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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 drafted electronically and important rules regarding Electronically Stored Information still needed to be invented. This series looks at a few of the major cases, opinions and outcomes that have informed this evolution.

Judge Shira Scheindlin issued precedent-setting (and often-cited) opinions in the important case of Zubulake v. UBS Warburg – 2003-2005.

The Back Story:

Laura Zubulake worked in New York and Connecticut for the Swiss-based firm, UBS Warburg, Europe's largest bank at the time. She was an extremely successful equities manager, earning more than $650,000 a year selling Asian equities to institutional investors for a decade. In 2000, she was passed over for a promotion that she had been promised, to take over as senior sales manager of the Asian desk in the U.S. when her superior left that position.

Instead, a Matthew Chapin was given the position, whereupon, according to the plaintiff, he “belittled her in front of co-workers and denied her important accounts… During the trial, a former UBS sales assistant testified that she overheard Chapin call Zubulake “old” and “ugly.” (“UBS Must Pay Ex-Saleswoman $29.3 Mln in Sex Bias Case (Update5)” – 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 city law.

UBS argued that Chapin wasn't abrasive because of sexual discrimination, but rather that he was abrasive to everyone, including male employees. A remarkable argument! The bank maintained that she was fired for insubordination.

When the time came for producing documents in discovery, UBS produced just 100 total emails, yet Zubulake herself was able to produce 450 relevant emails of communications between company staffers. UBS was under litigation hold obligations but still had apparently made hundreds of emails disappear in spite of their obligation to retain them. Furthermore, UBS produced additional emails that appeared to be falsely generated.

When discovery was requested for archival data and backup tapes, UBS asserted that to go after such data would be an undue expense and a burden on UBS. It cited the case of Rowe v. William Morris and asked the court to shift the expense of production to Zubulake based on the “Rowe test,” a set of weighting factors used to determine cost-shifting that derived from the Rowe case.

Judge Shira Scheindlin of the New York Southern District produced five evolving opinions regarding who should pay for production/discovery, to what extent discovery and production of ESI is allowable, and how to determine a party's duty to preserve evidence. She found that just because data is electronically stored (ESI) doesn't necessarily make its production an undue expense. In fact, due to the ability to perform machine/computer searches, costs can actually be less than equivalent human searches of paper documents.

The burden of cost is increased with decreasing accessibility, as determined by the type of media on which the ESI is stored. There were determined to be five categories of electronic repositories: online data (such as hard disks), near-line data (such as CDs and other optical disks), offline storage (such as magnetic tapes), backup tapes, and fragmented, erased and damaged data. Backup tapes and fragmented/damaged data were considered to be most inaccessible and therefore most subject to cost-shifting.

The court ordered sampling of the data by having 5 backup tapes restored to determine whether there was a likelihood that the remaining 70+ tapes would produce relevant data. They did produce 600 responsive messages. Judge Schendlin designed a new seven-factor test to determine whether cost-shifting was in order.

The first two factors are considered to be of the most importance.

1: Is the request tailored to discover relevant info? (Fishing expeditions frowned upon).

2: Is information available from other sources? (The parties should get the information from the most readily available sources, such as company reports or public information instead of having to dig though old backup tapes, for instance).

The next three factors are considered to be of secondary importance.

3: Total cost of production v. the amount in controversy (the cost of discovery should be considerably less than the potential winnings in the case).

4: Total cost v. resources available to each party (it 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 final two factors are considered to be of lesser importance than the first five.

6: Importance of issues at stake in litigation (Will the case have an important impact on society? The Zubulake case had to do with gender discrimination, but was not a groundbreaking case in that area).

7: What are the relative benefits to parties of obtaining the requested information?

(It is generally assumed that the plaintiff aims to benefit and so this test is then rarely considered to be of great importance.)

Eventually, the court found that UBS had lost evidence (some monthly backup tapes were missing), carelessly destroyed evidence (some weekly tapes backfilled the monthly tapes), willfully withheld additional evidence, and even faked evidence. As a result, Judge Scheindlin issued an adverse inference instruction to the jury, “Because UBS's spoliation was willful, the lost information is presumed to be relevant.” In other words, if data was missing, the jury could assume that UBS destroyed it on purpose because it might have hurt the bank's case. A disaster for UBS.

Zubulake won more than she'd asked for: $29 million, including $9 million in compensatory damages and $20 million punitive damages. UBS had to pay for depositions and repeat depositions, the costs of the motion, and nearly all the cost of production.

The Zubulake case produced several milestones in the evolution of law around Electronic Discovery, and led to many of the 2006 Amendments to the Federal Rules of Civil Procedure (FRCP). The milestones include:

The parties have a duty to preserve ESI during litigation. – not only once there's a litigation hold, but also if litigation is anticipated.

Lawyers have a duty to monitor their clients' ESI compliance. This includes outside counsel! Sanctions don't only affect the party and inside counsel.

Data sampling is allowed and encouraged. In the discovery process, grab data from a few tapes and hard drives first, for instance – to see if there's likely to be anything on the rest – or even if it's all available from a few (and possibly duplicated on the rest).

The disclosing party can shift the costs for less accessible data. If the requestor is looking for information that's hard to dig up or produce, the cost of producing that may have to be shifted to the requestor.

There may be sanctions imposed for the spoliation of ESI.

The Zubulake case set out rules and tests that have informed later courts' decisions as well as the 2006 amendments to the Federal Rules of Civil Procedure, and the 2009 California rules. They continue to help shape & inform law with regard to electronically stored information. As a result, the case also continues to change the shape of the computer forensic and electronic discovery industries.

Next in this series: the 2006 ESI Amendments to the Federal Rules of Civil Procedure.

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Source by Steve Burgess