it onto your network. Everything should go through a formal review process for conflicts checks and liability review.

• Clear Communication on Risk Transfer. Establish a formal process for “accepting” lateral-hire information.  When you take lateral hire client information into your firm, you’ll want to be clear about what client documents you are now responsible for managing and safeguarding, to uphold ethical and legal requirements.  A formal notice to the other firm and the client of what files you are, and are not, accepting is something to consider.

And vice, versa — have a protocol in place for communicating with the clients who elect to move their business and their information to the new firm  You’ll want to be very clear on who now has responsibility for managing and safeguarding their information going forward.

• Indoctrinate early. The key to successfully managing information costs and risks is consistent application of your policies by all employees and attorneys. So don’t give the new attorneys time to develop bad habits – train them on your program right away.  Make sure partners back you up in communicating that the firm takes its information management policies very seriously.

• Manage the new mountains.  After a review process, quickly integrate new hires’ information into your retention and destruction programs. You don’t want the incoming mountains of information to prevent you from managing your volumes down so you can lower costs.  Find out when your retention timeline officially starts with the newly acquired information so you can defensibly destroy the files at the right time.

• Is Your Law Firm “Paperless?
• Two-Headed Monsters Found in Law Firms
• What’s that Monkey Sitting on Your Back?

But just what does going “paperless” mean to law firms?  Recently at LitCon2011 and ARMA 2011 in Washington DC, and at Association of Legal Administrators (ALA) Regional Conferences I asked law firm folks what it means to be a “paperless” law firm.

Some law firm information management leaders say it means operating with predominantly electronic documents, keeping only such things as negotiable instruments, wills, etc. in paper form.  For others the key is declaring the electronic version to be the official record.  One clever senior records manager says it simply means “paperLESS” – i.e. using less paper.  At its heart going “paperless” is really a culture change that’s wrapped up in concerns about storage costs, efficiency, risk management, lawyer demands for mobile computing, and sometimes even the environment – do we really have to print so much paper and kill all those trees to practice law?

A LitCon speaker suggested that 90% of the material created or received at law firms is in electronic form.  So what starts as an electronic document gets printed – probably many times by different lawyers and paralegals, creating multiple paper copies.  A woman sitting next to me on the plane out to ARMA who practices energy law in DC reviewed three large paper documents during the flight.  She estimated that she works in paper about 30-35% of the time.  Sometimes it’s easier to flip between paper pages and documents than drive your eyes buggy zipping around electronic documents.  Especially when you spend 12 hours a day staring at a computer screen.

So paper isn’t going to vanish from law firms any time soon.  But progressive law firms are building systems, processes and cultures that put them on a path to becoming “paperless.”  And a surprising number of law firms are doing this faster than we may think.

Stay tuned – the full report on the Law Firm Information Management Benchmark Survey will be available on IronMountain.com on December 6, 2011.

• What’s that Monkey Sitting on Your Back?
• Two-Headed Monsters Found in Law Firms
• What Every Law Firm Needs to Know About Shredding (*But May Not Think to Ask)
• Three Trends in Law Firm Information Management
• Law Firm Solution Brief: Manage What Matters

Why Getting Rid of Monkeys is A Good Thing.

With all of the focus on improving efficiency and cost management at firms today, getting rid of this monkey by putting a policy in place is a good way to reduce storage costs. A firm that keeps founding partner files and 25 years of client files without destroying anything under a retention schedule, watches costs go up each month.  Still some firms elect to pay storage fees rather than buckle down to policy development, destruction costs and client notification processes. It is a choice.

Finding what the lawyers need fast is a benefit of saying goodbye to the monkey.  All lawyers want their documents from records management, yesterday.  If you take the time to get your records classified, categorized, described and destroyed when eligible you can quickly find what you need.  On-line records management tools are a great way to manage your policies and locate needed records fast.

Another good reason to have a records management program is to manage risks. There are stories of clients being very upset when they had to produce documents in investigations or litigation because the law firm didn’t dispose of duplicate client records that the client had destroyed under their own policies.  Likewise, partners can be very upset when they have to produce some unflattering records in a malpractice case against the firm because the documents are still sitting in storage.

Start with the Easy One – Firm Records

Sometimes it’s hard to find a place to start when the monkey seems so big.  Since law firms own and control their own files, it’s easier to first tackle firm files.  You can involve key stakeholders from departments such as human resources, finance, IT and records management to develop the policies and retention schedules, with the help of counsel or consultants. By sidestepping client files for now, you avoid the interpretation debates on who owns what files and what are the firm’s responsibilities for notifying the client before destroying files.  Once firms get the bugs out from implementing the firm file policy, they can turn to client file policy.

Tell the Client Up-Front About Your Records Policies.

If you have mustered the wherewithal to establish a client file policy – well, first, congratulations.  And second, it’s a good idea to set your retention policy in client engagement letters. This gives you the up-front permission to destroy their records at the right time, avoiding the effort and costs of later notification or review.  Another tactic is to simply state in the letter that all client files will be returned to the client at the close of the matter.  That will definitely reduce your storage costs.

Law Firm Information Management Benchmark Survey.

 If you are curious about where you and other firms stand on the spectrum of information management milestones, take this short online Law Firm Information Management Benchmark Survey. You may find out you are not the only one with a monkey or two on your back.

Creative Ways to Contain Discovery Costs in a Tight Economy

Solving the Cost Savings Mystery

Two-Headed Monsters Found in Law Firms

Compliance Advisor Answer: Find out now if your information is at risk

Webcast: Cost–effective litigation readiness

Monster #1: The Paper and Digital Factory

Paper documents are born and re-born every day inside law firms, right along with electronic documents.  Emails and word documents are cranked out by the minute, and get reincarnated as paper with the hum of a printer and photocopier. Paper documents are nestled into new file folders and tucked into drawers or storage boxes.

All this paper needs to be stored onsite or offsite, or securely destroyed.  It needs to be easy to access when lawyers want to reuse it. Electronic documents are saved to document management systems where automated destruction and retention policies are applied–if the firm has a records management policy.

And let’s not forget all the data stored in content management, email archive and eDiscovery systems.  How the firm goes about managing all this paper and digital data is no small task.   Law firm debates on records management policies can go on for years, and end in stalemate.

Monster #2: Firm Records and Client Records

Okay, so things are more complex for law firms. There’s the firm’s own data such as financial, strategic, human resource and contracts.   And then there are all the client files that arrive at the doorstep during a matter and the entire “work product” the lawyers create in a matter. Both have to be managed to comply with regulatory and legal mandates.  But here’s the double whammy for law firms.

Lawyers also have to contend with ethical duties regarding confidentiality, retention and ultimately destruction of client records.  There’s a variety of opinions and guidance on these issues from the American Bar Association, state and local bars and courts.  Many law firms are asking for more clarity on just what the rules are relating to client record destruction.

Monster #3: Techie and Non-Techie Lawyers

Every law firm has its techie and non-techie lawyers, with many others falling somewhere in between. You’ll find lawyers who have almost a tactile relationship with paper.   Their happy place is having that paper in their hands or on the desk as they review and analyze legal issues. At the end of the day their files and recycle or shred bins are chock full.

On the other end of the spectrum are the techie lawyers.  They are all about digital and mobility.  They practically practice law from their local Starbucks with their smartphone in hand.  They want MACs not PCs.  And they create volumes of digital information and manage client information wherever they are, creating new opportunities and challenges for their IT guys back at the office. The techie lawyer likes doing everything electronically—filings, mark-ups, ESI review, newsgathering and tweeting.  They would love to go digital and become a paperless firm.    

If you face any of these two-headed monsters at your firm, write a comment about how you are slaying them.   How are you tackling information management in the context of law firms?

In the Federal Rules of Civil Procedure and eDiscovery case law, there is this notion that requiring a party to produce electronically stored information (ESI) that would be unduly burdensome or costly to access must be balanced with the relevancy and importance of the ESI to the merits of the case.  If a court determines that the information is important to a party’s case, but that producing it would be unduly costly and burdensome to the other party, the court can order the requesting party to pay all or some of the costs of getting the ESI they want.

This is exactly what happened in the Takeda ruling this summer. The court ordered plaintiff Takeda to produce 13 additional years of ESI related to the inventive and research activities for the patent at issue.  The catch is that defendant Teva, who asked the court to compel Takeda to hand over the information, had to pay 80% of any vendor costs Takeda incurs.  This could cost Teva a pretty penny, given the estimated $1-1.5 million costs for vendor indexing, restoring, culling, searching and hosting the ESI.  Additionally, both sides will have to pay their own attorney costs — likely no small sum with 13 years of data to review.

Be careful what you ask for. The defendants may scratch their heads and ask if this strategy worked and is worth the cost.  Of course, they undoubtedly weighed this possible outcome, and the money at stake in the patent fight might well have justified the costs.  But litigants who pursue the classic strategy of trying to force settlement by killing the other side with discovery requests and costs, might rethink this approach after Takeda.

The information management wakeup call. The “information management wake-up call” should be sounding in the ears of CIOs and general counsels after this ruling.  What if the court had ordered Takeda to produce the 13 years of ESI and pay for 100% of the vendor costs on top of the legal review costs?  Having legacy data sitting around is an invitation for opposing counsel to ask you to produce it.  This can be very expensive, as we see in Takeda.

The bottom line is that developing information management and record retention policies that establish how long to keep digital and paper data is key for managing discovery risks and costs.  Enterprises also need intelligent archiving and data protection solutions that categorize and index information to make it easier to access and analyze the data for litigation or regulatory investigations. Of course before ESI is turned over to the company’s outside counsel or directly to the opposition or a regulator, in-house counsel will want to remove any non-responsive data.  To do this, in-house teams can use on-site early case assessment technology to cull, filter and analyze the ESI to lower law firm review costs, prepare their strategy and keep sensitive, non-responsive data behind the firewall.

Do these things and you’ll pay less the next time opposing counsel tries to overwhelm you with discovery requests.

A highlight for me was listening in on a conversation that Brad Smith, SVP & GC, Microsoft, and Kent Walker, VP & GC, Google, had on information, technology, society and impacts to in-house legal teams.  Kent staggered the audience with this fact:  We collectively generate 5 exabytes of information every 2 days.  Now that’s an information management challenge if there ever was one!

Both Microsoft and Google GCs called out that collaboration technology has improved their teams’ productivity with real time oral and written collaboration.  (Yes, us lawyers can be very good collaborators.)  Real time foreign language translation is coming soon, according to the pair, so get ready to speak le Francais via technology on your future conference calls.  Google and Microsoft legal teams also leverage the web and technology to give legal services to internal customers and to collaborate with their law firms.

In addition to technology facilitating better collaboration, both also cited managing global privacy, regulation and government access to data stored in the cloud as major agenda items.  Brad commented that product developers would do well to get informed on international privacy regulations so they can build “on/off” switches to accommodate possible restrictions in different regions, regimes.

Gucci’s G C, Cheryl Solomon; Hedrick & Struggles International’s Associate GC, Jacqueline Hatter; and CenterPoint Energy’s VP & Deputy GC, Carol Helliker, all offered records management advice. Collectively, it boiled down to four things. One, don’t put it off. Start developing digital records management policies and programs now. Two, gain buy-in for the program by reminding business units of the constant shared frustration of not being able to find data. Three, crawl before you walk by doing a pilot project with one department or one location and work the kinks out. And four, secure executive sponsorship because you’ll need it.

I also heard interesting nuggets from several judges in attendance. Judge Shira Scheindlin, famous for her Zubalake decision and recent Pension Committee decision talked about the duty to preserve, the standards for determining culpability in regard to spoliation and the importance of a written litigation hold notice. Judge Scheindlin noted that the majority of sanctions in eDiscovery relate to a failure to preserve ESI.

US Magistrate Judge David Waxse from the Kansas district court emphasized that parties need to take their duty to cooperate and work through issues at conference seriously to reduce court time spent on discovery motions.  He added with a wry smile that he has told contentious litigants he will ask security for the videotape of their discussions so he could confirm their good faith efforts to resolve as many issues as possible before coming before his court.  Lastly Michigan district court Judge Donald Sheldon reminded us that 97% of cases are filed in state courts, not federal.  He advised that given the enormous dockets they manage, state court judges probably have even less tolerance than federal judges for parties taking up their time with unresolved discovery issues.  The main theme of all three judges was that cooperating to reduce the cost and burden of eDiscovery is not a “nice to have.” It is a requirement and failure to do so will have real consequences.

McAffee’s Ron Willis, Sr. Corporate Counsel & Legal Risk Manager, emphasized the importance of documenting your eDiscovery process in detail. He advised that companies diagram their eDiscovery process to more easily identify what pieces to do in-house and what to delegate to law firms, service providers and contract reviewers to better manage costs. One example his AGC shared was to have custodians complete a template to give their basic personal information, rather than pay law firms to gather this information during the interviews.  Ron advised, “Stop paying $300/hour law firm associates to be eDiscovery project managers.”

Another speaker, Miriam Smolen of Fannie Mae, continued the theme of thoroughly documenting eDiscovery processes, in particular, so you don’t  invest in expensive technology that ultimately may not be a fit.

So as you can see the ACC meeting got my wheels turning.  What about you? Any learning to share on how the digital era has changed your job and discovery?