The shabby state of most enterprise content management implementations, combined with lady Justice's thirst for electronic documents, has made it so that "only the rich and Microsoft can afford to litigate," in the words of attorney Ralph Losey, who specializes in legal applications of technology.Losey, whom I met at a conference sponsored by EMC Corporation, decried what he called "extortion by discovery demands," which forces most defendants to simply settle their lawsuits rather than spend huge sums to defend themselves. It doesn't have to be this way, he said, but "the failure of business to adopt enterprise content management is destroying the American system of justice."

"There's enterprise and there's content but there's no management," he quipped.

Most companies, or at least those with a functioning legal department, now realize that courts expect them to make all forms of electronic communication available to their opponents during the pre-trial process called "discovery." That includes not only email but instant messages, blogs and any other relevant documents -- electronic and otherwise (hence the term "e-discovery").

And that's where it starts getting dicey, of course -- what's the definition of relevant, and how do you find it? Especially in an enterprise where some data is stored in structured databases, other documents are found in unstructured repositories like SharePoint servers, and yet others in enterprise content management applications like Documentum.

Typically, companies use specialized e-discovery search software to dredge up anything that looks remotely relevant, and then have paralegals or legal interns try to further pare down the pile; some documents also end up being relevant but also protected by client-attorney or other privilege, and those need to be logged as well. According to Losey, reviewing costs anywhere from $3 to $10 per file, so a company looking at parsing one gigabyte of documents -- some 16,000 files -- would be spending $80,000 on the e-discovery phase of litigation alone. Most companies have enough to technological firepower to merely "make a smaller haystack,"

That haystack can start out plenty big. When Fannie Mae was sued in January of this year, the plaintiffs issued a subpoena to the Office of Federal Housing Enterprise Oversight for all documents containing any of some 400 keywords, which resulted in the agency turning over more than 660,000 emails and attachments at a cost of $6 million for e-discovery (9% of the agency's total annual budget). If you think that's a lot of dough, Losey said litigants spend an average of $10 million per lawsuit in e-discovery costs.

According to Losey, vendors need to do a better job of explaining text analytics and other sophisticated applications that can do a better job of narrowing the haystack, which could save a lot of money. Currently, he said, "there's a huge disconnect between technology and our dispute resolution system."

The bigger disconnect, of course, is between our expectation of proper corporate citizenship and the shareholder-value-driven culture that permeates most companies, and in many cases creates the incentive for fraud. This isn't something we can cure through legislation--at least not entirely.

We're going to have to start demanding ethical behavior from companies, and using our pocketbooks to punish those that transgress. As a society, never mind an economy, we can't afford to continue throwing litigation dollars down the drain. And imagine how much money could be saved on parsing documents if companies knew they had nothing to hide.