Electronic Data and Litigation: Resolving A Company’s Obligation
To Preserve Electronic Data for Production in Litigation
By Mario Menendez1
What obligation does a company have to preserve electronic data for possible production in litigation? This question is at the center of an ever-growing debate over the discovery of electronic data.2 Companies without a clear standard for the preservation of such data cannot adequately prepare for litigation and are at a significant disadvantage when litigation arises. As electronic data becomes an increasingly pervasive tool for communicating and exchanging information, federal courts are becoming less tolerant when a litigant fails to produce discoverable data. In turn, opportunistic litigants increasingly level spoliation charges based upon their adversaries’ failure to adequately preserve electronic evidence, and they are succeeding.3 A recent study of U.S. cases concerning sanctions for spoliation of electronic evidence reveals that the most frequently sanctioned behavior involved the failure to produce electronic evidence (84%).4
Despite the emergence of the use of electronic data by U.S. companies, there has been very little judicial guidance on important and recurring issues such as “when is a company obligated to preserve electronic data and to what extent?” In Zubulake v. UBS Warburg, LLC, an employment discrimination case between equities trader Laura Zubulake and her employer UBS Warburg, LLC, New York Southern District Judge Shira Scheindlin, addresses these issues and provides a framework to resolving a company’s obligation to preserve various forms of electronic data. As part of pre-trial discovery in that case, Zubulake requested that UBS produce “all documents concerning any communication by or between UBS employees concerning the plaintiff” including all emails written by several company employees during the period preceding her termination. Although UBS produced roughly 100 pages of emails, the Court found the production to be inadequate. Indeed, Zubulake herself had produced more than 450 pages of emails. Judge Scheindlin ordered UBS to comply with Zubulake’s production request. In order for UBS to comply adequately with the request, however, the company would have had to find and restore volumes of deleted emails from archived media, a process that would have cost close to $300,000. Accordingly, UBS argued that the request was unreasonable and well beyond traditional discovery costs.
Judge Scheindlin was unreceptive to UBS’ arguments and in the course of approximately two years issued five opinions that have since become guiding forces in the arena of the discovery of electronic data.5 The first three Zubulake opinions focused on when and whether to shift the cost of electronic production to the requesting party. In the fourth opinio, Judge Scheindlin directly addresses the issue of when a company needs to begin preserving electronic evidence. There, she states that the time for preservation of relevant electronic evidence commences 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.” Zubulake IV, 220 F.R.D. at 216. In her fifth opinion, Judge Scheindlin held that UBS’ failure to communicate adequately with employees and the additional failure of both the company and counsel to monitor employee compliance with a litigation hold on document destruction resulted in the willful deletion of relevant emails.
If Judge Scheindlin’s order seems to impose an unbearable burden on UBS, the following passages from her fifth opinionare no less forgiving and will likely be cited in spoliation and sanction motions for years to come:
- “The central question implicated by this motion is whether [defendant] and its counsel took all necessary steps to guarantee that relevant data was both preserved and produced.”
“Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and researched.”
“Counsel must oversee compliance with the litigation hold, monitoring the party’s efforts to retain and produce relevant documents.”
“Unless counsel interviews each employee, it is impossible to determine whether all potential sources of information have been inspected.”
Indeed, in some cases, plaintiffs have used voluminous requests for electronic data to force out-of-court settlements.
Although the multitude of challenges presented by electronic evidence can overwhelm practitioners and their clients, companies can reduce these risks by developing and following a solid document retention program and a litigation response plan to preserve electronic data should a dispute arise. If a company can demonstrate it proactively developed a reasonable document retention and preservation plan long before litigation commenced and then followed that plan when litigation ensued, the likelihood of spoliation sanctions will decrease. In Zubulake, Judge Scheindlin outlines the five steps companies and their lawyers should take in meeting their duty to preserve electronic documents:
1. As soon as litigation is reasonably expected, attorneys should issue a “litigation hold” directing all employees to preserve documents and data that may be relevant to the litigation.
2. Once a hold is issued, corporate lawyers should determine all sources of potentially relevant information and speak with the company’s IT department about its document retention policies, data retention architecture, backup procedures and the recycling policies actually implemented for backup tapes.
3. The lawyers should interview all of the key employees involved in the case to determine how they store electronic data such as emails and evaluate their compliance with company retention policies and, at the same time, clearly communicate to these employees the litigation hold and their document retention and preservation responsibilities.
4. Employees should be instructed to produce electronic copies of their relevant active files and ensure that all backup data that the company is required to retain is safely stored to avoid the risk that backup tapes will be recycled.
5. The lawyers should take affirmative steps to monitor compliance with the litigation hold and periodically re-issue the hold so that new employees are aware of it and that it remains fresh in the minds of other employees.
In sum, the Zubulake decisions makes clear that it is no longer enough to just send out a litigation hold at the beginning of a case. Although Zubulake are opinions from the Southern District of New York and not directly binding on other courts, particularly those in Texas, the case’s notoriety ensures that the case will be widely cited and the practices outlined either adopted, or at least considered, by other courts in evaluating electronic discovery issues and requests for sanctions. Companies or attorneys that fail to adopt these practices do so at their own peril.
Sheehy Serpe & Ware, P.C. attorneys are adept at handling issues such as these for its clients. For more information, please contact Mr. Ray Neuer or Mr. Ed Perkins at 713-951-1000, or visit the Firm’s website at www.sswpc.com.
1 Mr. Menendez is an associate at Sheehy, Serpe & Ware, P.C. in the commercial litigation and toxic tort departments.
2 There are four broad categories of electronic data: (1) active data refers to the easily accessible content on the hard disk of one’s computer or company server; (2) replicated data describes the copies of data automatically created by your computer when, for instance, one visits a web page or opens an email attachment; (3) backup data refers to copies of active and replicated data and resides on floppy disks, backup tapes, removable hard disks, and rewritable CD-ROMs and DVDs; (4) residual data is that data which has been “deleted” from active use but may still be found in the farthest regions of the hard disk or company server. This last form of data is often referred to as “inaccessible.”
3 Spoliation is the damaging, altering or destroying of evidence.
4 Shira A. Scheindlin and Kanchana Wangkeo, Electronic Discovery Sanctions in the Twenty-First Century, 11 Mich. Telecomm. Tech. L. Rev. 71 (2004).
5 Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003) (“Zubulake I”) (addressing cost allocation for production of emails); Zubulake v. UBS Warburg LLC, 230 F.R.D. 290 (S.D.N.Y. 2003) (“Zubulake II”) (addressing reporting obligations); Zubulake v. UBS Warburg LLC, 216 F.R.D. 280 (S.D.N.Y. 2003) (“Zubulake III”) (allocation of backup tape restoration costs); Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003) (“Zubulake IV”) (ordering sanctions against defendant for violation of duty to preserve evidence); Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D.N.Y. 2004); (“Zubulake V”) (what electronic materials must be preserved, what steps must be taken to preserve them, and the consequences of the failure to adequately preserve electronic evidence”).