Zubulake: The real issues.

The Zubulake case shows that judges are becoming savvier about electronic discovery and data recovery, which means organizations may have difficulty claiming undue burden for discovery of poorly managed electronic records

In many ways the recent uproar evoked by Zubulake v. UBS Warburg is reminiscent of the one that arose in the legal world when the decision on client documents came down in Sage v. Proskauer Rose in 1997.

In both cases, a court was faced with defining the responsibility of a party to maintain and produce a body of (among other things) electronic data to another party. In both cases, the responding party asserted a defense to production that was dismissed more or less in its entirety by the court. In both cases, a large part of the interested public responded with horror: The conclusion generally drawn in both cases was that the courts had engaged in cutting-edge analysis and decision-making on the production (and by extension, the maintenance) of electronic records and data.

Who Should Pay?

Both the Zubulake and Sage cases involved relatively routine matters. In Zubulake, plaintiff Zubulake sued her former employer and during discovery requested production of all e-mail related to the dispute. In Sage, a former client sought to obtain all documents and information related to their representation after a dispute arose between them.

In Zubulake, the single real question before the court was one of apportionment of costs between the parties. Should the defendant, UBS Warburg, be required to bear the entire cost of going through an e-mail system, optical disks containing e-mail databases required by the Securities and Exchange Commission, and 94 backup tapes looking for responsive e-mail, or should the plaintiff share in the cost?

In answering this question, the court examined something called the Rowe Test, a list developed by a court in a prior case (Rowe Entertainment Inc. v. William Morris Agency) to help determine whether cost-shifting is appropriate. That test, then only a year old and used in a handful of cases, considered eight factors:

1. the specificity of the discovery requests

2. the likelihood of discovering critical information

3. the availability of such information from other sources

4. the purposes for which the responding party maintains the requested data

5. the relative benefits to the parties of obtaining the information

6. the total cost associated with production

7. the relative ability of each party to control costs and its incentive to do so

8. the resources available to each party

The court analyzed this test, concluded it was flawed and tended to weigh excessively in favor of cost-shifting, and came up with a new test that considered the following factors:

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 

7. the relative benefits to the parties of obtaining the information

The chief analytical difference between the two tests is that under the Rowe Test, the factors weigh equally, and an affirmative answer on any point tends to result in cost-shifting; the Zubulake court rejected this approach in favor of an outcome based on the total mix of circumstances.

In doing all this, the court engaged in an extensive analysis of electronic data discovery and its issues. It noted and rejected a tendency by earlier courts to assume that discovery of electronic records is necessarily more difficult than that of paper records and concluded that, in keeping with the longstanding requirements of the Rules of Civil Procedure and prior case precedent, cost-shifting, when appropriate at all, should be limited to those electronic items that are difficult to obtain, such as files on backup tapes requiring restoration, and not to items maintained online or in easily searchable repositories.

The upshot of all of this was that UBS Warburg was required to produce at its own cost all responsive e-mail on the active systems and optical disks because they required no restoration; and it was required to restore five sample tapes at its own expense. If the results of the sample restoration turned up significant amounts of relevant material, the court would then apply its seven-part test and make a cost-shifting determination regarding the other 89 tapes. After the sample restoration was complete, the court applied its test in a later order and split costs for further restoration--25 percent to Zubulake and 75 percent to Warburg.

To What Data Is the Client Entitled?

In Sage v. Proskauer, the question was even simpler: Does the ex-client's entitlement to possession of a copy of the client file (a standard and non-controversial doctrine) extend to drafts, internal memoranda, and electronic records and data created as part of the representation? The defendant argued that the right should be limited to the formal client file, or that the ex-client should at least be required to specify the drafts, internal documents, and electronic data sought based on a showing of particularized need.

The court concluded:

1. The client's entitlement presumptively extended to all records and data. created during the representation, with narrow exceptions based on protection of the rights of others such as other clients (again, not particularly controversial).

2. It was unreasonable to require the client to specify the particular items they wanted because they could not predict a priori either what they would need in the future or what data was even there, all of the material in question being in possession of the lawyer (no big surprise--protection of the client's interests has been a hallmark of this area of the law since time immemorial).

It is noteworthy that the court did not suppose itself to be creating any new doctrine whatsoever. It rested its decision on a long line of prior authority and simply aligned itself with what it determined to be the then-existing majority view.

Rational Analysis--at Last

So what, then, are the cutting-edge issues and revolutionary doctrines propounded by these courts?

In reality, there are none. In both cases the court: did nothing more than take existing, long-standing, and entirely non-controversial legal doctrine and apply it :in an entirely predictable and reasonable manner to electronic records and information. The uproar arises from three simple facts:

1. The courts in both cases demonstrated a sound understanding of records and information and the issues surrounding its identification, recovery, and production.

2. Both courts engaged in an extensive analysis of how existing legal doctrine might be applied in this arena.

3. The courts forced the parties on the receiving end to face some unpleasant facts about having to hand over their electronic data to somebody else, at considerable cost and difficulty to themselves.

The novelty is that lawyers and litigants are used to dealing with judges who have little or no understanding of the issues surrounding the management of electronic data. This situation cuts both ways. Both plaintiffs and defendants in the past have successfully talked judges into patently unreasonable orders regarding e-mail and other electronic data--overwhelmingly broad electronic discovery orders both extraordinarily expensive and impossible to comply with on the one hand, and unreasonably deferential protective orders or excessive cost-shifting on the other. In both scenarios, these orders arose because the prevailing litigant's lawyers were able to impose upon the judge a version of the situation highly favorable to their client, if perhaps at variance with the realities of electronic records and information management.

The Zubulake and Sage courts simply did not buy into this. However, neither court did anything that has not been done before, and both could and did cite extensive prior authority for the actions they took. The following facts make these cases stand out:

1. The courts engaged in extensive analysis of prior law and, in Zubulake, of the technical issues of producing electronic data.

2. The disputes went to litigation and the cases were published.

3. The cases received much publicity.

4. The courts involved are relatively prestigious courts.

The real legal effect of both cases is to make their thoughtful, sound, and persuasive analysis widely available to be cited by other litigants and, most likely, widely adopted by other courts. This means, in turn, that the next court will be more able to engage in an intelligent analysis of its own, free from the spin of litigants and lawyers.

If there is a lesson to be learned from either case, it is that organizations interested in the issues central to these cases had better get used to more decisions and outcomes of these sorts. A new generation of judges is coming up, familiar with computers and increasingly familiar with electronic records, electronic discovery, and the ins and outs of data recovery. Like these courts, they will look to real technical authority (the Zubulake court cited a number of technical articles and the works of the Sedona Conference and other authorities in considering the issue before it) and will be far less easily persuaded of the impossibility of finding and recovering computer data. This should come as no surprise to anyone, at least not now.

This reality does not necessarily spell doom for anyone. Indeed, the Zubulake court actually concluded that some cost-shifting was appropriate, although it could have forced UBS Warburg to foot the entire bill. Businesses and other organizations already are, and have been for years, spending large sums of money on electronic records production for adverse parties, a situation not likely to be materially changed one way or the other by these cases.

Both of these cases should serve as a wake-up call: If an individual or organization's electronic records are in a mess, they had better clean that mess up because if they go into court and claim undue burden, the court now has in front of it a paradigm for judging just how undue that burden is and plenty of authority for forcing that paradigm on the individuals or organization. If that day arrives, it may be a bad thing for the organization but, overall, a good thing for society. Rather than panicking over cases like this, everyone should be glad that rational analysis is at last entering the realm of electronic records and the courts.

At the Core

This article

* examines the Zubulake v. UBS Warburg case and its implications for the management of electronic records, particularly e-mail

* compares and contrasts the 1997 Sage v. Proskauer case to Zubulake

* discusses why these cases are significant to the management of electronic data

John G Montana, J.D., is a records management and legal consultant and principal of Montana and Associates. He may be contacted at [e-mail].