Interview with Drew Titus & Larry Samilow of Update Discovery
Interviewer: Andrew Zezas, SIOR
Following is the transcript of a CFO Studio video between Andrew Zezas, CEO of New Jersey based Real Estate Strategies Corporation and Drew Titus, Chief Operating Officer and Larry Samilow, National Sales Director of Update Discovery. Visit www.CFOstudio.com to read about this interview and to watch the entire video interview.
Zezas: Hi, this is Andrew Zezas, your host at CFO Studio. I have the pleasure of sitting here today with Update Discovery, a division of Update Legal, and that company’s COO, Drew Titus, and National Sales Director, Larry Samilow. Drew, it’s nice to have you here on CFO Studio.
Titus: Andy, thanks for inviting us.
Zezas: Larry, great to have you here.
Samilow: Andy, thanks for having us in. I really appreciate it.
Zezas: You’re here today to talk to us about litigation costs and how the CFO can manage and control litigation costs. My first question is CFO, litigation? Hasn’t litigation historically been the domain of the general counsel?
Samilow: You’re right, it has. What we’ve seen though, in the last couple years of economic recovery, with everyone really looking to tighten their belt, and watch not only legal spending, but overall company spending, is that CFOs have a much elevated position in terms of responsibility and authority. And, that is why CFOs in general, are looking at litigation spent.
Zezas: I get that. So, it’s a financial issue, and it’s a major financial issue. And, now CFOs have all this responsibility, even for legal issues. What are their major concerns as it relates to managing litigation costs?
Samilow: The main concern is that it is very hard to predict and it’s hard to budget. In other words, you have so many components in the litigation continuum that actually contribute to it. Historically, you have a law firm, which you go to for outside legal advice, and then you have a series of outside vendors that handle the non-law firm component. But, what happens is all of those entities tend to act in a mostly fragmented way, without really a general theme or a general strategy. And, you can see with all that type of “silo’d” approach, if you will, that it breeds a lot of inefficiencies. And, that drives the costs up. And, even more, so it drives the budget up.
Zezas: We’ve talked before about discovery, and you’ve mentioned that discovery is a significant portion of litigation. What percentage?
Samilow: I would say it gets into about the fifty-percent range.
Zezas: Wow…fifty percent! Why is litigation so hard to manage…so hard to control?
Titus: You know Andy, I’ll take that question. A number of factors. First, I’ll call it the email factor or the email problem. We, as a country, are sending six trillion emails each year. And I’ll say that again, six trillion emails! You know, most of those emails trickle down into litigation. I’d venture to say that probably seventy-five percent of business communication is probably done via email. So, if you think about it, think of all the high profile cases you have seen in the news, or read about in the paper, where a trader or some business executive is being caught for something like insider-trading, typically it’s by email. They catch them by email.
So, companies’ adversaries are asking for your email. That’s the first thing they’re asking for in litigation. And, you, as a defendant or you as a company kind of opposing an adversary, have to be protective. You have to kind of know what’s in your email, and monitor that. So, I would say that email has become the new frontier for litigation.
The second one, the second factor is, the courts are not making it easy for companies. The courts are increasing the burden on companies to respond to discovery in a much earlier fashion. Typically, you have about hundred twenty days at a scheduling conference to respond, and now they are making you do it in ninety days. So, that’s another really important factor.
And, finally I would say that this has become more of an exercise in work flow management. With the volume of emails as you can imagine – six trillion – with the volume of emails entering discovery, we need to find new and better ways to manage this. It has become kind of a manufacturing exercise. And, as you can see all these things add up to increased costs for corporations.
Zezas: I would imagine. Especially, when those types of analytical reviews are done on a traditional cost basis. It’s got to be significant.
Titus: Oh yeah, the hourly cost is skyrocketing, because of the volume.
Zezas: Is it fair to say that the traditional approach is flawed?
Titus: You know I’d go so far as to say it’s broken. It’s broken, because if you think about how many emails you have to review and the armies of lawyers you have to bring in now to review these emails – ten, fifteen years ago you did not have to do that. And, so think about that from a cost perspective…what you have to pay these people, and if you are paying the old rates that you were paying ten fifteen years ago.That could easily break the bank for any company’s litigation budget.
Zezas: I can only imagine. So, the system is flawed. It tends to be costly. I think I heard you say it tends to be inefficient, as a result. What alternatives are available to CFOs?
Titus: That’s a great question. CFOs really need to create, or work with their executive team to create solutions. They need to create a solution, and in order to do that you need to have experts. People who understand discovery. And, we take the position that discovery needs to be conducted on a case by case basis, because there is no cookie cutter way to do it anymore. Cases are too complex. There are different, varieties of ways to do this. So, you really need people to come in and help you to sift through the available technology, available work-flow, and really map out, on a case by case basis, the right strategy to conduct discovery for each case.
Zezas: I would imagine that every legal case is different. So, it’s a customized approach each time.
Titus: Very customized approach.
Zezas: What I have heard is we all agree that the system may be flawed, the traditional approach may be flawed. So, the solution is to custom create a strategy for discovery for each litigation.
Titus: Yeah, that’s a recommended solution. Certainly within a framework of – you have a specific framework, you look within that framework to customize solutions on a case by case basis. I would say that that is the best way to go forward in this new discovery arena.
Zezas: That makes perfect sense. Gentlemen, any other thoughts for finance executives as it relates to how they can reduce costs and manage overall budgets?
Samilow: I would say that what Drew mentioned about collaborating with the executive team – that’s a critical point. Again, we talked about companies that may, or may not have larger, expanded legal departments. You still have to consult with your legal department. We are not recommending you don’t. What you do want to consult with are experts in strategy to help you do this in a non-cookie cutter fashion.
Zezas: So, really it becomes a collaborative effort between finance exec, legal exec, management team, and external service providers who are able to look at the discovery process from a strategic perspective…that’s what I’m hearing. And, lay out a discovery process, so that it can be managed financially…in an economic fashion.
Titus & Samilow: Exactly!
Zezas: Gentlemen, that makes perfect sense. I’m sure our audience will appreciate that, as well. I want to thank you for being here on CFO Studio.
Samilow: You’re welcome. Thank you so much.
Zezas: Larry, it’s been a pleasure.
Titus: Thanks again for having us, Andy.
Zezas: Drew it’s been a pleasure having you here. This is Andrew Zezas, your host at CFO Studio saying thank you for watching.
Copyright Real Estate Strategies Corporation 2011