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: [email protected]
William Scarbrough
Baker & McKenzie
815 Connecticut Avenue N.W.
Washington, D.C. 20006
202.835.1640 (voice)
e-mail: [email protected]
Managing Editor
Eileen Gonyeau, J.D.
West
610 Opperman Drive
Eagan, MN 55123-1396
651.687.5497 (voice)
651.687.8722 (fax)
e-mail: [email protected]
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.
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