The legal havoc caused by recent stock options scandals illustrates a familiar and alarming pattern occurring across corporate America:  Regulatory investigations, compliance probes and class action lawsuits are having a serious, lasting and strategic impact on a wide range of companies.

New Strategies for Handling Litigated Matters
The good news is that some CEOs and boards of directors are fighting back by fundamentally rethinking their approach to the legal function and preparing for a new age of legal combat.  Rather than treating litigation as a series of one-time events, progressive companies are establishing corporate-level strategies that recognize the inevitability of legal action as a permanent feature of doing business.

To achieve that objective, companies are implementing best practices and technology solutions in much the same way that businesses introduced process improvements to enhance sales forecasting, customer satisfaction and expense control.  By building corporate infrastructure to support strategic litigation management, companies are minimizing the bombshell-like quality of lawsuits that drives even the most level-headed CEO mad.

The Virtue of Litigation Lifecycle Management — A Tale of Two Entities
To demonstrate this emerging shift in thinking, consider the experience of two major insurance companies.  One is a carrier for property and casualty and the other is a provider of life and health coverage.  Both companies faced a growing volume of lawsuits that hurt performance.  Both responded by retooling their approach to the legal function and embracing the discipline known as Litigation Lifecycle Management (LLM).

Much like a manufacturing company seeks to optimize each part of the supply chain, LLM is the art of managing each segment of the litigation process for the best possible result.  That involves creating best practices for each part of the litigation value chain from preparation, discovery and review to production and archiving of information.

In the case of these insurance companies, LLM has proven extremely successful because it addressed one of the greatest challenges facing any entity burdened by a mountain of lawsuits:  the collection of company documents involved in legal action.

When a suit is filed, finding all of the related documents is difficult at best.  For nationwide insurance companies with thousands of employees in hundreds of offices, this poses a special challenge.  The task requires gathering not only paper documents, but all types of electronic files including claim files, policy information or document files.  Basically, this includes any document or information that is potentially responsive to the case.

Finding a Needle in an Electronic Haystack
Much of this electronic information typically resides on a multitude of information systems within each company.  Neither company can easily identify or retrieve information, yet the importance of locating that information has grown even more critical.  In years past, companies could hide behind the defense that providing documents in a timely manner was unreasonable because of the time and expense.  Courts today are far less willing to accept that argument.

Identifying and collecting information is only part of the problem.  Equally vexing is the process of immediately freezing documents when new cases are filed.  Preventing rank-and-file employees from inadvertently disclosing key documents or allowing them to fall into the hands of plaintiffs' attorneys is a top priority for all legal teams.

Finally, both carriers faced enormous challenges in managing the information needs of their legal teams.  Collectively, these two insurers had more than 600 law firms working on their behalf.  Without a central repository, both companies incurred extraordinary fees as different law firms routinely reviewed the same documents.

Process Improvements Deliver Results
Both companies confronted these challenges by first recognizing that — like it or not — litigation is a central part of their business.  With that in mind, both embraced the practice of litigation lifecycle management and began realizing immediate returns on their investment.

Initially, they broke down the litigation process into its component parts and then concluded that technology could improve workflow and reduce costs.  The carriers installed technology platforms that created a central document repository accessible by corporate counsel and outside firms.

The implementation of a single online repository, rather than a repository for each firm involved in the litigation, was a key decision.  A centralized repository greatly reduces the chance of documents being reviewed more than once.  That is an avoidable expense that routinely inflates the cost of legal initiatives.

In addition, law firms for the insurers can access an updated information warehouse to retrieve a complete set of legal documents each night.  These documents can be reviewed online by tiers of attorneys who can view the work product of their predecessors.  That process results in enormous savings and increased productivity.

Another key process improvement that benefits both insurance companies is greater control over outbound information flow, thus minimizing the likelihood of privileged documents going to the wrong party.  A single repository enables companies to manage the exchange of documents far more effectively than if outsiders were in charge.  This becomes especially important when different legal teams take over in cases that last five or more years.

An Idea IT Can Support
From the perspective of both insurers' IT departments, a hosted centralized repository made good sense.  Neither company wanted to be in the database management business.  Moreover, the IT departments were increasingly leery of inviting outsiders — even trusted partners governed by attorney-client privilege — behind their corporate firewall, where a treasure trove of sensitive customer and financial information resides.

A centralized repository is also an elegant solution to the problem caused by technology itself, proliferating amounts of information being generated by the average American worker.  Several years ago, cases involving terabytes of data were rare.  Today, they're common, and there is no end in sight to the growth in volume.  Technology is the only way to solve the problem that technology has created.

As more corporations across America adopt LLM, they will benefit from more process efficiencies and cost savings.  In an increasingly litigious world, that's better for customers, shareholders and employees.

About our author . . .

Chris Kruse is President and CEO of CaseCentral, Inc.  CaseCentral provides electronic discovery and document hosting services to corporations and law firms nationwide.  Before founding CaseCentral in 1994, Chris served as vice president at Joint Defense Data Inc. (JDDI), a pioneer in electronic document repository services.  He can be reached at ckruse@casecentral.com.