MCC: It’s hard to overstate just how much the size and shape of datasets have changed, along with the scope of the data analysis required to support expert testimony in today’s high-stakes litigation and investigations. Tell us how you came to be involved in such a rapidly evolving area.
DeCesaris: Litigation and expert testimony have undergone profound transformations with regard to data, and I’ve been fortunate to be involved. My background combines economic consulting and computer science, which puts me in a good position for the changes we’re experiencing. After I earned a B.A. in economics I started in economic consulting as a way to continue doing applied economics and then got an M.S. in computer science while working in the industry. In many ways, this combination of disciplines and the type of analysis we do at Cornerstone Research has been redefined in the last five years to include an increased emphasis on data science.
MCC: As our in-house readers see every day, few areas have seen such a proliferation of technologies, tools and platforms, yet as so often happens in various areas of law, these changes must be accommodated within a legal process designed for older technology.
DeCesaris: Lawmakers and courts have not expanded expert discovery timelines in the face of the exploding size and complexity of data and analysis. That has exerted considerable pressure on experts and consultants, and the technology and techniques used to support them. To give some idea of the enormity of the challenges, until earlier this month, the data used to track trading of equities was captured at the millisecond level – that’s one thousandth of a second. Now that same data is captured at the microsecond level – one millionth of a second. That’s an order of magnitude increase that would have been unfeasible to process and analyze just a few years ago. To use the newly available hardware and software infrastructure efficiently to meet case deadlines requires deep expertise.
MCC: The core of Cornerstone Research’s services is providing consulting and expert testimony to clients involved in litigation and/or investigations. Do you focus on a particular type of matter?
DeCesaris: Our work covers several practices and disciplines. Analyzing data is a substantial component of almost everything we do. To support expert consulting and testimony today means dealing with very large databases from both public and private sources. Consider that not that long ago databases with millions of records were considered large. Today, billions of records are common. It requires a major collaborative effort among clients, counsel, experts and consultants.
MCC: For companies and their in-house counsel, it sounds like dealing with the analysis and data processing this requires could be a distraction from their core business responsibilities. How do you handle it?
DeCesaris: The challenge for counsel and consultants is to provide complete and accurate data to regulators and litigants with the least distraction and at the least cost to the business. Most requests, many of which involve customized production for different agencies, fall outside the scope of the data collection and analysis a company conducts in the ordinary course of business. As a result, the burden on their business analysts, who have other responsibilities, can be daunting. Moreover, security is an omnipresent concern for everyone involved in data-intensive projects that use proprietary data. You have to be able to mitigate the risks by using secure computing facilities and sophisticated techniques.
MCC: Tell us a bit more about the cases that Cornerstone Research is involved in. I know that your clients include major banks and other firms in the financial services industry.
DeCesaris: Yes, the litigation and investigations large financial institutions face require substantial, specialized subject-matter expertise, which is the heart of what we do, but they are also incredibly data intensive. One reason for this is the increase in trading and trading velocity in most markets. There’s also been a shift in focus to non-equity markets such as derivatives, commodities, foreign exchange, and the like. We’ve been involved in an array of prominent cases involving allegations of price fixing and collusion, including those related to foreign exchange, equities, fixed income securities, options, credit default swaps, and private equity.
MCC: At some point does the data get so big that the benefits you can derive from it dissipate?
DeCesaris: In the right hands, more data can be helpful in dealing with high-stakes investigations or litigation. With the right tools and techniques to analyze the data, and the deep financial and economic knowledge needed to interpret it, access to more detailed data can allow us to provide a more accurate depiction of what actually happened.
MCC: What impact do you expect the SEC’s Consolidated Audit Trail, or CAT initiative, to have? First, for readers not familiar, what is the CAT initiative?
DeCesaris: The SEC adopted a rule requiring the securities exchanges and FINRA to report into one consolidated audit trail (the “CAT”). The data to be reported include comprehensive information about every material event in the lifecycle of every quote, order, and execution in all exchange-listed stocks and options. The idea is to build and maintain a searchable database of time-sequenced information to replace the current, more cumbersome, and less effective methods, particularly the use of so-called electronic blue sheets. It is expected to involve 58 billion records of quotes, orders and executions per day – which is estimated at 21 petabytes (a petabyte is 1024 terabytes) of data in the first five years. This should help enable analysis that incorporates the timing of specific trader activity in the context of an investigation.
MCC: Where else are you seeing significant upswings in demand for your services?
DeCesaris: Consumer finance cases are a major and growing category. The advent and development of the Consumer Financial Protection Bureau has had a big impact. Debt collection is one area that is generating enforcement actions and class actions. As in other matters, big data allows us to analyze what actually happened under different theories of liability and causation. Armed with a better understanding of the facts, our clients have a more informed and productive dialogue with regulators.
MCC: What other types of data besides financial are you seeing in litigation and regulatory matters?
DeCesaris: The increased reliance on big data has led to expanded use of statistics and econometrics experts as well as those specialized in data science or marketing science. The experts involved in this type of analysis come from a range of disciplines and bring knowledge focused on different functional or industry areas. One area where this is playing out is in the increased use of text analytics and content analysis in intellectual property and consumer protection litigation. These methods lie at the intersection of data science and marketing science. They have already become widespread in the e-discovery world for assisting with or automating document review. Their use in expert work opens up new avenues for analysis of public press and user-generated content such as social media.
Another example is merger work, which now often involves analyzing increasingly voluminous transaction databases maintained by the merging parties under very tight deadlines, something that would have been impracticable even a few years ago. In addition, we are seeing an increase in the complexity of the statistical work in merger reviews and more adoption of structural demand modeling techniques that require massively parallel processing to run efficiently.
MCC: While we’ve mostly been talking about big data analytics and data science, as noted earlier, the core of what you do remains providing expert witness and consulting services. Tell us more about that.
DeCesaris: Clearly, the technical piece of what we do is critical to our success in providing support to our experts and our clients. Doing this well requires marrying technical expertise and state-of-the-art infrastructure with deep expertise in litigation and regulatory processes and the economic and financial issues facing our clients. Accomplishing this integration is a key reason we consult with Justin McCrary, a professor of law at the University of California, Berkeley, and founding director of the school’s D-Lab. Professor McCrary helps assure we are at the leading edge on the technical side of big data analysis in a way that is appropriate for the consulting work we do.
In the end, however, even in a technological area, the human element adds a crucial dimension to our success as a litigation consultancy. We consider our expertise in economics, marketing, finance, and accounting to be essential in bringing the right experts to address the issues in each case. Cornerstone Research has substantial in-house consulting and testifying expertise and an extensive network of outside experts, including faculty members of leading universities and prominent industry practitioners.
MCC: Our corporate counsel readers are under pressure to control costs, particularly when it comes to litigation. How can Cornerstone Research help?
DeCesaris: Inside counsel are looking for strategies to manage and control the costs related to compliance, regulatory enforcement, and litigation, while also increasing cost predictability. One strategy some companies are using to control costs is to create a centralized repository of business and transaction data for streamlining and reuse across different regulatory and litigation matters. By bringing in our consultants with subject matter expertise early in a case, we can expedite data production by thinking through how the data will be used in the class certification, liability, and/or damages phases of a case and help reduce overall costs on the business and the burden on internal staff. Our involvement in this process can include detailed interaction with in-house staff to provide assistance in creating the code and output processes that efficiently and accurately extract data from multiple systems maintained by the client. Our consultants can assist with preparing accurate and complete data production, while maintaining security and data privacy. They can also aid in assessing potential exposure and supporting settlement discussions, trial or arbitration, and claims processing.
The views expressed in this interview are solely those of Mr. DeCesaris, who is responsible for the content, and do not necessarily represent the views of Cornerstone Research.
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Justin McCrary, an economist by training, is a Professor of Law with the University of California, Berkeley, School of Law, and a Senior Advisor with Cornerstone Research. He is the founding director of the UC Berkeley Social Sciences Data Laboratory, or “D-Lab,” which is a center for innovation that supports the use of big data with computing infrastructure, data archives, and training. Professor McCrary, who is teaching a new class at Berkeley on Race, Policing and Data Science, as part of the new major in data science, is also a faculty research associate at the National Bureau of Economic Research.
According to Mike DeCesaris, Professor McCrary brings a vital element to clients of Cornerstone Research’s expert testimony and consulting business.
“Professor McCrary is an expert in statistics and economic modeling and a key leader in the data science field,” DeCesaris says. “He knows our business, having served as an expert on various antitrust cases and as a consultant for the U.S. Department of Justice, as well as on municipal bankruptcy, arbitration, discrimination, independent contractor/employee, and finance matters.”
For his part, Professor McCrary says it’s a new era of data-intensive research – in academia and litigation alike. That means both challenges and opportunities.
“As the volume and complexity of datasets increase, so does the need for cutting-edge computing platforms and techniques,” Professor McCrary says. “When companies effectively can turn huge amounts of data into knowledge, they gain a significant competitive advantage in litigation and regulatory matters. That’s no small affair in what can be a bet-the-company situation.”
“Working as he does at the intersection of law and economics, Justin provides us and our clients with invaluable insights derived from his unique, bird’s-eye view of the transformation of expert testimony and support,” DeCesaris says. “We are delighted he is a member of our team.”
Published September 19, 2015.