Author(s): Sean Fosmire

Background

If you use electronic mail, or if you have electronic files on a network or on standalone computers, you will need to know how to handle your electronic information after a lawsuit is filed. Perhaps more importantly, you will want to know what to do before a lawsuit is started. Electronic storage of data and electronic communications are similar in many respects to communications by the traditional means of paper reports, letters and memos. There are, however, important differences.

Electronic files and documents are discoverable to the same extent as paper documents, but it is sometimes difficult to know where discoverable information may be found. Your company’s backup tapes, for example, can provide an ongoing archive of the contents of your network on a daily basis, ripe for exploration by electronic archaeologists. Privileges that attach to paper communications will attach to electronic communications as well. But recall that an otherwise ironclad privilege may be waived by disclosure to another, even an inadvertent disclosure. Anyone can carry out a wholesale deletion of files by just a few keystrokes, but many novice computer users are unaware that ghost images of this data remain. Microsoft Word documents include hidden “metadata,” which will reveal to the curious eye with the right tools the entire history of the documents, including information deleted before it was finalized and sent. The retention of e-mail messages and other electronic data are involved in the most widely litigated issues involving the discovery of electronic evidence. Many companies have adopted a retention policy for electronic data, under which messages or files that are older than a specified period are destroyed. A key point to remember is that the failure to properly retain electronic documents may have significant effects in litigation such as a court granting a motion to instruct the jury that the “lost or unavailable evidence” should be assumed to have been adverse to the interests of the party that caused it to be unavailable.

The Zubulake Case
A series of decisions issued by a Federal court in New York, all in the course of one prominent employment discrimination case, has addressed and resolved a number of issues relating to the exclusion and the use of electronic evidence providing guidance on theseissues. The case is Zubulake v. UBS Warburg, LLC. The most significant orders issued by the Court are:

Zubulake II (May 13,2003) –
The court fashioned a three part test to determine how to implement limits on discovery of electronic evidence. The Court distinguished between “accessible” and “inaccessible” media. The “inaccessible” items were primarily e-mail messages stored on backup media using a proprietary storage technique. (In truth, they were not inaccessible; they would be better described as “difficult to access” or “accessible only by spending large amounts of money.”) In responding to a motion by plaintiff , the defendant estimated that it would cost about $300,000 to retrieve emails from the backup tapes. Data on tapes and data on CDs were both at issue, but the evidence showed that the data on CDs was much more “accessible.” Given the extent of the data found on the so-called “inaccessible” media and the relatively high cost involved, the Court ordered that a random sample be taken, so that the Court and the parties had some information as to what those media might contain. The defendant was ordered to produce five of the 94 backup tapes for analysis.

Zubulake III (July 24, 2003) –
The parties reported on the results of the sampling. Many items had been found on the backup that had been deleted from the active files. The defendant also reported on the expense factor: it had cost about $20,000 to retrieve and review the data. Projection of this cost over a total of 77 tapes suggested a total retrieval and review cost of about $275,000. UBS asked that the court require that plaintiff pay this cost. After a detailed consideration of the factors previously announced, the court ruled that 75% of the costs would be borne by UBS, and 25% by plaintiffs. The order was based in large part on the fact that UBS had, by deleting the communications from its active files, made recourse.

Zubulake IV (October 22, 2003) –
After the restoration of the data, some of the items were again found to be missing. Plaintiff moved for sanctions, including an order that all of the costs of retrieval be borne by the defendant; an adverse instruction in view of the missing evidence; and the costs of re-deposing witnesses based on the newly-disclosed evidence. The Court declined to rule that a defendant must always retain all documents and all information as long as it is in litigation, noting that many larger companies are continuously involved in litigation of one sort or another. It did rule, however, that regular retention and destruction policies should be suspended while litigation is pending or anticipated in order to ensure that relevant documents were preserved. It noted that UBS had instructed its personnel to maintain any documents about the plaintiff in a location separate from general documents, but several UBS employees had failed to follow these instructions. Finding that this was negligence but not willful misconduct, the Court declined to order the adverse inference instruction be given to the jury. The motion for costs of re- deposing the witnesses was granted.

Zubulake V (July 20, 2004) –
After the depositions were redone, UBS produced additional documentation. The Court also found that its previous order regarding the retention of electronic documentation had been violated, and found that the violation was willful. The key personnel employed by defendant were shown to have deleted numerous documents, some of which were retrieved via the backups but others of which were lost. Further, the Court found that some e-mails had not been deleted from the active files but had never been produced by defendant. In light of these facts, it ruled that additional costs would be imposed on UBS, and that the plaintiffs would be given the benefit of the adverse inference instruction, to the effect that the destroyed communications contained information detrimental to UBS’s position.

The Court also declared that the attorneys defending a party such as UBS had certain affirmative duties with respect to electronic discovery issues, based on their duty under the Federal rules to manage and coordinate the client’s discovery responsibilities. These duties included: issuing a “litigation hold” on the destruction of any documentation, including periodic renewals to ensure that new employees are advised of the directive, direct and particularized communication of the need to preserve documents to the “key players” in the litigation, and securing electronic copies of the documentation for themselves, rather than simply having the client maintain copies.

General Impressions
The key point for a standard retention policy is to define the policy in advance and then follow it consistently. The courts will usually accept a reasonable and properly followed retention policy. If a court were to learn that no files had been purged for five years, but that the defendant suddenly began to purge files “under the policy” after learning of an imminent lawsuit, the court is more likely to impose sanctions. Retention policies for paper documents are adopted by companies primarily because of the space considerations involved in storing volumes of paper documents. Serious consideration should be given to converting paper documents to electronic documents – that is, archiving them by scanning or (following an older approach) conversion to microfiche format rather than keeping them as paper documents.

Conclusion
Because electronic data is more evanescent than paper, special steps should be taken to ensure that it is
located and made accessible so that the company can properly respond to discovery requests. The several orders entered by the court in the Zubulake case suggests that courts will be looking to companies and to their attorneys to take on a more active role in finding and securing electronic data so that it will be available in the event of litigation. Finding all copies and all versions, and making them available to your attorneys early on, will prevent costly mistakes later.

Questions relating to the article should be directed to the author Sean Fosmire, a shareholder in the firm’s Marquette Office, at phone number: 906-226-2524.