Bytes, Bits and Bucks: Cost Shifting and Sanctions in E-Discovery: In the Electronic Forest Where Sanctions Can Abound, Good Faith of the Part of Counsel in Meeting Requests Can Go a Long Way in Avoiding Trouble

Article excerpt

ELECTRONIC discovery, known as e-discovery, is a hot-button litigation topic. Cost shifting and sanctions dominate the case law. The current landscape of cost shifting is dominated by the Zubulake test, which redefined the cost-shifting debate in the federal courts in 2003. The Rowe rubric had done the same a year earlier.

E-discovery sanctions are a trap for the unwary, as is evidenced by a selection of e-discovery cases in which sanctions were sought or awarded in state or federal courts the past two years. It's not surprising that the U.S. Judicial Conference has proposed amendments to the Federal Rules of Civil Procedure in an attempt to deal with the thorny issues raised by e-discovery. In the meanwhile, there are practical guidelines lawyers can follow to manage the costs of e-discovery compliance and avoid e-discovery-related sanctions.

COST SHIFTING

Who pays for electronic document production--the requesting party or the producing party? In cases in which the dollars at stake are large, the answer to this question likely begins with the decisions of Judge Shira A. Scheindlin of the U.S. District Court for the Southern District of New York in Zubulake v. UBS Warburg LLC. (1)

A. Zubulake I

Zubulake I held that the responding party generally bears the cost of production of electronic evidence, including e-mail. The issue arose in the context of Laura Zubulake's request for responsive e-mail from her former employer, UBS, in her gender discrimination case in which she claimed a failure to promote her and retaliation for filing a charge of discrimination with the Equal Employment Opportunity Commission.

Cost shifting is a function of whether the electronic data sought is "accessible" or "inaccessible," the district court stated. If accessible, it must be produced at the responding party's cost; if inaccessible, a cost-shifting analysis is required.

During discovery, UBS had produced 100 pages of e-mail. In contrast, Zubulake produced approximately 450 pages of e-mail correspondence she had retained from her employment. She claimed that UBS either had additional responsive e-mails or had improperly deleted them.

UBS conceded that responsive e-mail existed on optical storage media, as required by Securities and Exchange Commission regulations, and that indexes of its magnetic backup tapes revealed that responsive e-mails were contained on a total of 94 tapes. After an initial discovery conference, UBS agreed to produce responsive e-mails from five individuals named by Zubulake for a 16-month period from the date of her hire to one month after her termination, "if retrieval is possible." Despite this agreement, UBS did not try to retrieve e-mail from optical media or magnetic backup tapes. Instead, it contended the initial production was sufficient and that further efforts would be too costly, first estimated at approximately $300,000, then stated at oral argument to be $175,000. Zubulake then filed a motion to compel production and sought sanctions.

Because Zubulake herself had produced approximately 450 pages of e-mail correspondence, Judge Scheindlin agreed that UBS either had additional responsive e-mails or had deleted them. She also noted that Zubulake had produced a UBS e-mail that might qualify as a "smoking gun" in support of her case.

Under Rule 34 of the Federal Rules of Civil Procedure, Judge Scheindlin explained, electronic documents, including e-mails, are indistinguishable from paper documents with respect to production obligations, even if the electronic documents in question "may have been deleted and now reside only on backup disks." Whether production of electronic evidence is unduly burdensome or expensive turns primarily on whether it is kept in an accessible or inaccessible format. And whether electronic data is accessible or inaccessible depends on which of five types of media it is stored. (2)

Data which is (1) "online" or archived on current computer systems, such as hard drives, (2) "near-line," such as that stored on optical disks or magnetic tape stored in a robotic storage library from which records can be retrieved in two minutes or less, or (3) "off-line," but in storage or archives, such as removable optical disks or magnetic tape media are readily accessible using standard search engines because the data are retained in machine readable format. …