The Evolution of Electronic Discovery and Computer Forensics, Part 2: Zubulake V. UBS Warburg
The field of electronic discovery and digital forensics is rapidly evolving. In the early years of this millennium, discovery rules were primarily concerned with paper, but with the advent of the computer age, documents are written electronically, and important rules regarding electronically stored information still need to be invented. This series analyzes some of the main cases, opinions and results 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 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 a highly successful stock manager, earning more than $ 650,000 a year selling Asian stocks to institutional investors for a decade. In 2000, she was ignored for a promised promotion to take over as senior sales manager for the Asian office in the US when her superior left that position.
Instead, a Matthew Chapin was awarded the position, after which, according to the plaintiff, he “belittled her in front of her co-workers and denied her important accounts … During the trial, a former UBS sales assistant testified that he heard Chapin Zubulake call “ old ” and “ ugly. ” (“UBS must pay former salesperson $ 29.3 million in case of sexual bias (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) by falsifying emails, records, and complaints. Zubulake sued UBS for gender discrimination, lack of advocacy and retaliation under federal, state and municipal laws.
UBS argued that Chapin was not harsh due to sex discrimination, but was harsh on everyone, including male employees. A remarkable argument! The bank maintained that it was fired for insubordination.
When it came time to produce discovery documents, UBS produced only 100 emails in total, yet Zubulake herself was able to produce 450 relevant communications emails between company staff. UBS had retention obligations due to litigation, but had apparently made hundreds of emails disappear despite its obligation to retain them. Additionally, UBS produced additional emails that appeared to be falsely generated.
When discovery was requested for archival data and backup tapes, UBS claimed that searching for such data would be an undue expense and burden on UBS. He cited the case of Rowe v. William Morris and asked the court to shift the production expense to Zubulake based on the “Rowe test,” a set of weighting factors used to determine the cost offset that resulted from the Rowe case.
Judge Shira Scheindlin of the Southern District of New York drew up five evolving opinions on who should pay for production / discovery, the extent to which discovery and production of ESI are permitted, and how to determine a party’s duty to preserve the evidence. It found that the fact that the data is stored electronically (ESI) does not necessarily mean that its production is an undue expense. In fact, due to the ability to search by machine / computer, costs can actually 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 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 corrupted data. Backup tapes and fragmented / corrupted data were considered the most inaccessible and therefore subject to cost changes.
The court ordered the data to be sampled by restoring 5 backup tapes to determine if there was a possibility that the remaining 70+ tapes would produce relevant data. They produced 600 reply messages. Judge Schendlin designed a new seven-factor test to determine if the cost change was in order.
The first two factors are considered to be the most important.
1: Is the request designed to discover 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 search through old backup tapes, for example.)
The following three factors are considered of secondary importance.
3: Total cost of production v. the amount in dispute (the cost of discovery should be considerably less than the potential profits in the case).
4: Total cost v. resources available to each part (it shouldn’t ruin anyone).
5: Relative ability, incentive to control costs (clearly the party that pays 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 pioneering case in that area).
7: What are the relative benefits to the parties of obtaining the requested information?
(Generally, it is assumed that the plaintiff intends to benefit, and therefore this evidence is rarely considered of great importance.)
Ultimately, the court found that UBS had lost evidence (some monthly backup tapes were missing), carelessly destroyed the evidence (some weekly tapes filled out the monthly tapes), deliberately withheld additional evidence, and even false 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 data was missing, the jury might assume that UBS purposely destroyed it 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 depositions and repeat 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 resulted in 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 litigation, but also if litigation is anticipated.
Attorneys have a duty to monitor their clients’ ESI compliance. This includes an outside attorney! The sanctions not only affect the party and the in-house attorneys.
Data sampling is permitted and encouraged. In the discovery process, first get data from some tapes and hard drives, for example, to see if there is likely to be something in the rest, or even if everything is available on a few (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 the looting 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 California rules of 2009. They continue to help shape and inform the law regarding the information stored electronically. As a result, the case also continues to reshape the electronic discovery and computer forensics industries.
Next in this series: the 2006 ESI Amendments to the Federal Rules of Civil Procedure.
