One on One with Craig Carpenter of Recommind

Craig Carpenter is Vice President of Marketing and General Counsel at Recommind, an enterprise search and eDiscovery vendor. Carpenter has the unusual combination of MBA and law degree and began his career representing startups as outside counsel before transitioning to the vendor side after several years. He makes use of both of his degrees handling marketing and general counsel duties for Recommind and his experience and background in law gives him a level of authority and understanding when discussing eDiscovery with potential customers. We asked Carpenter about eDiscovery and the changing legal landscape.

FCM: Let's start with some statistical data: How many times is a company likely to be sued each year?

CC: The numbers will of course vary due to a number of factors such as industry, type of business activities, size, and financial stability. For example, I have seen reports that Wal-Mart is sued two to five times every business day somewhere in the United States in federal courts alone. There is also an annual litigation survey conducted by the law firm Fulbright & Jaworski (coincidentally, a Recommind customer) where 87% of US-based respondents--typically mid-large enterprises--said that they expect the number of legal disputes to increase from 2008.  

When your customer base is mid-large-size enterprises, it is really no longer a question of whether a company will be sued, but when. Thus, many companies have made the decision and subsequent financial investment to bring eDiscovery-related activities in-house, such as preservation, collection, processing, prefiltering, early case assessment and even some elements of review and analysis. Interestingly, the recession seems to have only expedited this process for many large enterprises, especially with legal holds (preservation, collection, processing and analysis of electronically stored information (ESI) before review starts). That is why automated ECA tools like Recommind’s Insite Legal Hold have become an imperative for many companies.

FCM: In my new year predictions, I predicted an explosion for eDiscovery. What's driving the interest in eDiscovery tools?

CC: I, along with a few others, have made similar predictions for 2009, with the trend likely to continue into 2010. There will no doubt be an increase in regulatory scrutiny of companies as a result of the events that occurred in 2008 and the economy that is in recession; we saw this start in 2008, with security class action claims growing 27% over 2007--and this was simply the leading edge of the storm. In addition, we are likely to see the fallout from the credit crisis in the form of more civil lawsuits and governmental enforcement actions. Furthermore, there is likely to be increased bankruptcy filings, and thus litigation, as a result of economic drivers, not to mention the fallout from various scandals which tend to be “uncovered” when times get particularly tough (think Madoff and Satyam).

While unfortunate for all of us as consumers, all of these factors bode well for companies like Recommind that provide powerful tools to help companies manage their information and eDiscovery needs. Those companies without effective infrastructure to deal with such litigation are in most cases seeing the coming storm and are taking proactive steps to get prepared by building the necessary teams and technology. Even companies with legacy infrastructure are taking a hard look at their processes, people and technology and are--quite often, at least in our experience--feeling the need to upgrade their abilities technologically in order to meet the upcoming challenges. Both groups are keenly rolling out any technology that can reduce the annual legal budget, a trend which has (perhaps surprisingly) only accelerated with the onset of recession.

FCM: What impact have changes in the Federal Rules of Civil Procedure had on litigation and eDiscovery tool makers?

CC: There have been a number of expected ramifications from the revised Rules and several we have yet to see come to fruition, but soon will. As expected, in the months following the revisions to the FRCP there was a jump in the number of cases reported where electronic discovery, and namely spoliation of evidence (e.g. missing email), was a prevalent issue. Court-imposed sanctions for violations of the FRCP related to eDiscovery such as issue preclusion or an adverse inference now play a major impact on the settlement or outcome of a case at trial. The impact of the revised rules have also been to force both in-house and outside counsel to get up to speed with their company’s or client’s ESI very early in a case in order to fulfill their meet and confer obligations.

Legal counsel who once left technology issues to others to worry about have found themselves behind the times or worse yet, in front of a judge explaining why certain evidence was destroyed. Or worse yet, not fully understand the costs associated with eDiscovery and not placing limitations as in the recent Fannie Mae case. These ramifications have led many in-house attorneys and outside counsel to educate themselves and seek the guidance and solutions from thought-leading companies. These folks seek out those experts and vendors who have deep substantive expertise about such legal matters and issues, and who have actually “walked the walk”, not just “talked the talk.”

FCM: You've talked about the cost of litigation shifting from attorney fees to information gathering efforts around electronic documents. How can firms control these costs (in general)?

CC: Fifteen and even ten years ago when I was litigating on behalf of my clients, the biggest cost in the eDiscovery life cycle by far was court time. Court time is now not only not the biggest cost in most cases, it is not even close. EDiscovery costs (from identification through production) dwarf it. Due to the massive amount of data we all create every day, including email, instant messages, web pages and so on, the amount of information subject to eDiscovery (aka ESI) is tenfold or a hundredfold greater than even five years ago. As a result, enterprises have realized that the collection of ESI is perhaps the most critical element of eDiscovery costs--both direct and indirect--as every gigabyte less which is preserved is a gigabyte less which needs to be collected, loaded, processed, filtered, culled, reviewed, analyzed and produced. The once unquestioned practice of a company hiring outside consultants to travel around and forensically “image” (i.e. copy in its entirety) each users’ computers in every case is no longer the default, as most enterprises are eschewing such a draconian approach in favor of more intelligent, selective collection.

In-house attorneys and outside counsel have gained a better understanding of the technology that is available to conduct remote collections and the case law so that they can make a risk-based decision regarding how and what to collect. Enterprises have brought expertise and technology in-house to conduct many of these collection activities and bring in an outside resource only when warranted, as in the case of potentially criminal conduct. At its essence, corporations are trying to gain control of data at the time of collection and even beforehand which can be done more cost effectively in-house. In addition, with these advanced collection tools these forward-thinking companies now have the ability to conduct effective in-house processing and analysis, thereby reducing the amount of information which must go through the eDiscovery process – with dramatic improvements to the eDiscovery’s budget’s bottom line.

FCM: What steps should companies be taking to ensure their records are in order before receiving a request for records?

CC: Your use of the word “before” is right on point since the best practices come from a proactive approach; by the time the subpoena hits, it’s too late to become prepared. Some best practices include:

• The need to conduct a data inventory and mapping exercise. Companies absolutely must know where their data is before they can even begin to respond to any given situation.
• Executive sponsorship is critical--no records management effort will ever succeed unless it has sufficient support from senior leadership.
• Corporate training; there is a strong need to educate employees at all levels about records management.
• The best records management programs are monitored on an ongoing basis and consistently analyzed for improvements. This requires the creation of metrics and the methods by which the metrics will be monitored.
• Follow documented policies--do some testing and sampling to see if data is being retained or destroyed where it should not be. Again, do this testing proactively, not during crisis as it is too late by that point.
• Look for technology that can automate the process to become more efficient, accurate and cost-effective. Used strategically, these technologies will assist the defensibility of the company’s processes in compliance and eDiscovery.

FCM: How much of record keeping is good business and how much is required by law?

CC: That really depends on the type of company you’re talking about since certain companies have regulatory requirements to maintain certain business records, e.g. financial service firms regulated by the SEC, healthcare firms and HIPAA, etc. For these firms, record keeping is mandatory for regulatory purposes so the point is moot. But the question is a good one as good records management has such significant benefits from a business perspective--including quicker employee access to the information they need, lower IT costs and lower eDiscovery costs--that the effort is well worth it.

At Recommind, we are acutely aware that enterprise information can present both opportunities and risks. We have had and continue to enjoy great success working with like-minded customers looking not only to address their regulatory and eDiscovery needs, but to do so in a way which will actually make their employees far more efficient, thereby giving their companies a competitive advantage over their peers.

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