Electronic Discovery: Lessons from Zubulake -...

© 2006 Larkin Hoffman Daly & Lindgren Ltd.1

Electronic Discovery:Electronic Discovery:Lessons from ZubulakeLessons from Zubulake

Bruce J. DouglasDaniel J. Ballintine

Presented November 29, 2006to Larkin Hoffman Daly & Lindgren Ltd.


Introduction Introduction

l What is a Zubulake, anyway, and how do I pronounce it?

l Why is this important to me --– As a litigator - a framework– As a non-litigator - recognize the issue

l You may be a “first responder”


Take AwaysTake Aways

l ICPAPl “Litigation Hold”l Trigger Datel Scopel Obligations of Counsel


OverviewOverview

l Unique qualities of electronically stored information (“ESI”)

l Unique problems of identifying, collecting, preserving and producing ESI

l The client’s obligationsl Outside counsel’s obligationsl Ethical obligationsl Sanctions


VocabularyVocabulary

l Electronically stored information (“ESI”)l Electronic discoveryl Metadatal Backup tapel Archived datal “Litigation hold”


The Zubulake casesThe Zubulake casesl May 13, 2003 - the litigation world changedl First decision in a discovery dispute by Judge

Shira A. Scheindlin in the case of Laura Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309 (S.D.N.Y. 2003) (“Zubulake I”)

l Case involved claims of sex discrimination -failure to promote and retaliation for filing a charge with the EEOC

l Issue became: To what extent is inaccessible electronic data discoverable, and who should pay for its production?


Zubulake I Zubulake I -- General PrinciplesGeneral Principles“The pre-trial deposition-discovery mechanism

established by Rules 26 to 37 is one of the most significant innovations of the Federal Rules of Civil Procedure. . . . The new rules . . . restrict the pleadings to the task of general notice-giving and invest the deposition discovery process with a vital role in the preparation for trial. . . . The way is now clear, consistent with recognized privileges, for the parties to obtain the fullest possible knowledge of the issues and facts before trial.”

-- Hickman v. Taylor, 329 U.S. 495, 500-01 (1947) (emphasis added)


Zubulake I Zubulake I -- Liberal Discovery and Liberal Discovery and its Limitationsits Limitationsl Fed. R. Civ. P. 26 - Discovery permitted with

respect to any matter not privileged that is relevant to the claim or defense of any party

l Presumption is that responding party must bear the expense of complying with discovery requests

l “Undue burden or expense” to responding party. Fed. R. Civ. P. 26(c)


Zubulake I Zubulake I -- CostCost--ShiftingShifting

l The “proportionality test” balances the broad scope of discovery under Rule 26(b)(1) with the cost-consciousness of Rule 26(c)

l Cost-shifting may be permitted in appropriate cases

l But, not to be assumed merely because electronic evidence is involved


Zubulake I Zubulake I -- Inaccessible vs. Inaccessible vs. AccessibleAccessiblel The real issue concerning the undue

burden or expense of producing electronic evidence turns on whether it is in an accessible or inaccessible format

l Information deemed “accessible” is stored in a readily usable format

l Corresponds to the world of paper documents -- is it readily available or is it in storage?


Zubulake I Zubulake I -- Types of DataTypes of Data

l Active, online datal Near-line datal Offline storage/archivesl Backup tapes or other medial Erased, fragmented or damaged datal Metadata


Zubulake I Zubulake I -- Previously Used Factors to Previously Used Factors to Determine Undue Burden or ExpenseDetermine Undue Burden or Expense1. Specificity of discovery requests2. Likelihood of discovering critical information3. Availability of such information from other sources4. Purposes for which the responding party maintains the

requested data5. Relative benefits to the parties of obtaining the

information6. Total cost associated with production7. Relative ability of each party to control costs and

incentive to do so8. Resources available to each party

-- Rowe Entertainment, Inc. v. William Morris Agency, Inc., 205 F.R.D. 421, 429 (Mag. J. Francis), aff’d 2002 WL 975713 (S.D.N.Y. 2002)


Zubulake I Zubulake I -- New 7New 7--Factor TestFactor Test1. 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

controversy4. 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 issues at stake in the litigation; and7. The relative benefits to the parties of obtaining the

information


Zubulake I Zubulake I -- ComparisonComparisonRoweRowe ZubulakeZubulake1. Specificity of discovery requests2. Likelihood of discovering critical

information3. Availability of such information

from other sources4. Purposes for which the responding

party maintains the requested data5. Relative benefits to the parties of

obtaining the information6. Total cost associated with

production7. Relative ability of each party to

control costs and incentive to do so

8. Resources available to each party

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 issues at stake in the litigation; and

7. The relative benefits to the parties of obtaining the information-- Rowe Entertainment, Inc. v. William Morris Agency, Inc., 205 F.R.D. 421,

429 (Mag. J. Francis), aff’d 2002 WL 975713 (S.D.N.Y. 2002)


Zubulake I Zubulake I -- CostCost--Shifting Factors Shifting Factors are Not to be Weighted Equallyare Not to be Weighted Equallyl Test should not be applied mechanicallyl Courts “do not just add up the factors”l First two factors are most importantl Second group of factors (3-6) are next in

importancel Final factor (7) is least importantl Looking for a “gold mine” not allowedl Test run or small sample may be useful


Zubulake I Zubulake I -- ThreeThree--Step AnalysisStep Analysis

l Thoroughly understand the responding party’s computer system, both with respect to active and stored data

l 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

l Apply the 7-factor cost-shifting factorl Court ordered a sample restoration of backup tapes

and production of e-mails and required the parties to report back in 30 days


Zubulake IIZubulake II

l In a separate decision issued on the same day as Zubulake I, the Court denied Plaintiff’s request to disclose to the SEC certain deposition testimony of Defendant’s IT Manager

l Court denied Plaintiff’s request as she was not obligated to report the information, which was designated “confidential”

l Decision is not related directly to issue of production of ESIZubulake II, 230 F.R.D. 290 (S.D.N.Y. 2003)


Zubulake III Zubulake III -- Full Discovery and Full Discovery and CostCost--Shifting Shifting 216 F.R.D. 280216 F.R.D. 280 (June 24, 2003)(June 24, 2003)

l Sample evidence showed that a UBS manager concealed and deleted especially relevant e-mails.

l Applying its 7-factor test, the Court ordered complete restoration and production and shifted 1/4 of the estimated $166,000 cost of restoring and searching 77 backup tapes to Plaintiff

l Court denied cost-shifting of estimated $108,000 for producing e-mails restored from backup tapes


Zubulake IV Zubulake IV -- Wait, Wait Wait, Wait ---- It Gets It Gets Worse for the Defendant!Worse for the Defendant!220 F.R.D. 212 (October 22, 2003) 220 F.R.D. 212 (October 22, 2003)

l Some of the monthly backup tapes were missing :-(

l Some weekly tapes “backfilled” the monthly tapes

l Some plainly relevant e-mails created after UBS supposedly began retaining all relevant e-mails were not saved at all

l In short, a failure to take adequate steps to collect and preserve evidence


Zubulake IV Zubulake IV -- Defendant is Thrown Defendant is Thrown a Bonea Bonel Court held that reconsideration of its prior

cost-shifting order regarding backup tapes was not warranted

l Adverse inference instruction for spoliation of evidence not warranted

l But, Court orders re-depositions of witnesses and additional discovery


Zubulake IV Zubulake IV -- The Defendant’s The Defendant’s Duty to Preserve EvidenceDuty to Preserve Evidencel The employer had a duty to preserve

backup tapesl “The obligation to preserve evidence arises

when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation.”-- Fujitsu Ltd. v. Federal Express Corp., 247 F.3d 423, 436 (2d Cir. 2001)


Zubulake IV Zubulake IV -- The Trigger DateThe Trigger Date

l The duty to preserve evidence arose, at the latest, on the date Zubulake filed her EEOC charge

l The duty to preserve evidence may have been triggered even before the EEOC complaint was filed

l UBS should have known that the evidence was relevant to future litigation


Zubulake IV Zubulake IV -- ScopeScope

l When the duty to preserve evidence arises, must a corporation preserve everything?

l No. “Such a rule would cripple large corporations, like UBS, that are almost always involved in litigation.”

l As a general rule, a party need not preserve all backup tapes even when it reasonably anticipates litigation


Zubulake IV Zubulake IV -- ScopeScopel Anyone who anticipates being a party or is

a party to a lawsuit must not destroy unique, relevant evidence that might be useful to an adversary

l Documents or tangible things made by individuals “likely to have discoverable information that the disclosing party may use to supports its claims or defenses” Rule 26(a)(1)(A)

l Duty extends to “key players”


Zubulake IV Zubulake IV -- What to RetainWhat to Retain

l All relevant documents (but not multiple identical copies)

l Ways to accomplish this include:– retain all then-existing backup tapes and

catalog future relevant additions– mirror image of computer system at the time

the duty attaches– List is not exclusive or exhaustive


Zubulake IV Zubulake IV -- Summary of Summary of Preservation ObligationsPreservation Obligationsl “Once a party reasonably anticipates

litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.”

l Generally, a “litigation hold” does not apply to inaccessible backup tapes

l Exception: “key players”


Document Retention PoliciesDocument Retention Policies

l Generally, Zubulake does not mandate that operation cease, but client may have to interrupt it to capture relevant information.

l Fed. R. Civ. P. 37(f) “safe harbor”l Ethical obligationsl Privilege communications with client and

the “crime/fraud exception”


Zubulake IV Zubulake IV ---- The Adverse The Adverse Inference Issue (Spoliation)Inference Issue (Spoliation)l In the Second Circuit, the test is:

– Party having control over evidence had an obligation to preserve it at time it was destroyed

– “Culpable state of mind,” which can include negligence

– Relevance of the destroyed evidence


Zubulake V Zubulake V -- The Hammer FallsThe Hammer Falls229 F.R.D. 422229 F.R.D. 422 (June 20, 2004)(June 20, 2004)

“Commenting on the importance of speaking clearly and listening closely, Philip Roth memorably quipped, ‘The English language is a form of communication! . . . Words aren’t only bombs and bullets -- no, they’re little gifts, containing meanings!’ What is true in love is equally true at law: Lawyers and their clients need to communicate clearly and effectively with one another to ensure that litigation proceeds efficiently. When communications between counsel and client breaks down, conversation becomes ‘just crossfire,’ and there are usually casualties.”

-- Judge Shira A. Scheindlin quoting Philip Roth, Portnoy’s Complaint, in Zubulake V, 229 F.R.D. 422, 424 (S.D.N.Y. 2004)


Zubulake V Zubulake V -- The Hammer FallsThe Hammer Falls229 F.R.D. 422229 F.R.D. 422 (June 20, 2004)(June 20, 2004)

l After the re-depositions ordered in Zubulake IV, Plaintiff presented evidence:– More deleted e-mails– E-mails preserved on UBS’s active servers that were

never produced -- and they were relevant and damning– UBS personnel deleted e-mails, some of which were

subsequently recovered and produced long after initial request

– UBS personnel did not produce other evidence for more than two years

– Deliberate conduct by some UBS managers


Zubulake V Zubulake V -- The EvidenceThe Evidence

l The newly discovered and produced e-mails were, indeed relevant

l Worse yet for UBS, they were damningl The e-mails were the proverbial “smoking

gun” evidence that clearly supported Ms. Zubulake’s claim of retaliation for filing an EEOC charge

l “Bad facts make bad law”?


Zubulake V Zubulake V -- Counsel’s Duty to Counsel’s Duty to Monitor ComplianceMonitor Compliancel “A party’s discovery obligations do not end with the

implementation of a ‘litigation hold’ -- to the contrary, that’s only the beginning. Counsel must oversee compliance with the litigation hold, monitoring the party’s efforts to retain and produce the relevant documents.”

l These duties include:– Locate relevant information– Continuing duty to ensure preservation– Produce relevant non-privileged material


Zubulake V Zubulake V -- The FailuresThe Failures

l The client failed in its dutiesl The in-house lawyers failed in their dutiesl UBS’s outside counsel failed in their duties to

locate and preserve relevant evidence– Outside counsel may rely to some extent

on the client– But, outside counsel is responsible to

coordinate the client’s discovery efforts


Zubulake V Zubulake V -- In SummaryIn Summary(or “What we’ve got here is a failure to communicate.” (or “What we’ve got here is a failure to communicate.” Captain in Cool Hand Luke (1967))Captain in Cool Hand Luke (1967))

l“Counsel failed to communicate the litigation hold order to all key players. They also failed to ascertain each of the key players’ document management habits. By the same token, UBS employees -- for unknown reasons -- ignored many of the instructions that counsel gave. This case represents a failure of communication, and that failure falls on counsel and client alike.”l“At the end of the day, however, the duty to preserve and produce documents rests on the party.”


Zubulake V Zubulake V -- The SanctionsThe Sanctionsl UBS acted willfully in destroying potentially

relevant information, which resulted either in the absence of such information or its tardy production

l Because UBS’s spoliation was willful, the lost information is presumed to be relevant

l Sanctions:– Adverse inference jury instruction– UBS to pay all costs of depositions or re-

depositions required by its late production– UBS to pay the costs of the motion


Zubulake V Zubulake V -- Adverse Inference Adverse Inference Jury InstructionJury Instruction“You have heard that UBS failed to produce some of the e-mails sent or received by UBS personnel in August and September 2001. Plaintiff has argued that this evidence was in defendants’ control and would have proven facts material to the matter in controversy.

“If you find that UBS could have produced this evidence, and that the evidence was within its control, and that the evidence would have been material in deciding facts in dispute in this case, you are permitted, but not required, to infer that the evidence would have been unfavorable to UBS. In deciding whether to draw this inference, you would consider whether the evidence not produced would merely have duplicated other evidence already before you. You may also consider whether you are satisfied that UBS’s failure to produce this information was reasonable. Again, any inference you decide to draw should be based on all of the facts and circumstances in this case.”


Zubulake Zubulake -- The ResultThe ResultShow Me The Money Show Me The Money -- Big TimeBig Timel In April 2005 a federal jury in Manhattan

awarded Ms. Zubulake $29.3 million– $9.1 million in compensatory damages– $20.2 million in punitive damages

l Plaintiff’s counsel had asked for $5 to $13 million in compensatory damages and up to $27 million more in punitives

l UBS said it would appeal


Zubulake V Zubulake V -- Specifically, What Specifically, What Should Counsel Do?Should Counsel Do?l Issue a “litigation hold”l Communicate directly with “key players”l Instruct all employees to produce

electronic copies of their relevant active files


ICPAPICPAP

l Identifyl Collectl Preservel Analyzel Produce


SummarySummary

l Duties of outside counsel: ICPAPl Trigger date for “litigation hold”l Scope of “litigation hold”

– Inaccessible data– Accessible data

l Be alert to possibility of litigation.


Where to Get More InformationWhere to Get More Informationl Other training sessions

– MSBA and other CLE providers– Kroll Ontrack– Cybercontrols

l Treatises:– Michael Arkfeld, Electronic Discovery and Evidence

(2003) – Adam I. Cohen & David J. Lender, Electronic

Discovery: Law and Practice (2004)– Manual for Complex Litigation– ABA books in 16th floor library “team” area

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