The field of electronic discovery and digital forensics is rapidly evolving. In the early years of this millennium, rules of discovery were primarily concerned with paper, but with the advent of the computer age, documents are drawn up electronically, and important rules regarding electronically stored information still needed to be invented. This series looks at some of the leading cases, opinions, and results that have informed this evolution.

Justice 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 job, after which, according to the plaintiff, he “belittled 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 Ex-Seller $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 the court found) falsifying emails, records, and complaints. Zubulake sued UBS for gender discrimination, failure to promote, and retaliation under federal, state, and local laws.

UBS argued that Chapin was not harsh because of sexual discrimination, but instead was harsh towards everyone, including male employees. A remarkable argument! The bank maintained that he was fired for insubordination.

When it came time to produce documents in discovery, UBS produced only 100 emails in total, but Zubulake herself was able to produce 450 emails relevant to communications between company staff. UBS was under litigation retention obligations, but had apparently still made hundreds of emails disappear despite its obligation to retain them. In addition, UBS produced additional emails that appeared to be falsely generated.

When discovery of archival data and backup tapes was requested, UBS claimed that seeking such data would be an undue expense and burden to 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 weighting factors used to determine Rowe cost shifting.

Judge Shira Scheindlin of the Southern District of New York produced five evolving opinions on who should pay for production/discovery, to what extent discovery and production of ESI is permitted, and how to determine a party’s duty to preserve evidence. She discovered that the fact that data is stored electronically (ESI) does not necessarily make it an undue expense to produce. In fact, due to the ability to perform machine/computer searches, costs can 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 placed. ESI It is stored. It was determined that there were five categories of electronic repositories: online data (such as hard drives), near-online 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 the most subject to cost transfer.

The court ordered data sampling by restoring 5 backup tapes to determine if the remaining 70+ tapes were likely to produce relevant data. They produced 600 reply messages. Judge Schendlin devised a new seven-factor test to determine whether cost shifting 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 information from the most readily available sources, such as company reports or public information rather than having to search 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 considerably less than the possible gains in the case).
4: Total cost V. resources available to each party (should not bankrupt anyone).
5: Relative capacity, 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: Significance 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?
(It is generally assumed that the plaintiff is out to benefit, 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 plundering of UBS was intentional, the missing information is presumed to be relevant.” In other words, if data was missing, the jury might assume that UBS destroyed it on purpose because it might have damaged 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 repeated depositions, the costs of the motion, and almost the entire 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 litigation. – not only once there is a litigation hold, but also if litigation is anticipated.

Lawyers have a duty to monitor the ESI compliance of their clients. This includes outside advice! The sanctions do not only affect the party and the in-house lawyers.

Sampling of data is permitted and encouraged. In the discovery process, first take data from some tapes and hard drives, for example, to see if there’s likely to be anything on the rest, or even if it’s all available on some (and possibly duplicated on the rest).

The disclosing party may change the costs of less accessible data. If the applicant is seeking information that is difficult to unearth or produce, the cost of production may need to be passed on to the applicant.

There may be penalties imposed for divestiture of 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.

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