US and UK companies turn to outsourcing to cut pre-trial costs

Some 28% of US companies and 22% of UK companies are cutting pre-trial costs by working with legal process outsourcing (LPO) providers, a new report has shown. The Sixth Annual Litigation Report,released by international law firm Fulbright & Jaworski, indicates that LPO partnerships are helping in-house counsel control their spend on the research and review of electronically stored information (ESI) – essential, but time-intensive tasks that are key to the document-heavy early stages of IP litigation.

In its survey of 408 UK and US corporate lawyers, Fulbright found that 77% of US respondents want the pre-trial document disclosure process to be reworked in order to make it more affordable – up 14% on last year. Pre-trial disclosure can pose particular problems in the US, where Federal rules compel lawyers to follow numerous steps for discovering and disclosing different kinds of information. While courts are allowed to alter these terms in specific cases in order to simplify proceedings, many lawyers still favour a streamlining of the rules at Federal level.

The IP-rich sectors of energy, healthcare and manufacturing have joined the financial sectors of insurance and real estate in the camp that backs a rethink. 'More than half of the public company sample favours reconsideration,' added the report, 'while the privately held group favours it by about three to one.' According to Fulbright, only 21% of UK respondents called for changes to disclosure rules, 'possibly because pre-trial disclosure [in the UK] is less fulsome already'.

Among the respondents who had worked with LPO providers in order to cut costs, loyalty emerged as a key factor. 'More than half … have preferred provider relationships for [document] collection and processing,' said the report, 'while a little more than a third have such relationships for preservation and review.'

Fulbright's findings arrive in the wake of a rise in recession-related lawsuits. Of the US respondents, 83% reported that their firms have been subject to new litigation in the past year, while 42% of the same group anticipated an onset of legal action against their firms in the year to come.

'Litigation rises in an economic downturn,' explained Stephen C Dillard, head of the Fulbright's global litigation practice. 'Regulators tend to step up enforcement, laid-off workers head to court and companies need to file more suits in order to collect on money owed. Perhaps most telling about this year's results,' he added, 'is that companies across the spectrum expect no substantial decreases in any area of litigation.'

Dillard said that, while corporations have not reduced their overall spend on litigation, their in-house teams have been busy 'finding other ways to cut costs' in efforts to make the most of existing budgets. Among the solutions they favour – such as outsourcing key document tasks, or 'in-sourcing' them to specially hired, in-house staff members – corporate counsel are also taking stricter views on their own document retention policies. Popular methods of enforcing these policies include more regular destruction of redundant data and shortening periods in which documents are retained.

In-house counsel also said that they are reducing the volume of discovery in legal cases by increasingly negotiating with the other side on what should and should not fall within the scope.