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Court Defines Discovery of Electronic Data

By: Kurt W. Melchior
01/04/05

Recent developments in the field of discovery of electronic data are of concern for any user of electronic communications such as e mails.  New case law, as yet from outside California, holds that from the time when litigation is first threatened or likely, lawyers, both in-house and outside, and clients are responsible to preserve and eventually to produce all electronic mail, relevant to the dispute.  These cases also hold lawyers responsible to inform clients of their obligations in this regard, to see that the advice is distributed fully within the client organization, and to keep reminding the client of the duty of preservation.  Failure to do so may cause sanctions, money assessments and even jury instructions about adverse inferences from the spoliation of evidence if electronic messages are deleted at times when the need for their preservation has become apparent.

Zubulake v. UBS Warburg, LLC (S.D. N.Y. 2004), 2004 U.S. Dist. Lexis 13574, is the latest of five decisions by a New York federal judge in a single case, which defines the territory of discovery of electronic messages.  This was a wrongful discharge/sexual discrimination case involving a bond trader whose salary had been 600K/year, with damage estimates ranging from the low 7 figures steeply upward.  The plaintiff moved for sanctions because e-mails had recently been discovered which had not been produced during several prior years of litigation, and the new material contradicted some depositions, which the court had previously required to be taken over at defendant's cost.  Among many other things, the court held:

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

But, the court stated, "that's only the beginning."  "[C]ounsel [inside the client as well as outside] must become fully familiar with her client's document retention policies, as well as the client's data retention architecture.  This will invariably involve speaking with [the client's] information technology personnel " and counsel must understand "how [the key players] stored information."  "Unless counsel interviews each employee, it is impossible to determine whether all potential sources of information have been inspected."  If the client is too big to allow such a detailed search, "counsel must be more creative," etc.

The court ruled that counsel have a "continuing duty to ensure preservation;" and warnings to the client alone are not sufficient.  The court summed up the duties of counsel:  1. Issue a "litigation hold" whenever litigation begins or "is reasonably anticipated."  2. Communicate directly with the "key players" to make sure the hold is being observed.  3.  Instruct all employees to "produce electronic copies of their relevant active files" and "make sure" that all backup media which the [client ] is required to maintain is identified and stored in a safe place."

Substantial sanctions including a money award and a jury instruction of adverse inferences based on spoliation of evidence were awarded.  Zubulake is certainly drastic in its scope and consequences, although it is at this point only a District Court decision from a Federal court in New York.  But the case has attracted national attention and has been cited in California decisions.  To the extent that it will in fact establish models for electronic document preservation and disclosure, this case clearly outlines a changed environment as to both lawyers' (in-house as well as outside) and clients’ management of electronic data preservation and retrieval.

On the other hand, a California court ruled even more recently that California law allows courts, in their discretion, to shift as much as the entire burden of retrieving and producing old "deleted" electronic messages from the party being asked to make the production to the party requesting it.  Toshiba America Electronic Components, Inc. v. Superior Court (2004), 2004 Cal. App. LEXIS 2055.  One thing seems certain:  requests for production of electronic records, the need for their preservation where litigation is threatened, the allocation of the costs of their retrieval and production, and the consequences of the destruction of such records at times when the courts may believe that they should have been preserved, will be the fodder for much litigation.

Caution is clearly advised with respect to such record deletion policies and activities.

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