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A critique of some data and an alarmist conclusion base on it regarding e-discovery cost tracking

Enterprise Strategy Group (ESG) recently surveyed 48 law departments (about a quarter of the respondents were general counsel) representing midmarket organizations (500 to 999 employees, 17%), larger companies (1,000 to 2,499 employees, 10%) and enterprise-class (2,500 employees or more, the remainder).

ESG was dismayed to find that in 2010 almost two out of three of those law departments did not “track e-discovery related expenses (i.e., document review fees, outside counsel fees, technology investments, etc.).” Perhaps they should be less surprised given who responded and the size of many of the companies – and thus their volume of lawsuits that justify tracking discovery expenses.

One out of three respondents was in a company with less than $1 billion of revenue, which would suggest less than four or five lawyers. Indeed, one quarter of the law departments had 1-10 total employees and a third had 11-24, which translates typically into 5 to 13 lawyers. Since it is fairly common to have one-to-two lawyers per 1,000 employees, even the largest midmarket respondents might have only a single lawyer (See my post of Dec. 2, 2010: lawyers per thousand employees.).

Smaller companies may have very little litigation, let alone of enough documentary bulk to require much e-discovery management, and thus no need to drill down to a component cost of it. In short, is the sample large enough of knowledgeable participants and litigation-intensive companies to draw a responsible conclusion about what spending information is tracked?

The report adds a methodological point not usually included in survey results: “After filtering out unqualified respondents, removing duplicate responses, and screening the remaining completed responses (on a number of criteria) for data integrity, we were left with a final total sample of 48 general counsel, attorneys and legal department executives.” I applaud the quality control, some form of which all benchmark surveys should apply, but wish there were more transparency regarding how they assessed “data integrity.”