"If you have a valid change order for $30,000 and it's going to cost you $15,000 for discovery, which you're never going to get back, plus $5,000 or $6,000 in legal fees just to get to mediation, is [the claim] really worth it?" Gwyn says.
There are steps smaller firms can take to avoid complex searches, Gwyn adds, starting with e-mail. At the start of a project, set up e-mail accounts into folders just as you would with separate manilla folders for change orders, documents, waivers, warrantees, change-order requests—and do it right away so you can keep up, he adds. After all, e-mail files are the first documents requested and often difficult to harvest and produce.
Even when policies exist to keep data locked down, the costs of e-discovery still add up. Take the case of the engineering firm HDR Engineering, which recently prevailed in a civil case brought against the firm by Tampa Bay Water, claiming faulty design of the utility's reservoir. The trial produced over 15 million pages of data to be stored for discovery and three million documents. In the aftermath of the trial, the firm says the cost of copying or obtaining documents came to $1 million and that it spent $2.1 million to electronically organize, store and maintain the documents. "This does not count internal and attorney-fee costs to code the documents, which is hard to separately break out," according to Timothy Connolly, executive vice president of HDR Engineering. He reckons that, on the case, the overall ESI document cost alone was about $4.6 million out of legal costs of more than $20 million, which it currently is seeking in the case.
This is one example of why federal and state judges recently ruled to allow predictive-coding search technology to help firms get a handle on the costs of managing electronic documents.
Dos, Don’ts and Disasters of Retention
E-discovery is easy—as "long as you have a retention policy," jokes Shawn Pressley, senior vice president and CIO for construction management firm Hill International Inc. He says the firm did a study to see how many megabytes of data it was keeping in the "banker's boxes" that often hold the printed versions of the electronic documents. The firm found that, on average, one banker's box holds about 2,500 pieces of paper and roughly 50 megabytes' worth of data. "On a case [of a two-year project], we might average about 40 to 100 boxes. That's about five gigabytes of data. If we take an average company, we're looking at over three million e-mails [in an average discovery request], which equates to about 50 gigs per person to recover," Pressley says. And that's with the backing of IT, legal, HR and senior management.
The costs to store and convert a gigabyte to the right standard file format, such as PDF or TIFF, are all over the map, experts say. Meanwhile, state courts, which historically have fewer e-discovery rules compared to federal courts, are getting tougher with firms that plead ignorance of IT or lack of resources.
Kathleen Seligman, whose firm Cohen Seglias Pallas Greenhall & Furman represents Hill International, says although that's changing, it means that smaller firms who are subpoenaed as a third party to another dispute are on the hook for the costs of producing the data. Judges are evolving on this matter, she notes, but it's still a huge area of uncertainty for third parties whose documents are subpoenaed.
Breaking Down the Basics
Patricia Harris, a Zetlin De Chiara construction attorney who provides best-practice seminars on data retention, says it's astonishing how quickly costs can rise if an e-discovery vendor has to help a party comply with a subpoena, from scratch. "We were involved in litigation where [one of the parties] had never segregated their e-mails by project," she says. The firm in question—a significant name in the AEC industry—eventually unearthed millions of e-mails using generic search words pertaining to the case, a huge project.
Harris' advice to firms is to think through their plans for the basics of data retention: identify records by type; prescribe length of retention; define method of retention; establish access to records; provide authority amid uncertainty; establish destruction policies; and construct rules in the even to litigation. Finally, she adds, communicate.
The truth is, most firms really don't know where all their documents are, and it is a struggle to get ahead of it, says Lorraine D'Angelo, senior vice president of ethics and compliance, Dragados. As AEC firms acquire other firms around the globe, those retention policies become even more complex. "The easy thing would be to go back to using paper," she says with a sigh. But since that's not going to happen and as the digital universe keeps expanding, her advice on best practices is to just think before sending many e-mails.
"It used to be people spent some time drafting a letter, instead of shooting from the hip," D'Angelo says. Also, if you do have a document destruction policy, be consistent about observing it, she adds. Selective document policies can also lead to a sanction in discovery cases.
The bottom line is that all these technologies and policies probably won't save any firm from dirty e-mail jokes on the job or an IT guy who tosses a half-eaten bag of Doritos into a banker's box of change orders headed for a warehouse full of mice.
This is still a rough-and-tumble industry after all, notes Pressley. But tools, techniques and better policies are emerging to help companies get a handle on their data deluge. Hopefully, all that can help them stay out of court.
Scott Judy contributed reporting to this story