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“ZUBULAKE V”

The duty to preserve. “ZUBULAKE V”. Zubulake v UBS Warburg LLC. 229 F.R.D. 422(S.D.N.Y. 2004) Justice Scheindlin. Parties. Laura Zubulake Equities trader specializing in Asian securities Suing former employer UBS for gender discrimination UBS Employees and counsel (in-house and outside).

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“ZUBULAKE V”

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  1. The duty to preserve “ZUBULAKE V” Zubulake v UBS Warburg LLC. 229 F.R.D. 422(S.D.N.Y. 2004) Justice Scheindlin

  2. Parties • Laura Zubulake • Equities trader specializing in Asian securities • Suing former employer UBS for gender discrimination • UBS • Employees and counsel (in-house and outside)

  3. 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

  4. 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.

  5. Rules • FRCP 26 • Duty 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

  6. 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.

  7. 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

  8. Spoliation • The 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 preserve • Records destroyed with a culpable state of mind • This includes negligence or in bad faith • Destroyed evidence was relevant • When done in bad faith, relevance is assumed

  9. 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

  10. 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”

  11. 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

  12. 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

  13. Oh so close……. • The Good • Counsel issued the litigation hold • Extended the litigation hold to backup tapes when it was clear they were at issue • Instructed employees to produce copies of the active computer files.

  14. The Bad • Failed to adequately communicate with employees about how data was stored (i.e. Tong and “archived”) • Made no effort to find out what that meant • Failed to inform key players about litigation hold • Neither in-house or outside counsel informed Mike Davies, HR employee who was a key player • Failed to ask some employees to “produce” data (i.e. Kim, saved but never asked to produce) • Failed to protect relevant backup tapes

  15. The Ugly • UBS employees deleted emails after receiving litigation hold • They 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.

  16. 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.

  17. Remedy • Zubulake is to be returned to the position she would have been in had UBS acted faithfully • The jury will be given an adverse inference instruction • UBS 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 motion • Zubulake can use the new evidence against contradictory statements given at deposition by the witnesses.

  18. 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

  19. 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?

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