Tax Court Approves Predictive Coding for First-Pass Document Review

Invariably, the logical answer to coping up with Big Data with regards to eDiscovery is Predictive Coding. While definitions of predictive coding vary, but a common form includes uploading electronic documents to a server followed by taking representative samples, and ‘Seed Sets’ are created by attorneys who are familiar with the legal issues of the case. Attorneys, then, review the seed sets and code each document for responsiveness or other attributes, such as privilege or confidentiality. Utilizing a re-iterative approach, predictive coding software is tweaked and adjusted regarding how the computer will analyze future documents.

Recently, a U.S. Tax Court gave permission to use predictive coding in Dynamo Holdings, Ltd. vs. Commissioner, 143 T.C. No. 9 (September, 17, 2014) case, whereby permitting a taxpayer to use predictive coding as a first-pass review of a large set of documents, despite the. Apparently, the big idea is to reduce costs. While respondents in this case asserted predictive coding to be an ‘unproven technology’, the court completely disagreed justifying this by citing several precedents along with an expert testimony. Predictive coding contains two important elements known as ‘Recall’ and ‘Precision’ – I have detailed these concepts in my earlier post.  Inspite of this, the court’s opinion is important for taxpayers faced with requests for a substantial amount of ESI, and has the potential to reduce costs that may easily run into millions of dollars.

This reaffirms one thing for sure – IT, which was once considered a necessary evil, is now evolving to form a symbiotic relationship with the legal industry, and with other industries alike. Manual document review is certainly going to be obsolete in the near future – if not already! Analytics, predictive coding, machine learning products and technologies providing us with business intelligence (BI) to make informed decisions. For example, Microsoft’s newest products such as Delve, along with host of BI tools provide meanings to your data, while SharePoint e-Discovery center adheres to the regulatory compliance and standards. With this said, predictive coding technology is essentially replacing manual work, and tech savvy attorneys seem to have a ball with one!

The important aspect in this regard lies with determining the optimal values for ‘recall’ and ‘precision’ within the predictive coding software!

7 Tips for Implementing E-Discovery Best Practices

E-Discovery best practices begin with making data management as part of daily routine and business operations. Attorneys cannot achieve this objective without the help of IT department, and IT personnel cannot properly maintain data without guidance from attorneys about what should be kept or destroyed. Federal Rules of Civil Procedure related to e-Discovery and keeping up with changing law in the area is a good start, however, knowing and understanding how to put these lessons to practically work in practice is the key to implementing and conducting e-Discovery successfully.

Planning ahead plays a pivotal role as it sets the standard for effective relationships between internal and external legal and technical resources. Below are few tips for implementing effective best practices for both inside and outside counsel.

1. Be proactive and have a formal document retention policy in place with rules for saving and destroying electronic documents.
2. Increase company-wide awareness of litigation readiness, and train employees to organize documents in an organized manner. Better yet, implement an effective document management solution such as M-Files – which includes e-compliance module.
3. Effectively cater to big data and effectively implement strategy for later archival, identification, and production in a timely fashion.
4. Train IT personnel to act as a deposition witness as per rule 30(b)(6).
5. Preserve potential evidence when necessary while effectively train and involve key legal and IT personnel as soon as litigation is imminent.
6. Must have adequate knowledge about client’s information systems and operations to effectively define e-Discovery parameters, ensuring smooth functioning with opposing counsel. Try to minimize disruption of clients operations.
7. When a document request is received, be a partner in the data retrieval process – not just a messenger.

While harmony, effective communication, and smooth functioning between attorneys and IT personnel can prove to be beneficial for the organization, keeping current with latest technology and how it can streamline the e-Discovery process is equally important. After all, the purpose of technology is to act as a tool to handle complex e-Discovery in a speedy and cost efficient manner.

e-Discovery best practices

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