Commercial Litigation and Arbitration

May a Party Obtain a Protective Order Relieving It of the Duty to Access Back-Up Tapes When that Party’s Negligent Failure to Issue a Litigation Hold Caused the Data to be Backed Up? Yes.

From Major Tours, Inc. v. Colorel, 2010 U.S. Dist. LEXIS 62948 (D.N.J. June 22, 2010):

The first question is whether, as a matter of law, a protective order under Rule 26(b)(2)(B) can ever be granted to a party when the evidence is inaccessible because of that party's failure to institute a litigation hold. The Court examines this question de novo, and concludes that no such bright line rule exists.

Nothing in the plain language of Rule 26(b)(2)(B) requires such a threshold determination of who is at fault for the data having become inaccessible. The Rule states, "A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost." One could argue that "undue" should be interpreted to mean "not a result of the party's own negligence," but the more natural reading of "undue" is simply that the burden or cost outweighs the potential benefit. Moreover, the Rule permits an order of production if the party shows good cause, which is where one would expect the analysis of the party's culpability in the inaccessibility to lie. The Advisory Committee notes point to a multi-factored balancing test for assessing good cause.

Both of the parties and Judge Schneider rely heavily on a line of cases from the Southern District of New York known as the Zubulake cases. See Zubulake v. UBS Warburg LLC ("Zubulake IV"), 220 F.R.D. 212 (S.D.N.Y. 2003) (Scheindlin, J.). These cases address the questions of when a duty to preserve evidence begins, what must be preserved in the context of electronic data, what is meant by inaccessible data, and what the proper remedies are for spoliation of this evidence. A case recently decided by the same Judge and self-titled as "Zubulake Revisited: Six Years Later," adds to this line of cases. Pension Committee of University of Montreal Pension Plan v. Banc of America, No. 05 Civ. 9016 (SAS), 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010) (Scheindlin, J.).

While the Zubulake cases thoughtfully consider discovery in the context of electronic data, none of the Zubulake cases, including Pension Committee, address the question of whether a party can be granted a protective order under Rule 26(b)(2)(B) when the inaccessibility of evidence is that party's fault. Instead, these cases speak to the question of when spoliation sanctions are warranted. Although these are conceptually related inquiries, they are distinct.

The imposition of spoliation sanctions is a discretionary act. In order to get from the Zubulake cases' discussion of spoliation to the bright line test Plaintiff seeks to defend, this Court would have to find that not only are spoliation sanctions required for negligent failure to retain emails on electronic servers as a matter of law, but also that the specific sanction of having to retrieve all of the relevant emails from backup tapes, no matter the cost, is also required as a matter of law. No part of the reasoning or holdings in the Zubulake cases supports the rule that negligent spoliation requires discovery of backup tapes regardless of the other circumstances of the case. Indeed, those cases affirm the longstanding rule that "the determination of an appropriate sanction for spoliation, if any, is confined to the sound discretion of the trial judge and is assessed on a case-by-case basis." Fujitsu Ltd. v. Federal Exp. Corp., 247 F.3d 423, 436 (2d Cir. 2001).

This need for case-by-case discretionary balancing of factors also applies to the analysis under Rule 26(b)(2)(B). See Disability Rights Council of Greater Washington v. Washington Metropolitan Transit, 242 F.R.D. 139 (D.D.C. 2007). In Disability Rights Council, Magistrate Judge Facciola considered the argument raised by Plaintiffs here, but concluded that the proper approach was to balance Defendants' culpability as one factor in the seven-factor analysis. Only after considering the seven factors suggested by the Advisory Committee did Judge Facciola find that discovery of the backup tapes was warranted. The Rules compel exactly this discretionary balancing of costs and benefits of discovery, not a bright line requirement of production, no matter how burdensome, how likely to succeed, or how necessary to the litigation, if a party fails to adequately preserve every byte of previously accessible data.

Plaintiffs object that unless there is a prophylactic bright line rule, future parties will have a road map to avoiding discovery obligations. This Court disagrees for three reasons. First, this opinion takes no position on the question of whether a bright line rule exists with respect to a party intentionally permitting relevant evidence to become inaccessible, rather than negligently failing to preserve it. If there is evidence that a party has intentionally deleted emails or deliberately failed to inform key parties about the need to preserve emails, then the outcome may be different. The case for intentional spoliation based on failures to preserve electronic evidence becomes easier and easier as federal rules for preservation of electronic evidence become more widespread and specific. Second, there are penalties available for spoliation wholly apart from whether the Court will order production of backup tapes. These penalties can be as severe as necessary to deter the strategy Plaintiffs suggest future parties may adopt. And third, the lack of a bright line rule should not be equated with the existence of the opposite rule; it does not mean that any given defendant will avoid the obligation of expensive retrieval of backup information. Instead, a party's failure to preserve evidence will be weighed among all the other relevant factors, one of which is how much information was able to be accessed. If a party permits all the relevant emails to be put on inaccessible media, as Plaintiffs fear, then the good cause balancing will tilt more strongly in favor of ordering discovery as the inaccessible media will be the only source of relevant emails.

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