Case Blurb: Zubulake III; Presumptions and Standards for Cost-Shifting Arguments

Although “the presumption is that the responding party must bear the expense of complying with discovery requests,” requests that run afoul of the Rule 26(b)(2) proportionality test may subject the requesting party to protective orders under Rule 26(c), “including orders conditioning discovery on the requesting party’s payment of the costs of discovery.” A court will order such a cost-shifting protective order only upon motion of the responding party to a discovery request, and “for good cause shown.” Thus, the responding party has the burden of proof on a motion for cost-shifting. Zubulake v. UBS Warburg LLC, 216 F.R.D. 280, 283 (S.D.N.Y. 2003).

In Zubulake I, I considered plaintiff’s request for information contained only on backup tapes and determined that cost-shifting might be appropriate. It is worth emphasizing again that cost-shifting is potentially appropriate only when inaccessible data is sought. When a discovery request seeks accessible data-for example, active on-line or near-line data-it is typically inappropriate to consider cost-shifting. Id.

The seven factor test from Zubulake III was posted here.

Editor’s note: Although the Zubulake decisions were foundations for current e-discovery law, and are referred to more than ever, please keep in mind that they were made before the enactments of the new amendments to the FRCP. Although many of the interpretations laid out by Judge Schindlin in the Zubulake decisions were codified in these amendments, there may be some divergence. Further, statutes numbers may have changed (or they may not have). I encourage you to do your own due diligence with respect to any case blurbs posted on our site, but especially those made before the enactment of the amendments to the FRCP. Thanks.)

Are back-up tapes inhererently inaccessible for purposes of e-discovery?

Data may be considered not reasonably accessible by reasons of hardware limitations. In general, litigation holds do not apply to inaccessible back-up tapes. Consolidated Aluminum Corp. v. Alcoa, Inc., 2006 WL 2583308, *2 (citing Zubulake IV, 220 F.R.D. at 218). Are all back up tapes inaccessible, by definition? The opinion in Alcoa stated that “accessible” back-up tapes should probably be included in any litigation hold. Id. From this perspective, then, back up tapes are not inherently inaccessible, but are merely presumptively so. What differentiates “accessible” back up tapes from tapes that are “inaccessible?” Active and frequent use of the tapes is apparently the key. Zubulake IV, 220 F.R.D. at 218 (stating that if backup tapes are accessible (i.e., actively used for information retrieval), then such tapes would likely be subject to the litigation hold.”). Another court ruled that:

[D]ata that is accessible is stored in a readily usable format that does [not?] need to be restored or otherwise manipulated to be usable. Conversely, data that is inaccessible is not readily useable and must be restored to an accessible state before the data is usable. Backup tapes are considered an inaccessible format, and, thus, shifting the costs of producing data from backup tapes may be considered.

Quinby v. WESTLB AG, No. 04Civ.7406(WHP)(HBP), 2006 WL 2597900, at *7 (S.D.N.Y. Sep. 5, 2006) (citing Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309, 320 (S.D.N.Y.2003)).

DataKos discusses e-mail tape backup and rotation schedules

In this post, DataKos looks for a silver bullet formula for tape storage and backup rotations:

Backup tapes should be used only for disaster recovery, but many organizations still use those media for archives, retention or storage, with a trend toward increased use of archive storage technologies. Archiving does not solve the information lifecycle challenges organizations face and the more information retained the more that is subject to collateral legal disclovery.

Another item to note: the more often you use tapes for archiving and restoring, the less likely a court will find those tapes “not reasonably accessible” for purposes of discovery. If you only restore in times of disaster or error, you will greatly decrease the chances of having to do costly and burdensome restore operations once litigation strikes.

ESI Tests: The Seven Factor Zubalake Test for Cost Shifting

Seven Factor Zubulake (Zubulake I, 217 F.R.D. at 322) Test for the cost of producing data from inaccessible sources (an adaptation of the Rowe Test); factors are listed in descending order of importance:

• The extent to which the request is specifically tailored to discover relevant information;
• The availability of such information from other sources;
• The total costs of production compared to the amount in controversy;
• The total costs of production, compared to the resources available to each party;
• The relative ability of each party to control costs and its incentive to do so;
• The importance of the issues at stake in the litigation; and
• The relative benefits to the parties of obtaining the information.

Application of Seven Factor Test:
The initial question is whether it is appropriate to shift the costs of electronic document production. Quinby v. WESTLB AG, 2006 WL 2597900 (S.D.N.Y. 2006).
When combined, the first two factors are known as the “marginal utility test.” Id. (citing Zubulake III, 216 F.R.D. at 284).
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.

If the information is available from another source, the marginal utility from the e-discovery is low, and would support cost-shifting. Id.

Application of the first Zubulake factor: The extent to which the request is specifically tailored to discover relevant information.

Π argues that because the court engaged in the “pairing down” process, the document request, as modified by the court, was per se specifically tailored to discover relevant information. The court disagreed. A court may limit the scope of discovery in several ways. Fed. R. Civ. Proc. 26(b)(2) permits the court to limit discovery if the burden or expense of production outweighs its potential benefits, and R. 26(c) permits the issueance of protective orders, including by shifting the costs of unduly burdensome or expensive production. Narrowing a document request pursuant to Rule 26(b)(2) does not preclude the Court from also granting a protective order in the form of cost-shifting for those documents that were ordered to be produced. Id. (citing Zubulake III, 216 F.R.D. at 283).
Even where cost-shifting is granted, the Δ must still pay for the majority of the production b/c of the presumption that the responding party pays for its discovery costs. Id. (citing Wiginton v. CB Richard Ellis, Inc., 229 F.R.D. at 577).
In addition, shifting a share that is too costly may chill the rights of litigants to pursue meritorious claims. Id. (citing Zublake III, 216 F.R.D. 289).

Case Blurb: WESTLB AG, Cost shifting when party inadvisably converts data to inaccessible format

If a party creates its own burden or expense by converting into an inaccessible format data that it should have reasonably foreseen would be discoverable material at a time when it should have anticipated litigation, then it should not be entitled to shift the costs of restoring and searching the data. Quinby v. WESTLB AG, 2006 WL 2597900 (S.D.N.Y 2006) (citing Zubulake IV, 220 F.R.D. at 216).

Case Blurb: WESTLB AG, Duty to preserve has limits

A party need not preserve every shred of paper, every e-mail or electronic document, nor every backup tape, as this would cripple large corporations who are almost always involved in litigation. Quinby v. WESTLB AG, 2006 WL 2597900 (S.D.N.Y. 2006).

Case Blurb: WestLB AG; Back up tapes an inaccessible format; cost shifting a consideration

[D]ata that is accessible is stored in a readily usable format that does [not?] need to be restored or otherwise manipulated to be usable. Conversely, data that is inaccessible is not readily useable and must be restored to an accessible state before the data is usable. Backup tapes are considered an inaccessible format, and, thus, shifting the costs of producing data from backup tapes may be considered. Quinby v. WESTLB AG, 2006 WL 2597900 (S.D.N.Y. 2006) (citing Zubulake I, 217 F.R.D. at 320).

Case Blurb: Alcoa, Inc., back-up tapes considered accessible

On the other hand, if [back-up tapes] are considered accessible (i.e., actively used for information retrieval), then such tapes would likely be subject to the litigation hold. Consolidated Aluminum Corp. v. Alcoa, Inc., 2006 WL 2583308 (M.D.La) (citing Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 218 (S.D.N.Y.2003)).

Case Blurb: Alcoa, Inc., back up tapes recycled during litigation

[Back up tapes] may usually continue to be recycled on the schedule set forth in the company’s policy. Consolidated Aluminum Corp. v. Alcoa, Inc., Slip Copy 2006 WL 2583308 (M.D.La) (citing Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 218 (S.D.N.Y.2003))

Case Blurb: Alcoa Inc., Preservation of b/u tapes

As a general rule, a party need not preserve all backup tapes even when it reasonably anticipates litigation. Consolidated Aluminum Corp. v. Alcoa, Inc., 2006 WL 2583308 (M.D.La) (citing Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 218 (S.D.N.Y.2003)).