On the latest episode of The Geek In Review:

Laurent Wiesel, Founder and CEO of Justly, talks with us about leaving his BigLaw partnership to create a startup focused on litigation analytics. Wiesel discusses how he saw that there was a growing gap between what clients were asking on issues of pricing and process, and what law firms were able to deliver. Greg (@glambert) talks about his ability to post an actual written blog post this week about who is the customer.

Legal Startup CEO, Laurent Wiesel

Continue Reading Podcast Ep. 13 – Litigation Analytics with Laurent Wiesel of Justly

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This three part series will examine the emerging trend for third party litigation funding. In this first segment, we describe what it is and why clients will find it interesting.

What is it?
Settlements from law suits are assets. There – I said it. And once something is recognized as an asset it can be bought, sold, traded and even collateralized.
Litigation Funding is an emerging, growing market that recognizes the asset-nature of settlements – a.k.a. claims. I say ‘emerging’ even though litigation funding in some shape has been around for a while. The classic personal injury, contingency fee firms are examples of this type of funding. Only in these cases, the law firms themselves are the funding sources.
What is actually new and emerging is investment in commercial claims. This is particularly the case in the US, where this has effectively been around for only a few years.
How Does it Work?
A client has a claim against another party. The claim is valued at some number, say $10m. The Litigation Funding Company (LFC) agrees to pay the legal costs for pursing the claim, up to $1m. If the settlement is obtained, the LFC receives a portion of the settlement, much like a contingency fee.
Simple enough? Yet this method creates some ‘issues’ for law firms. Primarily, law firms now have a third party in the mix, with a vested interested in the outcome of the case. It’s easy to say the firm must keep the client’s best interest first, but some times the client may defer to the LFC or even require their input on case decisions, especially when it comes to the settlement. The LFC will have expertise in valuing claims to the point the client will rely on their expertise and judgment. And the law firm will be in an odd spot, taking directions from not-the-client.
Why will clients do this?
In our example above, let’s say the LFC takes a 20% stake in the settlement. Why would a client give up $2m from their claim? For the same reason they would on any other asset. They basically convert the asset into cash – in this case $1m. So instead of spending $1m to get $10m, they spend nothing, shift the risk to the LFC and still potentially come out with $8m. Even if the company has the $1m to spend, they may likely prefer to spend it investing in their core business instead of lawsuits.
Of course with higher risks, the LFC will want larger portions of the settlement. But even then, the clients are shifting risk and keeping their cash for investing in their own business.
In Part 2 we will look at the funders, some challenges presented by this trend and explore the impact on law firms.

Download Fulbright’s Annual Litigation Trends Report

Well, guys, this is the 8th year that I have launched the online portion of Fulbright’sLitigation Trends Campaign.
Although it may appear to be just a simple download of a PDF, you really have no idea how much work goes into this.
And as any magician (i.e., IT + Marketing) will always tell you, what appears to be simple illusion usually takes years of trial and error, practice and digital dexterity to master.
What started off as a print and online campaign with a simple entry form has morphed into a pure online campaign with what I believe to be a unique online development: the ability to simultaneously download and register for an event without having to doubly enter your information.
Our IT guys are great at not only being responsive to our crazy marketing requests but also trying to stay two steps ahead of us.
Now we have all heard our share of IT v. Marketing wars but I have to say that after working with these guys for 8 years I have a profound respect for all that they have to deal with.

So check out what Fulbright’s IT team did—you can’t beat them for talent, creativity and plain old-fashioned work ethic.

Yet another 2011 ILTA Conference chance meeting lead to an interesting Q&A with Jim McGann VP of Information Discovery at Index Engines. In my prior role at Fulbright, I worked with the e-discovery practice group on developing ideas for building client relationships. As part of this we offered a “Litigation Readiness Audit” to help clients assess their preparedness for e-discovery requests. Not many bit on this offering. The best guess for why – was that clients didn’t have budgets for preparing for getting sued – but only for when they actually were sued. So the Q&A with Jim was a nice opportunity to see if things have changed. Read for yourself to get the full update.
Q&A with Jim McGann: Are Corporations Ready for Litigation Readiness?
Toby Brown: To what extent do you think the corporate world is finally ready for litigation readiness, after so much lip service about it over the past several years?
Jim McGann: Legal issues might force the corporate world to become litigation ready even if they aren’t now. The courts are not just asking anymore – they are insisting that data be retrieved for litigation. The technology now exists to make this easier and cheaper than it has been in the past, and today’s corporations must be informed and ready to use it.
Toby: If you do see a shift occurring toward greater litigation readiness, what have been the key drivers/reasons that are behind this?
Jim: Yes, I have seen a shift occurring towards greater litigation readiness. The key drivers are that courts aren’t accepting the burden excuse anymore that this data can’t be found or it’s too costly to retrieve. They are insisting that corporations adhere to these data requests or be heavily penalized. Recent cautionary tale court cases are prompting corporations take a second look at where their data is, and how to be proactive so they have the data needed and aren’t keeping data that could be a big liability in the future.
Toby: What are the benefits of taking a proactive approach to litigation readiness and/or information governance?
Jim: There is a lot of stored data lying around unnecessarily that could pose significant legal liabilities for companies. Knowing what you have, where it is and avoiding the “save everything” policy have all become critical to corporations. Knowing all this before there is an issue and having data retention policies in place can eliminate painful litigation issues in the future.
Toby: What are some steps that corporations can take now to make themselves litigation ready, and which department(s) should be in charge of overseeing the process?
Jim: Both IT and the legal department must be involved in this process; they must work hand in hand. Legal must create the policies, they know what data needs to be saved and for how long. They need to set the policy for IT to comply with, and of course, IT needs to actually comply with the policy.
Policies must not only apply to current data on corporate networks, but legacy data as well. Typically legacy data represents significantly more volume than the current data and it is frequently neglected because it is out of sight, out of mind. Legacy data is hidden away on backup tapes used by IT for disaster recovery purposes. Companies have thousands of these tapes that can become discoverable and represent a liability for the organization. When developing a solid information governance strategy, everything has to be looked at.
Toby: What will happen to companies that miss the boat and don’t take these steps?
Jim: Companies that don’t take a proactive approach to litigation readiness will always be putting out fires, having to go through Terabytes of data to find a few critical pieces needed for litigation, usually with not enough time to find them. There are no excuses for the courts anymore, they want the data and they want it right away. This is not easy to do if you haven’t taken the steps and started managing your data.
Toby: How are law firms getting involved in this process and what is their responsibility to their clients from a litigation readiness standpoint?
Jim: Law firms are thinking more proactively and are advising their clients on litigation readiness. After many reactive “fire drills,” law firms see the pain and exposure caused by improper management of corporate records. As a result, they are advising their clients to become litigation ready and implement proper information governance strategies.
Toby: Jim – thank you for participating and for your contribution to the 3 Geeks!

Big tip-o-the-hat to Courthouse News Service for following up on the class action suit brought by Texas resident Karen McPeters against Montgomery County’s (Texas) mandatory use of LexisNexis for electronic filing of court documents. We discussed the Federal class action lawsuit brought by McPeters back in April, but it appears that the Federal Judge was showing some doubt about the standing of the case in federal court on the issue of filing fees preventing due process or equal access to the law.
Cameron Langford at CNS gives a great “blow-by-blow” of the case, where McPeters equates the fee to a poll tax that is discriminatory to the public that can’t afford the fee… and essentially equivalent to a literacy test for those that are not computer literate enough to understand how to file document electronically. Those are interesting arguments, however, I did find one statement in the complaint that stood out for a much more practical reason. According to the complaint, LexisNexis charges over twice as much for filing over other e-filing services that serve Texas Courts.

Very interesting…(oh, and for you non-Texans… Bexar County is pronounced similarly to “Bear”… if you say Bex-ar County, they’ll know you’re not from around here.)

Here’s the synopsis of the complaint. It is definitely worth a read.

Martindale-Hubbell released an interesting report this morning called “The Profitable Legal Department: How legal departments can prosper by generating revenue for their company.” The report follows the legal departments of DuPont, Tyco and Standard Life and reports on the success of each of their “recovery programs” that take a more aggressive stance to assert the company’s rights through litigation.

The report focuses on “how legal departments can cease to be viewed purely as a cost centre in the company and, instead, can proactively generate (or recover) revenue for the business to the point where it may even become a profit centre.” The theme seems to be that the financial crisis has caused companies to re-evaluate their legal departments and no longer be content with looking at them as purely an overhead expense to monitor compliance, but to revamp the department to be more vigilant in protecting the company’s Intellectual Property and other rights through legal action.

Derek Benton, Director, International Operations at LexisNexis Martindale-Hubbell, says that “The recovery program approach does not advocate increased litigation, rather a change of mindset for the business, from a passive approach of conflict avoidance, to one that asserts its legal rights to ensure that business-to-business agreements are honoured.” Perhaps that is splitting hairs a bit, but the part that caught my eye, and will probably catch the eye of in-house counsel everywhere was the fact that in “2009, four out of five DuPont recoveries were resolved without litigation and most without the need for outside counsel.”

The report concludes that taking an adversarial approach to the company’s rights is good business and it is time for in-house counsel to shift the way the approach legal matters away from defensive, and more toward assertive. “Few CEOs or CFOs will disagree with the concept of taking a proactive stance instead of always being defensive or reactive. Attack is a good form of defence and lawyers should, when possible, be adversarial. That is the nature of their job. It may mean embedding a culture change within their own department and within the business, but a good and successful recovery program will always pay dividends.”

Martindale-Hubbell has a free 36-page report detailing the approaches taken by DuPont, Tyco and Standard Life’s legal departments, including key points from DuPont on how a legal recovery program should be established and operated by a company.

Seems that the issue of paying third-party vendors a fee to file documents in state courts has raised its head again – this time in Georgia. We covered this issue back in April when a claim was made against a Texas court that these types of fees were RICO violations. According to a Fulton County Daily report (paid service) and a Courthouse New Service report, a plaintiff was ‘locked out’ of the Lexis File and Serve service because the plaintiff’s counsel had allegedly not paid the service’s fees. The fees run from $7 to $12 per document and are paid directly to Lexis, and not the courts. Also according to the complaint, the Fulton County court apparently would only accept the electronic filing in this class-action case, and no paper documents would be accepted (supposedly getting around the $7 and $12 Lexis fees.)

In one of those arguments that fits the saying of “it may be true, but do you really want to use that as your defense?” Lexis’s attorney, William K. Whitner, said “The Georgia Supreme Court has repeatedly held that there is no constitutional right to access to the courts.”

This was swiftly met with a response from DeKalb Superior Court Judge Robert J. Castellani asking Whitner, “Did you just say there’s no right of access to the courts?”

Without skipping a beat, Whitner replied “No constitutional right… That’s the what the case law says; I’m not saying it’s right or wrong.”

Judge Castellani gave some sage advice to Whitner when he followed up with “I hope that’s not what your case rests on.”

There are a lot of issues that surround the idea that courts outsource their electronic filing. One of the things that seems to pop up in these cases is the fact that the plaintiffs and defendants are paying court fees directly to third party private vendors, and then the vendors are sending those fees on to the courts (after taking their cut.) I know that this is “logistically” a good way of doing things, but it does raise issues of people being excluded from the public court system because of money owed to a private company. Seems like it would be smarter for the courts to set their electronic fees in a way that builds the cost into the court fee, and not as a separate fee, then the court would pay the vendor a fee. That way, at least logistically, citizens would be failing to pay the court, not a private party. That would make the access to courts issue something that would then throw out the issue of private companies having a role in excluding citizens from the courts.

I reviewed Fulbright’s Litigation Trends Survey Report for Alternative Fee Arrangement (AFA) findings and came up with the following analysis.
It’s clear from the Report that clients have a significant focus on reducing legal costs. It is also apparent that the focus on reducing costs will not be decreasing any time soon and is expanding in various markets. The result is a growing adoption of AFAs in the market.
AFA Highlights from the Report:
I – Who is using AFAs?
51% of those surveyed are using AFAs
Larger/Public companies are almost twice as likely to be using AFAs as small companies
(61% vs 37%)
II – Primary Reason for using AFAs:
78% said “Lower Costs”
18% said “Predictable/Fixed Costs”
Smaller companies are more cost sensitive – with 84% stating “Lower Costs”
The US Energy industry shows 83% choosing “Lower Costs” as the reason
III – Estimate of the percentage of your billings done via AFAs:
78% say that more than 10% of their billings are under AFAs
18% said that “50% or More” of billings are under AFAs
However, there are numerous regional and industry adoption variations.
IV – What types of AFAs are currently in use?
Fixed fee is #1 at 55%
In the US fixed fee use is a bit higher at 58%
In the UK – 74% report using contingency/conditional fees
Smaller companies appear to favor blended rates – 50%
The Energy sector prefers using fixed fees – 66%
V – Are the use of AFAs going up?
Only 1% expect a decrease in AFA use
37% expect their use to go up
45% of larger companies expect the use of AFAs to go up
Interestingly, the answers to the general, opened ended questions on the survey also touched on the AFA subject. These are were broader questions about the state of the industry. Two of the quotes from these answers sum up the sentiment.
“An intense drive to lower legal costs.”

“I think alternative fees will become the norm, not the exception.”
These survey results bring strong evidence that things have changed and will not be changing back. The strong consensus on cost savings and the expanding use of AFAs reflects this.
Given what I do for a living (AFAs) these findings do not surprise me. Based on what I am seeing now in the various AFA deals I handle, I expect this trend to continue into next year’s survey results.

Fulbright’s released its annual Litigation Trends Report this morning. In its seventh year, the report has become a standard in BigLaw circles and has earned its share of kudos from companies around the country.

So what’s the big story this year?

Survey says: GCs are predicting that, despite the end of the recession, more litigation and more stringent regulations are coming.

The survey, conducted by the independent research firm of Greenwood Associates, polled over 400 GCs in the U.S. and U.K. during the 2nd quarter of 2010.

Want to read the full 57-page report? You can download it from Fulbright’s web site for the small price of entering your contact info.

Better go get it before copies run out! 😉

Note: in the interest of full disclosure, I work in Fulbright’s marketing department.

Texas resident Karen McPeters has brought a class action lawsuit against Montgomery County Judge Fredrick E. Edwards, Montgomery County Court Clerk Barbara Gladden Adamick, and LexisNexis claiming that requiring her to exclusively file documents through LexisNexis’ FileandServe product is a violation of US and Texas laws, and that the county and LexisNexis are engaged in RICO violations with their exclusive agreement.  McPeters, through her San Antonio attorney, Robert L. Mays, Jr., has filed the class action suit in the US District Court Southern District of Texas in Houston (Civil Action No. 4:10-CV-1103).

McPeters’ claim states that Court Clerk Adamick requires all of Judge Edwards civil cases to go through LexisNexis FileandServe, and will stamp any documents filed directly with the Court Clerks office with a “VOID” stamp and return the documents unfiled.  In her complaint, McPeters states that Adamick is relying upon an unsigned order from Judge Edwards from February 10, 2003, and there “is no standing order, signed by all of the District Judges in Montgomery County, establishing e-filing requirements for one, or more, of the courts of Montgomery County.”  According to the 2003 Judge Edwards order, only civil litigants are required to file through FileandServe and that criminal defendants are not required to use FileandServe.  Judge Edwards also excluded the following from the same requirement:

  • The State of Texas
  • Child Protective Services
  • Adoption Agencies, and
  • New divorce and annulment cases that are resolved within 90 days.
McPeters claims that the agreement between the courts and LexisNexis is a RICO violation through what she calls the “Plan” between the court and LexisNexis that requires her and other litigants “to pay filing fees, service charges and taxes that are no authorized by statute, and that exceed the amounts required by statute.” She believes that the “Plan” also financially benefits the county and that Judge Edwards and Court Clerk Adamick have gone beyond their official powers to require electronic filing and refusing to accept or file any documents presented directly to the Court Clerk’s office.  
The claim goes on to add that the exclusive agreement violates McPeters’ and other litigants’ due process rights, equal protection under the US Constitution as well as the open courts and due course of law rights under the Texas Constitution.  McPeters is seeking exemplary damages and wants the County enjoined from requiring that the court documents be filed exclusively through FileandServe.
It is always interesting when courts get into these agreements with private vendors where the court gives the vendor the exclusive rights to something like electronic filing. Yes, it does make things convenient for many of us who file regularly with the court, but what is convenient for some may not be for all litigants.  Requiring someone to only use a private vendor to file court documents, while at the same time refusing to accept the physical documents through the Court Clerk’s office seems like one of those situations where a Draconian Rule overrode common sense. It will be interesting to see how this suit takes shape over the next few months and what affect it will have over other courts that have exclusive contracts with vendors for e-filing, and if they can force everyone to use (and pay) that vendor while the court clerk refuses to accept any documents filed directly with his or her office.