The FBI seal and motto are seen at of the J. Edgar Hoover Federal Bureau of Investigation (FBI) Building in Washington, U.S., February 1, 2018. U.S. President Donald Trump is expected to announce soon that he will release a controversial memo that purports to show bias against him at the FBI and Justice Department as they investigated contacts between Trump's presidential campaign and Russia. REUTERS/Jim Bourg
Legal privilege: companies have the right to keep attorney-client confidences from scrutiny by agencies such as the FBI © Reuters
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In late 2017, the Federal Bureau of Investigation made a surprise dawn raid on a US transport company’s headquarters. Intent on seizing all the data they could, government agents confiscated everything from pen drives and servers to filing cabinets. They eventually walked away with more than 2m documents.

The FBI processed all the transport group’s data but, because of attorney-client confidentiality rules, before the bureau could legally share it with its internal investigators the transport company was permitted to analyse the data and exclude any information it felt could be privileged.

Attorney-client privilege is a bedrock of the US legal system. It exists so that lawyers can have frank conversations with a client, which in turn is encouraged to fully disclose information to its attorneys.

The client can do so safe in the knowledge that it is protected from incriminating itself and handing over trade secrets that are irrelevant to an investigation. Protection of privileged information is important for mounting a defence against both criminal and civil charges.

Those rules of privilege mean that Christian Mahoney, a senior attorney at law firm Cleary Gottlieb who represented the transport company, cannot divulge the client’s name, what it was charged with — or even if it was charged. Nor can he say what the FBI was looking for, the month the raid took place or the location of the client’s offices.

Revealing any morsel of information could break attorney-client privilege and make it too easy to ascertain the client’s identity.

In a federal investigation, lawyers want to exclude as much as possible from the regulator’s eyes, especially if it concerns conversations between the client and their lawyer.

In the transport company’s case, however, it was initially willing to waive its rights to privilege because paying lawyers to wade through the data to ascertain what could be excluded would have cost millions of dollars in legal fees.

Instead, Mr Mahoney suggested using digital technology to whittle the documents down to a manageable size.

“After a very broad filtering of the evidence, we were left with half a million documents that could have potentially been privileged — and thus kept out of the government’s hands,” says Mr Mahoney, who leads Cleary Gottlieb’s litigation technology efforts in Washington. “But the government wasn’t going to let us keep 500,000 documents from them without good reason. We needed to show them we’d been more rigorous in our analysis than just a big general claim covering half a million documents.”

Sifting and analysing documents in preparation for litigation and trials, known as the discovery process, is a trope in TV shows about lawyers that show young junior associates toiling into the night. In fact, much of this work is now done using data interrogation, machine learning and, increasingly, artificial intelligence (AI). Yet determining which documents should be protected under attorney-client confidentiality is a more complex affair than most ediscovery investigations.

Simply looking for key words with a search engine and then excluding the documents that mention lawyers is not enough. Even using the most advanced methods, ediscovery experts can easily miss privileged documents. Only about 20 per cent of documents found using well-crafted search terms fall under the privilege category, according to Mr Mahoney. That means 80 per cent of the documents found using privilege filters are essentially wasted effort.

“Imagine training and coding Google from scratch every time you wanted to perform a search — developing the rules and parameters every time. That’s what it’s like to examine large stacks of documents for privileged information,” says Mr Mahoney.

He has long focused on electronic discovery. He cut his teeth on the interplay between data and law in multinational document company Xerox’s legal department. Recently, he has been experimenting with using AI, machine learning and other tech for a range of legal tasks. This includes predicting outcomes and costs of legal actions, estimating the time it will take to reach certain milestones in cases — such as settlements — or modelling negotiations in mergers and acquisitions.

When the transport company’s dilemma arose, Mr Mahoney was already thinking about ways to crunch legal data to make it easier to find privileged documents.

“The problem with trying to sift information potentially covered by privilege is it’s not just what’s being said. It’s who’s saying it to whom and in what context,” says Mr Mahoney.

He spoke to a fellow Xerox alumnus now with legal tech company Lighthouse for advice.

Rob Hellewell, a lawyer-turned-data scientist, immediately saw Mr Mahoney’s conundrum.

“In determining if a document is privileged or not, context is key,” says Mr Hellewell. “Unearthing privileged material is often a big source of frustration. It’s usually the minority of data in cases but the majority of costs.

“The perennial problem is finding needles in the haystack, but the trick is making the haystack smaller.”

The two started to shrink their “haystack” by looking at metadata of documents. These are hidden details that describe data and documents, such as sender, receiver, date and the urgency level with which an email is flagged. “We figured the metadata would have a lot of information about the context of the conversations,” says Mr Hellewell. “And we started to see patterns.”

Building algorithms that would interrogate both the text of documents and the metadata, Mr Mahoney and Mr Hellewell began to see predictive patterns based on how people would speak to their lawyer. For instance, they found that privilege was more likely if it was only an individual emailing a specific lawyer rather than a group.

“From the 500,000 we started with, we quickly made our way to identifying 15,000 documents that were privileged,” says Mr Mahoney, adding that the result was enough to satisfy the government that the documents could not be turned over to investigators.

$50,000

Cost of identifying documents by AI, instead of the potential millions the job usually would cost

Instead of the potentially millions in billable hours the job usually would have cost, Mr Mahoney and Mr Hellewell’s system cost about $50,000. The reduced cost meant the client did not need to waive privilege.

Mr Mahoney rejects the notion that the tool lost his firm lucrative work. “This wasn’t a case of us arguing our way out of billable hours,” Mr Mahoney says. “That money was never coming to us from such a cost-sensitive client.”

Clients nowadays expect that kind of data-driven innovation, says Mr Mahoney, who intends to refine his predictive models in the expectation that other clients will need affordable ways to ascertain privileged information.

‘Attorneys-general target big consumer companies — and consumer protection laws are their weapons of choice’

Fiat Chrysler Automobiles assembly workers build 2019 Ram pickup trucks on 'Rotating Carrier' assembly line at the FCA Sterling Heights Assembly Plant in Sterling Heights, Michigan, U.S., October 22, 2018. Picture taken on October 22, 2018. REUTERS/Rebecca Cook - RC1DCDE8B810
Fiat Chrysler assembly line: the carmaker reached a global $800m settlement © Reuters

Multinationals operating in the US beware: the number of multi-border consumer cases is increasing, according to a top litigator.

Robert Giuffra, partner at Sullivan & Cromwell, says that as the Trump administration holds back in many regulatory enforcement matters, state attorneys-general have sought to fill the gap. Of particular note has been the pursuit of makers of recalled vehicles and drugs companies embroiled in the opioid crisis. In the past year a number of opioid manufacturers have been sued by dozens of state attorneys-general for their role in the spread of addictive painkillers.

“These AGs view themselves as filling a regulatory gap,” says Mr Giuffra, a prominent trial attorney. “Their targets are big consumer companies, and state consumer protection laws are their weapons of choice.”

Mr Giuffra, who reportedly declined a request to represent US President Donald Trump in the Mueller probe into allegations of Russian interference in the 2016 presidential election, has been called on to represent vehicle makers targeted in the wake of emissions scandals. In 2017, Fiat Chrysler faced allegations that it rigged more than 100,000 vehicles in the US with so-called “defeat devices” to evade emissions standards. As well as the lawsuits from vehicle owners, the Department of Justice accused the company of Clean Air Act violations and multiple state attorneys-general also threatened to sue.

Several years earlier, Mr Giuffra had steered Volkswagen through its own defeat device scandal by working out a series of integrated global settlements for more than $20bn.

The Fiat cases also threatened to cost billions. Instead, Mr Giuffra says he perfected his global settlement strategy, avoiding multiyear lawsuits and reaching a series of integrated global settlements costing $800m. These satisfied the Environmental Protection Agency, all 50 state attorneys-general, the California Air Resources Board, and the US Customs and Border Protection.

Ultimately, the lesson is that with multi-jurisdictional litigation rising, global settlements will become increasingly crucial for companies operating across markets.

The table below ranks law firms and in-house legal teams for the FT Innovative Lawyers North America awards.

Litigation and Disputes
RankLaw firmDescriptionOriginalityLeadershipImpactTotal
STANDOUTWhite & CaseThe law firm successfully defended pharmaceuticals group Allergan by arguing the unconstitutionality of a common practice in class action lawsuits against pharmaceutical companies. This set a precedent for all plaintiffs to demonstrate proof of injury to be considered an injured class, prior to receiving a jury verdict. 98825
STANDOUTDechertIn the 2008 lawsuit brought by Northstar against Schwab, which was settled last year, the firm set a precedent for mutual fund litigations. Because mutual fund prospectus documents are covered by federal securities law, these cases can now only be heard in federal, not state, courts. 88824
STANDOUTSullivan & CromwellRepresenting carmaker Fiat Chrysler Automobiles, the firm negotiated a settlement of $800m, as opposed to potential billions, with government agencies and owners of its diesel vehicles that were judged not to comply with rules on emissions. The carmaker was alleged to have used software designed to defeat US emissions tests. In the case, completed in May, the car company did not admit wrongdoing but agreed to install a software solution in cars to ensure compliance. 88824
HIGHLY COMMENDEDCravath, Swaine & MooreArrived at a global settlement of $4.7bn and a six-year licensing agreement with iPhone company Apple for its client, Qualcomm, the US chip company. The firm revealed documents triggering allegations that Apple’s claim that Qualcomm was not pricing its products competitively was an attempt deliberately to undermine Qualcomm’s business. 68923
HIGHLY COMMENDEDGibson, Dunn & CrutcherThe firm successfully argued that its client, the accommodation-sharing platform HomeAway, did not have to share user data with New York state officials who were concerned over the effect of short-term rentals. It cited the fourth amendment, which protects information from unreasonable searches and seizures.68923
HIGHLY COMMENDEDHausfeldThe firm won a $55m class-action lawsuit settlement with pharmaceutical company Celgene, which it alleged had monopolised the market for Revlimid, a drug used to treat a form of blood cancer. The case established a precedent for this type of lawsuit.78823
HIGHLY COMMENDEDMorgan, Lewis & BockiusThe firm defended pharmaceutical company Shire from the Federal Trade Commission by proving it was not within the FTC’s power to sue in federal court if an activity is not current or about to happen.87823
HIGHLY COMMENDEDRopes & GrayMutual fund manager Metropolitan West stood accused of charging excessive advisory fees. Ropes & Gray mounted a successful defence by demonstrating the competitiveness of the industry. The case hinged on the comparison of advisory and subadvisory fees, which the court ruled was “inapt”.87823
HIGHLY COMMENDEDSeyfarth ShawIn Johnson v United Airlines, Seyfarth Shaw defended the airline against the accusation that it had breached employees’ privacy by using thumbprint identification to clock in and out. 78823
COMMENDEDDLA PiperTechnology company Finisar faced a class-action lawsuit over a claim that it had misrepresented its stock price to the public. The firm argued this was not the case and that inflated stock prices were a result of later statements by analysts.78722
COMMENDEDLatham & WatkinsIn a securities class-action trial, the firm defended start-up pharmaceutical company Puma Biotechnology by arguing that its inflated stock price was caused by external factors rather than a misleading internal statement. 78722
COMMENDEDHausfeldThe practice settled an $80m antitrust class action lawsuit for 200,000 dentists in June. It was brought against three dental supply distributors for anti-competitive practices and inflation of prices through fixing margins and boycotting low-priced rivals.68721
COMMENDEDKing & SpaldingLawyers from the firm used the “doctrine of equivalents” argument when representing pharmaceutical company Galderma against its rival Amneal. Galderma prevailed in the case, which alleged infringement on patent rights. 68721
COMMENDEDWhite & CaseThe US Department of Justice alleged that three British bankers were engaged in a “conspiracy” to “suppress and eliminate competition” in trade in the dollar. White & Case represented Richard Usher, one of the three, in court in New York. The men denied price fixing and were cleared.77721
COMMENDEDAkermanArgued for the unconstitutionality of new Florida legislation that limited a company’s ability to apply for a medical marijuana licence. The court confirmed a conflict with the state constitution and upheld the ruling in July.78520
COMMENDEDKing & SpaldingLawyers from the firm used the “doctrine of equivalents” argument when representing pharmaceutical company Galderma against its rival Amneal. Galderma prevailed in the case, which alleged infringement on patent rights. 77620
COMMENDEDPillsbury Winthrop Shaw PittmanThe practice used a disgorgement model as a remedy for lost potential profits to win more than $370m for its client, the founder of Laserscopic Spinal Centers of America. The company's business model, employees and clients had been misappropriated by the defendant. 68620
Creating a New Standard
RankLaw firmDescriptionOriginalityLeadershipImpactTotal
STANDOUTWalden Macht & Haran Represented Grigory Rodchenkov, former head of Moscow's anti-doping laboratory, who is a whistleblower for a state-sanctioned doping regime to help Russia's athletes in the Olympic Games. The firm advised on subsequent new US legislation, the Rodchenkov Anti-Doping Act, which ensures that all parties involved in an athlete’s doping scheme, such as coaches and administrators, are held criminally liable, rather than just the athlete. Commended: Jim Walden 98825
STANDOUTOrrickCollaborated with entrepreneur and writer Eric Ries on the framework to establish the Long Term Stock Exchange, an idea proposed in his book 'The Lean Startup'. The exchange aims to establish a new contract between investors and companies to pursue long-term value rather than short-term profits. It will list companies that have a positive social impact and pay executives based on long-term performance. Following approval from the Securities and Exchange Commission, the exchange plans to start listing companies in 2020. Commended: John Bautista99624
HIGHLY COMMENDEDRopes & GrayDesigned an intellectual property policy for Protocol Labs, a technology developer, to protect its open source coding. The Permissive Licensing Stack includes a commitment not to initiate patent lawsuits, a plain language confidentiality agreement, and allowing employees to control and own patents for personal projects. Commended: Marta Belcher87722
HIGHLY COMMENDEDRopes & GraySecured a contract for Medicaid funding that reimburses the Children’s Law Center for costs associated with its legal advocacy work on the housing conditions that affect the health of children exposed to mould. The structure sets a precedent for other healthcare and legal providers to access funding to address social determinants of health, such as the environment, in addition to costs of treatment. 79622
COMMENDEDSeyfarth ShawAdvised on the formation of Civica Rx, a non-profit generic drug company, set up by seven hospitals and three charities to address the ongoing shortage of generic drugs. The company will provide low-cost prescription medications that were previously at risk of both shortages and high prices. 77721
COMMENDEDNelson MullinsAdvised the University of California San Diego Extension on the creation of renewable learning funds to support students receiving essential workforce training. These income share agreements allow graduates to pay for their education and training using a percentage of their income only once they have a $40,000 salary job. It is designed to help displaced workers access training to develop new skills. 77620

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