Switch to digital pays off
REINVENTED FIRM | Company prospers by providing electronic services to legal clients
A company with Chicago-based leaders and financial backers switched from paper to digital at just the right time to put it on the leading edge of a sea change in the legal profession.
(Brian Jackson/Sun-Times)
Encore Discovery Solutions, which changed its name last year from Encore Legal Solutions, gets 90 percent of its undisclosed yearly revenues from digital services ranging from data forensics to e-discovery to data-culling. Encore charges from $25,000 to $100,000 per client to set up data-retention policies, train employees to follow the policies and understand the rules on electronic discovery, as well as to reduce terabytes of data into gigabytes and host and protect the resulting data.
If terms such as e-discovery and data-culling sound foreign, it's because they reflect how today's law firms no longer turn to file cabinets and paper documents for research and information. Instead, law firms store a virtually endless number of electronic messages and documents that must be retrieved when preparing for lawsuits, investigations and legal discoveries.
The documents include not only e-mail but also tweets, instant messages, video files, Web sites, accounting databases and CAD/CAM files. The data explosion also spurred a new creation -- "metadata," or data about the data.
"We were a copying and imaging paper service, based on production, when we set out to reinvent the company into a knowledge-based provider of electronic discovery," said CEO Greg Mazares, who oversaw the two-year-long transition.
Encore Discovery's primary owners -- Chicago-based private-equity and leveraged-buyout firm Frontenac Co. and Troy Noard, one of its six managing directors, initiated the electronic changeover. Frontenac recently named Paul Reilly, a Chicago-based entrepreneur and investor, as Encore's chairman.
Noard said Frontenac first eyed Encore about six years ago as a leader in the industry and a "great platform to grow" through expansion and new service offerings. Frontenac was founded 38 years ago by Martin J. "Mike" Koldyke, who also founded the Golden Apple Foundation, which honors outstanding Chicago area teachers.
The need for e-discovery grew out of federal rules of civil procedure and, more recently, state statutes that require companies to be prepared for lawsuits by archiving and preserving data that's not easily tracked. The rules evolved after a seminal case from four years ago, Zubulake vs. UBS Warburg LLC, in which Laura Zubulake sued her former employer for retaliation, gender discrimination and failure to promote her. She claimed that the evidence she needed to prove her case was available only on UBS' computer systems and that UBS failed to preserve the evidence.
The New York federal judge in the case instructed the jury that it should consider the missing documents destroyed because they were harmful to UBS' case. The jury returned a $29 million sanction believed to be the largest jury verdict in history for a single-plaintiff employment discrimination action.
Finding and retrieving electronic data make up the costliest part of legal cases today, since even the most mundane issues involve a large volume of electronically stored information. The e-discovery process is about finding the data, collecting it, reducing it to relevant documents and having paralegals or junior associates initially review and comprehend it before lead attorneys review it. Indeed, law firms now have e-discovery procedures and departments as well as partners in charge of e-discovery as a practice.
Data retention companies are seeing tremendous business growth. Commercial electronic-discovery companies together garnered $2.79 billion in revenues in 2007, up 43 percent from 2006, according to the Socha-Gelbmann Electronic Discovery Survey. The experts predict the market will grow 15 percent from 2009 to 2010, resulting in revenues topping $4.6 billion by 2010.
"Companies need repeatable processes to store electronic and other corporate data," Mazares said. "The worst thing is to have to scramble to find or gather information as a result of a lawsuit. That's when it becomes more costly."
Dave Skowron, litigation technology regional coordinator for McDermott Will & Emery in Chicago, said the law firm uses Encore and other vendors to help with e-discovery because "they are far better set up to deal with the thousands of kinds of data we get."