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Zubulake v. UBS Warburg LLC1, 2003 U.S. Dist. LEXIS 12643 (S.D.N.Y. July 24, 2003).


Overview
Considering a discovery motion concerning the breadth of discovery of information from backup tapes, and the balance of factors related to defendant’s request to shift the costs of backup tape restoration to plaintiff, the court ordered plaintiff to share in the costs of restoration, but found that defendant would be required to bear the majority of the costs. Defendant was required to bear all the costs of review once the documents were restored from an "inaccessible" format to an “accessible” format.

Factual Background
Plaintiff (“Zubulake”) filed suit against defendant (“UBS”), her former employer, alleging gender discrimination and retaliation. This matter came before the court following Zubulake’s motion to compel UBS to produce email messages existing only on backup tapes and other archived media.

In assessing plaintiff’s request for discovery of information contained on backup tapes, the court issued a prior order (known as “Zubulake I”) that established a new three-pronged analysis for deciding disputes regarding the scope and cost of discovery of electronic data. The court’s analysis in Zubulake I also established a method for examining electronic discovery disputes in the context of whether requested data is stored in “accessible” or “inaccessible” format.

In order to analyze sufficient facts to apply the cost-shifting analysis, the court ordered UBS to restore and review information from five backup tapes out of a total 94 available tapes. The court ordered that Zubulake would be permitted to select the five tapes for sampling. UBS was required to submit an affidavit detailing the results of its search of the five sample tapes, along with a description of the time and money spent in the process. UBS later reported there were only 77 backup tapes containing relevant data, including the five already restored.

Zubulake selected for restoration five tapes containing email messages from the custody of her immediate supervisor at UBS. These tapes represented monthly system backups for five months. After the five sample tapes were restored, UBS reported there were 6,203 unique emails contained in the sample data. Keyword searches were then performed to identify messages containing reference to Zubulake. The keyword searches narrowed the data set to 1,075 unique messages. Of this subset, UBS deemed 600 messages to be responsive to Zubulake’s document request. These 600 messages were produced, along with fewer than 20 messages recovered from the company’s optical disk storage system.

UBS advised the court that it spent a total of $19,003.43 related to restoration, keyword searching, review, and production of relevant information contained on the five backup tapes. Based on these expenditures, UBS estimated costs for restoration, review, and production of information from the additional backup tapes would be $273,649.39 ($165,954.67 in restoration costs and $107,694.72 in review costs). UBS asked the court to shift these costs to Zubulake if restoration of additional backup tapes was ordered.

Legal Discussion
In recapping the detailed analysis of the legal standards related to UBS’s cost-shifting request, the court outlined the detailed seven-factor cost-shifting test set forth in Zubulake I:
  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.
Zubulake I at *43.

In restating this test, the court noted that the intent of Zubulake I was to “simplify the Rule 26(b)(2) proportionality test in the context of electronic data and to reinforce the traditional presumptive allocation of costs.” Zubulake III at *11.

With information from the sample data in mind, the court applied the seven-factor test and made the following determinations in balancing the cost-shifting request.

Factors 1 and 2:
Read together, these factors make up the “marginal utility analysis” discussed in Zubulake I and originally advocated in McPeek v. Ashcroft, 202 F.R.D. 31 (D.D.C. 2001). In analyzing these factors, the court noted that the sample restoration (which resulted in the production of relevant email) demonstrated that Zubulake’s discovery request was narrowly tailored to discover relevant information. And while the subject matter of some of those emails was addressed in other documents, some emails were available only from the backup tapes. Thus, the court concluded that direct evidence of discrimination may only be available through restoration, and that the marginal utility of this additional discovery may be quite high. The court noted that, while restoration could be the only means for obtaining direct evidence of discrimination, the existence of that evidence was still speculative, and that Zubulake demonstrated only that the marginal utility was potentially high. Because UBS had the burden of proving that cost-shifting is warranted, the court ruled that factors 1 and 2, comprising the marginal utility test, tipped slightly against cost-shifting. Id. at *23.

Factors 3, 4 and 5:
The court assessed these factors in making an overall determination of the costs involved and the relative abilities of the parties to pay. In responding to the court’s inquiry about the value of the case, Zubulake estimated damages as high as $19 million, while UBS said damages could reach more than $1.2 million. Noting the great discrepancy in valuation of the case, the court declined to try to assess the accuracy of either estimate. Nevertheless, the court recognized this as a “multi-million dollar case” and noted “the cost of restoration is surely not ‘significantly disproportionate’ to the projected value of this case.” Id. at *25. Thus, the court determined factor 3 weighed against cost-shifting. The court assessed that the resources of UBS greatly outweighed those of Zubulake, but noted that Zubulake was a highly compensated professional during her tenure at UBS, and determined that this fact, combined with her claim for damages as high as $19 million, would prevent the court from ruling out cost-shifting based on factor 4. Id. at *26. Based on the fact that the discovery request was already sufficiently narrow, and that the costs of tape restoration were now primarily in the hands of an outside vendor, the court determined that factor 5 was neutral. Id. at *27.

Factor 6:
Referring back to the analysis in Zubulake I, the court reiterated that this factor will only rarely come into play. This factor was considered neutral in this case. Id. at *28.

Factor 7:
The court weighted this factor in favor of cost-shifting, noting there could be no argument that Zubulake would stand to gain much more from discovery of the backup information than UBS.

Reviewing the weight and balance of all factors, the court determined that some cost-shifting would be appropriate in this case, but determined that UBS should still bear the burden of the marjority of the costs. Id. at *30.

Acknowledging that the final determination of allocation of costs is a matter of judgment of fairness rather than a mathematical calculation, the court advised caution in shifting costs too heavily to a requesting party in order to prevent a “chilling effect” that would discourage litigants from bringing meritorious claims. The court noted that the results of the search of the backup tapes were still somewhat speculative, however, and stated an intention to ensure the costs were not overly burdensome to UBS. The court ruled that a 75/25 cost sharing split, with UBS bearing the majority of costs, would be appropriate in this case. Id. at *31.

Finally, the court considered whether the allocation should apply only to the costs of restoration of the tapes, or to the entire production process (including attorney review time expenses).2 The court stated:
As a general rule, where cost-shifting is appropriate, only the costs of restoration and searching should be shifted. Restoration, of course, is the act of making inaccessible material accessible. That “special purpose” or “extraordinary step” should be the subject of cost-shifting. Search costs should also be shifted because they are so intertwined with the restoration process …. However, the responding party should always bear the cost of reviewing and producing electronic data once it has been converted to an accessible form.
Id. at *32-33. The court made this conclusion based on two facts: 1) the producing party always has the exclusive ability to control the costs of review, and 2) the reviewing party unilaterally decides on the review protocol. Id. at *34-35.

in summarizing the heart of the rulings in Zubulake I and Zubulake III, the court concluded:
Documents stored on backup tapes can be likened to paper records locked inside a sophisticated safe to which no one has the key or combination. The cost of accessing those documents may be onerous, and in some cases the parties should split the cost of breaking into the safe. But once the safe is opened, the production of the documents found inside is the sole responsibility of the responding party. The point is simple: technology may increasingly permit litigants to reconstruct lost or inaccessible information, but once restored to an accessible form, the usual rules of discovery apply.
Id. at *37.





1 Two prior opinions in the Zubulake case are referenced by the court as "Zubulake I" and "Zubulake II." The July 24, 2003 decision summarized here is referred to as "Zubulake III."

2 In a footnote to this analysis, the court referred to the Applied Discovery website as follows: "See, e.g., Applied Discovery website, at http://www.applieddiscovery.com/betterWay/theADIway.asp (offering "media restoration" service that includes "retrieval of information from backup tapes or legacy systems—from standard email and word processing programs to arcane systems and uncommon file types" and "proven, cost effective strategies for narrowing the set of potentially responsive documents.")." Id. at *33, n.79.


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The information contained herein is not intended to provide legal or other professional advice. Applied Discovery encourages you to conduct thorough research on the subject of electronic discovery.