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Litigation and Regulatory Investigation Services in a Post-Covid World

Alternative legal service providers (ALSPs) bring a strong focus on process and technology to litigation management, resulting in greater efficiency, reduced costs, and repeatable and reliable processes that result in more consistent work product. The success of ALSPs in disrupting the traditional law firm model is a direct result of this focus. While ALSPs originally brought innovation to eDiscovery, they are now increasingly bringing the same innovations to other aspects of litigation support. The Covid-19 pandemic now reshaping the world will only serve to increase the pace of this innovation.

Due to Covid-19, litigation and other document review activities have slowed to a virtual standstill, with only limited expectations of an uptick until the economy has opened considerably. Courts have closed, regulatory agencies have suspended work, and companies are pushing off litigation, if at all possible, to a time when a more “normal” economic climate resumes. Leaving aside the obvious impacts of closed court systems, Covid-19 has had a huge impact on the bottom line for many companies, reducing cash flow that might support litigation. Reducing costs, now more than ever, is at the forefront of the minds of company executives across the globe when considering whether to pursue litigation, how best to defend a potential litigation, or the best approach to responding to a regulatory agency. Another consideration is that Covid-19 has drained the coffers of potential defendants to the point that it may not make sense to commence a claim against a company where there is a low likelihood of successfully collecting damages that may be awarded in a lawsuit.

An interesting factor affecting litigation is a social consideration – namely that in adverse circumstances affecting society as a whole, parties tend to come together to resolve issues cooperatively, rather than adversarially. When executives are worried about the survival of their companies, dropping share prices, reduced revenue, employee health considerations, and even their own lives, there is little appetite for aggressive action. As often occurs when disasters strike, a kind of emotional fatigue sets in and this tendency away from aggressive action often survives for some period after events subside. While, as discussed below, there is likely to be an increase in litigation driven by plaintiff’s boutiques, such as HR claims, claims by employees that employers did not provide adequate protections, and securities class actions, it may take longer for more routine commercial litigation, such as breach of contract, to resume.

One factor that benefits ALSPs is that in-house counsel and law firms are now largely working remotely. One of the concerns of working with ALSPs often raised by companies has been that using an ALSP required remote collaboration, with much of the work handled offshore. As remote work becomes accepted across industries and across the world, fears of working remotely with ALSP vendors, whether onshore or offshore, will continue to fade.

The longer term effects the pandemic will have on the litigation landscape are the subject of wide discussion across the legal industry. As markets reopen and industries find the “new normal”, there are a number of areas that should expect increased activity.

Initially, as the financial effects of the pandemic are felt, bankruptcy and financial restructuring litigation will increase. It is already apparent that an apocalypse of sorts is hitting the retail industry, perhaps permanently damaging that industry. A wave of bankruptcies has begun, the number of which should be expected to increase in the short to medium term. To some extent, these bankruptcies may be delayed because widespread government-mandated closures are impairing the ability of retailers to conduct the liquidation sales that usually cover the transactional costs of bankruptcy. Bankruptcy is likely to hit other industries, including real estate, small businesses, airlines, transportation and logistics, and others. As with retail, this wave may be delayed until the economy settles down and government interventions subside, but the wave is inevitable.

Studies show that, by the end of 2019, 82% of companies were planning to reduce legal spend over the next year (Thomson Reuters report “Alternative Legal Services Providers 2019”). Once the eventual litigation wave hits, there is little doubt that companies and industries will be focused on reducing costs even further given the weak condition of the economy. Reducing litigation spend and pursuing more efficient ways to perform legal functions by engaging and leveraging increasingly sophisticated ALSPs is an avenue more and more companies will pursue as the post-Covid-19 litigation landscape emerges.

Another expected trend is increased litigation arising from plaintiff’s boutiques that specialize in areas such as HR, personal injury, and securities litigation. This wave of litigation will start much sooner than others, as plaintiff’s attorneys have been sidelined themselves by the virus and by government-ordered closures, which has directly impacted their bottom lines. The only way such firms are going to get back on their feet is by litigating as many possible claims on as many legal theories as possible.

A final trend to watch for is an increase in regulatory investigations. Many companies were forced to quickly change workplace policies as a result of the virus, including enabling an unprecedented number of employees to work from home. Untested workflows developed on the fly to ensure that that businesses continue to operate introduce risk. Work that was previously both highly and closely supervised, like that done in the clean rooms of companies, is now done from home, with possibly questionable security and oversight. Once the immediate crisis fades, it is logical to expect that there will be potential investigations into ethics and compliance violations made possible by the absence of long established controls.

Along with these areas of increased Covid-related activity, companies and their service providers must also continue to cope with new and developing compliance requirements under the privacy regimes emerging from privacy laws like GDPR and CCPA. While many in the litigation community may not be paying heed to these regimes, there are real implications for litigation going forward. Ignoring the compliance mandates of these laws in the litigation, and specifically the discovery, context could result in penalties, fines, and other sanctions for the responsible parties. Complying with the mandates of these laws will result in new burdens and costs in discovery.

So how will ALSPs help the litigation and regulatory investigation services industries address and adapt to these trends? The focus on cost-cutting and shifting to remote collaboration will drive the expansion of the use of ALSPs to more complex workflows and new sectors of litigation support. ALSPs will bring the same innovation they brought to eDiscovery to early case assessment, deposition preparation, and witness and trial preparation. ALSPs are experts in breaking up complex workstreams, like early case assessment, into smaller components and effectively pushing solutions to technology and process innovations and lower cost knowledge teams. This allows significantly more complex workstreams to be handled at a greatly reduced cost and with enhanced efficiency. In the face of the cost reduction and risk management focus, ALSPs disruption of the existing litigation model will proceed just as it did years ago in the realm of eDiscovery.

Another trend in the industry that will continue to expand is the use of automation in aid of and, in certain spaces, in replacement of traditional workflows. Perhaps most sensationally, TAR 2.0 utilizing continuous active learning is and will continue to revolutionize document discovery, using AI not only in aid of document production, but also of case assessment, fact development, and trial preparation. Another realm in which technology is changing the game is the field of foreign language document review. Machine translation continues to improve, and has eliminated the need for rooms full of expensive foreign language reviewers. Now, with the aid of machine translation, a traditional review team, with the aid of one or two foreign language resources, can manage a review no matter the size or the foreign language content of the document set. One final area in which we will see automation continue to shape the industry is in the redaction of information. Automated redaction tools can now identify and redact information throughout document sets, without the need for individuals to review documents to identify and manually redact sensitive, privileged, or confidential information. While these tools are far from perfect, they have markedly improved in the past years. This improvement will only continue.

This year will bring tremendous change to the managed document review industry. While short term pain is inevitable for most, the litigation and regulatory investigation services industry is well positioned with its focus on innovation, process rigour, and technology to continue to expand its reach and usefulness to clients across industries and matters.

By Briana R. Hulet, Director, Legal Solutions, Robert Coppola, Vice President, Legal Solutions, and David M. Klein, Vice President and General Counsel at QuisLex, a leading alternative legal services provider.