Employer Loses Credibility with the Court in Litigation Discovery Battle

September, 2003

Court Skeptical About $300,000.00 Cost Employer Claims To Produce Emails

The proverbial “smoking gun” is the hope of every employee and the fear of every employer. In Zubulake v. UBS Warburg, 2003 WL 21087884 (S.D.N.Y.), plaintiff did come up with something close to a smoking gun and the employer’s “circle the wagons” tactics did not help the employer with the judge either.

Facts

Zubulake had been hired as a senior salesperson at UBS’ Asian Equity sales desk. She charged that her supervisor: (a) ridiculed her in front of co-workers; (b) excluded her from work-related outings with male co-workers; (c) made sexist remarks in her presence; and (d) isolated her from other senior sales persons. She filed a gender discrimination and retaliation claim in federal court in New York.

A discovery battle began when the plaintiff asked for all documents between UBS employees concerning her. The request included electronic or computerized documents. The employer produced 350 pages of documents including approximately 100 pages of emails. After a conference with a U.S. magistrate, UBS agreed to produce additional emails. However, UBS then failed to produce any additional emails and insisted that its initial production of 100 pages was everything.

The employee, however, knew that there were additional emails because she had produced approximately 450 pages of emails. Each salesperson at the employer’s desk received approximately 200 emails each day, which the Securities and Exchange Commission required to be backed up and preserved. The employer never searched any of its back-up tapes. The employee moved to compel production. The employer contended that the estimated cost of time to search back-up tapes would be $300,000. Later, the employer recanted and claimed that it would cost $175,000. The employee asked the court to order the employer to produce those emails at its own expense.

Analysis

The district court judge stated that “this case provides a textbook example of the difficulty of balancing the competing needs of broad discovery and manageable costs.” The employer claimed that it would have to restore 94 back-up tapes in order to comply with the plaintiff’s discovery requests. That would be an “undue burden or expense.” Therefore, the employer argued that the cost should be shifted to the employee. The court was not persuaded -- the employer should have produced the tapes under the plaintiff’s initial discovery requests but had not.

The court noted that courts across the country have engaged in some sort of cost-shifting analysis as the employer requested. However, the judge was concerned that past applications unfairly burdened the plaintiff and crippled discovery. The court observed:

Courts must remember that cost-shifting may effectively end discovery, especially when private parties are engaged in litigation with large corporations. As large companies increasingly move to entirely paper-free environments, the frequent use of cost-shifting will have the effect of crippling discovery in discrimination and retaliation cases. This will undermine the "strong public policy favor[ing] resolving disputes on their merits," and may ultimately deter the filing of potentially meritorious claims.

Thus, the court observed that in cases such as this a new seven-point standard should apply considering the following: (1) requests tailored to discover relevant information; (2) availability of information from other sources; (3) total cost of production compared to the amount in controversy; (4) total cost of production compared to the resources of each party; (5) ability and incentive to control costs; (6) importance of the issue in the litigation; and (7) benefits to the parties of obtaining the information.

The court noted that there is a “temptation to treat such factors as a check-list, resolving the issue in favor of whichever column has the most checks.” But, it cautioned, “we do not favor just adding up the factors.”

Based on the court’s analysis, the employer was ordered, at its own expense, to: (i) produce all responsive emails on its optical disks or active servers, (ii) also at its expense, to produce responsive emails from any 5 back-up tapes selected by the plaintiff, and (iii) prepare an affidavit detailing the results of its search, as well as the time and money spent.

After reviewing the employer’s response, the court stated that it would conduct a cost-shifting analysis to determine what and who would bear the cost of additional production if necessary. ?

Learning Points:

Blanket “undue burden and expense” claims will not work.
Plaintiffs and courts are not easily dissuaded. They are sophisticated about electronic storage capabilities.
Employers can be fined if a court senses that they are hiding documents.

Recommendations:

Remind employees that what they put on e-mails is not erased when they push the delete button. Tell them that information is stored and kept. It will be produced in court.
Tell them about the outcome of this case. They must understand that courts will empower plaintiffs to seek out documents that reflect discriminatory or retaliatory comments.

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