Archive for March, 2007


Zubulake v. UBS Warburg, ZUBULAKE 2

Monday, March 26th, 2007

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

LAURA ZUBULAKE, :: Plaintiff,

-against-

UBS WARBURG LLC, UBS WARBURG, and : UBS AG, : Defendants.

OPINION AND ORDER :

02 Civ. 1243 (SAS)


SHIRA A. SCHEINDLIN, U.S.D.J.:

On May 13, 2003, I ordered defendants UBS Warburg LLC, UBS Warburg, and UBS AG (collectively “UBS”) to restore and produce certain e-mails from a small group of backup tapes. Having reviewed the results of this sample restoration, Laura Zubulake now moves for an order compelling UBS to produce all remaining backup e-mails at its expense. UBS argues that based on the sampling, the costs should be shifted to Zubulake. For the reasons fully explained below, Zubulake must share in the costs of restoration, although UBS must bear the bulk of that expense. In addition, UBS must pay for any costs incurred in reviewing the restored documents for privilege.

I. BACKGROUND

The background of this lawsuit and the instant discovery dispute are recounted in two prior opinions, familiarity with which is presumed.1 In brief, Zubulake, an equities trader who earned approximately $650,000 a year with UBS,2 is now suing UBS for gender discrimination, failure to promote, and retaliation under federal, state, and city law. To support her claim, Zubulake seeks evidence stored on UBS’s backup tapes that is only accessible through costly and time-consuming data retrieval. In particular, Zubulake seeks e-mails relating to her that were sent to or from five UBS employees: Matthew Chapin (Zubulake’s immediate supervisor and the alleged primary discriminator), Jeremy Hardisty (Chapin’s supervisor and the individual to whom Zubulake originally complained about Chapin), Rose Tong (a human relations representative who was assigned to handle issues concerning Zubulake), Vinay Datta (a co-worker), and Andrew Clarke (another co-worker). The question presented in this dispute is which party should pay for the costs incurred in restoring and producing these backup tapes.

In order to obtain a factual basis to support the cost shifting analysis, I ordered UBS to restore and produce e-mails from five of the ninety-four backup tapes that UBS had then identified as containing responsive documents; Zubulake was permitted to select the five tapes to be restored.3 UBS now reports, however, that there are only seventy-seven backup tapes that contain responsive data, including the five already restored.4 I further ordered UBS to “prepare an affidavit detailing the results of its search, as well as the time and money spent.”5 UBS has complied by submitting counsel’s declaration.

According to the declaration, Zubulake selected the backup tapes corresponding to Matthew Chapin’s e-mails from May, June, July, August, and September 2001.7 That period includes the time from Zubulake’s initial EEOC charge of discrimination (August 2001) until just before her termination (in the first week of October 2001).8 UBS hired an outside vendor, Pinkerton Consulting & Investigations, to perform the restoration.

Pinkerton was able to restore each of the backup tapes, yielding a total of 8,344 e-mails.10 That number is somewhat inflated, however, because it does not account for duplicates. Because each month’s backup tape was a snapshot of Chapin’s server for that month — and not an incremental backup reflecting only new material — an e-mail that was on the server for more than one month would appear on more than one backup tape. For example, an e-mail received in January 2001 and deleted in November 2001 would have been restored from all five backup tapes. With duplicates eliminated, the total number of unique emails restored was 6,203.

Pinkerton then performed a search for e-mails containing (in either the e-mail’s text or its header information, such as the “subject” line) the terms “Laura”, “Zubulake”, or “LZ”.12 The searches yielded 1,541 e-mails,13 or 1,075 if duplicates are eliminated.14 Of these 1,541 e-mails, UBS deemed approximately 600 to be responsive to Zubulake’s document request and they were produced.15 UBS also produced, under the terms of the May 13 Order, fewer than twenty e-mails extracted from UBS’s optical disk storage system.

Pinkerton billed UBS 31.5 hours for its restoration services at an hourly rate of $245, six hours for the development, refinement and execution of a search script at $245 an hour,17 and 101.5 hours of “CPU Bench Utilization” time for use of Pinkerton’s computer systems at a rate of $18.50 per hour.18 Pinkerton also included a five percent “administrative overhead fee” of $459.38.19 Thus, the total cost of restoration and search was $11,524.63.20 In addition, UBS incurred the following costs: $4,633 in attorney time for the document review (11.3 hours at $410 per hour)21 and $2,845.80 in paralegal time for tasks related to document production (16.74 hours at $170 per hour).22 UBS also paid $432.60 in photocopying costs,23 which, of course, will be paid by Zubulake and is not part of this costshifting analysis.

The total cost of restoration and production from the five backup tapes was $19,003.43.25 UBS now asks that the cost of any further production estimated to be $273,649.39, based on the cost incurred in restoring five tapes and producing responsive documents from those tapes — be shifted to Zubulake. The total figure includes $165,954.67 to restore and search the tapes and $107,694.72 in attorney and paralegal review costs. These costs will be addressed separately below.

II. LEGAL STANDARD

The Federal Rules of Civil Procedure specify that “any matter, not privileged, that is relevant to the claim or defense of any party” is discoverable,26 except where:

(i) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive;

(ii) the party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or

(iii) the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues.

Although “the presumption is that the responding party must bear the expense of complying with discovery requests,” requests that run afoul of the Rule 26(b)(2) proportionality test may subject the requesting party to protective orders under Rule 26(c), “including orders conditioning discovery on the requesting party’s payment of the costs of discovery.” A court will order such a cost-shifting protective order only upon motion of the responding party to a discovery request, and “for good cause shown.” Thus, the responding party has the burden of proof on a motion for cost-shifting.

III. DISCUSSION

A. Cost-Shifting Generally

In Zubulake I, I considered plaintiff’s request for information contained only on backup tapes and determined that cost-shifting might be appropriate.31 It is worth emphasizing again that cost-shifting is potentially appropriate only when inaccessible data is sought. When a discovery request seeks accessible data for example, active on-line or near-line data it is typically inappropriate to consider cost-shifting.

In order to determine whether cost-shifting is appropriate for the discovery of inaccessible data, “the following factors should be considered, weighted more-or-less in the following order”:

  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.

In establishing this test, I modified the list of factors articulated in Rowe Entertainment, Inc. v. William Morris Agency, Inc., to meet the legitimate concern of those commentators who have argued that “the factors articulated in Rowe [] tend to favor the responding party, and frequently result in shifting the costs of electronic discovery to the requesting party.” Thus, total costs and ability to control costs will favor the responding party. If courts simply conduct an absolute comparison of the eight Rowe factors, the responding party will need to attain just one more factor to shift the costs to the requesting party.

This is a dramatic shift from earlier cases, which were more inclined to follow the presumption in traditional document production, requiring the responding party to pay.”). the seven-factor test articulated in Zubulake I was designed to simplify application of the Rule 26(b)(2) proportionality test in the context of electronic data and to reinforce the traditional presumptive allocation of costs.

B. Application of the Seven Factor Test

1. Factors One and Two

As I explained in Zubulake I, the first two factors together comprise the “marginal utility test” announced in McPeek v. Ashcroft:


The more likely it is that the backup tape contains information that is relevant to a claim or defense, the fairer it is that the [responding party] search at its own expense. The less likely it is, the more unjust it would be to make the [responding party] search at its own expense. The difference is “at the margin.”

These two factors should be weighted the most heavily in the cost-shifting analysis.

  1. The Extent to Which the Request Is Specifically Tailored to Discover Relevant Information

The document request at issue asks for “[a]ll documents concerning any communication by or between UBS employees concerning Plaintiff,” and was subsequently narrowed to pertain to only five employees (Chapin, Hardisty, Tong, Datta, and Clarke) and to the period from August 1999 to December 2001. This is a relatively limited and targeted request, a fact borne out by the e-mails UBS actually produced, both initially and as a result of the sample restoration.

At oral argument, Zubulake presented the court with sixty-eight e-mails (of the 600 she received) that she claims are “highly relevant to the issues in this case” and thus require, in her view, that UBS bear the cost of production.39 And indeed, a review of these e-mails reveals that they are relevant. Taken together, they tell a compelling story of the dysfunctional atmosphere surrounding UBS’s U.S. Asian Equities Sales Desk (the “Desk”). Presumably, these sixty-eight e-mails are reasonably representative of the seventy-seven backup tapes.

A number of the e-mails complain of Zubulake’s behavior. Zubulake was described by Clarke as engaging in “bitch sessions about the horrible men on the [Desk],” and as a “conduit for a steady stream of distortions, accusations and good ole fashioned back stabbing,” and Hardisty noted that Zubulake was disrespectful to Chapin and other members of the Desk. And Chapin takes frequent snipes at Zubulake. There are also complaints about Chapin’s behavior. In addition, Zubulake argues that several of the e-mails contradict testimony given by UBS employees in sworn depositions.

In particular, six e-mails singled out by Zubulake as particularly “striking” include:

  • ! An e-mail from Hardisty, Chapin’s supervisor, chastising Chapin for saying one thing and doing another with respect to Zubulake. Hardisty said, “As I see it, you do not appear to be upholding your end of the bargain to work with her.” This e-mail stands in contrast to UBS’s response to Zubulake’s EEOC charges, which says that “Mr. Chapin was receptive to Mr. Hardisty’s suggestions [for improving his relationship with Zubulake].”
    • ! An e-mail from Chapin to one of his employees on the Desk, Joy Kim, suggesting to her how to phrase a complaint against Zubulake. A few hours later, Joy Kim did in fact send an e-mail to Chapin complaining about Zubulake, using precisely the same words that Chapin had suggested. But at his deposition (taken before these e-mails were restored), Chapin claimed that he did not solicit the complaint.
    • ! An e-mail from Chapin to the human resources employee handling Zubulake’s case listing the employees on the Desk and categorizing them as senior, mid-level, or junior salespeople. In its EEOC filing, however, UBS claimed in response to Zubulake’s argument that she was the only senior salesperson on the desk, that it “does not categorize salespeople as ‘junior’ or ‘senior.’” In addition, UBS claimed in its EEOC papers that there were four female salespeople on the Desk, but this email shows only two.
    • ! An e-mail from Chapin to Hardisty acknowledging that Zubulake’s “ability to do a good job . . . is clear,” and that she is “quite capable.”
    • ! An e-mail from Derek Hillan, presumably a UBS employee, to Chapin and Zubulake using vulgar language, although UBS claims that it does not tolerate such language.
    • ! An e-mail from Michael Oertli, presumably a UBS employee, to Chapin explaining that UBS’s poor performance in Singapore was attributable to the fact that it only “covered” eight or nine of twenty-two accounts, and not to Zubulake’s poor performance, as UBS has argued.


    Not surprisingly, UBS argued that these e-mails have very little, if any, relevance to the issues in the case.

    While all of these e-mails are likely to have some “tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence,” none of them provide any direct evidence of discrimination. To be sure, the e-mails reveal a hostile relationship between Chapin and Zubulake — UBS does not contest this. But nowhere (in the sixty-eight e-mails produced to the Court) is there evidence that Chapin’s dislike of Zubulake related to her gender.

    1. The Availability of Such Information from Other Sources

    The other half of the marginal utility test is the availability of the relevant data from other sources. Neither party seemed to know how many of the 600 e-mails produced in response to the May 13 Order had been previously produced. UBS argues that “nearly all of the restored e-mails that relate to plaintiff’s allegations in this matter or to the merits of her case were already produced.” This statement is perhaps too careful, because UBS goes on to observe that “the vast majority of the restored e-mails that were produced do not relate at all to plaintiff’s allegations in this matter or to the merits of her case.”55 But this determination is not for UBS to make; as the saying goes, “one man’s trash is another man’s treasure.”

    It is axiomatic that a requesting party may obtain “any matter, not privileged, that is relevant to the claim or defense of any party.” The simple fact is that UBS previously produced only 100 pages of e-mails, but has now produced 853 pages (comprising the 600 responsive e-mails) from the five selected backup tapes alone. UBS itself decided that it was obliged to provide these 853 pages of e-mail pursuant to the requirements of Rule 26. Having done so, these numbers lead to the unavoidable conclusion that there are a significant number of responsive emails that now exist only on backup tapes.

    If this were not enough, there is some evidence that Chapin was concealing and deleting especially relevant e-mails. When Zubulake first filed her EEOC charge in August 2001, all UBS employees were instructed to save documents relevant to her case.59 In furtherance of this policy, Chapin maintained separate files on Zubulake.60 However, certain e-mails sent after the initial EEOC charge and particularly relevant to Zubulake’s retaliation claim — were apparently not saved at all. For example, the e-mail from Chapin to Joy Kim instructing her on how to file a complaint against Zubulake61 was not saved, and it bears the subject line “UBS client attorney priviledge [sic] only,” although no attorney is copied on the e-mail.62 This potentially useful e-mail was deleted and resided only on UBS’s backup tapes.

    In sum, hundreds of the e-mails produced from the five backup tapes were not previously produced, and so were only available from the tapes. The contents of these e-mails are also new. Although some of the substance is available from other sources (e.g., evidence of the sour relationship between Chapin and Zubulake), a good deal of it is only found on the backup tapes (e.g., inconsistencies with UBS’s EEOC filing and Chapin’s deposition testimony). Moreover, an e-mail contains the precise words used by the author. Because of that, it is a particularly powerful form of proof at trial when offered as an admission of a party opponent.

    1. Weighing Factors One and Two

    The sample restoration, which resulted in the production of relevant e-mail, has demonstrated that Zubulake’s discovery request was narrowly tailored to discover relevant information. And while the subject matter of some of those emails was addressed in other documents, these particular e-mails are only available from the backup tapes. Thus, direct evidence of discrimination may only be available through restoration. As a result, the marginal utility of this additional discovery may be quite high.

    While restoration may be the only means for obtaining direct evidence of discrimination, the existence of that evidence is still speculative. The best that can be said is that Zubulake has demonstrated that the marginal utility is potentially high. All-in-all, because UBS bears the burden of proving that costshifting is warranted, the marginal utility test tips slightly against cost-shifting.

    2. Factors Three, Four and Five

    “The second group of factors addresses cost issues:

    ‘How expensive will this production be?’ and, ‘Who can handle that expense?’”

    1. The Total Cost of Production Compared to the Amount in Controversy

    UBS spent $11,524.63, or $2,304.93 per tape, to restore the five back-up tapes. Thus, the total cost of restoring the remaining seventy-two tapes extrapolates to $165,954.67.65.

    In order to assess the amount in controversy, I posed the following question to the parties: Assuming that a jury returns a verdict in favor of plaintiff, what economic damages can the plaintiff reasonably expect to recover? Plaintiff answered that reasonable damages are between $15,271,361 and $19,227,361, depending upon how front pay is calculated.66 UBS answered that damages could be as high as $1,265,000.


    Obviously, this is a significant disparity. At this early stage, I cannot assess the accuracy of either estimate. Plaintiff had every incentive to high-ball the figure and UBS had every incentive to low-ball it. It is clear, however, that this case has the potential for a multi-million dollar recovery. Whatever else might be said, this is not a nuisance value case, a small case or a frivolous case. Most people do not earn $650,000 a year. If Zubulake prevails, her damages award undoubtedly will be higher than that of the vast majority of Title VII plaintiffs.

    In an ordinary case, a responding party should not be required to pay for the restoration of inaccessible data if the cost of that restoration is significantly disproportionate to the value of the case. Assuming this to be a multi-million dollar case, the cost of restoration is surely not “significantly disproportionate” to the projected value of this case. This factor weighs against cost-shifting.

    1. The Total Cost of Production Compared to the Resources Available to Each Party

    There is no question that UBS has exponentially more resources available to it than Zubulake.68 While Zubulake is an accomplished equities trader,69 she has now been unemployed for close to two years. Given the difficulties in the equities market and the fact that she is suing her former employer, she may not be particularly marketable. On the other hand, she asserts that she has a $19 million claim against UBS. So while UBS’s resources clearly dwarf Zubulake’s, she may have the financial wherewithal to cover at least some of the cost of restoration. In addition, it is not unheard of for plaintiff’s firms to front huge expenses when multi-million dollar recoveries are in sight.70 Thus, while this factor weighs against cost shifting, it does not rule it out.

    c. The Relative Ability of Each Party to Control Costs and Its Incentive to Do So


    Restoration of backup tapes must generally be done by an outside vendor. Here, UBS had complete control over the selection of the vendor. It is entirely possible that a less expensive vendor could have been found. However, once that vendor is selected, costs are not within the control of either party. In addition, because these backup tapes are relatively well-organized — meaning that UBS knows what e-mails can be found on each tape — there is nothing more that Zubulake can do to focus her discovery request or reduce its cost. Zubulake has already made a targeted discovery request and the restoration of the sample tapes has not enabled her to cut back on that request. Thus, this factor is neutral.

    3. Factor Six: The Importance of the Issues at Stake in the Litigation

    As noted in Zubulake I, this factor “will only rarely come into play.”74 Although this case revolves around a weighty issue — discrimination in the workplace — it is hardly unique. Claims of discrimination are common, and while discrimination is an important problem, this litigation does not present a particularly novel issue. If I were to consider the issues in this discrimination case sufficiently important to weigh in the cost-shifting analysis, then this factor would be virtually meaningless. Accordingly, this factor is neutral.

    4. Factor Seven: The Relative Benefits to the Parties of Obtaining the Information

    Although Zubulake argues that there are potential benefits to UBS in undertaking the restoration of these backup tapes — in particular, the opportunity to obtain evidence that may be useful at summary judgment or trial — there can be no question that Zubulake stands to gain far more than does UBS, as will typically be the case.75 Certainly, absent an order, UBS would not restore any of this data of its own volition. Accordingly, this factor weighs in favor of cost-shifting.

    5. Summary and Conclusion

    Factors one through four tip against cost-shifting (although factor two only slightly so). Factors five and six are neutral, and factor seven favors cost-shifting. As noted in my earlier opinion in this case, however, a list of factors is not merely a matter of counting and adding; it is only a guide.

    Because some of the factors cut against cost shifting, but only slightly so in particular, the possibility that the continued production will produce valuable new information — some costshifting is appropriate in this case, although UBS should pay the majority of the costs. There is plainly relevant evidence that is only available on UBS’s backup tapes. At the same time, Zubulake has not been able to show that there is indispensable evidence on those backup tapes (although the fact that Chapin apparently deleted certain e-mails indicates that such evidence may exist).

    The next question is how much of the cost should be shifted. It is beyond cavil that the precise allocation is a matter of judgment and fairness rather than a mathematical consequence of the seven factors discussed above. Nonetheless, the analysis of those factors does inform the exercise of discretion. Because the seven factor test requires that UBS pay the lion’s share, the percentage assigned to Zubulake must be less than fifty percent. A share that is too costly may chill the rights of litigants to pursue meritorious claims. However, because the success of this search is somewhat speculative, any cost that fairly can be assigned to Zubulake is appropriate and ensures that UBS’s expenses will not be unduly burdensome. A twenty-five percent assignment to Zubulake meets these goals.

    C. Other Costs

    The final question is whether this result should apply to the entire cost of the production, or only to the cost of restoring the backup tapes. The difference is not academic the estimated cost of restoring and searching the remaining backup tapes is $165,954.67, while the estimated cost of producing them (restoration and searching costs plus attorney and paralegal costs) is $273,649.39 ($19,003.43 for the five sample tapes, or $3,800.69 per tape, times seventy-two unrestored tapes), a difference of $107,694.72.

    As a general rule, where cost-shifting is appropriate, only the costs of restoration and searching should be shifted. Restoration, of course, is the act of making inaccessible material accessible. That “special purpose” or “extraordinary step” should be the subject of cost-shifting. Search costs should also be shifted because they are so intertwined with the restoration process; a vendor like Pinkerton will not only develop and refine the search script, but also necessarily execute the search as it conducts the restoration. However, the responding party should always bear the cost of reviewing and producing electronic data once it has been converted to an accessible form. This is so for two reasons.

    First, the producing party has the exclusive ability to control the cost of reviewing the documents. In this case, UBS decided as is its right to have a senior associate at a top New York City law firm conduct the privilege review at a cost of $410 per hour. But the job could just as easily have been done (while perhaps not as well) by a first-year associate or contract attorney at a far lower rate. UBS could similarly have obtained paralegal assistance for far less than $170 per hour.

    Moreover, the producing party unilaterally decides on the review protocol. When reviewing electronic data, that review may range from reading every word of every document to conducting a series of targeted key word searches. Indeed, many parties to document-intensive litigation enter into so-called “claw-back” agreements that allow the parties to forego privilege review altogether in favor of an agreement to return inadvertently produced privileged documents.81 The parties here can still reach such an agreement with respect to the remaining seventy-two tapes and thereby avoid any cost of reviewing these tapes for privilege.

    Second, the argument that all costs related to the production of restored data should be shifted misapprehends the nature of the cost-shifting inquiry. Recalling that costshifting is only appropriate for inaccessible but otherwise discoverable data, it necessarily follows that once the data has been restored to an accessible format and responsive documents located, cost-shifting is no longer appropriate. Had it always been accessible, there is no question that UBS would have had to produce the data at its own cost.82 Indeed, this is precisely what I ordered in Zubulake I with respect to certain emails kept on UBS’s optical disk system.

    Documents stored on backup tapes can be likened to paper records locked inside a sophisticated safe to which no one has the key or combination. The cost of accessing those documents may be onerous, and in some cases the parties should split the cost of breaking into the safe. But once the safe is opened, the production of the documents found inside is the sole responsibility of the responding party. The point is simple: technology may increasingly permit litigants to reconstruct lost or inaccessible information, but once restored to an accessible form, the usual rules of discovery apply.

    IV. CONCLUSION

    For the reasons set forth above, the costs of restoring any backup tapes are allocated between UBS and Zubulake seventy-five percent and twenty-five percent, respectively. All other costs are to be borne exclusively by UBS. Notwithstanding this ruling, UBS can potentially impose a shift of all of its costs, attorney’s fees included, by making an offer to the plaintiff under Rule 68.

    SO ORDERED:

    ___________________

    Shira A. Scheindlin

    U.S.D.J.

    Dated: New York, New York

    July 24, 2003

    – Appearances –

    For Plaintiff:

    James A. Batson, Esq.

    Christina J. Kang, Esq.

    Liddle & Robinson, LLP

    685 Third Avenue

    New York, New York 10017

    (212) 687-8500

    For Defendants:

    Kevin B. Leblang, Esq.

    Norman C. Simon, Esq.

    Kramer Levin Naftalis & Frankel LLP

    919 Third Avenue

    New York, New York 10022

    (212) 715-9100

    Analog Devices, Inc. v. Michalski, 2006 NCBC 14

    Friday, March 23rd, 2007

    STATE OF NORTH CAROLINA

    COUNTY OF GUILFORD

    ANALOG DEVICES, INC., Plaintiff,

    v.

    CHRISTOPHER MICHALSKI, KIRAN KARNIK AND MAXIM INTEGRATED PRODUCTS, INC., Defendants.

    IN THE GENERAL COURT OF JUSTICE

    SUPERIOR COURT DIVISION

    01 CVS 10614

    ORDER AND OPINION

    {1} This matter is before the Court on Defendants’ Motion to Compel. Defendants have requested that Plaintiff produce e-mails from each of the originators of twenty-one trade secrets at issue for a two-year period surrounding the release dates of products implementing those trade secrets. Much of the information requested is contained in inaccessible form.

    {2} The opinion in this case and the opinion in Bank of America Corp. v. SR International, Inc., 2006 NCBC 15 (N.C. Super. Ct. Nov. 1, 2006), filed contemporaneously, discuss for the first time the extent to which inaccessible electronic data is discoverable and who should pay for its production under the North Carolina Rules of Civil Procedure. This case addresses the issues in the context of a party-to-party request for production of documents, and the Bank of America decision addresses those issues in the context of a subpoena to a nonparty. In some instances the considerations are the same, and in others they differ dramatically. In both contexts, trial judges should be guided by the language of the applicable Rules of Civil Procedure, supplemented by the Guidelines adopted by the Conference of Chief Justices. In this instance the Court has decided to require production and to split the cost of production between the parties subject to further revision on allocation of costs at the end of the litigation.

    Womble Carlyle Sandridge & Rice, PLLC by Michael E. Ray, John J. Morrow, Jr., and Robert D. Mason; Wilmer Cutler Pickering Hale & Dorr LLP, by James C. Burling, Gregory P. Teran, and Clark W. Petschek for Plaintiff Analog Devices, Inc.

    Smith Moore, LLP, by Jonathan A. Berkelhammer; Heller Ehrmann LLP, by Alan H. Blankenheimer, Laura E. Underwood, and Jo Dale Carothers, for Defendants Christopher Michalski, Kiran Karnik, and Maxim Integrated Products, Inc.

    Tennille, Judge.

    I.FACTUAL & PROCEDURAL BACKGROUND

    A.THE PARTIES

    {3} Plaintiff Analog Devices, Inc. (“Analog”) is a Massachusetts corporation maintaining its principal place of business at Norwood, Massachusetts. Analog is engaged in the business “of, among other things, designing, manufacturing, and marketing high-performance analog, mixed-signal, and digital signal procession integrated circuits used in signal processing applications.” (2d Am. Compl. ¶ 6.) (more…)

    Zubulake v. UBS Warburg, ZUBULAKE 5

    Saturday, March 17th, 2007

    Commenting on the importance of speaking clearly and listening closely, Phillip 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!”1 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 communication between counsel and client breaks down, conversation becomes “just crossfire,” and there are usually casualties.

    I. INTRODUCTION

    This is the fifth written opinion in this case, a relatively routine employment discrimination dispute in which discovery has now lasted over two years. Laura Zubulake is once again moving to sanction UBS for its failure to produce relevant information and for its tardy production of such material. In order to decide whether sanctions are warranted, the following question must be answered: Did UBS fail to preserve and timely produce relevant information and, if so, did it act negligently, recklessly, or willfully?

    This decision addresses counsel’s obligation to ensure that relevant information is preserved by giving clear instructions to the client to preserve such information and, perhaps more importantly, a client’s obligation to heed those instructions. Early on in this litigation, UBS’s counsel both in-house and outside instructed UBS personnel to retain relevant electronic information. Notwithstanding these instructions, certain UBS employees deleted relevant emails. Other employees never produced relevant information to counsel. As a result, many discoverable e-mails were not produced to Zubulake until recently, even though they were responsive to a document request propounded on June 3, 2002.

    In addition, a number of e-mails responsive to that document request were deleted and have been lost altogether.

    Counsel, in turn, failed to request retained information from one key employee and to give the litigation hold instructions to another. They also failed to adequately communicate with another employee about how she maintained her computer files. Counsel also failed to safeguard backup tapes that might have contained some of the deleted e-mails, and which would have mitigated the damage done by UBS’s destruction of those e-mails.

    The conduct of both counsel and client thus calls to mind the now famous words of the prison captain in Cool Hand Luke: “What we’ve got here is a failure to  communicate.”4 Because of this failure by both UBS and its counsel , Zubulake has been prejudiced. As a result, sanctions are warranted.

     II. FACTS

    The allegations at the heart of this lawsuit and the history of the parties’ discovery disputes have been well-documented in the Court’s prior decisions,5 familiarity with which is presumed. In short, Zubulake is an equities trader specializing in Asian securities who is suing her former employer for gender discrimination, failure to promote, and retaliation under federal, state, and city law.

    1. Background

    Zubulake filed an initial charge of gender discrimination with the EEOC on August 16, 2001.6 Well before that, however as early as April 2001 she received a right-to-sue letter from the EEOC, Zubulake filed this lawsuit on February 15, 2002.

    Fully aware of their common law duty to preserve relevant evidence, UBS’s in-house attorneys gave oral instructions in August 2001 immediately after Zubulake filed her EEOC charge — instructing employees not to destroy or delete material potentially relevant to Zubulake’s claims, and in fact to segregate such material into separate files for the lawyers’ eventual review.9 This warning pertained to both electronic and hard-copy files, but did not specifically pertain to so-called “backup tapes,” maintained by UBS’s information technology personnel.10 In particular, UBS’s in-house counsel, Robert L. Salzberg, “advised relevant UBS employees to preserve and turn over to counsel all files, records or other written memoranda or documents concerning the allegations raised in the [EEOC] charge or any aspect of [Zubulake’s] employment.”

    Subsequently  but still in August 2001 UBS’s outside counsel met with a number of the key players in the litigation and reiterated Mr. Salzberg’s instructions, reminding them to preserve relevant documents, “including e-mails.” Salzberg reduced these instructions to writing in e-mails dated February 22, 200213 immediately after Zubulake filed her complaint — and September 25, 2002.14 Finally, in August 2002, after Zubulake propounded a document request that specifically called for emails stored on backup tapes, UBS’s outside counsel instructed UBS information technology personnel to stop recycling backup tapes.15 Every UBS employee mentioned in this Opinion (with the exception of Mike Davies) either personally spoke to UBS’s outside counsel about the duty to preserve e-mails, or was a recipient of one of Salzberg’s e-mails.

    1. Procedural History

    In Zubulake I, I addressed Zubulake’s claim that relevant e-mails had been deleted from UBS’s active servers and existed only on “inaccessible” archival media (i.e., backup tapes). Arguing that e-mail correspondence that she needed to prove her case existed only on those backup tapes, Zubulake called for their production. UBS moved for a protective order shielding it from discovery altogether or, in the alternative, shifting the cost of backup tape restoration onto Zubulake. Because the evidentiary record was sparse, I ordered UBS to bear the costs of restoring a sample of the backup tapes.

    After the sample tapes were restored, UBS continued to press for cost shifting with respect to any further restoration of backup tapes. In Zubulake III, I ordered UBS to bear the lion’s share of restoring certain backup tapes because Zubulake was able to demonstrate that those tapes were likely to contain relevant information.

    Specifically, Zubulake had demonstrated that UBS had failed to maintain all relevant information (principally e-mails) in its active files. After Zubulake III, Zubulake chose to restore sixteen backup tapes. “In the restoration effort, the parties discovered that certain backup tapes [were] missing.” They also discovered a number of e-mails on the backup tapes that were missing from UBS’s active files, confirming Zubulake’s suspicion that relevant e-mails were being deleted or otherwise lost.

    Zubulake III begat Zubulake IV, where Zubulake moved for sanctions as a result of UBS’s failure to preserve all relevant backup tapes, and UBS’s deletion of relevant e-mails. Finding fault in UBS’s document preservation strategy but lacking evidence that the lost tapes and deleted e-mails were particularly favorable to Zubulake, I ordered UBS to pay for the re-deposition of several key UBS employees Varsano, Chapin, Hardisty, Kim, and Tong — so that Zubulake could inquire about the newly restored e-mails.

    1. The Instant Dispute

    The essence of the current dispute is that during the re-depositions required by Zubulake IV, Zubulake learned about more deleted e-mails and about the existence of e-mails preserved on UBS’s active servers that were, to that point, never produced. In sum, Zubulake has now presented evidence that UBS personnel deleted relevant e-mails, some of which were subsequently recovered from backup tapes (or elsewhere) and thus produced to Zubulake long after her initial document requests, and some of which were lost altogether. Zubulake has also presented evidence that some UBS personnel did not produce responsive documents to counsel until recently, depriving Zubulake of the documents for almost two years.

    1. Deleted E-Mails

    Notwithstanding the clear and repeated warnings of counsel, Zubulake has proffered evidence that a number of key UBS employees — Orgill, Hardisty, Holland, Chapin, Varsano, and Amone — failed to retain e-mails germane to Zubulake’s claims. Some of the deleted e-mails were restored from backup tapes (or other sources) and have been produced to Zubulake, others have been altogether lost, though there is strong evidence that they once existed. Although I have long been aware that certain e-mails were deleted, the redepositions demonstrate the scope and importance of those documents.

    1. At Least One E-Mail Has Never Been Produced

    At least one e-mail has been irretrievably lost; the existence of that email is known only because of oblique references to it in other correspondence. It has already been shown that Chapin — the alleged primary discriminator deleted relevant e-mails.25 In addition to those e-mails, Zubulake has evidence suggesting that Chapin deleted at least one other e-mail that has been lost entirely. An e-mail from Chapin sent at 10:47 AM on September 21, 2001, asks Kim to send him a “document” recounting a conversation between Zubulake and a coworker.

    Approximately 45 minutes later, Chapin sent an e-mail complaining about Zubulake to his boss and to the human resources employees handling Zubulake’s case purporting to contain a verbatim recitation of a conversation between Zubulake and her co-worker, as overheard by Kim. This conversation allegedly took place on September 18, 2001, at 10:58 AM.28 There is reason to believe that immediately after that conversation, Kim sent Chapin an e-mail that 29 Kim sent an e-mail at 11:19 AM on September 18, bearing the subject “2,” which appears to contain a different verbatim quotation from Zubulake. See UBSZ 004047. The e-mail containing the quotation that Chapin used in his September 21 e-mail would have borne the subject “1” and been sent sometime between 10:58 AM and 11:19 AM. See also 2/6/04 Deposition of Matthew Chapin at 565 (Chapin testifying that he might have pasted the quotation from another document); id. at 587 (Chapin testifying that he wasn’t sure whether the quotation was a paraphrase or pasted from another e-mail).

    contained the verbatim quotation that appears in Chapin’s September 21 e-mail the “document” that Chapin sought from Kim just prior to sending that e-mail and that Chapin deleted it.29 That e-mail, however, has never been recovered and is apparently lost.

    Although Zubulake has only been able to present concrete evidence that this one e-mail was irretrievably lost, there may well be others. Zubulake has presented extensive proof, detailed below, that UBS personnel were deleting relevant e-mails. Many of those e-mails were recovered from backup tapes. The UBS record retention policies called for monthly backup tapes to be retained for three years. The tapes covering the relevant time period (circa August 2001) should have been available to UBS in August 2002, when counsel instructed UBS’s information technology  personnel that backup tapes were also subject to the litigation hold.

    Nonetheless, many backup tapes for the most relevant time periods are missing, including: Tong’s tapes for June, July, August, and September of 2001; Hardisty’s tapes for May, June, and August of 2001; Clarke and Vinay Datta’s tapes for April and September 2001; and Chapin’s tape for April 2001. Zubulake did not even learn that four of these tapes were missing until after Zubulake IV. Thus, it is impossible to know just how many relevant e-mails have been lost in their entirety.

    1. Many E-Mails Were Deleted and Only Later Recovered from Alternate Sources

    Other e-mails were deleted in contravention of counsel’s “litigation hold” instructions, but were subsequently recovered from alternative sources such as backup tapes and thus produced to Zubulake, albeit almost two years after she propounded her initial document requests. For example, an e-mail from Hardisty to Holland (and on which Chapin was copied) reported that Zubulake said “that all she want[ed] is to be treated like the other ‘guys’ on the desk.” That e-mail was recovered from Hardisty’s August 2001 backup tape and thus it was on his active server as late as August 31, 2001, when the backup was generated but was not in his active files. That e-mail therefore must have been deleted subsequent to counsel’s warnings.

    Another e-mail, from Varsano to Hardisty dated August 31, 2001 the very day that Hardisty met with outside counsel forwarded an earlier message from Hardisty dated June 29, 2001, that recounted a conversation in which Hardisty “warned” Chapin about his management of Zubulake, and in 35 8/31/01 e-mail from Varsano to Hardisty, UBSZ 002968. Because the header information from Hardisty’s June 29, 2001 e-mail was cropped when Varsano forwarded it, it is not clear who — besides, presumably, Varsano received that message.

    which Hardisty reminded Chapin that Zubulake could “be a good broker.” This e-mail was absent from UBS’s initial production and had to be restored from backup; apparently neither Varsano nor Hardisty had retained it. This deletion is especially surprising because Varsano retained the June 29, 2001 e-mail for over two months before he forwarded it to Hardisty. Indeed, Varsano testified in his deposition that he “definitely” “saved all of the e-mails that [he] received concerning Ms. Zubulake” in 2001, that they were saved in a separate “very specific folder,” and that “all of those e-mails” were produced to counsel. As a final example, an e-mail from Hardisty to Varsano and Orgill, dated September 1, 2001, specifically discussed Zubulake’s termination. It read: “LZ ok once lawyers have been signed off, probably one month, but most  easily done in combination with the full Asiapc [downsizing] announcement.

    We will need to document her performance post her warning HK. Matt [Chapin] is doing that.” Thus, Orgill and Hardisty had decided to terminate Zubulake as early as September 1, 2001. Indeed, two days later Orgill replied, “It’s a pity we can’t act on LZ earlier.”40 Neither the authors nor any of the recipients of these emails retained any of them, even though these e-mails were sent within days of Hardisty’s meeting with outside counsel.

    They were not even preserved on backup tapes, but were only recovered because Kim happened to have retained copies. Rather, all three people (Hardisty, Orgill and Varsano) deleted these emails from their computers by the end of September 2001. Apart from their direct relevance to Zubulake’s claims, these e-mails may also serve to rebut Orgill and Hardisty’s deposition testimony. Orgill testified that he played no role in the decision to terminate Zubulake. And Hardisty testified that he did not recall discussing Zubulake’s termination with Orgill.

    These are merely examples. The proof is clear: UBS personnel unquestionably deleted relevant e-mails from their computers after August 2001, even though they had received at least two directions from counsel not to. Some of those e-mails were recovered (Zubulake has pointed to at least ), but some — and no one can say how many were not. And even those e-mails that were recovered were produced to Zubulake well after she originally asked for them.

    1. Retained, But Unproduced, E-Mails

    Separate and apart from the deleted material are a number of e-mails that were absent from UBS’s initial production even though they were not deleted. These e-mails existed in the active, on-line files of two UBS employees Kim and Tong — but were not produced to counsel and thus not turned over to Zubulake until she learned of their existence as a result of her counsel’s questions at deposition. Indeed, these e-mails were not produced until after Zubulake had conducted thirteen depositions and four re-depositions.

    During her February 19, 2004, deposition, Kim testified that she was never asked to produce her files regarding Zubulake to counsel, nor did she ever actually produce them,46 although she was asked to retain them.47 One week after Kim’s deposition, UBS produced seven new e-mails. The obvious inference to be drawn is that, subsequent to the deposition, counsel for the first time asked Kim to produce her files. Included among the new e-mails produced from Kim’s computer was one (dated September 18, 2001) that recounts a conversation between Zubulake and Kim in which Zubulake complains about the way women are treated at UBS.48 Another e-mail recovered from Kim’s computer contained the correspondence, described above, in which Hardisty and Orgill discuss Zubulake’s termination, and in which Orgill laments that she could not be fired sooner than she was. On March 29, 2004, UBS produced several new e-mails, and three new e-mail retention policies, from Tong’s active files. At her deposition two weeks earlier, Tong explained (as she had at her first deposition, a year previous) that she kept a separate “archive” file on her computer with documents pertaining to Zubulake.50 UBS admits that until the March 2004 deposition, it misunderstood Tong’s use of the word “archive” to mean backup tapes; after her March 2004 testimony, it was clear that she meant active data. Again, the inference is that UBS’s counsel then, for the first time, asked her to produce her active computer files.

    Among the new e-mails recovered from Tong’s computer was one, dated August 21, 2001, at 11:06 AM, from Mike Davies51 to Tong that read, “received[.] thanks[,] mike,”52 and which was in response to an e-mail from Tong, sent eleven minutes earlier, that read, “Mike, I have just faxed over to you the pages of Laura’s [EEOC] charge against the bank.”

    mail seems insignificant in isolation, it is actually quite important. Three hours after sending that three word response, Davies sent an email to Tong with the subject line “Laura Zubulake” that reads: I spoke to Brad [Orgill] he’s looking to exit her asap [by the end of month], and looking for guidance from us following letter? we sent her re her performance [or does he mean PMM] I said you were on call with US yesterday and that we need US legal advise etc, but be aware he’s looking to finalise quickly! said if off by end August then no bonus consideration, but if still employed after aug consideration should be given? Davies testified that he was unaware of Zubulake’s EEOC charge when he spoke with Orgill.55 The timing of his e-mails, however the newly produced e-mail that acknowledges receiving Zubulake’s EEOC charge coming three hours before the e-mail beginning “I spoke to Brad” strongly undercuts this claim.

    The new e-mail, therefore, is circumstantial evidence that could support the inference that Davies knew about the EEOC charge when he spoke with Orgill, and suggests that Orgill knew about the EEOC charge when the decision was made to terminate It is also plausible that Orgill and Davies spoke days earlier before either knew about the EEOC charge and Davies might have omitted that information from his initial e-mail to Tong. The newly discovered e-mail, however, is helpful to Zubulake in arguing her view of the evidence. Zubulake.56 Its relevance to Zubulake’s retaliation claim is unquestionable, and yet it was not produced until April 20, 2004.

    * * *

    Zubulake now moves for sanctions as a result of UBS’s purported discovery failings. In particular, she asks — as she did in Zubulake IV — that an adverse inference instruction be given to the jury that eventually hears this case.

    III. LEGAL STANDARD

    Spoliation is “the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.” “The determination of an appropriate sanction for spoliation, if any, is confined to the sound discretion of the trial judge, and is assessed on a case-by-case basis.”59 The authority to sanction litigants for spoliation arises jointly under the Federal Rules of Civil Procedure and the court’s inherent powers.

    The spoliation of evidence germane “to proof of an issue at trial can support an inference that the evidence would have been unfavorable to the party responsible for its destruction.” A party seeking an adverse inference instruction (or other sanctions) based on the spoliation of evidence must establish the following three elements: (1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a “culpable state of mind” and (3) that the destroyed evidence was “relevant” to the party’s claim or defense such that a reasonable trier of fact could stated that, to obtain an adverse inference instruction, a party must establish that the unavailable evidence is ‘relevant’ to its claims or defenses, our cases make clear that ‘relevant’ in this context means something more than sufficiently probative to satisfy Rule 401 of the Federal Rules of Evidence. Rather, the party seeking an adverse inference must adduce sufficient evidence from which a reasonable trier of fact could infer that the destroyed or unavailable evidence find that it would support that claim or defense.

    In this circuit, a “culpable state of mind” for purposes of a spoliation inference includes ordinary negligence.63 When evidence is destroyed in bad faith (i.e., intentionally or willfully), that fact alone is sufficient to demonstrate relevance.64 By contrast, when the destruction is negligent, relevance must be proven by the party seeking the sanctions.

    In the context of a request for an adverse inference instruction, the concept of “relevance” encompasses not only the ordinary meaning of the term, but also that the destroyed evidence would have been favorable to the movant.

    “This corroboration requirement is even more necessary where the destruction was merely negligent, since in those cases it cannot be inferred from the conduct of the spoliator that the evidence would even have been harmful to him.” This is equally true in cases of gross negligence or recklessness; only in the case of willful spoliation does the degree of culpability give rise to a presumption of the relevance of the documents destroyed.

    IV. DISCUSSION

    In Zubulake IV, I held that UBS had a duty to preserve its employees’ active files as early as April 2001, and certainly by August 2001, when Zubulake filed her EEOC charge.70 Zubulake has thus satisfied the first element of the adverse inference test. As noted, the central question implicated by this motion is whether UBS and its counsel took all necessary steps to guarantee that relevant data was both preserved and produced. If the answer is “no,” then the next question is whether UBS acted wilfully when it deleted or failed to timely produce relevant information resulting in either a complete loss or the production of responsive information close to two years after it was initially sought. If UBS acted willfully, this satisfies the mental culpability prong of the adverse inference test and also demonstrates that the deleted material was relevant.71 If UBS acted negligently or even recklessly, then Zubulake must show that the missing or late produced information was relevant.

    1.     Counsel’s Duty to Monitor Compliance

    In Zubulake IV, I summarized a litigant’s 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. As a general rule, that litigation hold does not apply to inaccessible backup tapes (e.g., those typically maintained solely for the purpose of disaster recovery), which may continue to be recycled on the schedule set forth in the company’s policy. On

    the other hand, if backup tapes are accessible (i.e., actively used for information retrieval) , then such tapes would likely be subject to the litigation hold.

    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. Proper communication between a party and her lawyer will ensure (1) that all relevant information (or at least all sources of relevant information) is discovered, (2) that relevant information is retained on a continuing basis; and (3) that relevant non-privileged material is produced to the opposing party.

      1. Counsel’s Duty to Locate Relevant Information

    Once a “litigation hold” is in place, a party and her counsel must make certain that all sources of potentially relevant information are identified and placed “on hold,” to the extent required in Zubulake IV. To do this, counsel must become fully familiar with her client’s document retention policies, as well as the client’s data retention architecture.73 This will invariably involve speaking with information technology personnel, who can explain system-wide backup procedures and the actual (as opposed to theoretical) implementation of the firm’s recycling policy.

    It will also involve communicating with the “key players” in the litigation, in order to understand how they stored information. In this case, for example, some UBS employees created separate computer files pertaining to Zubulake, while others printed out relevant e-mails and retained them in hard copy only. Unless counsel interviews each employee, it is impossible to determine whether all potential sources of information have been inspected.

    A brief conversation with counsel, for example, might have revealed that Tong maintained “archive” copies of e-mails concerning Zubulake, and that “archive” meant a separate on-line computer file, not a backup tape. Had that conversation taken place, Zubulake might have had relevant e-mails from that file two years ago.

    To the extent that it may not be feasible for counsel to speak with every key player, given the size of a company or the scope of the lawsuit, counsel must be more creative. It may be possible to run a system-wide keyword search; counsel could then preserve a copy of each “hit.” Although this sounds burdensome, it need not be. Counsel does not have to review these documents, only see that they are retained. For example, counsel could create a broad list of search terms, run a search for a limited time frame, and then segregate responsive It might be advisable to solicit a list of search terms from the opposing party for this purpose, so that it could not later complain about which terms were used documents.

    When the opposing party propounds its document requests, the parties could negotiate a list of search terms to be used in identifying responsive documents, and counsel would only be obliged to review documents that came up as “hits” on the second, more restrictive search. The initial broad cut merely guarantees that relevant documents are not lost.

    In short, it is not sufficient to notify all employees of a litigation hold and expect that the party will then retain and produce all relevant information. Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched.

    This is not to say that counsel will necessarily succeed in locating all such sources, or that the later discovery of new sources is evidence of a lack of effort. But counsel and client must take some reasonable steps to see that sources of relevant information are located.

    2. Counsel’s Continuing Duty to Ensure Preservation

    Once a party and her counsel have identified all of the sources of potentially relevant information, they are under a duty to retain that information (as per Zubulake IV) and to produce information responsive to the opposing party’s requests. Rule 26 creates a “duty to supplement” those responses.

    Although the Rule 26 duty to supplement is nominally the party’s, it really falls oncounsel. As the Advisory Committee explains, Although the party signs the answers, it is his lawyer who understands their significance and bears the responsibility to bring answers up to date. In a complex case all sorts of information reaches the party, who little understands its bearing on answers previously given to interrogatories . In practice, therefore, the lawyer under a continuing burden must periodically recheck all interrogatories and canvass all new information.

    To ameliorate this burden, the Rules impose a continuing duty to supplement responses to discovery requests only when “a party[,] or more frequently his lawyer, obtains actual knowledge that a prior response is incorrect. This exception does not impose a duty to check the accuracy of prior responses, but it prevents knowing concealment by a party or attorney.”

    The continuing duty to supplement disclosures strongly suggests that parties also have a duty to make sure that discoverable information is not lost. Indeed, the notion of a “duty to preserve” connotes an ongoing obligation. Obviously, if information is lost or destroyed, it has not been preserved. The tricky question is what that continuing duty entails. What must a lawyer do to make certain that relevant information especially electronic information is being retained? Is it sufficient if she periodically re-sends her initial “litigation hold” instructions? What if she communicates with the party’s information technology personnel? Must she make occasional on-site inspections?

    Above all, the requirement must be reasonable. A lawyer cannot be obliged to monitor her client like a parent watching a child. At some point, the client must bear responsibility for a failure to preserve. At the same time, counsel is more conscious of the contours of the preservation obligation; a party cannot reasonably be trusted to receive the “litigation hold” instruction once and to fully comply with it without the active supervision of counsel.

    There are thus a number of steps that counsel should take to ensure compliance with the preservation obligation. While these precautions may not be enough (or may be too much) in some cases, they are designed to promote the continued preservation of potentially relevant information in the typical case. First, counsel must issue a “litigation hold” at the outset of litigation or whenever litigation is reasonably anticipated.81 The litigation hold should be periodically re-issued so that new employees are aware of it, and so that it is fresh in the minds of all employees.

    Second, counsel should communicate directly with the “key players” in the litigation, i.e., the people identified in a party’s initial disclosure and any subsequent supplementation thereto.

    Finally, counsel should instruct all employees to produce electronic copies of their relevant active files. Counsel must also make sure that all backup media which the party is required to retain is identified and stored in a safe place. In cases involving a small number of relevant backup tapes, counsel might be advised to take physical possession of backup tapes. In other cases, it might make sense for relevant backup tapes to be segregated and placed in storage. Regardless of what particular arrangement counsel chooses to employ, the point is to separate relevant backup tapes from others. One of the primary reasons that electronic data is lost is ineffective communication with information technology personnel. By taking possession of, or otherwise safeguarding, all potentially relevant backup tapes, counsel eliminates the possibility that such tapes will be inadvertently recycled.

    Kier v. UnumProvident Corp. provides a disturbing example of what can happen when counsel and client do not effectively communicate. In that ERISA class action, the court entered an order on December 27, 2002, requiring UnumProvident to preserve electronic data, specifically including e-mails sent or received on six particular days. What ensued was a comedy of errors. First, before the court order was entered (but when it was subject to the common law duty to preserve) UnumProvident’s technical staff unilaterally decided to take a “snapshot” of its servers instead of restoring backup tapes, which would have recovered the e-mails in question. (In fact, the snapshot was useless for the purpose of preserving these e-mails because most of them had already been deleted by the time the snapshot was generated.) Once the court issued the preservation order, UnumProvident failed to take any further steps to locate the emails, believing that the same person who ordered the snapshot would oversee compliance with the court order. But no one told him that.

    Indeed, it was not until January 13, when senior UnumProvident legal personnel inquired whether there was any way to locate the e-mails referenced in the December 27 Order, that anyone sent a copy of the Order to IBM, who provided “email, file server, and electronic data related disaster recovery services to UnumProvident.” By that time, UnumProvident had written over 881 of the 1,498 tapes that contained backup data for the relevant time period. All of this led to a stern rebuke from the court.Had counsel in Kier promptly taken the precautions set out above, the e-mails would not have been lost.

    3. What Happened at UBS After August 2001?

    As more fully described above, UBS’s in-house counsel issued a litigation hold in August 2001 and repeated that instruction several times from September 2001 through September 2002. Outside counsel also spoke with some (but not all) of the key players in August 2001. Nonetheless, certain employees unquestionably deleted e-mails. Although many of the deleted e-mails were recovered from backup tapes, a number of backup tapes and the e-mails on them are lost forever. Other employees, notwithstanding counsel’s  that they produce their files on Zubulake, did not do so.

    1. UBS’s Discovery Failings

    UBS’s counsel both in-house and outside repeatedly advised UBS of its discovery obligations. In fact, counsel came very close to taking the precautions laid out above. First, outside counsel issued a litigation hold in August 2001. The hold order was circulated to many of the key players in this litigation, and reiterated in e-mails in February 2002, when suit was filed, and again in September 2002. Outside counsel made clear that the hold order applied to backup tapes in August 2002, as soon as backup tapes became an issue in this case. Second, outside counsel communicated directly with many of the key players in August 2001 and attempted to impress upon them their preservation obligations. Third, and finally, counsel instructed UBS employees to produce copies of their active computer files.

    To be sure, counsel did not fully comply with the standards set forth above. Nonetheless, under the standards existing at the time, counsel acted reasonably to the extent that they directed UBS to implement a litigation hold. Yet notwithstanding the clear instructions of counsel, UBS personnel failed to preserve plainly relevant e-mails.

    1. Counsel’s Failings

    On the other hand, UBS’s counsel are not entirely blameless. “While,of course, it is true that counsel need not supervise every step of the document production process and may rely on their clients in some respects,”90 counsel is responsible for coordinating her client’s discovery efforts. In this case, counsel failed to properly oversee UBS in a number of important ways, both in terms of its duty to locate relevant information and its duty to preserve and timely produce that information.

    With respect to locating relevant information, counsel failed to adequately communicate with Tong about how she stored data. Although counsel determined that Tong kept her files on Zubulake in an “archive,” they apparently made no effort to learn what that meant. A few simple questions like the ones that Zubulake’s counsel asked at Tong’s re-deposition would have revealed that With respect to making sure that relevant data was retained, counsel failed in a number of important respects. First, neither in-house nor outside counsel communicated the litigation hold instructions to Mike Davies, a senior human resources employee who was intimately involved in Zubulake’s termination. Second, even though the litigation hold instructions were communicated to Kim, no one ever asked her to produce her files. And third, counsel failed to protect relevant backup tapes; had they done so, Zubulake might have been able to recover some of the e-mails that UBS employees deleted.

    In addition, if Varsano’s deposition testimony is to be credited, he turned over “all of the e-mails that [he] received concerning Ms. Zubulake.” 91 If Varsano turned over these e-mails, then counsel must have failed to produce some of them.

    In sum, while UBS personnel deleted e-mails, copies of many of these e-mails were lost or belatedly produced as a result of counsel’s failures.

    1. Summary

    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. Once that duty is made clear to a party, either by court order or by instructions from counsel, that party is on notice of its obligations and acts at its own peril. Though more diligent action on the part of counsel would have mitigated some of the damage caused by UBS’s deletion of emails, UBS deleted the e-mails in defiance of explicit instructions not to.

    Because UBS personnel continued to delete relevant e-mails, Zubulake was denied access to e-mails to which she was entitled. Even those emails that were deleted but ultimately salvaged from other sources (e.g., backup tapes or Tong and Kim’s active files) were produced 22 months after they were initially requested.

    The effect of losing potentially relevant e-mails is obvious, but the effect of late production cannot be underestimated either. “[A]s a discovery  deadline . . . draws near, discovery conduct that might have been considered ‘merely’ discourteous at an earlier point in the litigation may well breach a party’s duties to its opponent and to the court.” Here, as UBS points out, Zubulake’s instant motion “comes more than a year after the Court’s previously imposed March 3, 2003 discovery cutoff.” Although UBS attempts to portray this fact as evidence that Zubulake is being overly litigious, it is in fact a testament to the time wasted by UBS’s failure to timely produce all relevant and responsive information. With the discovery deadline long past, UBS “was under an obligation to be as cooperative as possible.”95 Instead, the extent of UBS’s spoliation was uncovered by Zubulake during court-ordered re-depositions.

    I therefore conclude that UBS acted wilfully in destroying potentially relevant information, which resulted either in the absence of such information or its tardy production (because duplicates were recovered from Kim or Tong’s active files, or restored from backup tapes). Because UBS’s spoliation was willful, the lost information is presumed to be relevant.

    2.     Remedy

    Having concluded that UBS was under a duty to preserve the e-mails and that it deleted presumably relevant e-mails wilfully, I now consider the full panoply of available sanctions.97 In doing so, I recognize that a major  consideration in choosing an appropriate sanction — along with punishing UBS and deterring future misconduct is to restore Zubulake to the position that she would have been in had UBS faithfully discharged its discovery obligations.

    That being so, I find that the following sanctions are warranted. First, the jury empanelled to hear this case will be given an adverse inference instruction with respect to e-mails deleted after August 2001, and in particular, with respect to e-mails that were irretrievably lost when UBS’s backup tapes were recycled. No one can ever know precisely what was on those tapes, but the content of e-mails recovered from other sources along with the fact that UBS employees wilfully deleted e-mails is sufficiently favorable to Zubulake that I am convinced that the contents of the lost tapes would have been similarly, if not more, favorable.

    Second, Zubulake argues that the e-mails that were produced, albeit late, “are brand new and very significant to Ms. Zubulake’s retaliation claim and would have affected [her] examination of every witness . . . in this case.” Likewise, Zubulake claims, with respect to the newly produced e-mails from Kim and Tong’s active files, that UBS’s “failure to produce these e-mails in a timely fashion precluded [her] from questioning any witness about them.” These arguments stand unrebutted and are therefore adopted in full by the Court. Accordingly, UBS is ordered to pay the costs of any depositions or re-depositions required by the late production.

    Third, UBS is ordered to pay the costs of this motion. Finally, I note that UBS’s belated production has resulted in a self executing sanction. Not only was Zubulake unable to question UBS’s witnesses using the newly produced e-mails, but UBS was unable to prepare those witnesses with the aid of those e-mails. Some of UBS’s witnesses, not having seen these Emails, have already given deposition testimony that seems to contradict the newly discovered evidence. For example, if Zubulake’s version of the evidence is credited, the e-mail from Davies acknowledging receipt of Zubulake’s EEOC charge at 11:06 AM on August 21, 2001, puts the lie to Davies’ testimony that he had not seen the charge when he spoke to Orgill — a conversation that was reflected in an e-mail sent at 2:02 PM. Zubulake is, of course, free to use this testimony at trial.

    These sanctions are designed to compensate Zubulake for the harm done to her by the loss of or extremely delayed access to potentially relevant evidence. They should also stem the need for any further litigation over the backup tapes.

    3.     Other Alleged Discovery Abuses

    In addition to the deleted (and thus never- or belatedly produced) emails, Zubulake complains of two other perceived discovery abuses: the destruction of a September 2001 backup tape from Tong’s server, and the belated production of a UBS document retention policy.

    1. Tong’s September 2001 Backup Tape

    Zubulake moves for sanctions because of the destruction of Tong’s September 2001 backup tape. In Zubulake III, I ordered UBS to pay 75% of the cost of restoring certain backup tapes.104 Understandably, one of the tapes that Zubulake chose to restore was Tong’s tape for August 2001, the month that Zubulake filed her EEOC charge. That tape, however, had been recycled by UBS. Zubulake then chose to restore Tong’s September 2001 tape, on the theory that “the majority of the e-mails on [the August 2001] tape are preserved on the September 2001 tape.”105 When that tape was actually restored, however, it turned out not to be the September 2001 tape at all, but rather Tong’s October 2001 tape. This tape, according to UBS, was simply mislabeled.

    2001, which it has and which has not yet been restored.107 Varsano was Tong’s HR counterpart in the United States, and was copied on many (but not all) of the emails that went to or from Tong.108 These backup tapes, taken together, should recreate the lion’s share of data from Tong’s August 2001 tape. UBS must therefore pay for the restoration and production of relevant e-mails from Varsano’s August 2001 backup tape, and pay for any re-deposition of Tong or Varsano that is necessitated by new e-mails found on that tape.

    1. The July 1999 Record Management Policy

    Zubulake also moves for sanctions in connection with what she refers to as “bad faith discovery tactics” on the part of UBS’s counsel.109 In particular, Zubulake complains of a late-produced record management policy.110 The existence of this policy was revealed to Zubulake at Varsano’s second deposition on January 26, 2004,111 at which time Zubulake called for its production. Zubulake twice reiterated this request in writing, in the hopes that she would have the policy in time for Hardisty’s deposition on February 5, 2004.

    UBS did not produce the policy, however, until February 26, 2004.The late production of the July 1999 policy does not warrant sanctions at all. First, UBS’s production of the policy was not late. Zubulake requested it at Varsano’s deposition on January 26, 2004, and UBS produced it one month later, on February 26. The Federal Rules afford litigants thirty days to respond to document requests,114 and UBS produced the policy within that time.

    The fact that Zubulake wanted the document earlier is immaterial if it was truly necessary to confront Hardisty with the policy, then his deposition should have been rescheduled or Zubulake should have requested relief from the Court. Not having done so, Zubulake cannot now complain that UBS improperly delayed its production of that document.

    Second, even if UBS was tardy in producing the policy, Zubulake has not demonstrated that she was prejudiced. She suggests that she would have used the policy in the depositions of Hardisty and perhaps Chapin, but does not explain how. Nor is it at all clear how Zubulake might have used the policy. With respect to e-mail, the policy states: “Email is another priority. We will have a separate policy regarding email with appropriate reference or citation in this policy and/or retention schedules.”116 Prior to these depositions, Zubulake had a number of UBS document retention policies that post-dated the June 1999 Policy.

    V. CONCLUSION

    In sum, counsel has a duty to effectively communicate to her client its discovery obligations so that all relevant information is discovered, retained, and produced. In particular, once the duty to preserve attaches, counsel must identify sources of discoverable information. This will usually entail speaking directly with the key players in the litigation, as well as the client’s information technology personnel. In addition, when the duty to preserve attaches, counsel must put in place a litigation hold and make that known to all relevant employees by communicating with them directly. The litigation hold instructions must be 118 Rulings numbered (1) and (3) may both result in the re-deposition of Tong and Varsano. Obviously, each should only be re-deposed once.

    reiterated regularly and compliance must be monitored. Counsel must also call for employees to produce copies of relevant electronic evidence, and must arrange for the segregation and safeguarding of any archival media (e.g., backup tapes) that the party has a duty to preserve.

    Once counsel takes these steps (or once a court order is in place), a party is fully on notice of its discovery obligations. If a party acts contrary to counsel’s instructions or to a court’s order, it acts at its own peril. UBS failed to preserve relevant e-mails, even after receiving adequate warnings from counsel, resulting in the production of some relevant e-mails almost two years after they were initially requested, and resulting in the complete destruction of others. For that reason, Zubulake’s motion is granted and sanctions are warranted. UBS is ordered to:

    1. Pay for the re-deposition of relevant UBS personnel, limited to the subject of the newly-discovered e-mails;
    2. Restore and produce relevant documents from Varsano’s August 2001 backup tape;
    3. Pay for the re-deposition of Varsano and Tong, limited to the new material produced from Varsano’s August 2001 backup tape;
    4. Pay all “reasonable expenses, including attorney’s fees,” incurred by Zubulake in connection with the making of this motion.

    In addition, I will give the following instruction to the jury that hears this case:

    You have heard that UBS failed to produce some of the e-mails sent or received by UBS personnel in August and September 2001. 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 should 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.

    The Clerk is directed to close this motion [number 43 on the docket sheet]. Fact discovery shall close on October 4, 2004. A final pretrial conference is scheduled for 4:30 PM on October 13, 2004, in Courtroom 15C. If either party believes that a dispositive motion is appropriate, that date will be converted to a pre-motion conference.

    VI. POSTSCRIPT

    The subject of the discovery of electronically stored information is rapidly evolving. When this case began more than two years ago, there was little guidance from the judiciary, bar associations or the academy as to the governing standards. Much has changed in that time. There have been a flood of recent opinions including a number from appellate courts and there are now several treatises on the subject.

    In addition, professional groups such as the American Bar Association and the Sedona Conference have provided very useful guidance on thorny issues relating to the discovery of electronically stored information. Many courts have adopted, or are considering adopting, local rules addressing the See, e.g., E.D. Ark. Local Rule 26.1; W.D. Ark. Local Rule 26.1; D. Wy. Local Rule 26.1; D.N.J. Local Rule 26.1(d); see also Memorandum from the subject.123 Most recently, the Standing Committee on Rules and Procedures has approved for publication and public comment a proposal for revisions to the Federal Rules of Civil Procedure designed to address many of the issues raised by the discovery of electronically stored information.

    Now that the key issues have been addressed and national standards are developing, parties and their counsel are fully on notice of their responsibility to preserve and produce electronically stored information. The tedious and difficult fact finding encompassed in this opinion and others like it is a great burden on a court’s limited resources. The time and effort spent by counsel to litigate these issues has also been time-consuming and distracting. This Court, for one, is optimistic that with the guidance now provided it will not be necessary to spend this amount of time again. It is hoped that counsel will heed the guidance provided by these resources and will work to ensure that preservation, production and spoliation issues are limited, if not  eliminated.

    SO ORDERED:

    _________________________

    Shira A. Scheindlin

    United States District Judge

    Dated: New York, New York

    July 20, 2004

    52

             Appearances –

     

    For Plaintiff:

    James A. Batson, Esq.

    LIDDLE & ROBINSON, LLP

    685 Third Avenue

    New York, New York 10017

    (212) 687-8500

     

    For Defendants:

    Kevin B. Leblang, Esq.

    Norman C. Simon, Esq.

    KRAMER LEVIN NAFTALIS & FRANKEL LLP

    919 Third Avenue

    New York, New York 10022

    (212) 715-9100

    Zubulake v. UBS Warburg, ZUBULAKE 4

    Wednesday, March 14th, 2007

    “Documents create a paper reality we call proof.” The absence of such documentary proof may stymie the search for the truth. If documents are lost or destroyed when they should have been preserved because a litigation was threatened or pending, a party may be prejudiced. The questions presented here are how to determine an appropriate penalty for the party that caused the loss and the flip side — how to determine an appropriate remedy for the party injured by the loss.


    Finding a suitable sanction for the destruction of evidence in civil cases has never been easy. Electronic evidence only complicates matters. As documents are increasingly maintained electronically, it has become easier to delete or tamper with evidence (both intentionally and inadvertently) and more difficult for litigants to craft policies that ensure all relevant documents are preserved.2 This opinion addresses both the scope of a litigant’s duty to preserve electronic documents and the consequences of a failure to preserve documents that fall within the scope of that duty.

     
    I.                   BACKGROUND

    This is the fourth opinion resolving discovery disputes in this case. Familiarity with the prior opinions is presumed, and only background information relevant to the instant dispute is described here. In brief, Laura Zubulake, an equities trader who earned approximately $650,000 a year with UBS,4 is suing UBS for gender discrimination, failure to promote and retaliation under federal, state, and city law. She has repeatedly maintained that the evidence she needs to prove her case exists in e-mail correspondence sent among various UBS employees and stored only on UBS’s computer systems.

    On July 24, 2003, I ordered the parties to share the cost of restoring certain UBS backup tapes that contained e-mails relevant to Zubulake’s claims.5 In the restoration effort, the parties discovered that certain backup tapes are missing. In particular:

     

    ndividual/Server

    Missing Monthly Backup tapes

     

    (UBS has located certain weekly backup tapes to fill some of the gaps created by the lost monthly tapes).

    In addition, certain isolated e-mails — created after UBS supposedly began retaining all relevant e-mails – were deleted from UBS’s system, although they appear to have been saved on the backup tapes. As I explained in Zubulake III, “certain e-mails sent after the initial EEOC charge – and particularly relevant to Zubulake’s retaliation claim – were apparently not saved at all. For example, [an] e-mail from Chapin to Joy Kim [another of Zubulake’s coworkers] instructing her on how to file a complaint against Zubulake was not saved, and it bears the subject line ‘UBS client attorney priviledge [sic] only,’ although no attorney is copied on the e-mail. This potentially useful e-mail was deleted and resided only on UBS’s backup tapes.”

    Zubulake filed her EEOC charge on August 16, 2001; the instant action was filed on February 14, 2002. In August 2001, in an oral directive, UBS ordered its employees to retain all relevant documents.7 In August 2002, after Zubulake specifically requested e-mail stored on backup tapes, UBS’s outside counsel orally instructed UBS’s information technology personnel to stop recycling backup tapes.

    Zubulake now seeks sanctions against UBS for its failure to preserve the missing backup tapes and deleted e-mails. In particular, Zubulake seeks the following relief: (a) an order requiring UBS to pay  in full the costs of restoring the remainder of the monthly backup tapes; (b) an adverse inference instruction against UBS with respect to the backup tapes that are missing; and (c) an order directing UBS to bear the costs of re-deposing certain individuals, such as Chapin, concerning the issues raised in newly produced e-mails.


    II.                LEGAL STANDARD

    Spoliation is “the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.” The spoliation of evidence germane “to proof of an issue at trial can support an inference that the evidence would have been unfavorable to the party responsible for its destruction.”10 However, “[t]he determination of an appropriate sanction for spoliation, if any, is confined to the sound discretion of the trial judge, and is assessed on a case-by-case basis.”11 The authority to sanction litigants for spoliation arises jointly under the Federal Rules of Civil Procedure and the court’s own inherent powers.


    III.            
    DISCUSSION

    It goes without saying that a party can only be sanctioned for destroying evidence if it had a duty to preserve it. If UBS had no such duty, then UBS cannot be faulted. I begin, then, by discussing the extent of a party’s duty to preserve evidence.

    A. Duty to Preserve

    “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.” Identifying the boundaries of the duty to preserve involves two related inquiries: when does the duty to preserve attach, and what evidence must be preserved?

    1. The Trigger Date

    In this case, the duty to preserve evidence arose, at the latest, on August 16, 2001, when Zubulake filed her EEOC charge.14 At that time, UBS’s in-house attorneys cautioned employees to retain all documents, including e-mails and backup tapes, that could potentially be relevant to the litigation. 

    In meetings with Chapin, Clarke, Kim, Hardisty, John Holland (Chapin’s supervisor), and Dominic Vail (Zubulake’s former supervisor) held on August 29-31, 2001, UBS’s outside counsel reiterated the need to preserve documents.

    But the duty to preserve may have arisen even before the EEOC complaint was filed. Zubulake argues that UBS “should have known that the evidence [was] relevant to future litigation,” as early as April 2001, and thus had a duty to preserve it. She offers two pieces of evidence in support of this argument. First, certain UBS employees titled e-mails pertaining to Zubulake “UBS Attorney Client Privilege” starting in April 2001,  notwithstanding the fact that no attorney was copied on the e-mail and the substance of the e-mail was not  legal in nature. Second, Chapin admitted in his deposition that he feared litigation from as early as April 2001:


    Q: Did you think that Ms. Zubulake was going to sue UBS when you received these documents?

    A: What dates are we talking about?

    Q: Late April 2001.

    A: Certainly it was something that was in the back of my head.

    Merely because one or two employees contemplate the possibility that a fellow employee might sue does not generally impose a firm-wide duty to preserve. But in this case, it appears that almost everyone associated with Zubulake recognized the possibility that she might sue. For example, an e-mail authored by Zubulake’s co-worker Vinnay Datta, concerning Zubulake and labeled “UBS attorney client priviladge [sic],” was distributed to Chapin (Zubulake’s supervisor), Holland and Leland Tomblick (Chapin’s supervisor), Vail (Zubulake’s former supervisor), and Andrew Clarke (Zubulake’s co-worker) in late April 2001.19 That e-mail, replying to one from Hardisty, essentially called for Zubulake’s termination: “Our biggest strength as a firm and as a desk is our ability to share information and relationships.

    Any person who threatens this in any way should be firmly dealt with. . . . [B]elieve me that a lot of other [similar] instances have occurred earlier.” Thus, the relevant people at UBS anticipated litigation in April 2001. The duty to preserve attached at the time that litigation was reasonably anticipated.

    1. Scope

    The next question is: What is the scope of the duty to preserve? Must a corporation, upon recognizing the threat of litigation, preserve every shred of paper, every e-mail or electronic document, and every backup tape? The answer is clearly, “no”. Such a rule would cripple large corporations, like UBS, that are almost always involved in litigation. As a general rule, then, a party need not preserve all backup tapes even when it reasonably anticipates litigation.

    At the same time, 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. “While a litigant is under no duty to keep or retain every document in its possession . it is under a duty to preserve what it knows, or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request.”

    i.                    Whose Documents Must Be Retained?

    The broad contours of the duty to preserve are relatively clear. That duty should certainly extend to any documents or tangible things (as defined by Rule 34(a))24 made by individuals “likely to have discoverable information that the disclosing party may use to support its claims or defenses.” The duty also includes documents prepared for those individuals, to the extent those documents can be readily identified (e.g., from the “to” field in e- mails). The duty also extends to information that is relevant to the claims or  defenses of any party, or which is “relevant to the subject matter involved in the action.”26 Thus, the duty to preserve extends to those employees likely to have relevant information — the “key players” in the case. In this case, all of the individuals whose backup tapes were lost (Chapin, Hardisty, Tong, Datta and Clarke) fall into this category.

        ii. What Must Be Retained?

        A party or anticipated party must retain all relevant documents (but not multiple identical copies) in existence at the time the duty to preserve attaches, and any relevant documents created thereafter. In recognition of the fact that there are many ways to manage electronic data, litigants are free to choose how this task is accomplished. For example, a litigant could choose to retain all then-existing backup tapes for the relevant personnel (if such tapes store data by individual or the contents can be identified in good faith and through reasonable effort), and to catalog any later-created documents in a separate electronic file. That, along with a mirror-image of the computer system taken at the time the duty to preserve attaches (to preserve documents in the state they existed at that time), creates a complete set of relevant documents. Presumably there are a multitude of other ways to achieve the same result.

        iii. Summary of Preservation Obligations

        The scope of a party’s preservation obligation can be described as follows: 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. As a general rule, that litigation hold does not apply to inaccessible backup tapes (e.g., those typically maintained solely for the purpose of disaster recovery), which may continue to be recycled on the schedule set forth in the company’s policy. On the other hand, if backup tapes are accessible (i.e., actively used for information retrieval), then such tapes would likely be subject to the litigation hold.

    However, it does make sense to create one exception to this general rule. If a company can identify where particular employee documents are stored on backup tapes, then the tapes storing the documents of “key players” to the existing or threatened litigation should be preserved if the information contained on those tapes is not otherwise available. This exception applies to all backup tapes.

        iv. What Happened at UBS After August 2001?

    By its attorney’s directive in August 2002, UBS endeavored to preserve all backup tapes that existed in August 2001 (when Zubulake filed her EEOC charge) that captured data for employees identified by Zubulake in her document request, and all such monthly backup tapes generated thereafter. These backup tapes existed in August 2002, because of UBS’s document retention policy, which required retention for three years. In August 2001, UBS employees were instructed to maintain active electronic documents pertaining to Zubulake in separate files.29 Had these directives been followed, UBS would have met its preservation obligations by preserving one copy of all relevant documents that existed at, or were created after, the time when the duty to preserve attached.

    In fact, UBS employees did not comply with these directives. Three backup tapes containing the e-mail files of Chapin, Hardisty, Clarke and Datta created after April 2001 were lost, despite the August 2002 directive to maintain those tapes. According to the UBS document retention policy, these three monthly backup tapes from April and June 2001 should have been See supra note. According to a chart prepared by UBS’s attorneys and presented during oral arguments, the three backup tapes of U.S. personnel were in fact deleted between October 2001 and February 2002 — after UBS staff were warned to retain documents, but before they were told specifically to preserve backup tapes. retained for three years.

    The two remaining lost backup tapes were for the time period after Zubulake filed her EEOC complaint (Rose Tong’s tapes for August and October 2001). UBS has offered no explanation for why these tapes are missing. UBS initially argued that Tong is a Hong Kong based UBS employee and thus her backup tapes “are not

    subject to any internal retention policy.” However, UBS subsequently informed the Court that there was a document retention policy in place in Hong Kong starting in June 2001, although it only required that backup tapes be retained for one month.32 It also instructed employees “not [to] delete any emails if they are aware that  litigation is pending or likely, or during a discovery process.” In any event, it appears that UBS did not directly order the preservation of Tong’s backup tapes until August 2002, when Zubulake made her discovery request.

    In sum, UBS had a duty to preserve the six-plus backup tapes (that is, six complete backup tapes and part of a seventh) at issue here.

    B. Remedies

    As noted, Zubulake has requested three remedies for UBS’s spoliation of evidence. I consider each remedy in turn.

    1. Reconsideration of the Cost-Shifting Order

    Zubulake’s request that this Court re-consider its July 24, 2003, Order in Zubulake III is inappropriate. At the time that motion was made, the Court was well aware that certain emails had not been retained and that certain backup tapes were missing. Indeed, Zubulake urged that these missing backup tapes “be considered as a factor in why the costs should be shifted to defendants,” in part because she would have chosen one of the lost tapes as part of the court-ordered sample restoration.36 And these lost tapes and deleted e-mails did, in fact, inform my resolution of the cost-shifting motion. In Zubulake III, in my analysis of the marginal utility factors, I specifically noted that “there is some evidence that Chapin was concealing and deleting especially relevant e-mails.” There is therefore no need to reconsider that ruling in light of the instant motion; this evidence already played a role in the costshifting decision.

    1. Adverse Inference

    Zubulake next argues that UBS’s spoliation warrants an adverse inference instruction. Zubulake asks that the jury in this case be instructed that it can infer from the fact that UBS destroyed certain evidence that the evidence, if available, would have been favorable to Zubulake and harmful to UBS. In practice, an adverse inference instruction often ends litigation it is too difficult a hurdle for the spoliator to overcome. The in terrorem effect of an adverse inference is obvious. When a jury is instructed that it may “infer that the party who destroyed potentially relevant evidence did so ‘out of a realization that the [evidence was] unfavorable,’”38 the party suffering this instruction will be hard-pressed to prevail on the merits. Accordingly, the adverse inference instruction is an extreme sanction and should not be given lightly.

    B.A.Q. 1, 7 (2003) (listing “severe sanctions, such as adverse inference instructions” imposed by courts when “relevant electronic evidence was not preserved, or was intentionally destroyed”); but see Mosel Vitelic Corp. v. Micron Technology, Inc., 162 F. Supp. 2d 307, 315 (D. Del. 2003) (“adverse inference instructions are one of the least severe sanctions which the court can impose”).

    A party seeking an adverse inference instruction (or other sanctions) based on the spoliation of evidence must establish the following three elements: (1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a “culpable state of mind” and (3) that the destroyed evidence was “relevant” to the party’s claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.40 In this circuit, a “culpable state of mind” for purposes of a spoliation inference includes ordinary negligence.41 When evidence is destroyed in bad faith (i.e., intentionally or willfully), that fact alone is sufficient to demonstrate relevance.42 By contrast, when the destruction is negligent, relevance must be proven by the party seeking the sanctions.

     

    1. Duty to Preserve

    For the reasons already discussed, UBS had and breached — a duty to preserve the backup tapes at issue. Zubulake has thus established the first element.

    b. Culpable State of Mind Zubulake argues that UBS’s spoliation was “intentional or, at a minimum, grossly negligent.” Yet, of dozens of relevant backup tapes, only six and part of a seventh are missing. Indeed, UBS argues that the tapes were “inadvertently recycled well before plaintiff requested them and even before she filed her complaint [in February 2002].”

    But to accept UBS’s argument would ignore the fact that, even though Zubulake had not yet requested the tapes or filed her complaint, UBS had a duty to preserve those tapes. Once the duty to preserve attaches, any destruction of documents is, at a minimum, negligent.46 (Of course, this would not apply overwritten.”).to destruction caused by events outside of the party’s control, e.g., a fire in UBS’s offices).

    Whether a company’s duty to preserve extends to backup tapes has been a grey area. As a result, it is not terribly surprising that a company would think that it did not have a duty to preserve all of its backup tapes, even when it reasonably anticipated the onset of litigation. Thus, UBS’s failure to preserve all potentially relevant backup tapes was merely negligent, as opposed to grossly negligent or reckless.

    UBS’s destruction or loss of Tong’s backup tapes, however, exceeds mere negligence. UBS failed to include these backup tapes in its preservation directive in this case, notwithstanding the fact that Tong was the human resources employee directly responsible for Zubulake and who engaged in continuous correspondence regarding the case. Moreover, the lost tapes covered the time period after Zubulake filed her EEOC charge, when UBS was unquestionably on notice of its duty to preserve. Indeed, Tong herself took part in much of the correspondence over Zubulake’s charge of discrimination. Thus, UBS was grossly negligent, if not reckless, in not preserving those backup tapes.

    we have stated that, to obtain an adverse inference instruction, a party must establish that the unavailable evidence is ‘relevant’ to its claims or defenses, our cases make clear that ‘relevant’ in this context means something more than sufficiently probative to satisfy Rule 401 of the Federal Rules of Evidence. Rather, the party seeking an adverse inference must adduce sufficient evidence from which a reasonable trier of fact could infer that ‘the destroyed or unavailable evidence would have been of the nature alleged by the party affected by its destruction.’”) (citations, footnote, and alterations omitted).

    Because UBS was negligent and possibly reckless Zubulake has satisfied her burden with respect to the second prong of the spoliation test.

    1. Relevance

    Finally, because UBS’s spoliation was negligent and possibly reckless, but not willful, Zubulake must demonstrate that a reasonable trier of fact could find that the missing emails would support her claims.48 In order to receive an adverse inference instruction, Zubulake must demonstrate not only that UBS destroyed relevant evidence as that term is ordinarily understood, but also that the destroyed evidence would have been favorable to her. “This corroboration requirement is even more necessary where the destruction was merely negligent, since in those cases it cannot be inferred from the conduct of the spoliator that the evidence would even have been harmful to him.” This is equally  true in cases of gross negligence or recklessness; only in the case of willful spoliation is the spoliator’s mental culpability itself evidence of the relevance of the documents destroyed.

    On the one hand, I found in Zubulake I and Zubulake III that the e-mails contained on UBS’s backup tapes were, by-andlarge, relevant in the sense that they bore on the issues in the litigation. On the other hand, Zubulake III specifically held that “nowhere (in the sixty-eight e-mails produced to the Court) is there evidence that Chapin’s dislike of Zubulake related to her gender.” And those sixty-eight e-mails, it should be emphasized, were the ones selected by Zubulake as being the most relevant among all those produced in UBS’s sample restoration. There is no reason to believe that the lost e-mails would be any more likely to support her claims.

    Furthermore, the likelihood of obtaining relevant information from the six-plus lost backup tapes at issue here is even lower than for the remainder of the tapes, because the majority of the six-plus tapes cover the time prior to the filing See generally Turner, 142 F.R.D. at 77 (“Where, as here, there is no extrinsic evidence whatever tending to show that the destroyed evidence would have been unfavorable to the spoliator, no adverse inference is appropriate.”); Concord Boat Corp., 1997 WL 33352759, at *7 (“It would simply be inappropriate to give an adverse inference instruction based upon speculation that deleted e-mails would be unfavorable to Defendant’s case.”). of Zubulake’s EEOC charge. The tape that is most likely to contain relevant e-mails is Tong’s August 2001 tape the tape for the very month that Zubulake filed her EEOC charges. But the majority of the e-mails on that tape are preserved on the September 2001 tape. Thus, there is no reason to believe that peculiarly unfavorable evidence resides solely on that missing tape. Accordingly, Zubulake has not sufficiently demonstrated that the lost tapes contained relevant information.

    1. Summary

    In sum, although UBS had a duty to preserve all of the backup tapes at issue, and destroyed them with the requisite culpability, Zubulake cannot demonstrate that the lost evidence would have supported her claims. Under the circumstances, it would be inappropriate to give an adverse inference instruction to the jury.

    3. UBS Must Pay the Costs of Additional Depositions Even though an adverse inference instruction is not warranted, there is no question that e-mails that UBS should have produced to Zubulake were destroyed by UBS. That being so, UBS

    must bear Zubulake’s costs for re-deposing certain witnesses for 9/26/03 Tr. at 26 (statement of James Batson, seeking to re-depose only these four employees).

    the limited purpose of inquiring into issues raised by the destruction of evidence and any newly discovered e-mails. In particular, UBS is ordered to pay the costs of re-deposing Chapin, Hardisty, Tong, and Josh Varsano (a human resources employee in charge of the Asian Equities Sales Desk and known to have been in contact with Tong during August 2001).

    IV. CONCLUSION

    For the reasons set forth above, Zubulake’s motions for an adverse inference instruction and for reconsideration of the Court’s July 24, 2003, Order are denied. Her motion seeking costs for additional depositions is granted.

    SO ORDERED:
    ___________________

    Shira A. Scheindlin

    U.S.D.J.

    Dated: New York, New York

    October 22, 2003

    – Appearances –

    For Plaintiff:

    James A. Batson, Esq.

    Liddle & Robinson, LLP

    685 Third Avenue

    New York, New York 10017

    (212) 687-8500

    For Defendants:

    Kevin B. Leblang, Esq.

    Norman C. Simon, Esq.

    Kramer Levin Naftalis & Frankel LLP

    919 Third Avenue

    New York, New York 10022

    (212) 715-9100

    Zubulake v. UBS Warburg, ZUBULAKE 3

    Wednesday, March 14th, 2007

    On May 13, 2003, I ordered defendants UBS Warburg LLC, UBS Warburg, and UBS AG (collectively “UBS”) to restore and produce certain e-mails from a small group of backup tapes. Having reviewed the results of this sample restoration, Laura Zubulake now moves for an order compelling UBS to produce all remaining backup e-mails at its expense. UBS argues that based on the sampling, the costs should be shifted to Zubulake. For the reasons fully explained below, Zubulake must share in the costs of restoration, although UBS must bear the bulk of that expense. In addition, UBS must pay for any costs incurred in reviewing the restored documents for privilege.

     

    I.                   BACKGROUND

     

    The background of this lawsuit and the instant discovery dispute are recounted in two prior opinions, familiarity with which is presumed.1 In brief, Zubulake, an equities trader who earned approximately $650,000 a year with UBS,2 is now suing UBS for gender discrimination, failure to promote, and retaliation under federal, state, and city law. To support her claim, Zubulake seeks evidence stored on UBS’s backup tapes that is only accessible through costly and time-consuming data retrieval. In particular, Zubulake seeks e-mails relating to her that were sent to or from five UBS employees: Matthew Chapin (Zubulake’s immediate supervisor and the alleged primary discriminator), Jeremy Hardisty (Chapin’s supervisor and the individual to whom Zubulake originally complained about Chapin), Rose Tong (a human relations representative who was assigned to handle issues concerning Zubulake), Vinay Datta (a co-worker), and Andrew Clarke (another co-worker). The question presented in this dispute is which party should pay for the costs incurred in restoring and producing these backup tapes.

      (more…)