To understand the scheme devised by class counsels in securities class actions to inflate their lodestars by hundreds of thousands of hours, we need to first set out the rudiments of the discovery process in class actions. Document review in securities class actions is typically not undertaken until a court first certifies that the putative class meets certain procedural requirements and denies the defendant's motion to dismiss the case because of the insufficiency of the complaint. Class certification and denial of the motion to dismiss are forthcoming in about 60 percent of all securities class actions filed; virtually all of these class actions are then settled because of the litigation dynamics discussed in Chapter 16.

As part of the dance leading up to settlement, class counsel has the power, under the Federal Rules of Civil Procedure, to demand that the defendant produce a wide range of documents that may be relevant to the case, including e-mails, spreadsheets, reports, letters, photos, and any electronically stored communications or information. Defendants are required to respond to these discovery requests, though they may seek to contest their scope. Frequently, the search process is facilitated by the parties agreeing on key search terms and proposed Boolean search strings. Most public companies in securities class actions hire outside law firms as soon as suit is filed to take over the defense of the action. The task of responding to the document request is especially daunting, costly, and disruptive for large and multinational companies.