Managing in a Changing Legal Environment
Transcription
Managing in a Changing Legal Environment
MARCH 2005 – VOLUME 6, NUMBER 1 IN THIS ISSUE Mid-Decade Review: Critical Issues in Legal Records Management – p. 1 Best Practices in Electronic Discovery – p. 6 Practicing Law in China – p. 8 Law Firm Technology in the 21st Century: A Conversation with David Baker – p. 10 Gain an Edge—Competitive Intelligence is Here to Stay – p. 12 Book Review: The New Six Sigma – p. 16 Practice Innovations Managing in a Changing Legal Environment Three editions of Practice Innovations are published each year. March 2005 Communicating best practices and innovations in law firm information and knowledge management to legal professionals. Editors in Chief Austin Doherty Director, Information Resource Center Hogan & Hartson L.L.P. Washington, D.C. William Scarbrough Executive Director Baker & McKenzie Washington, D.C. Editorial Board Members Janet Accardo Director of Information Services Skadden, Arps, Slate, Meagher & Flom L.L.P. New York, NY Silvia Coulter President Legal Sales and Service Organization, Inc. Boston, MA Cindy Diamond Knowledge Resource Coordinator Hogan & Hartson L.L.P. Washington, D.C. Lisa Kellar Practice Automation Manager Hunton & Williams, L.L.P. Washington, D.C. Kingsley Martin Senior Director, West km, Thomson Elite Chicago, IL Nina Platt Director of Library Services Faegre & Benson L.L.P. Minneapolis, MN Al Podboy Director of Libraries Baker & Hostetler L.L.P. Cleveland, OH Linda Will Director of Information Resources Dorsey & Whitney L.L.P. Minneapolis, MN Please direct any comments or questions to either of the editors in chief: Editors in Chief Austin Doherty Hogan & Hartson L.L.P. 555 13th St. N.W., Rm. 10W100 Washington, D.C. 20004 202.637.8701 (voice) e-mail: radoherty@hhlaw.com William Scarbrough Baker & McKenzie 815 Connecticut Avenue N.W. Washington, D.C. 20006 202.835.1640 (voice) e-mail: william.p.scarbrough@bakernet.com Managing Editor Eileen Gonyeau, J.D. West 610 Opperman Drive Eagan, MN 55123-1396 651.687.5497 (voice) 651.687.8722 (fax) e-mail: eileen.gonyeau@thomson.com The trademarks used herein are the trademarks of their respective owners. West trademarks are owned by West Publishing Corporation. © 2005 West, a Thomson business. Printed 03/05. Material #40396144 L-107884 AT A GLANCE: At mid-decade, a records management professional discusses her picks for the five critical issues on records management for law firms and their clients. By Lee R. Nemchek, Information Resources Manager, Morrison & Foerster, LLP, Los Angeles, CA Critical Issues in Legal Records Management A Mid-Decade Review In future years, the first decade of the 21st century will undoubtedly be remembered as a period when corporate records management came of age as a professional discipline. Beginning with the events of September 11, 2001, when many businesses lost both their physical and electronic records and the image of New York City streets littered with paper embedded itself forever in the minds of the world’s population, through the Arthur Andersen document shredding scandal and the passage of the Sarbanes-Oxley Act,1 which requires strict record-keeping practices and stiff penalties for noncompliance, a spotlight has been focused on the records management profession. for both records retention/destruction and emergency preparedness/business resumption. This mandate is so universally accepted as to be considered old news. The blurring of boundaries between the library and RM department is another area that has gained considerable acceptance over the past ten years, especially in large firms with sophisticated conflicts-of-interest systems. However, as we enter the last half of the current decade, compelling new issues have emerged. These are the RM issues of our time, the ones being written about every day, in every prominent legal publication. Here, then, in no particular order, are my picks for today’s top five critical issues in legal records management. Historically, law firms tend to be insulated enclaves, untouched by the kinds of scandals “[L]egal records managers may finally attain a level of respect that rock the corporate world. But this is no longer true. Lawyers and law firms were that has formerly been reserved for librarians!” among the hardest hit by the World Trade Center tragedy. In addition, lawyers are now heavily involved in records management compliance matters, helpRFID Technology ing clients deal with new laws and regulations designed to ensure Every librarian is intimately familiar with the various headaches that corporations do not repeat the mistakes of the past. With associated with tracking the movement of materials within respect to the internal records management practices of lawyers and outside their organizations. These headaches include, among and their clients, records management (RM) has never been hotter. others, (1) finding and reshelving incorrectly shelved materials, Although generated by unfortunate events, the focus on records (2) following the trail of materials handed off from one patron management has had a tremendous marketing/public relations to another within an organization, and (3) the expense in time effect on RM professionals in all industries, including law. These and money of replacing lost materials. Libraries that already days, one cannot pick up a legal or business periodical without use bar coding technology to electronically manage circulation can seeing at least one article on records-related management or comstill experience problems, such as long checkout lines, frequent pliance issues. Some of these issues have been at the forefront for mis-shelving, sorting and shelving backlogs, and repetitive strain several years now. For example, there is no longer any doubt that injuries among staff who spend a lot of time handling books law firms must develop and implement in-house programs and bar code scanners. In the RM arena, the cost of misplacing or continued on page 2 1 Mid-Decade Review: Critical Issues in Legal Records Management losing a client file can potentially be hundreds of thousands of dollars. That’s why radio frequency identification (RFID) technology is so exciting. RFID, which may eventually replace bar codes as an inventory management tool, works by placing special microchips—RFID tags—on or in goods, animals, and even people.2 The tags signal their location across a network of readers that are placed in strategic locations throughout an organization, enabling staff to monitor an item’s location as it travels across floors, from office to workroom to a different office and back to the library or records center. The tags can be read in bulk from distances of 20 to 30 feet, making manual scanning of individual items unnecessary. Picture a typical scenario in a law firm RM department: five cart loads of client files are wheeled into the center by a facilities clerk who has been cleaning out an abandoned workroom. An RFID system can check in all incoming folders simultaneously, without anyone having to touch the folders. This may sound like technology of the future, but, in fact, RFID systems are already in place or will soon be installed at over 300 libraries in the United States, including the University of Nevada and San Francisco public library systems. Law firms will follow suit, as soon as standardization, cost, and privacy issues have been satisfactorily resolved. Outsourcing Media coverage of the outsourcing phenomenon is at an all-time high, with the current focus on off-shoring American jobs to India and other far-flung locations. In law firms, outsourcing has morphed, seemingly overnight, from a business arrangement targeting back-office clerical functions such as reprographics, messengering, and mailroom services to 24/7 technology help desk operations to, most recently, provision of contract legal services, including research, document drafting and review, litigation support, due diligence, and competitive intelligence reporting. These days, it seems that every conceivable law firm task can be done by someone who isn’t actually employed by the firm, including the 2 continued from page 1 job of lawyer!3 Moreover, the multi-billion dollar outsourcing industry has created a new and growing niche practice area for law firms: representing corporate clients in complex global outsourcing transactions in both IT and core business operations. Traditionally, information departments such as library, records management, conflicts, and docket/calendar have been the least likely to fall victim to full-scale departmental outsourcing. This is still true, despite the fact that law firm libraries and RM departments have been successfully using selective outsourcing for years to manage functions, projects, and staff positions.4 Now, however, many legal administrators are taking a more serious look at RM as a potential target for some level of outsourcing. Records managers that prepare in advance for this development will fare best over the next five years. Practice Area Development Outsourcing is not the only new practice area that law firms have recently developed. A sure sign that records management has arrived as an important consideration in the lives of lawyers is the emergence of RM-related practice areas. This emergence is the direct result of this decade’s focus on corporate compliance,5 including Sarbanes-Oxley, Gramm-Leach-Bliley,6 HIPAA,7 and the implications of Zubulake.8 Some firms market RM expertise under the umbrella of privacy and information management. For example, the Hunton & Williams Privacy and Information Management Practice Group advertises “strategic business consulting on all aspects of information policy, including privacy, information security and records management.”9 The approach of Reed Smith’s Records Management and E-Discovery Group is to focus on electronic records management strategies.10 Blackwell Sanders Peper Martin takes this concept a step further. Its Records & Information Management program, run by a partner whose practice focuses “on a single issue of central importance to companies today—how best to manage company records and electronic data,”11 offers legal services in creating and validating records retention policies and schedules, RM compliance systems, legal hold strategies, and electronic records risk management.12 I predict that before the end of the decade some law firms will develop a further specialization within the RM niche: providing records management compliance services to law firms and other legal organizations. Such a practice will offer librarian/records managers working in firms that offer it a rare opportunity to contribute to client service by providing reference and research assistance in an area in which they possess professional expertise. Electronic Records Management Whereas records retention/destruction was the hot topic of the 1990s in legal RM, it has been replaced by electronic records management (ERM) as the number one priority of most law firm records and IT managers. “More than 90% of all new information is created and stored in electronic form … Not since the adoption of the Xerox machine 45 years ago has the centuries-old legal profession been so affected by new technology.”13 It is a Catch-22 that law firms must invest in sophisticated records management technology in order to deal with the new sophisticated records creation technologies. In other words, firms must automate their RM operations at a high level of sophistication in order to manage a wide variety of electronic records, including e-mails and their attachments, electronic documents, web pages, database output, digital images and recordings, and instant messaging. To date, the legal world has only scratched the surface of ERM. Although a lot of time and effort is being devoted to worrying about electronic records, most firms have only recently begun to implement an e-mail management solution. The most advanced firms are beginning to incorporate e-document management as well, but this is about as far as we’ve gotten. Moreover, the development of ERM in law firms is being driven by IT concerns and by the changing nature of the legal profession, not by RM. For example, the main reason that lawyers are accepting e-mail management functionality is that they are being forced to by (1) mailbox volume limits imposed by IT, and (2) increased lawyer mobility, which requires that electronic client records be easily portable. Similarly, mandatory e-filing in the courts is driving the integration of e-document management technologies in the firms. Regardless of why and how it is happening, lawyers are being dragged slowly but surely, kicking and screaming, into the ERM world of the 21st century, if not for themselves, then for the benefit of their clients.14 In coming years, look for voice mail and instant messaging to emerge as the next big ERM concerns. continued on page 4 3 Mid-Decade Review: Critical Issues in Legal Records Management Electronic Discovery What can one say about electronic data discovery (EDD) in a few hundred words that can begin to convey the enormity of the subject? Not much, considering that several treatises have been written by leading legal authorities and whole conferences are being devoted to this area. This doesn’t include newsletters and online resource portals. A recent article states that about 160 commercial companies offer EDD services, most of which sprang up in the past five years. Total revenues of these companies have increased tenfold, from $40 million in 1999 to $430 million in 2003.15 To date, records managers have not played a significant role in law firm EDD. Whereas in the business world the corporate RM department is usually heavily involved in coordinating EDD efforts, EDD in law firms is most typically handled by a litigation support department, and the department manager is most often an IT professional, a specialized paralegal, or an attorney. Although EDD is all about the records, law firm records managers are generally left out of the loop in the electronic discovery process. continued from page 3 Realistically speaking, no law firm records manager has the time or the staff to manage EDD in addition to running a traditional active/inactive RM operation. In all but the smallest firms, EDD must be compartmentalized in a separately functioning unit. Most law firms outsource their EDD projects to specialized vendors, but in-house EDD is emerging as an alternative for firms willing to make the necessary investments for hardware, software, space, and personnel. In return for this investment, bringing EDD in-house “theoretically opens a new—potentially substantial— profit center, and it can have a significant impact on revenue for many firms.”16 I believe there is a future role in EDD for legal records managers. First, such managers might look at litigation support as a change of pace or a promotional opportunity. Those who have the requisite IT qualifications, or who are willing to train and learn, can make good use of their extensive knowledge of hard copy and electronic records to assist with EDD. Records professionals in small firms that have not yet had to tackle EDD should be especially proactive in promoting themselves and their abilities, because it is likely that they can greatly increase their value by offering services in this area. In firms starting up an in-house unit, there is an opportunity to get in on the ground floor and get the RM department involved at the outset. Conclusion This is a very exciting time to be a records manager. The landscape of RM is changing rapidly with every new regulatory and ethics ruling, court decision, and technological innovation. Almost nothing is routine anymore; it seems every day brings new twists to job responsibilities and tasks that were once upon a time considered dull and monotonous. Moreover, as lawyers come more and more to acknowledge the complex and critical nature of records management, they are affording RM professionals increased credibility in the workplace. Toward the end of this first decade of the 21st century, legal records managers may finally attain a level of respect that has formerly been reserved for librarians! • 4 1 Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745 (July 30, 2002). 2 RFID technology is currently being developed, or is already in use, for applications as diverse as the following: (1) embedding in currency and medicine bottles to combat counterfeiting; (2) tracking children in amusement parks; (3) tracking lost pets; (4) tracking airline luggage and dry cleaning; (5) implanting in patients to speed the delivery of vital medical history information to doctors and hospital personnel; and (6) implanting in humans to curb identity theft and kidnapping and to tighten building security. 3 4 A study done by Forrester Research indicates that in 2005, “1 percent of the work traditionally done by U.S. lawyers will be sent offshore to places like India and China.” The number is expected to rise to 8 percent by 2015. For paralegals, the statistics are even grimmer. “[B]y 2015, 18 percent of the work traditionally done by U.S. paralegals and legal assistants will be outsourced.” Steve Seidenberg, “Time to Get Rid of the Lawyers?” 25 California Lawyer (January 2005): 14. These statistics are echoed in Altman Weil’s fifth annual Chief Legal Officer Survey. In October 2004 when data for the survey was collected, 2 percent of respondents indicated that they were currently offshoring legal work, “although 8 percent indicated that they would pursue such an initiative within the next 12 to 18 months.” Press Release, Altman Weil, Inc., “Chief Legal Officers Face Increasingly Demanding Environment, New Survey Reports” (December 7, 2004), available at http://www.altmanweil.com/news/release.cfm?PRID=47. In the private legal environment, there are seven different outsourcing configurations for library and RM departments: (1) functional areas, e.g., loose-leaf filing, messengering, micrographics, imaging, off-site storage of inactive files; (2) projects, e.g., catalog and/or classification conversions, automated records management system (ARMS) conversions, inventories, retroactive retention policy implementation; (3) individual staff position outsourcing; (4) nonexempt staff only; (5) management only; (6) full-scale departmental outsourcing (management and staff); and (7) shared service centers. For further discussion, see Jean Barr, Beth Chiaiese, and Lee R. Nemchek, Records Management in the Legal Environment: A Handbook of Practice and Procedure (Lenexa, KS: ARMA International, 2003): 34-37. 5 “The most important client relationship issue chief legal officers identified is compliance/Sarbanes-Oxley, including implementation, execution, training and records management in the new regulatory environment.” Press Release, Altman Weil, supra note 3. 6 Financial Modernization Act of 1999, Pub. L. No. 106-102, 113 Stat. 1338 (November 12, 1999) (privacy of financial information). 7 Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191, 110 Stat. 1936 (August 21, 1996) (privacy of health and medical information). 8 Zubulake v. UBS Warburg LLC, et al., No. 02 Civ. 1243 (SAS) (S.D.N.Y. July 20, 2004) (provides guidance to lawyers on managing electronic discovery and litigation holds). 9 Http://www.hunton.com/practices/ practice_detail.aspx?gr_H4ID=943&desp=true. 10 Http://www.reedsmith.com/specialtopics/specialtopics.cfm?topicID=9. 11 Http://www.blackwellsanders.com/ bio.aspx?id=4534488c-34af-44f3-910a-66cac6f500f1&type=Firm. Partner Peter B. Sloan’s firm biography shows that he is a member of two prominent international records management associations, AIIM and ARMA. 12 Http://www.blackwellsanders.com/ programDetails.aspx?id=d4cef059-4983-4771-936f-64837a14fbc8. 13 Tricia Bishop, “Electronic Records Open Up Fertile Legal Research Field,” Los Angeles Times (December 27, 2004): C3. 14 See Barr, et al., supra note 4, at 366-422, for an in-depth discussion of electronic records creation and management technologies in the legal environment. 15 Bishop, supra note 13. 16 See, e.g., Richard E. Davis, “In-House EDD: Pot of Gold or Can of Worms?” e-Discovery Law & Strategy (November 3, 2004): http://www.law.com/jsp/ltn/PubArticleFriendlyLTN.jsp?id=1099217123685. See also Matthew Levy, “In-House EDD Departments Help Law Firms Scale the Digital Mountain,” The E-Discovery Standard (Fall 2004): 3, 10. Additional Reading Arkfeld, Michael, Electronic Discovery and Evidence, Phoenix: Law Partner Publishing, 2004. Bennett, Steven C. “EDD: Calling All Voicemail.” e-Discovery Law & Strategy (December 15, 2004): http://www.law.com/jsp/ltn/PubArticleFriendlyLTN.jsp?id=1102944934273. Cohen, Adam I., and David J. Lender, Electronic Discovery: Law and Practice, New York: Aspen Publishers, 2004. Deitch, Joel, “Data Driven: The Chosen Path to E-Discovery.” LawSolutions (Winter 2004): 8-11. Feldman, Joan E., Essentials of Electronic Discovery: Finding and Using Cyber Evidence, Little Falls, NJ: Glasser LegalWorks, 2003. Gilbert, Alorie. “RFID, Coming to a Library Near You.” CNET News.com (October 17, 2004): http://news.com.com/2100-1012_3-5411657.html. ____________. “With RFID, Corporate Might Makes Right.” CNET News.com (September 28, 2004): http://news.com.com/2100-1012_3-5385128.html. Lange, Michele, Electronic Evidence and Discovery: What Every Lawyer Should Know, Chicago: American Bar Association, 2004. Lorek, L. A., “IM is a Must in Lots of Offices”, MySA.com (web posted January 2, 2005): http://www.mysanantonio.com/globalincludes/printstory.jsp?path=/business/stories/MYSA010205.1R.IM.55538bcc.h tml McAree, Dee, “More Firms Are Helping Clients to Outsource.” National Law Journal (October 4, 2004): S2-S3. Scarbrough, William, “Shared Services Centers – Are Law Firms Ready for the Latest Corporate Trend?”, 5 Practice Innovations (March 2004): 4-5. Sedona Conference, “Sedona Principles: Best Practices Recommendations & Principles for Addressing Electronic Document Production”, Silver Spring, MD: Pike & Fischer, 2004. Valetk, Harry A., “Is Radio Frequency ID Technology Watching You?”, Legal Times (December 6, 2004): 17. Vizy, Nick J., “Records Retention Bibliography”, Corporate Counsel’s Records Retention Report (December 2004): 1-8. Wehner, Ross, “Reform Law Powers Profits; Cottage Industry of Contractors Grows to Help Firms Comply with Sarbanes-Oxley”, Denver Post (January 3, 2005): 1E, 6E. in Legal Records Management 5 AT A GLANCE: Here are five basic concepts to help you unknot the tangles when you face pretrial discovery of information in electronic format. By Tim Hood, eDiscovery Consultant, Faegre & Benson, LLP Minneapolis, MN Best Practices in Electronic Discovery Over the past five years, the litigation world has run into a new twist on the old pretrial discovery road. Many lawyers see it as a tangle or even a knot in the civil discovery process. Lawyers are no longer dealing with a stack of paper files, but with the more ethereal realities of the digital world when conducting discovery. Litigators must acknowledge that the server is usurping the file cabinet. Many lawyers are not equipped to deal with this new discovery reality. Newly minted lawyers grow up in a world where technology is used in most day-to-day interactions, but technology as a variable in the discovery process does not exist in the average civil procedure course. Those few students lucky enough to be exposed to the discovery process in a clinic are unlikely to even touch upon the many and varied digital sources of discovery that confront a modern-day litigator. Many experienced (i.e. not “newly minted”) lawyers are reluctant to change the way “we’ve always done things.” Add to the mix the fact that electronic documents are dynamic in form, often transient in their existence, with a tendency to replicate themselves to the far reaches of any business, and you have the potential for a very tangled discovery process. The many variables involved with extracting electronic information for discovery purposes require a lawyer to adapt to a changing technology environment, interpret court decisions with individualized tangles, and potentially adapt to proposed changes to civil rules.1 Because each case presents its own discovery challenges and unique issues, it can be difficult to embrace one generalized and encompassing set of best practices that will work in every instance. What follows are five basic concepts that I view as best practices when addressing the discovery of electronic information. 6 “[T]he server is usurping the file cabinet.” 1. Do proactive reconnaissance regarding your client’s systems and data retention practices. Find out what e-mail platform is being used by the client and how recently this system was put in place. Determine whether the client uses a Document Management System (“DMS”) to manage critical documents. Find out if there are written protocols for creating, transmitting, and storing electronic documents, and whether these are enforced. Find out if any of the potentially relevant documents fall under a retention guideline prescribed by a statute or regulation. These are just a few examples of the questions lawyers need to ask to help familiarize themselves with what may await them and their clients when faced with responding to a discovery request.2 Understanding the technology landscape prior to litigation will streamline the actual collection and discovery process when the time comes. Litigation-savvy clients are looking for lawyers and law firms that know to ask these kinds of questions up front. 2. Understand and communicate your client’s preservation responsibilities. While the preservation of electronic information is a challenge, it is also a necessity, because failure to preserve can lead to severe sanctions and undesirable legal results. In modern electronic systems, data is created, saved, modified and deleted constantly. Although pinpointing the exact moment that a party has a duty to preserve information in the face of litigation is a difficult task, courts are less and less sympathetic to parties who seem not to have taken this duty seriously. At least one court3 has developed a line of reasoning that would impose the duty as of the time when “key actors” have knowledge of anticipated litigation. The imposition of the duty to preserve forces a process whereby sources of electronic information must be identified, whether the source is defined as a person or business entity (and one cannot forget third party technology providers who may be hosting e-mail or other data4). These sources must then be given notice of their responsibility to preserve information and to identify any practices that may cause potentially relevant information to be destroyed. This is commonly referred to as the “litigation hold,” and the process for instituting a litigation hold should be well thought out and standardized. 3. Do not procrastinate. For those lawyers and clients who have a habit of putting things off with regard to discovery, electronic data is an iceberg bearing down on you. Even a run-ofthe-mill contract dispute between two moderate-sized businesses can involve potentially enormous amounts of data, putting a lawyer and a client in a tough position when it comes to meeting discovery deadlines. An avalanche of information, much of which may not be recognized at the outset, that needs to be collected, reviewed for privilege or confidentiality, and produced, can also force unwanted changes in litigation strategy. Another important reality of electronic discovery is that working with electronic information takes time. The unstructured form of most electronic data is another reason to start early. I know people who keep all e-mail in their inbox. I know others who have an e-mail folder for every conceivable project or topic. Guess which ones are harder to work with in the context of discovery? Clients organize data according to their personal preferences and business needs, not to suit litigation discovery. Unraveling their classification schemes (or lack thereof) takes time. Those lawyers whose historic practice has been to procrastinate about discovery may be forced to address the issue of electronic discovery sooner than they might wish due to proposed changes in the Federal Rules of Civil Procedure. As an example, proposed modifications to Rule 26 would require parties to address issues concerning the identification and production of electronic information.5 Certain local rules already require this or similar action.6 continued on page 15 7 AT A GLANCE: Today’s U.S. law firms see China as a major growth market, a view unimaginable in 1972. By William Scarbrough, Executive Director, Baker & McKenzie LLP, Washington, D.C. Practicing Law In response to U.S. concern over the growing imbalance of Sino-American trade, in which imports from the People’s Republic of China (PRC) far exceeded U.S. exports, former Secretary of State Henry Kissinger is said to have joked to former Chinese Premier Deng Xiaoping that the U.S. had a surplus of lawyers available for export to China. For American law firms, China has become one of the most remarkable frontiers of private international law. According to the National Law Journal (November 15, 2004), there are 36 U.S. law firms registered in China, and the U.K., France, Germany, and other countries are also well represented. In addition to Baker & McKenzie, those firms include Coudert Brothers, Freshfields, Linklaters, Morrison & Foerster, O’Melveny & Myers, and Skadden Arps. Lawyers are involved in nearly every transaction that makes up a bilateral trade volume that has grown to nearly $180 billion per year as of 2003. “It is better to enter a tiger’s mouth than to enter a court of law.” Old Chinese saying 8 in C In 1972 Nixon Went to China But U.S. Law Firms Had Yet To Visualize a Future There Richard Nixon was the first prominent U.S. lawyer to visit the PRC when, as President, he visited China in February 1972. The lawyerly touch he helped give to the Shanghai Communiqué, in which the U.S. dealt creatively with the delicate Taiwan question with its “acknowledgement that all Chinese on either side of the Taiwan Strait maintain that there is but one China and that Taiwan is a part of China,” may have been a harbinger of lawyers’ work to come. It was nearly beyond imagination in 1972 that Beijing would ever welcome foreign lawyers to set up shop in the Middle Kingdom. defend the Chinese Government in U.S. litigation (successfully, with partner Tom Peele, in Jackson et al. v. People’s Republic of China, et al, 794 F.2d 1490 (11th Cir. 1986)). Today Baker & McKenzie has registered offices in Beijing and Shanghai, supported by more than 200 lawyers in the Firm’s Hong Kong Office. Ms. Jia Zhao, Harvard Law School’s first Chinese J.D. graduate since the founding of the PRC, is presently a partner of the firm’s Chicago office, and leader of Baker & McKenzie’s U.S.-based China Practice Group. In 2004, Baker & McKenzie’s China Practice was named “China Practice of the Year,” and the firm was named “International Law Firm of the Year” and “Asia Pacific Law Firm of the Year.” Today Many U.S. Law Firms Work in China in Complex Interaction with Chinese Lawyers hina “It is better to enter a tiger’s mouth,” says the Chinese adage, “than to enter a court of law.” During the Great Proletarian Cultural Revolution, Chinese lawyers had been banished to the countryside, “to learn from the peasants.” The earliest U.S. business visitors to China found nearly no formal legal framework for commerce. Marxism, Leninism, and Maoism had China on course toward the “withering away of state and law,” along with a withering away of the legal profession. Foreign law firms in China are registered pursuant to elaborate regulations implemented and enforced by the Ministry of Justice (MOJ), and registration must be renewed annually in a rigorous re-application process. Foreign lawyers who practice law are restricted to advice on national law of their own jurisdictions and on matters of international law. They are prohibited from advising clients or issuing opinions on Chinese law. Not surprisingly, foreign law firms in China depend upon local Chinese firms for advice and opinions on domestic law. To assure the growth of a strong domestic legal profession, the MOJ assures that foreign firms are encouraged to utilize the services of the rapidly growing number—and sophistication—of Chinese law firms. In that regard, the MOJ’s annual review requires foreign firms to submit with their re-application a report that shows the extent to which applicant firms are utilizing the services of Chinese law firms. The MOJ requires detailed information concerning: 1. a description of services undertaken with Chinese firms 2. the areas of law involved in such cooperation 3. the period of time over which cooperation occurred 4. the name and address of the Chinese firm, and 5. the nature of the cooperation. Russell Baker, the visionary founder of Baker & McKenzie, who at the end of WWII pioneered the practice of private international law, nevertheless expected no future for the firm in China. “It’s a will-o-the-wisp,” he told a young associate in 1972. “China is a Communist country that will never allow foreign law firms to be established there, and they will never use foreign lawyers.” Foreign firms, and their resident attorneys, are subject to income taxation by the Ministry of Finance. Inasmuch as many commercial transactions do not give rise to taxation in China, service providers such as foreign law firms and foreign lawyers are among the leading sources of tax revenues to China. That associate, Gene Theroux, became the firm’s first lawyer to visit China in 1972, just four months following the Nixon visit. He first established a Baker & McKenzie presence in Beijing in 1980, and in 1983 became the first foreign lawyer retained to Foreign law offices in China conduct their practices almost entirely in Chinese. Proficiency in the Chinese language is as essential for U.S. lawyers in China as English is for Chinese lawyers practicing in the United States. continued on page 15 9 AT A GLANCE: Linda Will picks the brain of legal technology veteran David Baker, who promotes knowing to the level of management and implementation. By Linda Will, Director of Information Resources, Dorsey & Whitney LLP, Minneapolis, MN Law Firm Tech in the 21st Century: Ben Johnson once said, “There are two types of knowledge, one is knowing a thing, the other is knowing where to find it.” Legal technology veteran David Baker, founder and chairman of Baker Robbins & Company, promotes knowing to the next level, one of management and implementation. With over 20 years in the legal information industry, Baker has witnessed a few watershed moments, from the advent of word processing to knowledge management. But it is, according to Baker, in the last five to seven years with the evolution of content, research, and the library, that we are once again at a tipping point of change. Although the technology has been impressive and has played an important role in making law firms more competitive, the tools by themselves have not been enough. It is the blending of technology with policy and culture in law firms and, more specifically, in practice groups, where Baker sees the next revolution. Practice-Specific Workflow Processes Are the Beginning of a Law Firm’s KM Initiatives The starting point for Baker is a law firm’s workflow process. Much of it is routine, and matter intake is a common denominator firm-wide. However, when workflow is examined on a practice-specific basis and the question is asked, “What do we do, how do we do it, and can we do it better?”, then standard client/matter intake procedures will not be the most effective way to organize the process and client service. Baker sees practice-specific workflow processes as the beginning of a firm’s KM initiatives. “KM is not simply about choosing technology tools, rather it involves studying workflow processes, how practice groups are structured and managed, and why.” He is emphatic that one size does not fit all and, for a KM initiative to be successful, it must be granular before it can become holistic. Baker states that the legal industry has not embraced change management (CM) as other industries have done. Culture in law firms is the one constant, and it is culture, along with firm policy, that will guide formal CM. And Baker is adamant about formal CM, believing that there must be a policy established before any type of knowledge management can be structured. 10 ”You want to be successful in the current economy, you’ve got to be good at getting attention.” nology A Conversation with David Baker Interaction, the Client Relationship Management tool used by most law firms, can be a million dollar mistake if some simple concepts are not absorbed. These concepts include: integrating tools with what people do and how they do it; setting expectations; training and support; and finding a champion, preferably senior partners who are converted nay-sayers. Law Firms Should Analyze Profits by Practice Area Rather Than Geography “The average large law firm IT department spends 6% of the firm’s funds each year. IT expenditures are a leap of faith, and still not easily measured.” Again, Baker returns to analyzing practice-specific workflows. Of course, according to Baker, this will require a paradigm shift, from analyzing profits by geography to a measurement using practice or industry grouping, the antithesis of how most law firms presently measure revenue. Measuring by practice groups will require a virtual team that collaborates across the firm using the tools of technology. WiFi Will Revolutionize the Way Law Firms Network That brought up a discussion of wireless connectivity, which Baker says is for everyone (or should be). Although many firms already use Bluetooth (capabilities include cordless communication between an earphone/headset and a cell phone, enabling a cell phone and a PDA to talk to each other when they are in range, and automatically synchronize their contact lists), it is quickly becoming less of a player and losing market share to WiFi. Bluetooth devices only have a transmission range of about 30 feet, while WiFi offers the same wireless connectivity, is not limited, and is cheap. Baker thinks that high-speed WiFi will revolutionize the way we network and search the Internet. It will enable a user to have a virtual version of the local office. Users will be fluid, not bound to a specific location, never having to skip a beat. WiFi means there is no need for DSL or cable to get to the Internet, nor is there a need for cellular service for a phone. All services will all be enabled from the same network. Baker sees the expansion of WiFi technology as the new frontier. In closing, Baker revisits the relationship between law firm culture and change management. Expansion of WiFi will revolutionize office life as we know it. Beginning with substantial savings in real estate, attorneys will no longer have to have a physical office. They can replicate their entire desktop as well as administration from their home computer. Everything from conference calls to faxes can be programmed using business rules. This will enable attorneys to serve clients in a more expedient and customized manner. The entire law office operation will be seamless. It is the culture of a law firm that could hinder or even deny this technology. Senior partners will be reluctant to break the traditional paradigm of mahogany reception areas and corner offices. Not only is the traditional office space in question, but service as well. Law firms want to serve their clients as best they can and want clients to know they are always there for them. What Service Will Clients Come to Expect of Technologically Advanced Firms? When is it okay to be unconnected? Will clients come to expect law firms to be available 24/7 (even more than they might already)? What will the expectation be if they know law firms have the technology to offer such a service? If, as Thomas Davenport states in his book The Attention Economy, “... you want to be successful in the current economy, you’ve got to be good at getting attention,” attorneys will have no choice but to offer 25/8 services. This again comes down to a practice group’s workflow and the culture of the firm. Law firms, enabled with the technology to offer super-sized services, must look within and decide if this is the path to be taken. There is a fork in the technology road and we will likely see the first manifestations of the new law practice before the first decade of the 21st century is over. • 11 AT A GLANCE: Competitive intelligence has a definite place within law firms and can help the organization gain a competitive edge. Jan Rivers, Competitive Intelligence Liaison, Dorsey & Whitney LLP, Minneapolis, Minnesota Silvia Coulter, President, Legal Sales and Service Organization, Boston, Massachusetts Gain an Edge Competitive Intelligence is Here to Stay Competitive intelligence (CI) is not just relegated to the realm of high-tech or manufacturing companies, but also has a definite place within law firms and other professional services organizations. CI can help a law firm gain a competitive edge through the following three ways: knowing your competition, knowing your clients, and knowing your clients’ industries. 12 While some firms may elect to have their marketing or sales personnel conduct competitive intelligence research, the most efficient approach is for a firm to utilize its Information Resources/Library department for this activity. Not only does the IR department likely already have the contracts in place for the online resources needed for such research, Information Resources also has the personnel whose primary skill set is conducting research or—another way to look at it—managing and cataloguing information. The collaboration between Information Resources and the marketing and sales organization creates benefits that the firm as a whole may realize, for example, the elimination of contracts for duplicate resources and the utilization of personnel time according to core competencies. Marketing and sales personnel are able to concentrate on creating the pitch and collateral materials and other business development tasks knowing their information resources team is supporting them with the necessary research. Good CI requires a significant amount of time and effort to do properly. It should not be attempted hours before a client meeting. The goal of CI is to have good, actionable information and not just a data dump of many articles and other unfiltered information. To obtain this goal, the research results need to be read, culled, interpreted and synthesized. Wherever possible, data should be presented graphically using pie charts, spreadsheets or graphs. Articles should be distilled into bullet points of the most important information. All of the synthesized data should be presented in an executive overview type of deliverable, such as a PowerPoint presentation. The full-text articles and other supporting materials can be delivered along with the overview so they can be accessed if needed. Know Your Competition Sun Tzu advised, “Know your enemy.” How well do you know your competition? What are their strengths, weaknesses? Are they expanding or contracting? Who’s coming and who’s leaving, and for where? How have they performed over the past few years? Martindale-Hubbell provides information on law firms and their attorneys and offices. Thomson Legal Record can also provide information about a firm’s attorneys, the cases in which they have been involved, and the judges before whom they have appeared. This information can be combined with that gleaned from the firm’s website. Pay attention to conferences the firm is sponsoring, speaking engagements made by its attorneys (both topic and venue), pro bono activity, lateral hires (especially in which practice or industry areas and in which offices), publications and newsletters the firm produces, and representative client lists. Follow-up with a news search to see who has left the firm and for where, as well as the practice and industry areas involved, since these departures are not going to be reported on the firm’s own site. A news search will also uncover interviews with firm personnel (including COO, CIO, and other non-lawyer employees), coverage of major case wins or losses, and other stories that may be of interest (e.g., contracts signed with technology vendors). A good news search will include trade and industry journals outside of the legal profession. Examine all rankings lists, specialty (e.g., IP), and geographic, as well as the American Lawyer and National Law Journal lists, to see how the firm is rising or falling over the years. Conducting a law firm strategic profile will identify the volume of litigation cases the firm has had over the past few years and will break it down by types of matter (i.e., labor, securities fraud, product liability). Searches can also be done to identify the volume of work the firm has had involving initial public offerings (IPOs) or as patent counsel, etc. Information about a firm’s offices and leases can also be useful. Are they moving into new office space? Are they closing an office, but remain stuck with an expensive lease? Local business press is a good source for this type of information. continued on page 14 13 Gain an Edge— Competitive Intelligence is Here to Stay Know Your Clients Research underscores over and over again that in-house counsel want their outside law firms to understand their business. They want outside counsel who know what issues keep them awake at night, which developments may have an impact on their business, what activities their business is currently undertaking, and what their strategic priorities are for the year. Competitive intelligence provides the necessary background for sales personnel and attorneys to go into a client meeting with a core state of the client overview, including current financials, significant developments within the past year, other law firms the client uses and for what types of matters, biographical information on the general counsel and other “C”-level executives, a profile of the client’s legal department, threats and opportunities the client is facing, and other information. This core information provides a foundation from which to ask questions and enter into a relationship-building dialog with prospects and clients. It is always useful to review a public company’s latest 10-K and 10-Q filings. These filings always include sections on legal matters the company is facing, operations and competition, and management discussion and analysis, among others. These filings can be obtained from the Securities and Exchange Commission website or, in nicely formatted versions, from various online vendors. To identify potential cross-selling opportunities, as well as to see who else may be gaining a bigger portion of your client’s legal spend, research the litigation your client has faced over the last five years. A strategic profile will identify what types of matters your client has faced, as well as who represented them and in what districts. Some firms make the mistake of preparing briefing books based solely upon what information can be pulled off of a client or target’s website as well as via a quick search in Google. While this approach can yield some results, much information will remain uncovered. It is necessary to use a fee-based online resource for searching news coverage about your client, because archival depth and broad industry and trade coverage for many critical sources are only available in full-text via such repositories. Remember, negative news rarely appears in the press releases on a company’s website. This does not mean that the general Internet should be ignored as a source. It should always be searched via two or three search 14 continued from page 13 engines (Google, Vivisimo, etc.), since results will differ. These searches will capture conference information, speaking engagements, sponsorships and memberships of key client personnel, donations made by them, and, most importantly, small local “home town” newspaper coverage. Frequently, these small newspapers are not included in online vendor databases. Know Your Clients’ Industries You cannot know your client if you do not know that in which they live—their industry. CI can help keep sales and marketing personnel, as well as attorneys, abreast of industry developments via ongoing current awareness services, such as newsletters or e-mail feeds. Special intranet pages can also be created to serve this function. Current awareness can also be done via alerts for cases filed against clients, enabling you to find out when your client has been sued, frequently before the general counsel knows herself. Good current awareness newsletters are e-mail based, allowing them to be pushed to readers instead of making the reader go to an Internet site to read them. They are organized for quick skimming and include only a citation and sentence or two for each news item contained, as well as a headline link to the full-text of each news story should the reader wish to access it. CI research can also be done to create profiles of industries much like the client profile work described earlier. This would include an overview of the major players within an industry, government/regulatory and other developments affecting it (including natural disasters, weather and other non-man-made events), long-range potential of the industry, identifying threats and opportunities within it, etc. Be Prepared In summary, building a strong sales strategy is no different than building a good trial strategy. Today’s competitive climate in which we find the legal profession demands excellence. Sales provides an opportunity to showcase that excellence. Be in control of the process and know as much as you can about the prospect, the client, and their industry. Go to clients and prospects with a winning strategy. Competitive intelligence, provided by a strong team of experts, is part of the strategy that will help build winning sales teams. • Best Practices in Electronic Discovery 4. Assess the need for external help. Even large law firms and corporate legal departments use outside experts and vendors to help them with many electronic discovery projects. Most of the outside help comes in two forms: (a) forensic data acquisition and analysis, or (b) file review and production. Whether you need outside help for a particular project depends on many variables. The type of litigation might make a difference. For example, if the case involves trade secrets or a sexual harassment claim, some forensic data preservation and analysis may be necessary. Do you have any experience in managing the review of electronic files for relevance and privilege? If not, you may need a third party to host the data so you can review it via a secure web connection, allowing you to focus on document content and not mechanics. 5. Document your procedures. Electronic data has put discovery disputes front and center in much litigation. Being able to articulate the precise steps taken to identify, preserve, and produce Practicing Law in China continued from page 7 information is key to withstanding a discovery attack. In cases where parties have been sanctioned for discovery failings, judges use words such as haphazard and disorganized 7 to describe discovery efforts. Even if you lose the dispute, the judge’s order may be more narrowly tailored because of documented procedures. Conclusion Electronic information is now a staple in the diet of discovery in most civil litigation. There will likely always be paper documents that are collected and produced, but it will be the rare lawsuit where the volume of paper documents exceeds the volume of electronic information produced. The digital realm presents both enormous volumes and the management of disparate information formats. Although many lawyers have shied away from addressing this change in their daily practice, those who are embracing it and learning as much as they can about issues and possible solutions will have a competitive advantage in marketing their legal services. Their knowledge will also provide a strategic advantage to their clients. The notion of “best practices” in electronic discovery is a difficult one to grasp.8 The almost limitless combination of disputes, parties, available resources and types of electronic information prevents us from creating stock responses to a set number of circumstances. Such is the practice of law. But by adhering to the basic concepts listed above, lawyers can do much to address digital discovery successfully. • 1 Proposed modifications to Rules 16, 26, 33, 34, 37 and 45 of the Federal Rules of Civil Procedure. 2 In today’s world nearly every discovery request is an electronic discovery request. 3 Zubulake v. UBS Warburg, U.S. Dist. LEXIS 13574 (S.D.N.Y. 2004). 4 Kier v. UnumProvident Corp., 2003 WL 21997747 (S.D.N.Y. 2003). 5 http://www.uscourts.gov/rules/comment2005/CVAug04.pdf 6 Federal district courts in Arkansas, New Jersey, and Wyoming. 7 In re Prudential Ins. Co. of Am. Sales Practice Litigation, 169 F.R.D. 598 (D.N.J. 1997). 8 One group of practitioners, commentators and industry participants has put a tremendous amount of thought into this issue. They have created a document entitled “The Sedona Principles: Best Practices Recommendations & Principles for Addressing Electronic Document Production (2004).” continued from page 9 China’s leading law schools are excellent, and they are turning out very able practitioners. Foreign law firms are not allowed to hire Chinese law graduates who are licensed to practice law in China, though foreign firms are allowed to hire local professional staff. Chinese lawyers are associating themselves into law firms in all of China’s major cities, very much on the American partnership model. A growing number of Chinese law graduates are enrolling in JD and LLM programs at law schools in the United States. Many of these graduates are found, today, in American law firms, and an increasing number of them are practicing in U.S. firms founded and staffed in this country by Chinese nationals who have been licensed to practice in the U.S. The idea of American lawyers practicing law in China may have been unthinkable thirty years ago, but it has become an increasingly well-established fact today. As in many other segments of American business, the legal industry is looking towards China as a major growth market in the 21st century. • 15 Book Review: The New Six Sigma by Matt Barney and Tom McCarty* Reviewed by John E. Duvall, Administrative Analyst, Hogan & Hartson L.L.P., Washington, D.C. Six Sigma’s focus on process is well-suited to measuring the true value of assets, which is the value of the work they do (not the liquidation value). In 1979, Motorola set up a task force that developed a program to improve product quality and retain Motorola’s global leadership. The program was initially focused on manufacturing processes, but it quickly became apparent that the program had to extend beyond manufacturing to all units involved in developing new products and services. A succession of quality and design engineers developed the program, which eventually took the name Six Sigma. It became a company-wide initiative for obtaining continuous quality improvement and mobilizing employees around common goals. Motorola also defined the standards for Black Belts, originally quality improvement experts, by requiring that they also possess statistical, team, and business skills. Tom McCarty describes the New Six Sigma as currently applied by means of an extended case study of a hypothetical technology company. First, understand the Voice of the Customer by developing a statement of what are believed to be the customer’s expectations, validating them with actual customers, converting them to measurable requirements, and communicating them throughout the organization. Next, obtain general agreement on strategic objectives. Analyze the environment to build the case for change. Develop a dashboard, i.e., a small set of key measurements for leaders to use in monitoring progress toward goals. Identify a small set of performance drivers that have the greatest impact on the dashboard measurements and set up teams to target each for rapid improvement. McCarty emphasizes the importance of targeted, just-in-time training. Team members are trained in Green Belt statistical tools, while team leaders learn (presumably more sophisticated) Black Belt tools. 16 McCarty concludes by reviewing the four insights of the New Six Sigma: Insight #1: ALIGN – create relevant targets and appropriate measures. Insight #2: MOBILIZE – use empowered teams and a focused project management methodology to enable people to act. Insight #3: ACCELERATE – with coaching, application support, and rigorous review of project teams against deadlines. Insight #4: GOVERN – with visible support by senior executives and ongoing knowledge sharing. Alejandro Reyes and Carey Dassatti discuss applying the DMAIC (Define, Measure, Analyze, Improve, Control) framework to solving the leadership shortage at Motorola. The first step is defining the gap by measuring the decrease in the pool of business leaders against the increase in corporate demand for leaders. Measure and analyze the gap by studying Motorola’s existing leadership process and benchmarking it against other world-class corporations. Improve by redesigning the process into six interdependent processes. Require each business unit to identify its most effective leaders and its most leveraged positions to spotlight gaps where top talent is needed. Matt Barney discusses future applications of Six Sigma. Focusing on one of Baruch Lev’s three causes of financial accounting failures—financial reporting is too narrow and misses intangibles— Barney shows how Six Sigma’s focus on process is well-suited to measuring the true value of assets, which is not their liquidation value but the value of the work they do. He proposes to measure this value by using “stochastic models (i.e. Markov chains) and operations research simulation tools [that] can help model the real time performance of assets in a system.” (p. 74). Barney advocates making better choices among projects by using real options analysis, Monte Carlo analysis, and linear programming to evaluate probabilities of outcomes. He recommends using new risk management techniques not yet known to Six Sigma practitioners. Policy capturing reverse engineers customer decision-making processes and forecasts future customer requirements, allowing a company to anticipate them faster than the competition. Multidimensional scaling, factor analysis, and other data reduction techniques extract the vital few of hundreds of customer specifications to permit meeting the true customer need more efficiently. Six Sigma Black Belts will need to learn new statistical techniques for measuring and improving employee performance, predicting job candidates’ performance, measuring the impact of training, and managing organizational change. They will need to master time series analysis, real options valuation, and other econometric methods. While this book names numerous techniques that Six Sigma uses or could use in the future, and that presumably distinguish Six Sigma from other management initiatives, it does not explain or describe any of these techniques or how they are used, leaving the reader unable to judge how much, if at all, Six Sigma is different. It does introduce readers generally to Black Belts, the Voice of the Customer, and other Six Sigma concepts. • * Although Matt Barney and Tom McCarty are identified as the authors of this slim volume, intended to give a quick overview of Six Sigma, they are really as much editors as authors, as the volume embodies substantial contributions by several other individuals. Communicating best practices and innovations in law firm information and knowledge management to legal professionals. PRESORTED STANDARD U.S. POSTAGE PAID WEST 610 Opperman Drive Eagan, MN 55123