Needles in haystacks: The secret burden holding back our economy

There’s one rarely discussed burden on today’s economy: businesses are forced to search and store massive amounts of documents on the off chance they may become evidence in court. The cost for this unnecessary exercise hits businesses of all sizes at a time when our focus should be freeing up capital to create jobs and generate growth. Today Microsoft is sharing data that shows just how wasteful the “discovery” process can be for business. By sharing this data, we join others who speak in favor of recently proposed updates that would modernize the rules and help eliminate waste.

Microsoft is forced to store an average of 60 million pages each time someone brings a case against us – just one case. As the case progresses, we’re permitted to narrow that down to about 350,000 pages after filtering by issue, source and dates. Next, we hire teams of lawyers to manually review those documents, and they end up finding around 87,500 pages that are arguably relevant to the issues in the case and produced to the other side. Of the 60 million pages we start with, only 88 end up making it to court. It’s no wonder we’ve spent around $600 million on outside services to help with discovery in the past decade, not including internal systems and employees dedicated to managing it.

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All the time and resources spent preserving, collecting, reviewing, analyzing and producing might be worth it if we ended up using all this data, but we don’t. Instead, we get haystacks upon haystacks of information and very few needles. Not only does this waste eat into company profits and shareholder value – it also tilts the scales of justice. The burden of discovery deters companies from defending themselves against meritless suits and slows the process of dispute resolution. Perhaps most importantly, it makes the United States a less attractive place to do business.

In fairness to our rule makers and the judges responsible for applying the rules, this is a relatively new problem brought about by what is otherwise a positive development – the ability to communicate and collaborate in so many ways from any device – email, databases, instant messages, texts and social media – all of which generate data that have become collectable. In FY 2010, Microsoft had to preserve about 39 terabytes in total to comply with obligations. By the end of FY 2013, that number grew to more than 261 terabytes.

Adapting requires us to understand why today’s rules lead to such waste. Right now we’re responsible for preserving potentially relevant documents when we “reasonably anticipate” litigation – which can sometimes be a tough judgment call. When businesses fail to produce enough data, they run the risk of court sanctions and fines. Plaintiffs’ lawyers understand the ambiguity in the rules and frequently use it to force large settlements. For this reason, most companies err on the side of preserving enormous amounts of data that may conceivably be evidence, but in all likelihood will never be used.

The body charged with recommending changes to the Federal Rules of Civil Procedure – The Committee on Rules of Practice and Procedure – published a proposed set of amendments for public comment in August which will be considered by the business and legal communities in the coming months. The changes get to the heart of the ambiguity that’s at the center of so much waste:

· First, the proposed amendments narrow the scope of discovery in civil litigation and tie discovery more closely to the scope and needs of the case at hand.

· Second, and more fundamentally, the proposed amendments adopt a standard that absent bad faith or willful misconduct, a party cannot be sanctioned for failing to preserve “enough” in anticipation of litigation.

While not perfect, these amendments could help reduce waste in the system without hampering litigants’ right to obtain evidence that is truly material. The United States system of civil litigation promotes a litigant’s right to search for, obtain and test the veracity of evidence more than any other system in the world. The proposals will not change that.

We’re confident the committee, and the Supreme Court, which makes the ultimate decision, will see these changes are not only the right thing to do for the legal system but also for the economy. Like other companies, we look forward to putting more capital where it can do the country some good – not into building haystacks.

About the Author

Assistant General Counsel, Microsoft