The Bloomberg administration has announced that the City of New York will now fight Civil Rights lawsuits, instead of offering small settlements. Deciding to fight more cases as a cost-control mechanism creates a tipping point for lawsuits, and document reviews. For too long, linear document review has been the “gold standard,” in eDiscovery. However, studies have shown that linear review is very inaccurate and it costs far more than alternatives. Alternatives like Technology Assisted Reviews (TAR), that are 70 to 90% lower in cost. It’s going to something big to move conservative lawyers from the linear reviews they are familiar with, to TAR. Something like New York City deciding to increase the number of lawsuits it handles.

It’s no coincidence that the City is announcing their new strategy just as the sequester kicks in. Cities and states are scrambling to close budget gaps in 2013. By moving away from the old policy of settling minor cases, the City hopes to make a dent in the cost of litigation. This policy has in pilot since mid-2011, but has only been used for 50 of the 1,500 Civil Rights suits the City deals with every year. So far, the City has only targeted the cases they feel are the weakest, but they have won more than 75% of time, when the cases get to court. And the number of new suits has dropped for the first time in years.

This new policy is incredibly important because it has the potential to be the tipping point for quickly moving us to more TAR based reviews, and more outsourcing in Discovery. Here are the key issues:

LOWER COST: Currently only 50 out of 1,500 cases have been targeted, as easy cases to win that make financial sense to fight. Initially, you tend to be conservative when you move to a new policy. Maybe the number going forward will be 100. But if you changed the cost of litigation, then you can greatly increase the number of cases that you can pursue. Big corporations pay around $2,000,000 just in eDiscovery costs, per case. How much does the City pay? If the cost of eDiscovery dropped dramatically, how many more cases would be with fighting? Using TAR and outsourcing together, could completely change the equation with hundreds of fewer settlements.

REDUCTION IN CASES: The number of new cases is declining. The decline is small, but it is real. If NYC is more aggressive in fighting suits, the number of new suits may continue to decline. Avoiding new suits is even more cost-effective than winning in court.

LEGAL FEES: The NYTimes article gave the example of one case where the City fought and lost in court. The plaintiff won $600, but the city also had to pay the plaintiff’s legal fees of $78,000. In the few cases the city fought and lost, some had legal fees in the hundreds of thousands of dollars.

MORE MUNICIPALITIES: NYC may have some financial gaps, but other municipalities, especially in California, are in bankruptcy. The City of Detroit is about to have a manager appointed by the Governor of the State. Most cities, and corporations for that matter, have some sort of formula as to when they pay rather than ligate. Change the cost of litigation, and you dramatically change that formula. Cities that are in bankruptcy may be ordered by the bankruptcy trustee, to move to more cost effective legal processes, to protect the remaining assets of the city.

Not that long ago, it was the demand from Freedom of Information request that forced City and State governments to move from manual document redaction to automated redaction. The financial squeeze from a still recovering economy and the sequester from Washington are forcing the courts to get creative. It seems likely that NYC or some other municipality will be squeezed hard enough to make a big move towards TAR and greater legal outsourcing. Will New York City kill linear document review? The jury is still out, but I’m betting that TAR is about to get a big boost from the Big Apple!