The field of electronic discovery and digital forensics is rapidly evolving. In the early years of this millennium, discovery rules dealt primarily with paper, but with the advent of the computer age, documents are redacted electronically, and important rules still needed to be invented regarding information stored electronically. This series looks at some of the major cases, opinions, and results that have informed this evolution.
Judge Shira Scheindlin issued precedent-setting (and frequently cited) opinions in the landmark case of Zubulake v. UBS Warburg – 2003-2005.
The backstory:
Laura Zubulake worked in New York and Connecticut for the Swiss firm UBS Warburg, the largest bank in Europe at the time. She was an extremely successful stock manager, earning more than $650,000 a year selling Asian stocks to institutional investors for a decade. In 2000, she was passed over for a promised promotion to take over as senior sales manager for the US Asian section when her superior left that position.
Instead, Matthew Chapin was given the position, after which, according to the plaintiff, he “disparaged her in front of his co-workers and denied her important accounts… During the trial, a former UBS sales assistant verified who heard Chapin’s call”. Zubulake is “old” and “ugly”. (“UBS must pay former saleswoman $29.3 million in sex discrimination case (update 5)” – Bloomberg, April 6, 2005).
In August 2001, Zubulake filed a complaint with the employment commission, and in October, Chapin fired her, in the process (as determined by the court) falsifying emails, records, and complaints. Zubulake sued UBS for gender discrimination, lack of promotion and retaliation under federal, state and municipal laws.
UBS argued that Chapin was not harsh because of sexual discrimination, but rather was harsh with everyone, including male employees. A remarkable argument! The bank maintained that he was fired for insubordination.
When it came time to produce documents on the discovery, UBS produced only 100 emails in total, but Zubulake itself was able to produce 450 relevant emails of communications between company staff. UBS was under litigation retention obligations, but had apparently still made hundreds of emails disappear despite its retention obligation. In addition, UBS produced additional emails that appeared to have been falsely generated.
When the discovery of archival data and backup tapes was requested, UBS stated that searching for such data would be an undue expense and a burden on UBS. He cited the case of Rowe v. William Morris and asked the court to shift production costs to Zubulake based on the “Rowe test,” a set of weights used to determine cost shifting in the Rowe case.
Judge Shira Scheindlin of the Southern District of New York produced five evolving opinions on who should pay for production/discovery, to what extent ESI discovery and production is allowed, and how to determine a party’s duty to preserve evidence. She found that just because the data is stored electronically (ESI) doesn’t necessarily make it wasteful to produce. In fact, due to the ability to perform machine/computer searches, costs may be less than equivalent human searches of paper documents.
The cost burden increases with decreasing accessibility, as determined by the type of medium in which it is used. esi It is stored. It was determined that there were five categories of electronic repositories: online data (such as hard drives), near-line data (such as CD and other optical discs), offline storage (such as magnetic tapes), backup tapes, and fragmented, erased, and damaged data. Backup tapes and fragmented or damaged data were considered to be the most inaccessible and therefore most subject to cost transfer.
The court ordered data sampling by restoring 5 backup tapes to determine whether the remaining 70+ tapes were likely to produce relevant data. They produced 600 reply messages. Judge Schendlin designed a new seven-factor test to determine whether cost transfer was in order.
The first two factors are considered the most important.
1: Is the request designed to uncover relevant information? (Fishing expeditions frowned upon).
two: Is information available from other sources? (Parties should obtain the information from the most readily available sources, such as company reports or public information rather than having to dig through old backup tapes, for example.)
The following three factors are considered to be of secondary importance.
3: Total cost of production vs. the amount in dispute (the cost of discovery must be substantially less than the potential gains in the case).
4: Total cost V. resources available to each party (shouldn’t bankrupt anyone).
5: Relative ability, incentive to control costs (clearly the party paying for production has a strong incentive to control costs).
The last two factors are considered less important than the first five.
6: Importance of the issues at stake in the litigation (Will the case have a significant impact on society? The Zubulake case had to do with gender discrimination, but it was not a groundbreaking case in that area).
7: What are the relative benefits to the parties of obtaining the requested information?
(In general, it is assumed that the plaintiff aims to profit, so this test is rarely considered of great importance.)
Ultimately, the court found that UBS had lost evidence (some monthly backup tapes were missing), carelessly destroyed evidence (some weekly tapes replaced monthly tapes), deliberately withheld additional evidence, and even falsified evidence. As a result, Judge Scheindlin issued an adverse inference instruction to the jury: “Because the looting of UBS was intentional, the missing information is presumed to be relevant.” In other words, if the data was missing, the jury could assume that UBS destroyed it on purpose because it could have hurt the bank’s case. A disaster for UBS.
Zubulake won more than he asked for: $29 million, including $9 million in compensatory damages and $20 million in punitive damages. UBS had to pay for the depositions and repeat declarations, the costs of the motion and almost all the cost of production.
The Zubulake case produced several milestones in the evolution of the law surrounding electronic discovery and led to many of the 2006 amendments to the Federal Rules of Civil Procedure (FRCP). Milestones include:
The parties have a duty to preserve ESI during the litigation. – not only once there is a litigation hold, but also if litigation is anticipated.
Lawyers have a duty to monitor their clients’ ESI compliance. This includes outside consulting! The sanctions do not only affect the party and the internal lawyers.
Data sampling is permitted and encouraged. In the discovery process, take data from some tapes and hard drives first, for example, to see if there is likely to be something on the rest, or even if everything is available on some (and possibly duplicated on the rest).
The disclosing party can change the costs of the less accessible data. If the requester is looking for information that is difficult to unearth or produce, the cost of production may need to be passed on to the requester.
There may be penalties imposed for stripping ESI.
The Zubulake case established rules and evidence that have informed subsequent court decisions, as well as the 2006 amendments to the Federal Rules of Civil Procedure and the 2009 California rules. They continue to help shape and inform the law regarding information stored electronically. As a result, the case also continues to reshape the computer forensics and electronic discovery industries.
Next in this series: the 2006 ESI Amendments to the Federal Rules of Civil Procedure.
