Court Addresses Electronic Discovery

It has been estimated that the number of e-mails sent now exceeds 10 billion daily. Recent studies also concluded that 93 percent of all information generated in 1999 was in digital form. Although this may be a more efficient form of running a business, it also can dramatically impact discovery procedures in a lawsuit.

``To what extent is electronic data discoverable, and who should pay for its production?'' Those are the questions the Southern District of New York recently answered in a case that impacts nearly all litigation in this age of fiber optics.

The case was one which even the court admitted was a ``textbook example of the difficulty of balancing the competing needs of broad discovery and manageable costs.''

A woman sued her employer for gender discrimination and illegal retaliation. The key evidence could only be found in company e-mails that were now in backup tapes or archived material. Retrieving them would cost about $300,000. The plaintiff asked the court to order the defendant company to produce the e-mails at its expense.

In an opinion that is sure to be widely cited, Judge Shira Schneidlin set out a discoverability standard based on whether the data is accessible or inaccessible. Zubulake v. UBS Warburg LLC, UBS Warburg and UBS AG, No. 02 Civ 1243 (S.D.N.Y., decided May 13, 2003).

The court then set up a seven-factor test in balancing whether the costs for discovery should be shifted to the opposing party. Those factors in descending order of importance 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 benefit to the parties of obtaining the information.

The court cautioned that the list should not be treated as a checklist with the first two taking priority, and it ``cannot be mechanically applied at the risk of losing sight of its purpose.''

The Zubulake decision cited an earlier significant case on the matter, Oppenheimer Fund v. Sanders, 437 U.S. 340 (1978), which held that ``the presumption is that the responding party must bear the expense of omplying with discovery requests, but may invoke the district court's discretion under Rule 26(c) to grant orders protecting from `undue burden or expense' ... including orders conditioning discovery on the requesting party's payment of the costs of discovery.''

Some courts have found that if a party chooses an electronic storage method, the cost for retrieval is an ordinary and foreseeable cost of doing business. Federal Rule 26(b)(2) which governs the discoverability of a case reiterates some of these factors and states that discovery may not be ``unreasonably cumulative or duplicative.''

Many state courts echo these parameters. In Illinois, Supreme Court Rule 201(b)(1) was amended in 1996 to include ``all retrievable information in computer storage'' should be considered a document for purposes of discovery.

Rule 214 also requires a responding party to provide ``all retrievable information in computer storage in printed form.'' Accordingly, Rule 201(c)(1) allows the court to limit or regulate discovery only to ``prevent unreasonable annoyance, expense, embarrassment, disadvantage, or oppression.''

Generally, in the traditional discovery context, the responding party bears the cost of retrieval and review in responding to a request to address responsiveness and privilege.

Zubulake reaffirmed this proposition but recognized that in electronic discovery cases, this can translate into millions of dollars in retrieval costs because of the expertise required in retrieving stored e-mails and because of the sheer volume of communications in computer terminals across the globe.

Some defendants even use this method to discourage plaintiffs with boxes and carloads of materials in complex cases, hoping not only to delay the litigation but to bury important details within mounds of material.

In using the seven-part test in Zubulake, the court decided that since e-mail was the common form of communication among employees at Warburg, the electronic records requested by the plaintiff could be recovered from back-up and optical disks. It further held that, after review of the details of this search as well as the time and money spent by the defendant in doing so, it would then conduct a cost-shifting analysis.

Rather than deal with each case on an ad hoc basis, though, the Administrative Office of the U.S. Courts (AOC) sent out a survey on electronic discovery last year to 150 lawyers, bar organizations and technical people seeking input on whether federal rules are adequate to ensure that discovery is predictable.

The AOC is in the process of collating responses to this survey, the first step in a three- to four-year process that ultimately could lead to changes in the Federal Rules of Civil Procedure.

It is well established that federal court rules as well as most state courts allow for general notice pleading and that the meat of the matter is to be flushed out in discovery.

It appears that the courts are attempting to offer a reasoned approach to a full and fair trial on the facts without bankrupting any party.