“ZUBULAKE V”

Zubulake v UBS Warburg LLC.

229 F.R.D. 422(S.D.N.Y. 2004)

Justice Scheindlin

The duty to preserve

Parties

Laura Zubulake

Equities trader specializing in Asian securities

Suing former employer UBS for gender discrimination

UBSEmployees and counsel (in-house and

outside)

Facts

Some employees were on notice of impending court action as early as April, 2001

Initial gender discrimination charge was filed August 16, 2001

In house counsel advised employees not to destroy or delete potentially relevant material and to separate relevant material into separate files for review

This warning applied to electronic and hard copy files, but not specifically to backup tapes

How did we get here?Zubulake I- UBS was ordered to bear the costs of

restoring a sample of back up tapes

Zubulake III- UBS ordered to bear the lion’s share of restoration of 16 backups because Zubulake demonstrated that the backup files were likely to have relevant information which UBS failed to maintain.

Zubulake IV- Motion for sanctions due to the discovery that certain backup files were missing and may have been destroyed. Based on faulty preservation techniques, UBS was ordered to pay for re-deposition of key litigants.

Rules

FRCP 26Duty to Disclose

FRCP 30

Depositions

FRCP 34

Producing documents and electronically stored information

FRCP 37

Failure to Make Disclosures or to Cooperate in Discovery; Sanctions

Post Zubulake IV

During the re-depositions Zubulake uncovered information about more deleted emails on the active servers which were never produced (2 years after the beginning of litigation)

Learned of 4 missing backup tapes

Re-depositions strengthen the claim that highly relevant emails were destroyed after at least two instructions from in-house and outside counsel

Other new emails were then produced, two years after initial discovery.

The meaning of archived

After re-depositions Kim and Tong testified that they had relevant emails but were never asked to produce them, only save them.

Counsel says there was a misunderstanding with Tong as they understood that these emails were “archived” or in- accessible backup tapes.

Also leads to an inference that counsel failed to ask employees for all active, readily accessible data

Zubulake asks for an adverse inference to be given

SpoliationThe destruction or significant alteration of

evidence or failure to preserve property for another’s use as evidence in pending or foreseeable litigation

Finding of spoliation can support an inference that destroyed evidence would have been unfavorable to the responsible party

Must prove 3 elements:An obligation to preserveRecords destroyed with a culpable state of mind

This includes negligence or in bad faithDestroyed evidence was relevant

When done in bad faith, relevance is assumed

Were these elements met?

The duty to preserve was imposed at least by August 2001, when the claim was filed, and as early as April 2001 for some of the employees.

There is ample evidence that emails and tapes were destroyed or mishandled (at least one email was entirely lost)

Judge concludes that destruction was willful so relevance is assumed

Counsel’s duty

Counsel must oversee compliance with the litigation hold

Must assure that all relevant information is discovered, relevant information is retained on a continuing basis, and that non privileged material is produced to the opposing party.

“Counsel must take affirmative steps to monitor compliance”

How can counsel do this?

Must become fully familiar with client’s document retention policies and data retention architecture

Must speak to the Information technology employees, as well as the key players in the litigation

Must develop a discovery technique that is fitting to the size of the search in question (if small corp., personal interviews, if large corp., could run a word search)

Simply telling employees to save data is not enough, it’s only the beginning

Continuing duty to preserveRule 26

After locating relevant information, counsel must safely retain it. Judge offers three step process

1. Issue a litigation hold at outset of litigation or when it is reasonably foreseeable

2. Communicate with “key players”

3. Instruct all employees to produce relevant active materials (not merely hold on to them). This safeguards against later destruction

Oh so close…….

The GoodCounsel issued the litigation holdExtended the litigation hold to backup tapes when it

was clear they were at issue Instructed employees to produce copies of the active

computer files.

The BadFailed to adequately communicate with employees

about how data was stored (i.e. Tong and “archived”)Made no effort to find out what that meantFailed to inform key players about litigation hold Neither in-house or outside counsel informed Mike

Davies, HR employee who was a key playerFailed to ask some employees to “produce” data (i.e.

Kim, saved but never asked to produce)Failed to protect relevant backup tapes

The UglyUBS employees deleted emails after receiving

litigation holdThey recycled their backup tapes prematurely If employee testimony is true that all emails were

handed over to counsel, then this means counsel failed to produce them.

Failure to communicate

- Lawyers failed to mitigate damage

- UBS employees deleted relevant emails after hold was placed

- Some relevant emails were produced 22 months later than should have been (Spoliation)

- Judge then concluded that this was willful spoliation, therefore lost information is to be presumed relevant and shall be inferred as unfavorable towards UBS.

Remedy

Zubulake is to be returned to the position she would have been in had UBS acted faithfullyThe jury will be given an adverse inference

instructionUBS must pay the cost of any depositions and re-

depositions based on the late production of relevant materials

UBS is ordered to pay costs of current motionZubulake can use the new evidence against

contradictory statements given at deposition by the witnesses.

Conclusion

- Counsel must monitor compliance

- Must locate relevant information

- Has a continuing duty to ensure protection of relevant material

- Any party that defies “orders to preserve” acts at its own peril

Questions

Does Zubulake V place too much of a burden on the lawyer?

Does negligent handling of files warrant an adverse inference? (consider only 1 email was demonstrated lost entirely) What if it is done in bad faith?