With so much going for a litigation early warning system, how could it fail to be a game-changer? We’ve had more than one person suggest this question: “Wouldn’t the attorneys, or the executives, prefer not to know?”
Or these variations on that theme: “What if the enterprise knew and didn’t do anything? If the failure to act, after having knowledge, were to be discovered, wouldn’t that be worse than not knowing about the threat in the first place?”
So we must be clear-eyed about this. Our view is this:
[T]he profession needs to rethink its role from that of an ambulance at the bottom of a cliff (remedial practice) to helping people to manage risks on top of the cliff. While the practice at the bottom of the cliff can be very profitable, clients and consumers should be reminded to avoid practices that are detrimental in the longer run.
To practise [sic] preventive law, we must first work with relevant data. Some of our colleagues may not consider this part of the job description of the legal function, but it is down to us to embrace it or watch someone else do so in the course of taking our profession to the next level. In today’s big data era, this is not an option, but a necessity.
But do attorneys perceive any need to change? Historically, the answer is no. As the Hon. John Facciola (U.S. Magistrate Judge, retired) has recounted, “the telephone was in existence for 10 years before lawyers started to use it. They thought it was beneath their dignity.”
So, there are obstacles, and we can list some of them. First, we face the momentum in the legal profession which argues against change, especially when the change involves technology. While some of the lawyers who are litigators must now learn to understand technology in the eDiscovery aspects of every lawsuit, they still resist it. Yet many litigators do not know how to use that necessary but admittedly specialized technology.
In fact, they are not even proficient with the basics: software programs for word processing, spreadsheets, and PDFs. And this is why D. Casey Flaherty, formerly in-house counsel at Kia Motors America, and Suffolk University’s School of Law recently launched the Suffolk/Flaherty Legal Tech Audit.
In July of 2013, Flaherty explained:
“My hypothesis is that lawyers in general are woefully deficient in using the software tools at their disposal – for example, Word, Acrobat, Excel. To test this, I provided associates at outside firms with mock assignments. Sample tasks include (a) formatting a motion in Word, (b) preparing motion exhibits in PDF, and (c) creating an arbitration exhibit index in Excel.
I’ve administered the audit 10 times to nine firms (one firm took it twice). … [A]ll the firms failed—some more spectacularly than others. The audit takes me 30 minutes…. Both the median and mean (average) pace rounded to 5 hours.
Second, we face the momentum that has in-house counsel acting as procurement and matter managers of the cases in which an enterprise is involved. They depend on the “bench” of outside law firms to do the heavy lifting.
Third, in-house counsel may balk at having a tool which permits them to take on the mantles of investigator and analyst. Is this the practice of law? Can’t the IT or HR departments do this work instead of us?
Fourth, in-house counsel may resist a change which permits them to be strategic business partners with the company’s other leaders. Who’s in charge?
Fifth, the larger plaintiff-oriented law firms may resist any change that reduces the number of prospective plaintiffs. Their reason for being is to redress harm and to recover damages. With fewer deaths, injuries, and other civil wrongs, there would be fewer prospective plaintiffs, and the plaintiffs’ “bar” would have fewer clients to represent. (However, they can hardly complain if their stated goal is actually achiever, but in some other way. Who can wish for more deaths, injuries, and other civil wrongs?)
Sixth, the larger defense-oriented law firms may resist any change that reduces the number of lawsuits for them to defend. Their firm revenues are based, in part, on the number of cases they are engaged to defend, and the amount of hours they bill to defend them. They have no financial interest in seeing these metrics go down.
And, any early warning system, at least in its early versions, may produce a number of false positives, such that early adopters may look for an early exit and return to their comfort zones.
Finally, it could turn out that many business leaders might genuinely prefer to simply deal with lawsuits as they come, to be strictly customer-facing, and to stick with driving revenue and profits.
It seems that there are many reasons “not to know.”
But we contend that we humans have learned, in other contexts, that it is far better to know than not to know. The Greeks knew this long ago, and we have already mentioned their phrase for it: Forewarned is forearmed. The ostrich defense—sticking one’s head in the sand to avoid knowing about the nearby predator—has never worked very well for the ostrich. In American jurisprudence, this defense is not well known as a successful strategy and has been alternatively called the dumb CEO defense, dummy defense, idiot defense, or Sergeant Schultz defense.
In our view, it is better to suffer through some number of false positives than to be blind-sided by a preventable litigation catastrophe.
We think Bill Gates would agree. In 1999, he wrote a book to which he devoted a whole section and six chapters to explain why. Chapter 10 was entitled, “Bad News Must Travel Fast.” He even went a step further, and began the section this way:
“I have a natural instinct for hunting down grim news. If it’s out there, I want to know about it. The people who work for me have figured this out. Sometimes I get an e-mail that begins, “in keeping with the dictum that bad news should travel faster than good news, here’s a gem….”
Gates provides lots of examples, including from the computer industry. He mentioned IBM, when its mainframe and minicomputer businesses were undermined by the PC; Digital Equipment Corporation, when its minicomputer business was undercut by still smaller PCs, which DEC had dismissed as toys; and Wang, which lost the word processing market when it stuck with putting word processing software on dedicated hardware systems rather than on the PC.
He also mentions Ford, Douglas Aircraft, and why the United States was not prepared for the attack on Pearl Harbor.
Gates advised this:
“A change in corporate attitude, encouraging and listening to bad news, has to come from the top…. The bearer of bad tidings should be rewarded, not punished…. You can’t turn off the alarm and go back to sleep. Not if you want your company to survive….
Gates asserts that leaders should heed the early warnings from salespeople, product developers, and customers, but he doesn’t mention the Legal Department. We can excuse the Legal Departments of the past. They had no way to see litigation in-the-making, and so could not sound off to give what Gates called an “alert.”
But now they can see. An alert from a system intended to prevent litigation is like a smoke alarm: When it goes off, it doesn't necessarily tell you there's a fire; but you have to pay attention to it.
 The original source of this blog article is Chapter 24 of Preventing Litigation: An Early Warning System to Get Big Value Out of Big Data (Business Expert Press 2015), whose principal author is Intraspexion’s founder. Intraspexion’s use of the material here, with very few changes, is with his permission and is permitted by his contract with the publisher. Intraspexion’s co-founder, Larry W. Bridgesmith, added the points concerning the criminal sentencing guidelines and Sarbanes Oxley.
 Kenneth Tung. March, 2015. “A Kodak moment for the legal profession,” www.lexology.com/library/detail.aspx?g=2eae2fe3-8226-45b2-931e-97b7d66ed7d1, (last accessed April 11, 2015). In 2008, law practice guru Richard Susskind, who endorsed Preventing Litigation, said as much in The End of Lawyers? Rethinking the Nature of Legal Services (Oxford: Oxford University Press), p. 224.
 Hon. John Facciola (interviewed by Zoe Tillman). April, 2015. “Law at the Speed of Technology.” Corporate Counsel, p. 56.
 D. Casey Flaherty and Andrew Perlman. 2015. Suffolk/Flaherty Legal Tech Audit. www.legaltechaudit.com (last accessed April 8, 2015) (“The test takers will finalize a redlined investors’ rights agreement (word processing). They will then be given data on dividend payments to investors to investigate whether payments were made equally to all investors (spreadsheets). Finally, they will prepare an e-filing attaching the agreement and spreadsheet (PDF).”).……….
 D. Casey Flaherty. July, 2013. “Could you pass this in-house counsel’s tech test? If the answer is no, you may be losing business.” ABA Journal, www.abajournal.com/legalrebels/article/could_you_pass_this_in-house_counsels_tech_test (last accessed April 8, 2015).
 U.S. Legal, Inc. Unknown date. “Ostrich Defense Law and Legal Definition.” http://definitions.uslegal.com/o/ostrich-defense/ (last accessed April 27, 2015). Furthermore, an ostrich defense does not open the door to favorable treatment for being proactive under the criminal sentencing guidelines, and defies the mandates of Sarbanes Oxley requiring publicly traded companies and their executives to adopt and use proactive policies and procedures to uncover fraud and illegality.
 William H. (Bill) Gates III, with Collins Hemingway. 1999. Business @ the Speed of Thought: Using a Digital Nervous System (New York: Warner Books, Inc. 1999), pp. 159-200.
 Ibid. at 159-160.
 Ibid. at 179-180.
 Ibid. at 180. For the Pearl Harbor example, Gates cites Gordon Prange, At Dawn We Slept (New York: McGraw Hill, 1981) at 439-492 (chapters 54 through 59), for communications breakdowns and “fundamental disbelief” on the U.S. side during the weekend of December 6-7, 1941.
 Ibid. at 179.