Forecasting the Impact of Cloud-Computing on e-Discovery

Owen Praskievicz, Law Clerk
Schwartz Semerdjian Ballard & Cauley LLP
Published:  06.01.2013

In 2013, “the cloud” – that mystical place where unlimited resources can be accessed at the click of a button – will likely retire its connotation as an abstract tech term.  As IT departments around the country continue to fully embrace the advantages of cloud-based solutions, use of the technology will demand professionals become more familiar with the cloud’s legal implications.   

For litigators, the consequences of the cloud’s new ubiquity are twofold.  Not only are clients more apt to have stored terabytes of email and data on a remote server, introducing potential e-Discovery challenges and opportunities, but now most legal services are equally as likely to utilize some form of cloud computing, opening new options for sorting through e-Discovery.  

Although some lawyers may be familiar with these changes, the pervasiveness of the new technology means today’s lawyers can’t afford to not be knowledgeable about the new rules of the game.  Nor should they be afraid of learning them.  

For those who still view cloud computing as a foreign term, you are not alone.  But chances are you have already used some form of the cloud at home or at work, and you are likely more familiar with the technology than you think.  

Cloud-computing is, in its simplest terms, the linking of a network of computers over the internet by a third party, where individual users can access software applications or files from anywhere on-demand.  For example, when you update your calendar on your PC at work and your phone simultaneously reflects the update, that’s one small example of the cloud doing its thing.  In litigation, cloud-computing allows attorneys, experts, and other third-parties to access the same data regardless of location.

Client Use of Cloud-Computing

The biggest growth in cloud-computing is being seen in companies that store a majority of their files on a third-party cloud system, something many companies have been attempting to do for the past few years.  With the reduced computing costs offered by cloud technology’s offsite infrastructure, corporations don’t have to invest in the upfront costs that internal data infrastructure requires, making the technology an attractive option.  

But almost immediately after this trend toward cloud-computing began, several legal issues became evident. 

Back in 2011, Barry Murphy of Forbes magazine discussed these problems in cloud computing as a “hot and controversial topic” in e-Discovery.  Murphy highlighted the security concerns that many organizations were running into while transitioning to cloud technology; companies and government agencies are and should be cautious about who has access to sensitive information stored remotely.  But Murphy also noted the e-Discovery challenges that came along with these transitions.  

Murphy’s article cited a survey showing that only 16% of cloud-users indicated that they had a plan in place for e-Discovery of information placed in the cloud, a fact made even worse because only 26% said they did not have such a plan – meaning 58% had no idea if they had a plan in place at all.  The concern was that these companies were unequipped to respond strategically in a litigation setting and that, as a result, companies would be reluctant to fully embrace the technology.

Two years later, things have changed.  As business and technology analyst Laurent Lachal reported in Ovum Software’s “2013 Trends to Watch,” any doubt as to whether cloud services will be adopted by corporate IT has been answered; cloud computing is now almost universally viewed as an additional path to outsourcing and service delivery.  

This year, some of these changes will manifest in different ways.  Ovum’s Lachal notes that some companies are tying their cloud services to an “emerging nexus” of cloud-mobility-data, meaning more information can be stored and accessed via a mobile device.  Across the board, cloud governance, management and integration are soon to be a recognized and key corporate priority, meaning lawyers will need to be consulted.

In a January webcast by Exterro, Inc., a provider of e-discovery services, three attorneys and an IT director discussed what all of this means for e-discovery.

The main concern with cloud-computing is the “loss of control” risks associated with storing information remotely.  Both California and the Federal Rules of Civil Procedure allow parties to request for discovery of information in the responding party’s “possession, custody, or control.”  But with cloud-stored data, this possession is split between third-parties and cloud users.  And because courts typically hold that information stored in the cloud is discoverable, parties need to be sure they adequately preserve the data store in the cloud.

To manage these risks, Bennet Borden of William Mullen noted in the Exterro webcast that it is important to know “what your cloud provider can and cannot do ... know in advance how you can find [data] and get it out of the cloud.”  This means adequately informing clients on the front-end what they must do to protect their data.  

The main protection is to beef up internal information governance processes to monitor how the third party is controlling the cloud data. One of the main concerns here is that with the data being stored offsite, companies have less access or direct control of the internal IT departments that manage the information.  Another major concern is compliance with the numerous regulations requiring certain duties for securing the information.  Companies can limit these problems by working closely with the cloud provider.

Once the litigation wagon gets moving, however, the consequences change.  Borden says that cloud users must treat cloud data the same as they would with any other request for discovery; data stored in the cloud must be produced.  He notes that third-party providers must do the same, but under the Stored Communications Act can only release stored data with the consent of the client.

Should information not have been adequately preserved in the cloud, Borden cites three major consequences that could affect the admissibility of certain documents in court: spoliation, invalid chain of custody, and inadvertent production or waiver of privileges.  The last point is especially important for litigators because sensitive data may be accidentally produced if documents are not adequately tracked when being pulled from the cloud. 

Cloud-Computing for Attorneys

On the other side of things, cloud-computing is also being utilized by cost-conscious attorneys when laboring through massive e-Discovery.  

In particular, legal service providers of all sizes now typically offer applications for sorting through e-Discovery on a cloud-based system.  This type of cloud computing is sometimes referred to as software-as-a-service, or SaaS.  As an alternative, some service providers also offer locally hosted applications, called enterprise software or appliance-based software.

One benefit to cloud-computing is that data stored in the cloud can be accessed anywhere on-demand, so attorneys and other parties are not tied to their offices when searching for documents.  Enterprise software, on the other hand, although not available remotely, offers attorneys direct control of the documents, so there is a trade-off.  

Yet cloud-computing does present one clear advantage, as discussed in the March/April issue of American Bar Association’s Law Practice Magazine.  When it comes to costs, John Tredennick, founder and CEO of Catalyst Repository Systems, reports that cloud-computing far and away outshines enterprise software.  

Tredennick prepared a report that compared the three-year costs of enterprise software versus cloud-computing.  Using a hypothetical law firm with 200 small cases that required 25 gigabytes of data each and 25 large cases that required 200 gigabytes each, the report analyzed a firm’s use of 10 terabytes divided over three years.  Then the report assumed the data was pulled at 67% (industry average) by over 500 system users, a combination of attorneys, project managers, and other parties (such as experts).

The initial upfront costs for system installation of an in-house system were large compared with the zero dollars needed for system installation of a cloud system.  But when considering the fees and productions costs of a cloud-system, the enterprise software actually looked more attractive.  The same analysis holds true for the recurring service fees between the two are compared.

But where the cloud system makes its cost gains is in the three-year ongoing operating expenses that enterprise software requires.  Under this analysis, the cloud saved about 36 percent more over three years than an in-house system.

Obviously these costs may change with the scale of discovery and size of firm, but given the flexibility of scaling a cloud system, the cost advantage for large discovery clearly favors cloud-computing.  

Of course, costs are not the only concern with e-Discovery.  

As Tredennick notes, defensibility of a chosen discovery process must also be a consideration, and the choice between cloud computing and enterprise software could bolster or weaken the defensibility of the process.  Tredennick says that a good platform will provide robust tracking and reporting capabilities, as well as providing for collaboration, redundancy, and quality control to minimize errors.  Moreover, professional responsibility standards require that any third-party service must meet the high standards of security and confidentiality lawyers owe to their clients.


At the end of the day, the implications of cloud-computing will affect each lawyer differently depending on the type of clients an attorney serves or the types of cases an attorney handles.  But the growing use of cloud-computing demands that all lawyers at least familiarize themselves with the technology and its consequences so that they can plan and prepare for any issues that may come up.  These issues play out not only in preparing a client for how they must handle their use of a cloud system, but how lawyers might utilize the technology as well.