Zubulake I through IV – Cost Allocation for Electronic Discovery2018-11-15T20:25:21+00:00

Zubulake I through IV – Cost Allocation for Electronic Discovery

Zubulake I through IV – Cost Allocation for Electronic Discovery
By
Michael R. Arkfeld

Four recent federal court decisions, arising from the same case, provide a significant insight into
the discoverability and cost allocation for electronic information. In the case a former female
employee brought a gender discrimination and retaliation claim against her former employer. At
issue was the discoverability of electronic information – specifically electronic mail – in the
control and possession of the employer.
Initially, the court issued two decisions on the same day concerning different issues in the case.
Zubulake I
In Zubulake v. UBS Warburg, LLC, CIV.02-1243, 2003 WL 21087884 (S.D.N.Y. May 13, 2003)
(hereinafter referred to as Zubulake I) the court addressed the specific issues has to whether the
employee was entitled to discovery of relevant e-mails that had been deleted and that were stored
on backup disk, and, also, whether cost shifting was appropriate for the court to consider.
The plaintiff contended that key e-mail exchanged among the defendants’ employees existed only
on backup tapes and other archived media. Defendants contended that it would cost
approximately $175,000 (down from an earlier estimate of $300,000 dollars), in addition to
attorney time in reviewing the e-mail, to disclose the electronic information from the backup and
archived media.
The court held that the employee was entitled to discovery of deleted relevant e-mail that resided
on backup storage media. Of special significance was the courts analysis regarding the
discoverability and cost allocation of discovering the electronic information.
The court phrased the issue as “[t]o what extent is inaccessible electronic data discoverable, and
who should pay for its production? Id. at *1. The court also noted that “discovery is not just
about uncovering the truth, but also about how much of the truth the parties can afford to
disinter.” Id. at *1.
After the Court analyzed in detail the restoration process of electronic information from backup
tape and optical storage, the Court discussed the application of the federal discovery rules to
electronic evidence and costs allocation (proportionality test) issues regarding the restoration and
production of electronic information. The Court stated:
Under Rule 34 a party may request discovery of any document, “including writings, drawings,
graphs, charts, photographs, phonorecords, and other data compilations….” The “inclusive
description” of the term document “accord[s] with changing technology.” “It makes clear that
Rule 34 applies to electronics [sic] data compilations.” Thus, “[e]lectronic documents are no less
subject to disclosure than paper records.” This is true not only of electronic documents that are
currently in use, but also of documents that may have been deleted and now reside only on
backup disks.” Id. at *6.
However, the Court ruled that the cost shifting did not have to be considered in every case
because “The Supreme Court has instructed that “the presumption is that the responding party
must bear the expense of complying with discovery requests. . . .“ (citing from Oppenheimer
Fund, Inc. v. Sanders, 437 U.S. 340, 358 (1978). Id. at *6.
The court also discussed the burdens imposed by electronic discovery and stated,
Many courts have automatically assumed that an undue burden or expense may arise simply
because electronic evidence is involved. This makes no sense. Electronic evidence is frequently
cheaper and easier to produce than paper evidence because it can be searched automatically, key
words can be run for privilege checks, and the production can be made in electronic form
obviating the need for mass photocopying. Id. at *7.
In ruling upon the cost shifting request the court classified data as “accessible” versus
“inaccessible.”. The court noted that e-mail that was available on active computer files was easily
accessible. However, data stored on the optical and tape backup systems was less accessible and
more expensive to produce.
The courts then discussed a seven-factor test to determine whether cost shifting should occur.
The factors are:
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.
Id at *11.
The court noted that these seven factors should not be weighted equally in the court’s
determination as to whether to shift the cost.
Weighting the factors in descending order of importance may solve the problem
and avoid a mechanistic application of the test. The first two factors– comprising
the marginal utility test–are the most important. These factors include: (1) The
extent to which the request is specifically tailored to discover relevant
information and (2) the availability of such information from other sources. The
substance of the marginal utility test was well described 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.”
The second group of factors addresses cost issues: “How expensive will this
production be?” and, “Who can handle that expense?” These factors include: (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 and (5) the
relative ability of each party to control costs and its incentive to do so. The third
“group”–(6) the importance of the litigation itself–stands alone, and as noted
earlier will only rarely come into play. But where it does, this factor has the
potential to predominate over the others. Collectively, the first three groups
correspond to the three explicit considerations of Rule 26(b)(2)(iii). Finally, the
last factor–(7) the relative benefits of production as between the requesting and
producing parties–is the least important because it is fair to presume that the
response to a discovery request generally benefits the requesting party. But in the
unusual case where production will also provide a tangible or strategic benefit to
the responding party, that fact may weigh against shifting costs.
In their decision the Court set forth a three-step analysis in resolving the scope and cost of
discovery when electronic information is involved.
First, it is necessary to thoroughly understand the responding party’s computer
system, both with respect to active and stored data. For data that is kept in an
accessible format, the usual rules of discovery apply: the responding party should
pay the costs of producing responsive data. A court should consider cost-shifting
only when electronic data is relatively inaccessible, such as in backup tapes.
Second, because the cost-shifting analysis is so fact-intensive, it is necessary to
determine what data may be found on the inaccessible media. Requiring the
responding party to restore and produce responsive documents from a small
sample of the requested backup tapes is a sensible approach in most cases.
Third, and finally, in conducting the cost-shifting analysis, 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.
Accordingly, UBS is ordered to produce all responsive e-mails that exist on its
optical disks or on its active servers (i.e., in HP OpenMail files) at its own
expense. UBS is also ordered to produce, at its expense, responsive e-mails from
any five backups tapes selected by Zubulake. UBS should then prepare an
affidavit detailing the results of its search, as well as the time and money spent.
After reviewing the contents of the backup tapes and UBS’s certification, the
Court will conduct the appropriate cost-shifting analysis.
Id. at *13.
Zubulake II
In Zubulake v. UBS Warburg LLC, 55 F.R.S. 3d 622 (S.D.N.Y. May 13, 2003) (hereinafter
referred to as Zubulake II) the court addressed the issue of whether the plaintiff was under an
ethical obligation to report alleged securities violations that were supposedly disclosed in a
deposition. The testimony obtained in the deposition was from an individual knowledgeable
about the defendants’ e-mail retention and retrieval policies. The Court ruled that the plaintiff
was not under such an obligation.
Zubulake III
Just over two months later in Zubulake v. UBS Warburg LLC, 216 F.R.D. 280 (S.D.N.Y. Jul 24,
2003) (hereinafter referred to as Zubulake III) the Court applied the cost shifting principles set
forth in Zubulake I. The Court ruled that cost shifting was appropriate only when inaccessible
data is requested. As requested by the court in Zubulake I the defendants had performed a
sampling of the backup tapes to determine their relevancy as well as the cost of restoring the e-
mail backup tapes.
After performing the sample restoration of backup e-mails, defendant argued that the cost of
production of the remaining e-mail backup tapes should be shifted to the plaintiff. The court
ruled that the plaintiff was to share in the cost of restoration, although the defendant was to bear
the major part of the expense – defendant to pay 75% and the plaintiff to pay 25% of the cost of
restoration. Also, the court ruled that the defendant must pay “for any costs incurred in
reviewing the restored documents for privilege.” Id. at 290.
Zubulake IV
The Court addressed the issue of spoliation. See the court decision.

© 2003 Michael R. Arkfeld