Now, I know what you’re probably thinking.  “Revisit Zubulake!?  But that was so long ago!  Surely everything has changed!”  (Sarcasm)

To be fair, things were quite different back then – no iPhones, no clouds (in the IT world), no Google Any-Application-You-Can-Think-Ofs.  The technology landscape has certainly evolved since Zubulake became a household name.

But (at least) two things haven’t changed:  Judge Shira A. Scheindlin’s view of eDiscovery due diligence and parties’ (and their lawyers’) continued failure to meet these expectations.

In Her Honor’s latest eDiscovery-related opinion, Pension Comm. of Univ. of Montreal Pension Plan v. Bank of Am. Secs., LLC, __ F. Supp. 2d __ (S.D.N.Y. 2010), Judge Scheindlin provides us all with a much needed reminder that sloppy (i.e., negligent or grossly negligent) document preservation and production will expose parties (and their lawyers) to the court’s arsenal of sanctions: from further discovery, to cost-shifting, to fines, to special jury instructions, to preclusion, to the most severe sanction of all – entry of default judgment or dismissal.

If you’re looking for scandalous discovery abuses or headline-grabbing fines, you’re not going to find that here.  This case addresses boring, run-of-the-mill – yet all too common and very serious – sloppy preservation and production actions on the part of clients and their lawyers.

In Pension Comm. of Univ. of Montreal Pension Plan, a group of ninety-six investors filed the initial action in an attempt to recover $550 million in losses after the liquidation of two British Virgin Island-based hedge funds in which they held shares.   During the lengthy discovery process, defendants brought to the court’s attention substantial gaps in some (thirteen of the ninety-six) plaintiffs’ document productions.

These defense allegations led to depositions and affidavits that detailed the steps (not) taken to preserve and produce documents (including electronically stored information). At the close of discovery, defendants sought the dismissal of the complaint or some alternative relief for plaintiffs’ discovery abuses.

All tolled, the court found thirteen plaintiffs either negligent or grossly negligent in meeting their discovery obligations and issued sanctions that ranged from further discovery (at the low end), to monetary sanctions and an adverse inference “spoliation charge” (at the high end).  In true eLessons Learned fashion, let’s take a closer look at exactly why Judge Scheindlin found plaintiffs’ (and their lawyers’) efforts to be “flawed.”

The ‘Pure Heart and Empty Head’ Syndrome

It’s important to point out from the start that Scheindlin’s assessment of plaintiffs’ acts concluded decisively that this was an instance of careless and lazy preservation of data, as opposed to an intentional destruction of evidence.  Nonetheless, she concludes that “there can be little doubt that some documents were lost or destroyed.”   Thus, Scheindlin begins down the path of determining the appropriate sanctions for such conduct, despite plaintiffs’ “pure heart [and] empty head.”

But, before we solve the final puzzle (SAN_TIONS), here are the plaintiffs’ R-S-T-L-N and E (Reckless Steps Their Lawyers Negligently Endorsed):*

The Plaintiffs

• Plaintiffs did not issue an appropriate written litigation hold until a few years after they should have.
• Plaintiffs failed to execute a comprehensive and orderly search for documents.
• Plaintiffs failed to sufficiently guide, supervise, and monitor their employees’ document collection.
• Plaintiffs submitted inaccurate, incomplete, vague, and contradictory declarations that misled defendants and the court about plaintiffs’ document preservation and production efforts.
• Plaintiffs failed to adequately prepare and produce witnesses with knowledge about document preservation and production efforts, including which files were searched, how searches were conducted, who was asked to search and what they were told, and the extent to which employees’ efforts were supervised.
• Plaintiffs’ document preservation and production efforts were found to be “severely deficient.”
• Plaintiffs failed to collect or preserve any electronic documents prior to their belated litigation hold.
• Plaintiffs failed to request documents from key custodians and witnesses.
• Plaintiffs’ memoranda (purporting to be litigation holds) never specifically instructed employees and key custodians not to destroy records.
• Plaintiffs designated employees with no experience conducting searches and who received no instruction on how to conduct searches, had no supervision during the collection, and had no contact with lawyers during the search.
• Plaintiffs unduly limited the scope of persons with relevant documents to the point of excluding many more who did in fact have responsive documents.
• One plaintiff’s representative admitted that she failed to search an executive’s PalmPilot, which may have contained relevant emails.
• One plaintiff’s general counsel at first declared that he supervised his company’s document search efforts; but later testified at a deposition that he delegated the search to a paralegal.  When pressed, he did not know the details of the paralegal’s communication with employees regarding preservation or whether employees complied. In fact, general counsel signed his declaration without fully investigating his company’s search efforts, and he lacked personal knowledge of many of the issues raised in his declaration.

Their Lawyers

• Lawyers’ telephone conversations, emails, and memoranda instructing plaintiffs to be over, rather than under, inclusive and noting that emails and electronic documents should be included in the production were not enough to constitute an effective litigation hold.
• Lawyers’ subsequent monthly case status memoranda, which included additional requests for documents, were not enough to constitute either an effective litigation hold or adequate monitoring.
• Lawyers failed to focus efforts on discovery while a three-year discovery stay was in place.
• Lawyers failed to sufficiently guide, supervise, and monitor their clients’ document collection.

* – On the surface, these actions may appear intentional or wanton to the unsuspecting eye.  However, what “saved” these thirteen plaintiffs was the fact that these errors were corrected later through the filing of amended declarations and other curative conduct.

Wheel of Sanctions

Now back to the sanctions.  Scheindlin stated “a plaintiff’s duty [to preserve information] is more often triggered before litigation commences, in large part because plaintiffs control the timing of litigation.”  Here, as with other cases we’ve blogged about, “the breach of the duty to preserve, and the resulting spoliation of evidence, may result in the imposition of sanctions by a court.”  Recognizing that not all sanctions are created equal, Scheindlin addresses which sanctions would be proper under the circumstances.

She explains that for fines, cost shifting, and other “less severe” sanctions, the crux of the matter is the conduct of the spoliating party.  For more severe sanctions (i.e., dismissal, preclusion, and adverse inference jury instructions), “the court must consider, in addition to the conduct of the spoliating party, whether any missing evidence was relevant and whether the innocent party has suffered prejudice as a result of the loss of evidence.”

Scheindlin employs the following burden shifting test to deal with the burden of proof in cases such as this one, which seek more severe sanctions for egregious conduct:

1. When the spoliating party’s conduct is sufficiently egregious to justify a court’s imposition of a presumption of relevance and prejudice, or when the spoliating party’s conduct warrants permitting the jury to make such a presumption, the burden shifts to the spoliating party to rebut that presumption.
2. If the spoliating party demonstrates to a court’s satisfaction that there could not have been any prejudice to the innocent party, then no jury instruction will be warranted, although a lesser sanction might still be required.

The Final Spin

After a lengthy and thorough review of the facts (indeed, Judge Scheindlin estimates that, collectively, almost 300 hours were spent on the motion and opinion), the court found that plaintiffs “failed to execute a comprehensive search for documents and/or failed to sufficiently supervise or monitor their employees’ document collection.”  Scheindlin concludes with the lesson of this case:

While litigants are not required to execute document productions with absolute precision, at a minimum they must act diligently and search thoroughly at the time they reasonably anticipate litigation.

The failure to issue an effective written litigation hold constitutes gross negligence because that failure is likely to result in the destruction of relevant information.  Furthermore, a litigation hold that places total reliance on clients’ employees to search and select what they believed to be responsive records without any supervision from counsel is not “effective.”

In the end, jurors will receive instructions that they are permitted to presume the lost evidence is relevant and favorable to the defendants.  Additionally, plaintiffs must now deal with monetary sanctions on top of their alleged $550 million losses.

Scheindlin set the precedent for the consequences of this sort of behavior in Zubulake and subsequent decisions. Courts are not going to accept excuses for disregarding now-standard principles and practices.  Attention must be paid to avoid the pitfalls documented by Judge Scheindlin.  Heed her warning because with one spin of the Wheel of Sanctions, you might not be able to afford buying a vowel.

Given our recent treatment of Zubulake as the “ebook of Genesis” on the creation of ediscovery, it is important to note that sanctions for ediscovery mishaps existed even before the term was coined.

This case arose out of a class action lawsuit brought by Prudential policy holders alleging that Prudential engaged in a scheme to sell life insurance through deceptive practices. On September 15, 1995, the court entered its first Order requiring that all parties preserve all documents and other records containing information potentially relevant to the litigation. This opinion relates to the multiple instances of document destruction by Prudential employees and agents after the issuance of this Order.

In 1994, pursuant to a regulatory directive issued to most life insurance companies, Prudential undertook a sweep of its sales materials to remove any unauthorized materials. To accomplish this, the company issued a manual that outlined the procedures to be followed in order to identify and remove all unauthorized sales materials. The materials specifically called for the destruction of all materials no longer authorized by Prudential.

Subsequent to the court order directing the preservation of documents, various document retention notices were sent to various employees within Prudential. All except one of these notices were sent via email. At the time, less than half of the employees had email or access to email, and none of the notices were ever printed out in hard copy or posted for all employees to see. The management charged with notifying the employees failed to adequately ensure that all employees were made aware of the document retention policy. The management did not forward the emails to all the employees, nor did management distribute the document retention policies via hard copy to the employees. This resulted in some of the employees seeing various emails relating to document retention, however most employees did not see any.

Because of the haphazard approach to the dissemination of the emails and notices, documents continued to be destroyed. One particularly extreme situation occurred in the Prudential Cambridge office where 9000 client files were reviewed and any unauthorized materials were destroyed. Most employees from the Cambridge office denied ever seeing any of the emails relating to document retention. In compliance with the existing document destruction policies, Prudential made unannounced compliance audits to the field offices to ensure that the offices were destroying the appropriate materials. At these audits, the auditors would destroy any unapproved sales materials, and issue fines and sanctions to employees that were not complying with the destruction policy.

The Federal Rules of Civil Procedure provide for sanctions when a party to litigation fails to obey a pre-trial order. The Court must “let the punishment fit the crime.” The Third Circuit provides a two-part test with concomitant factors to determine whether and which sanctions are appropriate. First, the Court must consider the conduct at issue and must explain why the conduct warrants sanctions. A pattern of wrongdoing may require stiffer sanctions than an isolated incident. Second, after evaluating the conduct at issue, the Court must consider the range of permissible sanctions and must explain why less severe sanctions are inadequate or inappropriate. After making its findings of fact and law, the Court was satisfied that the conduct of Prudential explicitly violated the mandate to preserve documents.

Although there is no proof that Prudential, through its employees, engaged in conduct intended to thwart discovery through the purposeful destruction of documents, its haphazard and uncoordinated approach to document retention denied its opponents potential evidence to establish facts in dispute. Because the destroyed records in Cambridge are permanently lost, the Court will draw the inference that the destroyed materials are relevant and if available would lead to the proof of a claim. When the September 15, 1995 Court Order to preserve documents was entered, it became the obligation of senior management to initiate a comprehensive document preservation plan and to distribute it to all employees. The senior management needed to advise its employees of the pending litigation, provide them with a copy of the Court’s Order, and to acquaint its employees with the possible sanctions that the Court could issue for noncompliance with this Court’s Order. When senior management fails to establish and distribute a comprehensive document retention policy, it cannot shield itself from responsibility because of field office actions. The obligation to preserve documents that are potentially discoverable materials is an affirmative one that rests squarely on the shoulders of senior corporate officers.

Here, Prudential violated the Order of the Court to preserve documents and failed to advise its field offices of the pending litigation and the Court-ordered requirement to preserve documents. While e-mail is an appropriate means for a corporation to disseminate its policy, the internal orders directed to the field by Prudential lacked coordination and represented a haphazard response. Further, because documents have been destroyed, they can never be retrieved and the resultant harm is incalculable. Thus, the Court concluded that there existed more than enough to warrant sanction. The sanctions issued to Prudential for its conduct are listed below:

Sanctions Issued:

1. Within ten days after the opinion, Prudential shall mail to every employee a copy of the Court’s September 15, 1995 Order, together with a full explanation of the pending litigation and the civil and criminal sanctions that apply to the failure to follow an Order of the Court.
2. Within thirty days, Prudential shall submit to the Court a written manual that embodies Prudential’s document preservation policy.
3. During the pendency of the litigation, Prudential shall dedicate a telephone “hotline” to facilitate reports of document destruction, if any.
4. During the pendency of the litigation, Prudential shall establish a certification process wherein each field manager shall certify that his/her office is in compliance with the document retention manual and has not engaged in document destruction contrary to Prudential’s established policy.
5. Within ten days after the opinion, Prudential shall pay to the Clerk of the United States District Court for the District of New Jersey, the sum of $1,000,000. This sanction recognizes the unnecessary consumption of the Court’s time and resources in regard to the issue of document destruction.
6. Prudential shall promptly reimburse plaintiffs’ counsel for all fees and costs associated with the motion for sanctions, the order to show cause, the depositions and discovery in preparation for the depositions, and the preparation and distribution of the Report of Investigation to the Court and counsel.
7. The sanctions contained herein are without prejudice to the subsequent imposition of additional sanctions as may be fair and appropriate to remedy unknown harm to individual party opponents caused by document destruction.

Scott Paterson is a third year student at Seton Hall Law School with an interest in Tax Law. After graduation, Scott will be working for a New Jersey Superior Court Criminal Judge.

As many e-discovery scholars may know, U.S. District Judge Shira A. Scheindlin of the Southern District of New York was the author of the watershed e-discovery opinion, Zubulake v. UBS Warburg LLC. However, Judge Scheindlin had been pondering e-discovery issues well before Zubulake landed on her docket. In 2000, Judge Scheindlin and Jeffrey Rabkin, a former law clerk, wrote the above article regarding the applicability of Rule 34 of the Federal Rules of Civil Procedure to electronic documents as the Rule existed before it was amended in 2006. This post will analyze Judge Scheindlin’s main points and how they’ve been addressed in the amendment to Rule 34.

Scheindlin Point 1: Define the Scope of Rule 34(a) to Include All Forms of Electronic Evidence

Prior to 2006, Rule 34(a) allowed litigants to request the production of “any designated documents,” which included “writings, drawings, graphs, charts, photographs, phonorecords, and other data compilations from which information can be obtained.” Judge Scheindlin noted that the italicized provision of Rule 34 (which was written in 1970) implied that a request for electronic data, or “data compilations,” could be satisfied by merely printing out such data onto paper.

Judge Scheindlin noted a significant problem with this: not all electronic evidence fits nicely within the definition of “documents” or the category of “data compilations.” Such a definition would likely exclude electronic information such as “embedded data” (or metadata, such as that on the right), web caches, web history, temporary files, and cookies. Judge Scheindlin noted that such electronically stored information could be relevant but nonetheless undiscoverable under the pre-2006 version of Rule 34(a).

Judge Scheindlin proposed an amendment to Rule 34(a), which would allow for the production of “any designated documents or any designated data,” and would replace “other data compilations from which information can be obtained” with “electronically-stored information.” Judge Scheindlin believed that this definition would be more inclusive of various types of electronic evidence and would allow courts to have a textual basis for developing different bodies of case law for “documents” and “data,” a distinction that would recognize the special characteristics of electronically stored information when considering issues of privilege, protective orders, and whether such information was within the producing party’s custody and control.

Fast-forward to 2009: Rule 34(a) now allows parties to request production of “any designated documents or electronically stored information — including writings, drawings, graphs, charts, photographs, sound recordings, images, and other data or data compilations — stored in any medium from which information can be obtained.” Rule 34(a) is not word-for-word what Judge Scheindlin suggested, but it did change in order to alleviate her concern, and it is much more specific as to what is discoverable: traditional documents, or electronically stored information.

Scheindlin Point 2: Amend Rule 34 to Reduce Judicial Intervention and Harness the Power of Electronically Stored Information

Another issue that Judge Scheindlin lamented was the way in which electronically stored information was produced during discovery. At the time, courts had found that Rule 34 had applied to electronic documents, but they diverged regarding whether parties could specify the format in which electronic documents should be produced. Worse, because Rule 34 contemplated that a request for electronic documents could be satisfied by producing print-outs of such documents, many courts held that such production obviated the need to produce the electronic information in native format, even though that native format was often times more useful than the print-outs.

Judge Scheindlin also lamented the amount of possible judicial intervention that the pre-2006 rules invite regarding electronic discovery, such as who should bear the costs of producing electronically stored information, in what format must the producing party produce the electronically stored information, whether such information should remain private, and how these disputes should be resolved. Judicial intervention to resolve these issues often costs large amounts of money and expend valuable judicial resources that are often best used to rule on a case’s merits.

As such, Judge Scheindlin offered a solution: amend Rule 34(b) to allow the following:

1. All electronically stored information shall be produced in the same format in which it is stored;
2. Such information is presumptively subject to a protective order;
3. Any party requesting the production of such information in a different form shall bear the costs of doing so.

In Judge Scheindlin’s mind, these changes would force producing parties to produce electronically stored information in its most useful format while keeping judicial intervention at a minimum.

Fast-forward to 2009: Rule 34(b) now requires the producing party to “produce documents [and electronically stored information] as they are kept in the usual course of business,” or in the form that the requester specifies. This allays part of Judge Scheindlin’s concern, but still requires producing parties to produce electronically stored information in the form most useful to the requester. However, this change in Rule 34 does not foreclose the objection of a requested form as being unduly burdensome, and Rule 34(b)(E)(iii) explicitly states that producing parties need not produce such information “in more than one form.”

* * *

As a fitting end to her article, Judge Scheindlin reiterates the purpose of her article of hoping to invite change to Rule 34 to bring more clarity to e-discovery and states that “[i]f this Article serves to incite debate and deliberation on how the Rules should best be brought into the twenty-first century, we have achieved our goal.” Mission accomplished, Your Honor.

This is the fifth chapter in our Zubulake series.

Zubulake’s suit against UBS was your typical, run on the mill, employment discrimination case. However, along the way it has now become one of the seminal e-discovery cases.

Zubulake V is concerned with the plaintiff’s request for electronically stored information (“ESI”), in particular, e-mails. This motion was made after two years of attempting to get the information that she requested. The court was faced with the issue of whether to issue sanctions on UBS for its failure and delay in producing relevant evidence and if so whether UBS acted negligently, recklessly, or willfully.

The UBS’s lawyers did make some efforts to preserve evidence. They told employees to not delete relevant information. They instructed IT personnel to preserve back up tapes. And they met with key individuals and explained that the need to preserve all relevant evidence. However, it eventually came to light that these efforts were not enough. It was discovered that some back up tapes that stored e-mails had been deleted and that at least one relevant e-mail had been lost.

Judge Scheindlin immediately noted that many of the discovery issues presented in this case were due to the lack of effective communication.

Judge Scheindlin outlined the attorney’s and client’s duty to preserve and produce ESI. In short, counsel has an obligation to instruct his client to preserve relevant information. The client has an obligation to take that instruction to heart.

Ultimately, the court found that Zubulake was prejudiced by the failure to produce relevant e-mails and therefore, UBS was sanctioned with costs and fees. The court also determined that adverse inference instruction based on spoliation was appropriate in this situation. This was based on three elements. One, the defendant was in control of the evidence and had a duty to preserve. Two, the defendant willfully destroyed the records. Three, the destroyed evidence was relevant to Zubulake’s claim.

Attorneys, as well as clients, should be aware of the recommendations made by Judge Scheindlin in regards to e-discovery practices. These include the following:

1. Communicate Effectively. Attorneys need to talk with the key players involved in the litigation in regards to their discovery obligations. Litigation holds must be issued and attorneys are responsible for re-issuing the litigation hold to remind the employees about their obligation to preserve information. An active role must be taken by counsel to ensure that the litigation hold is closely followed.
2. Understand the Client’s ESI network. Attorneys should know all the places that ESI is stored and reasonable efforts should be made to identify and preserve relevant ESI. Discussions with key players will help unveil discoverable information. Further, attorneys should know their clients’ document retention policies inside and out. It is wise for the attorney to meet with IT personnel and receive a basic education on the system and policies.
3. Backup! Attorneys should make sure that their backup materials are identified and retained in a safe place. It may be best for counsel to personally store the backup materials, if there is a small amount. However, if there are a number of backup tapes, they should be placed into storage.
4. Get Employees to Produce. Attorneys must instruct the employees to produce a copy of all the relevant documents that they have retained.

Shannon is a graduate of Boston College and is currently a third year student at Seton Hall Law.

Our fourth installment of our Zubulake series addresses two key critical issues in the e-discovery process: (1) the scope of the duty to preserve and (2) remedies for failure to preserve.

(1) Scope of the Duty to Preserve

The Zubulake IV opinion states that upon anticipation of litigation, a party to a lawsuit has the

“…duty to preserve what it knows or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence is reasonable likely to be requested during discovery and/or is the subject of a pending discovery request.”

To satisfy this standard, the attorney and party should work together to identify the key employees involved in the case. Next, all relevant documents should be identified with reasonable efforts – including all current documents and back-up tapes. The best way to ensure the preservation is to communicate a “litigation hold” to those identified key people.

So what are the relevant documents? When the party announces its litigation hold, a “mirror-image” of relevant computer system data from key people must be taken. Most importantly, any document destruction policy must stop.

The scope of the duty to preserve is probably best summed up as “reasonable” and “relevant”. An attorney should take reasonable efforts to preserve relevant data upon anticipation of litigation.

(2) Adverse Inference for Spoilation

Zubulake sought an adverse inference instruction because UBS lost relevant back up tapes. The Court stated that it could only issue an adverse inference if (1) the party had control over evidence at the time it was destroyed, (2) evidence was destroyed with “culpable state of mind” and (3) evidence was relevant to party’s claim or defense such that a reasonable trier of fact could find that the evidence would support a party’s claim or defense.

The most difficult of the three-prong test, appears to be the relevance prong. A party seeking sanctions must prove that the lost or destroyed evidence is relevant without having seen the evidence. Zubulake did not overcome this barrier and I would be interested to know of cases that have. The Court reasoned that this high standard is important because an adverse inference can have a substantial effect on the jury from the outset of trial.

Although Zubulake could not prove that the emails were relevant to her claims and defenses, the Court acknowledged that UBS should have produced the emails and ordered UBS to pay costs of re-deposing certain witnesses.

In sum, the scope of the duty to preserve is probably best summed up as “reasonable” and “relevant”. An attorney should take reasonable efforts to preserve relevant data upon anticipation of litigation.

Katherine Sparks is less than a month away from graduating from Seton Hall University of Law and starting bar exam preparations.

Background

In Zubulake I, Zubulake v. UBS Warburg, 217 F.R.D. 309 (S.D.N.Y. 2003), Laura Zubulake was seeking evidence stored on UBS’s backup tapes. Retrieval of the evidence was going to be costly and time-consuming. The dispute in Zubulake I centered on which party should pay for the costs incurred in restoring and producing these backup tapes.

As part of the preliminary determination, the court ordered the UBS to produce, at its own expense, all requested emails existing on its optical disks, active servers, and five backup tapes as selected by the plaintiff. The court determined that only after the contents of the backup tapes were reviewed and the defendant’s costs were quantified, the court would conduct the appropriate cost-shifting analysis using a seven factor test.The seven factors elucidated in Zubulake I (in descending order of importance) included:

(1) the extent to which the request is specifically tailored to discover relevant information;

(2) the availability of such information from other sources;

(3) the total cost of production compared to the amount in controversy;

(4) the total cost of production compared to the resources available to each party;

(5) the relative ability of each party to control costs and its incentive to do so;

(6) the importance of the issue at stake in the litigation and;

(7) the relative benefits to the parties of obtaining the information.

Enter Zubulake III

In Zubulake III, issued on July 24, 2003, Judge Scheindlin took up the cost-shifting analysis previously laid out in Zubulake I. Zubulake selected five backup tapes corresponding to Matthew Chapin’s e-mails from May, June, July, August, and September 2001. Chapin was Zubulake’s immediate supervisor at UBS. The period chosen includes the time from Zubulake’s initial EEOC charge of discrimination (August 2001) until just before her termination (in the first week of October 2001).

According to the affidavit submitted by Zubulake’s counsel, the cost of restoration and production from the five tapes was $19,003. At dispute now is the cost of restoration and production from the remaining tapes, estimated to be $273,649, which includes $165,954 to restore and search the tapes and $107,694 in attorney and paralegal review costs.

Outcome

After applying the seven-factor test, Judge Scheindlin found “some cost-shifting” was appropriate and that most, but not all, of the factors weighed against cost-shifting. The first four factors weighed against cost-shifting and the next two factors were deemed neutral. Therefore, the most decisive factor, ironically the least important factor, favored the cost-shifting – “the relative benefits to the parties of obtaining the information.” Judge Scheindlin found that Zubulake had “not been able to show that there [wa]s indispensable evidence” on the back-up tapes. Thus, UBS was ordered to bear 75% of the cost of restoring and searching the back-up tapes.

However, UBS was not permitted to shift any of the cost of reviewing the e-mails once they had been restored and searched. At first reading, this seems counterintuitive. Why is Zubulake ordered to pay 25% of the costs? Judge Scheindlin explained that application of the factors “is not merely a matter of counting and adding; it is only a guide. . . . It is beyond cavil that the precise allocation is a matter of judgment and fairness rather than a mathematical consequence of the seven factors.” Moreover, there is a subtle distinction in the way costs were split between the parties. The court applied the general rules of e-discovery: As a general rule, where cost-shifting is appropriate, only the costs of restoration and searching should be shifted. Restoration, of course, is the act of making inaccessible material accessible. Search costs should also be shifted because they are so intertwined with the restoration process. But, the responding party should always bear the cost of reviewing and producing electronic data once it has been converted to an accessible form. Therefore, Zubulake would contribute to those costs of restoration; and, true to general e-discovery practice, the responding party, UBS, was to pay for the cost of reviewing and producing electronic data once it had been restored.

Judge Scheindlin aptly summarized her holding on the issue:

The point is simple: technology may increasingly permit litigants to reconstruct lost or inaccessible information, but once restored to an accessible form, the usual rules of discovery apply.

Still, the Zubulake saga is not quite finished. While restoring the e-mails in Zubulake III, the parties discovered that certain tapes were missing. Additionally, certain isolated e-mails had been deleted from the system after being saved, and others had not been saved in the first place. Zubulake subsequently moved for sanctions against UBS Warburg, including: (a) the full costs of restoration; (b) an adverse inference instruction with respect to the backup tapes that were missing; and (c) the costs of re-deposing certain individuals concerning the issues raised in the e-mails.

Tanya Basu is a Pharmacist and a third year student at Seton Hall Law School, focusing on Health and Intellectual Property Law.

Often times, the posts on this blog talk about a specific lesson to be learned related specifically to e-discovery rules, practice, and procedure. It can be easy to forget that in many cases, the e-discovery part of the litigation is not the end all and be all of the case, but it rather is interrelated with other substantive areas of law. This was especially true in the Zubulake v. UBS Warburg LLC opinion cited above, one of the many in the seminal Zubulake case.

In this 2003 Zubulake v. UBS Warburg LLC opinion, the plaintiff, Laura Zubulake, moved for an order permitting her to release the transcript of Christopher Behny’s deposition to securities regulators. Behny was the Manager of Global Messaging for UBS. The Southern District of New York had previously ordered UBS to produce an individual knowledgeable about UBS’s email retention and retrieval policies. After UBS produced Behny for a deposition, Behny testified on the structure of UBS’s backup system, its backup tape destruction/retention policy, and the feasibility and estimated cost of restoring the data that Zubulake requested.

Upon review of the deposition, Zubulake concluded that UBS was in violation of Section 17(a) of the Securities Exchange Act of 1934 and SEC Rule 17a-4 promulgated thereunder. (These combine to require certain document retention requirements on brokerage firms.) Zubulake thus requested the court allow her to release the transcript of the deposition so that should could comply with her ethical obligations under various securities laws to report knowledge of rule violations to the appropriate authorities.

In denying Zubulake’s motion, the court determined that Zubulake failed to proffer any reason for disclosing the contents of Behny’s deposition. The court ruled that Zubulake had no clear duty to disclose the information contained within the deposition, and it thus denied her motion.

At first glance, it would seem that this case has little, if anything, to do with e-discovery. However, if one digs a little deeper, we see that there is one important e-discovery lesson to be learned. Namely, e-discovery issues often are interrelated to other areas of law. Thus, it is important to keep in mind the interplay between e-discovery and other legal theories when seeking to compel disclosure of electronic information. In this specific opinion, the e-discovery issues played out in the context of securities law. In other cases that have been discussed on this blog, e-discovery issues played out in the context of internet law, employment law, intellectual property, and construction law, to name a few.

The point here is that e-discovery issues can arise in all types of litigation. It is thus imperative for attorneys (and future attorneys) to be familiar with e-discovery concepts so that at the very least, they will know when to seek the advice of an e-discovery expert.

Tim Cedrone is a third year student at Seton Hall Law School.

For those of you that have been living under an e-discovery rock, and therefore have never heard of Zubulake, please continue reading.

The Zubulake decisions in 2003 through 2004 shook the world of e-discovery. Litigators, law professors, and all kinds of pundits, tuned in and took notice: U.S. District Judge Shira Scheindlin, one of the most brilliant trial judges on the bench today, and unfortunately for UBS, an e-discovery expert threw the gavel at UBS on this one. Zubulake walked away from this case with close to $30 million and UBS was left with a deep hole and lots of sanctions.

But we are skipping ahead in our saga. The case started as a common gender discrimination suit brought by Zubulake against her former employer, UBS. Zubulake requested that UBS produce “[a]ll documents concerning any communication by or between UBS employees concerning the plaintiff.” UBS produced 350 pages of documents, including approximately 100 pages of email. Zubulake knew that emails existed that the defendant had failed to produce because she, in fact, had produced approximately 450 pages of email correspondence. Fed. R. Civ. P. 26 provides that discovery permitted with respect to any matter not privileged that is relevant to the claim or defense of any party. The presumption is that responding party must bear the expense of complying with discovery requests. Nonetheless, UBS refused to produce any of the emails from their archival media, claiming undue burden and expense of over $175,000. UBS wanted the court to shift the cost of production to the plaintiff.

The main issue in this case was determining to what extent is inaccessible electronic data discoverable, and who should pay for its production? The court considered the Rowe 8-factor cost shifting test. The court noted that the application of the Rowe factors may result in disproportionate cost shifting away from large defendants, and the court modified the test to 7 factors, in descending order of importance:

(1) the extent to which the request is specifically tailored to discover relevant information;

(2) the availability of such information from other sources;

(3) the total cost of production compared to the amount in controversy;

(4) the total cost of production compared to the resources available to each party;

(5) the relative ability of each party to control costs and its incentive to do so;

(6) the importance of the issue at stake in the litigation and;

(7) the relative benefits to the parties of obtaining the information.

However, the court would not apply its new 7-factor test just yet. The court wanted to follow a three step process to arrive at a solution. The steps iterated in the opinion are:

1. Thoroughly understand the responding party’s computer system, both with respect to active and stored data.
2. Because the cost-shifting analysis is so fact-intensive, it is necessary to determine what data may be found on the inaccessible media. Production from a small sample is a sensible approach.
3. Apply the 7-factor cost-shifting factor.

Therefore, the court ordered the defendant to produce, at its own expense, all responsive email existing on its optical disks, active servers, and five backup tapes as selected by the plaintiff. The court determined that only after the contents of the backup tapes are reviewed and the defendant’s costs are quantified, the court will conduct the appropriate cost-shifting analysis.

So, Zubulake I leaves us with an important lesson – the undue burden card has been taken out of play and now courts will be more skeptical of defendants trying to weasel their way out of paying for data retrieval, especially when the plaintiff has a legitimate case.

Throughout the next few days, we will be continuing with the Zubulake case line.  Check back again tomorrow for more.

Tanya Basu is a Pharmacist and a third year student at Seton Hall Law School, focusing on Health and Intellectual Property Law.