Where Do Your Clients Stand on the Discovery Cost Sensitivity Matrix?

Where Do Your Clients Stand on the Discovery Cost Sensitivity Matrix?

The days of law firms treating discovery costs as overhead are largely over. Today, the vast majority of firms pass through their discovery costs directly back to the client. This is the approach to discovery cost recovery taken by 84 percent of law firms, according to a recent survey of more than 100 firms by Logikcull. When done correctly, this pass-through model can result in 100 percent recovery of discovery expenditures made by the firm.

Discovery Cost Recovery Approaches

But even in the best-case scenarios, clients may push back against discovery costs. Eighty-nine percent of firms experience client pushback on discovery costs, according to our survey, with 68 percent experiencing pushback sometimes, usually, or always.

Pushback Frequency

For law firms looking to reduce client pushback, and the write-offs that can follow, one of the best strategies is to start by understanding the client. That was the central message, made clear again and again, in a recent webinar on eDiscovery billing challenges. That webinar, now available on-demand, brought to you in conjunction with the Association of Certified eDiscovery Specialists, featured strategies and best practices for discovery cost recovery presented by Jennifer Williams, Director of Practice Support at Vinson & Elkins, Ricky Brooman, Litigation Support Project Manager at Saul Ewing Arnstein & Lehr, and Aaron Crockett, eDiscovery Counsel at Harrang Long Gary Rudnick.

The Discovery Cost Sensitivity Matrix

One of the best ways to neutralize client pushback before it starts is to think of where your client falls on what Aaron Crockett described as the “Discovery Cost Sensitivity Matrix.” The matrix is straight-forward way to evaluate clients based on their sophistication and cost sensitivity—and tailor your approach to match.

Cost Sensitivity Matrix for Evaluating Client Sensitivity to Discovery Costs

“I have a privileged position in my practice of working with both very large and very small clients, and so I really see a range,” Crockett explains. “This matrix represents, in a very non-scientific way, the general breakdown in how I categorize clients and prepare myself to have the conversation with them as to what the bill is going to look like.”

By thinking of where your clients fall on this matrix, you can begin to understand what might be objectionable to them and what level of education they might need regarding the discovery process.

Though clients may fall anywhere across the spectrum, the matrix breaks down into four broad categories: sophisticated, cost-insensitive clients; sophisticated, cost-sensitive clients; unsophisticated, cost-insensitive clients; and unsophisticated, cost-sensitive clients.

Sophisticated, Cost-Insensitive Clients

On the bottom left of the chart fall sophisticated, cost-insensitive clients. These are the type of clients, such as insurers, who litigate frequently and are familiar with the discovery process, including the costs that can arise and the various approaches to discovery one may take. If a client is sophisticated and cost insensitive, that doesn’t mean they do not care about costs. Rather, Crockett explains, “they can definitely afford the bill, and so it’s just a matter of getting them to be willing to pay for it.”

How do you do that? The key is predictable discovery pricing. “The sophisticated client is going to want a lot of information explaining how the bill is broken down,” Crocket says, as well as “how you’re planning to control the bill and what discovery is likely to cost down the road.”

Sophisticated, Cost-Sensitive Clients

Like their less cost-sensitive cousins, these clients are frequent litigants—but they also hold the purse strings tight. They may have preferred tools and approaches to discovery, or they may simply refuse to pay for certain tasks.

Here, price predictability is also essential, as is showing the value of your approach and how it can reduce overall discovery costs. Tools that allow you to reduce excessive, line-item fees, to speed up the discovery process, and to partner more closely with clients can go far here.

Unsophisticated, Cost-Insensitive Clients

Unsophisticated, cost-insensitive clients are those who have the ability to pay for litigation but are not frequent litigants. Crockett typically sees medium-sized businesses and local government entities fall into this category.

Unlike more frequent litigants, these clients will require more education about the discovery process and how different models can impact the ultimate cost of discovery. They, too, may need to be educated on the value discovery can bring to litigation.

“It’s going to be a bit of a hurdle to explain why discovery is valuable and ultimately saves them money,” Crockett admits, “but that’s what you’re looking at with these clients: an education.”

Unsophisticated, Cost-Sensitive Clients

These clients tend to be those who do not litigate regularly and simply do not have much money to dedicate to litigation. Such clients include individual witnesses who have been subpoenaed, for example, or small organizations who have received a Civil Investigative Demand from a government agency and need to produce documents.

“These are the clients,” Crockett says, “where getting creative in your billing rather than how you explain your billing is going to move the relationship forward.” That could involve using alternative fee arrangements or varying your rates depending on the work performed.

How Do You Convince Clients of the Value of Your Discovery Process?

While cost projections, statistics, and explaining the cost benefits of different discovery approaches are valuable, so too is anecdotal evidence. “What I find most helpful are anecdotal war stories,” Crockett says, “cases that turned on being able to identify a critically important piece of evidence in a production very quickly.”

These “digestible stories and anecdotes” can be essential to demonstrating the value of discovery to clients—or to senior attorneys who will be educating clients directly. Crockett has a few war stories of his own:

We had a big case that was lingering, as cases sometimes do, for almost two years, and it flipped in a week when opposing counsel produced, in native format, a particular document that exposed the plaintiff to some personal liability that he had not previously had on his radar.
That document was produced in a stack of other documents, just a day or so before the key deposition.
I was able to receive and process and review that set of documents and identify this particular smoking-hot document in less than an hour, and include that and an analysis of its critical metadata all into the package so we were ready to go with the deposition the following morning.
It effectively ended that case.

While such Pery Mason moments might be rare in these days, the ability to quickly find the “smoking gun” in discovery isn’t unheard of—particularly when you have the right tool in place, one that allows you to get into your data and find what you need quickly.

“Having an efficient process for handling native productions,” Crockett concludes, “can be a real game-changer.”

Regardless of your client’s sophistication or cost sensitivity, all clients can benefit from a streamlined discovery process and predictable pricing. That’s why Logikcull is designed to be simple, straight-forward, and easy to bill back. Learn more about Logikcull’s pricing here.

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