Electronic Discovery: Lessons from Zubulake

Transcription

1 Electronic Discovery: Lessons from Zubulake Bruce J. Douglas Daniel J. Ballintine Presented November 29, 2006 to Larkin Hoffman Daly & Lindgren Ltd. 1

2 Introduction What is a Zubulake, anyway, and how do I pronounce it? Why is this important to me -- As a litigator - a framework As a non-litigator - recognize the issue You may be a first responder 2

3 Take Aways ICPAP Litigation Hold Trigger Date Scope Obligations of Counsel 3

4 Overview Unique qualities of electronically stored information ( ESI ) Unique problems of identifying, collecting, preserving and producing ESI The client s obligations Outside counsel s obligations Ethical obligations Sanctions 4

5 Vocabulary Electronically stored information ( ESI ) Electronic discovery Metadata Backup tape Archived data Litigation hold 5

6 The Zubulake cases May 13, the litigation world changed 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 ) Case involved claims of sex discrimination - failure to promote and retaliation for filing a charge with the EEOC Issue became: To what extent is inaccessible electronic data discoverable, and who should pay for its production? 6

7 Zubulake I - General 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, (1947) (emphasis added) 7

8 Zubulake I - Liberal Discovery and its Limitations Fed. R. Civ. P Discovery permitted with respect to any matter not privileged that is relevant to the claim or defense of any party Presumption is that responding party must bear the expense of complying with discovery requests Undue burden or expense to responding party. Fed. R. Civ. P. 26(c) 8

9 Zubulake I - Cost-Shifting The proportionality test balances the broad scope of discovery under Rule 26(b)(1) with the cost-consciousness of Rule 26(c) Cost-shifting may be permitted in appropriate cases But, not to be assumed merely because electronic evidence is involved 9

10 Zubulake I - Inaccessible vs. Accessible The real issue concerning the undue burden or expense of producing electronic evidence turns on whether it is in an accessible or inaccessible format Information deemed accessible is stored in a readily usable format Corresponds to the world of paper documents -- is it readily available or is it in storage? 10

11 Zubulake I - Types of Data Active, online data Near-line data Offline storage/archives Backup tapes or other media Erased, fragmented or damaged data Metadata 11

12 Zubulake I - Previously Used Factors to Determine Undue Burden or Expense 1. Specificity of discovery requests 2. Likelihood of discovering critical information 3. Availability of such information from other sources 4. Purposes for which the responding party maintains the requested data 5. Relative benefits to the parties of obtaining the information 6. Total cost associated with production 7. Relative ability of each party to control costs and incentive to do so 8. 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 (S.D.N.Y. 2002) 12

13 Zubulake I - New 7-Factor 7 Test 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 13

14 Zubulake I - Comparison Rowe Zubulake 1. Specificity of discovery requests 2. Likelihood of discovering critical information 3. Availability of such information from other sources 4. Purposes for which the responding party maintains the requested data 5. Relative benefits to the parties of obtaining the information 6. Total cost associated with production 7. Relative ability of each party to control costs and incentive to do so 8. 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 (S.D.N.Y. 2002) 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 14

15 Zubulake I - Cost-Shifting Factors are Not to be Weighted Equally Test should not be applied mechanically Courts do not just add up the factors First two factors are most important Second group of factors (3-6) are next in importance Final factor (7) is least important Looking for a gold mine not allowed Test run or small sample may be useful 15

16 Zubulake I - Three-Step Analysis Thoroughly understand the responding party s computer system, both with respect to active and stored data Because the cost-shifting analysis is so factintensive, it is necessary to determine what data may be found on the inaccessible media. Production from a small sample is a sensible approach Apply the 7-factor cost-shifting factor Court ordered a sample restoration of backup tapes and production of s and required the parties to report back in 30 days 16

17 Zubulake II 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 Court denied Plaintiff s request as she was not obligated to report the information, which was designated confidential Decision is not related directly to issue of production of ESI Zubulake II, 230 F.R.D. 290 (S.D.N.Y. 2003) 17

18 Zubulake III - Full Discovery and Cost-Shifting 216 F.R.D. 280 (June 24, 2003) Sample evidence showed that a UBS manager concealed and deleted especially relevant e- mails. 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 Court denied cost-shifting of estimated $108,000 for producing s restored from backup tapes 18

19 Zubulake IV - Wait, Wait -- It Gets Worse for the Defendant! 220 F.R.D. 212 (October 22, 2003) Some of the monthly backup tapes were missing :-( Some weekly tapes backfilled the monthly tapes Some plainly relevant s created after UBS supposedly began retaining all relevant s were not saved at all In short, a failure to take adequate steps to collect and preserve evidence 19

20 Zubulake IV - Defendant is Thrown a Bone Court held that reconsideration of its prior cost-shifting order regarding backup tapes was not warranted Adverse inference instruction for spoliation of evidence not warranted But, Court orders re-depositions of witnesses and additional discovery 20

21 Zubulake IV - The Defendant s Duty to Preserve Evidence The employer had a duty to preserve backup tapes 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) 21

22 Zubulake IV - The Trigger Date The duty to preserve evidence arose, at the latest, on the date Zubulake filed her EEOC charge The duty to preserve evidence may have been triggered even before the EEOC complaint was filed UBS should have known that the evidence was relevant to future litigation 22

23 Zubulake IV - Scope When the duty to preserve evidence arises, must a corporation preserve everything? No. Such a rule would cripple large corporations, like UBS, that are almost always involved in litigation. As a general rule, a party need not preserve all backup tapes even when it reasonably anticipates litigation 23

24 Zubulake IV - Scope 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 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) Duty extends to key players 24

25 Zubulake IV - What to Retain All relevant documents (but not multiple identical copies) 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 25

26 Zubulake IV - Summary of Preservation Obligations 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. Generally, a litigation hold does not apply to inaccessible backup tapes Exception: key players 26

27 Document Retention Policies Generally, Zubulake does not mandate that operation cease, but client may have to interrupt it to capture relevant information. Fed. R. Civ. P. 37(f) safe harbor Ethical obligations Privilege communications with client and the crime/fraud exception 27

28 Zubulake IV -- The Adverse Inference Issue (Spoliation) 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 28

29 Zubulake V - The Hammer Falls 229 F.R.D. 422 (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) 29

30 Zubulake V - The Hammer Falls 229 F.R.D. 422 (June 20, 2004) After the re-depositions ordered in Zubulake IV, Plaintiff presented evidence: More deleted s s preserved on UBS s active servers that were never produced -- and they were relevant and damning UBS personnel deleted s, 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 30

31 Zubulake V - The Evidence The newly discovered and produced e- mails were, indeed relevant Worse yet for UBS, they were damning The s were the proverbial smoking gun evidence that clearly supported Ms. Zubulake s claim of retaliation for filing an EEOC charge Bad facts make bad law? 31

32 Zubulake V - Counsel s Duty to Monitor Compliance 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. These duties include: Locate relevant information Continuing duty to ensure preservation Produce relevant non-privileged material 32

33 Zubulake V - The Failures The client failed in its duties The in-house lawyers failed in their duties 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 33

34 Zubulake V - In Summary (or What we ve got here is a failure to communicate. Captain in Cool Hand Luke (1967)) 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. At the end of the day, however, the duty to preserve and produce documents rests on the party. 34

35 Zubulake V - The Sanctions UBS acted willfully in destroying potentially relevant information, which resulted either in the absence of such information or its tardy production Because UBS s spoliation was willful, the lost information is presumed to be relevant Sanctions: Adverse inference jury instruction UBS to pay all costs of depositions or redepositions required by its late production UBS to pay the costs of the motion 35

36 Zubulake V - Adverse Inference Jury Instruction You have heard that UBS failed to produce some of the s sent or received by UBS personnel in August and September 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. 36

37 Zubulake - The Result Show Me The Money - Big Time 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 Plaintiff s counsel had asked for $5 to $13 million in compensatory damages and up to $27 million more in punitives UBS said it would appeal 37

38 Zubulake V - Specifically, What Should Counsel Do? Issue a litigation hold Communicate directly with key players Instruct all employees to produce electronic copies of their relevant active files 38

39 ICPAP Identify Collect Preserve Analyze Produce 39

40 Summary Duties of outside counsel: ICPAP Trigger date for litigation hold Scope of litigation hold Inaccessible data Accessible data Be alert to possibility of litigation. 40

41 Where to Get More Information Other training sessions MSBA and other CLE providers Kroll Ontrack Cybercontrols 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 41