Electronic discovery can get very expensive.

So who should pay these billions, however many they may be?

This spring United States District Court Judge Shira A. Scheindlin of the Southern District of New York released a set of guidelines (www.nysd.uscourts.gov/rulings/02cv1243_051803.pdf) for splitting e-discovery costs. Then, on July 24, 2003, she issued a ruling (www.nysd.uscourts.gov/rulings/02cv01243_072403.pdf) applying those guidelines to the case at issue.

The Decisional Framework

The case, Zubulake v. UBS Warburg, LLC, et al., 02 Civ 1243 (SAS), is a still-pending employment discrimination suit. The plaintiff had requested all e-mails concerning her written by five UBS employees during a period surrounding her termination. UBS responded that it had those e-mails on backup tapes, but that Zubulake should cover the cost of restoring those tapes, estimated to be around $300,000. Zubulake objected to paying this amount.

In her May ruling, Judge Scheindlin rejected the idea that the requesting party should always pay for the restoration.

"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."

Instead, she enumerated seven elements to consider when allocating such costs:

"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 benefits to the parties of obtaining the information."

But she also stated that all these elements only provided guidance.

"When evaluating cost-shifting, the central question must be, does the request impose an 'undue burden or expense' on the responding party? . The seven-factor test articulated above provides some guidance in answering this question, but the test cannot be mechanically applied at the risk of losing sight of its purpose."

She then ordered UBS to restore the information on five of the 94 backup tapes and to present the court with a more accurate cost estimate.

July Decision

UBS came back with a figure of $273,649.39 - $165,954.67 for restoring and searching the tapes and another $107,694.72 for attorneys and paralegals to review the documents. In her July decision, Judge Scheindlin addressed these two items separately. First, she ruled that Zubulake should pay for a quarter of the restoration costs.

"A share that is too costly may chill the rights of litigants to pursue meritorious claims. However, because the success of this search is somewhat speculative, any cost that fairly can be assigned to Zubulake is appropriate and ensures that UBS's expenses will not be unduly burdensome."

The attorney review time, however, was solely UBS's responsibility.

"[T]he responding party should always bear the cost of reviewing and producing electronic data once it has been converted to an accessible form

Relief In Sight

But, just because e-discovery can be expensive, doesn't mean that it must be. As Judge Scheindlin noted in May:

"Many courts have automatically assumed that an undue burden or expense may arise simply because electronic evidence is involved. This makes no sense. Electronic evidence is frequently cheaper and easier to produce than paper evidence because it can be searched automatically, key words can be run for privilege checks, and the production can be made in electronic form obviating the need for mass photocopying."

We will explore that issue further in the next issue. We will cover some of the advances in e-discovery and document management which cut down the time and cost involved in discovery. We will also take a look at some of the recent regulations covering document retention and privacy, as well as methods for achieving compliance.