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  • 2.

    The availability of such information from other sources;

  • 3.

    The total cost of production, compared to the amount in controversy;

  • 4.

    The total costs 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.

The court ultimately ordered UBS bear the cost of restoring and producing all responsive documents from five backup tapes to be chosen by plaintiff.

In Zubulake III, Judge Scheindlin applied the seven-factor cost-shifting analysis to the information UBS obtained from the limited search. UBS produced over 600 responsive e-mails from the five backup tapes restored. The court found that many of the e-mails were particularly relevant to the claims and previously unavailable from accessible sources. Based on the findings and the other facts of the case, the court decided that some cost-shifting was warranted. It held that UBS had to bear the lion’s share of the costs because, while cost-shifting was appropriate to ensure that UBS’s expenses did not become too burdensome, shifting too much cost to the plaintiff might chill the right to pursue an otherwise meritorious claim.

The last question the court confronted was what costs to shift. As a general rule, the court held that only costs of restoration and searching should be shifted, where cost-shifting is appropriate. However, the responding party must always bear the cost of reviewing and producing (i.e. the attorneys’ costs) electronic data once restored because (a) the producing party has the ability to control the costs and (b) once electronic data is returned to accessible form, it is no different from any other accessible data and cost-shifting is never appropriate in those cases. The court concluded that UBS should bear 75 percent of the costs of restoration and searching and plaintiff should bear the rest. UBS was also responsible for the attorney review costs.

In Zubulake IV, the parties discovered during the restoration process that certain UBS backup tapes containing relevant information were missing. In addition, certain e-mails created after UBS had placed a “litigation hold” were deleted from UBS’s system, but retained on backup tapes. The court was, thus, confronted with spoliation, or “the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.”

The court, in Zubulake IV, formulated a standard for when the duty to preserve electronic data attaches and what data must be retained. As general matter, the duty to retain documents arises once a company reasonably anticipates litigation. However, the scope of the duty to preserve is not limitless. The court reasoned that large corporations would be crippled if forced to preserve every backup tape each time litigation was reasonably anticipated because companies like UBS are almost involved in litigation. It held, as a general rule, a party has no obligation to preserve all backup tapes even when it reasonably anticipates litigation.14 Inaccessible backup tapes may continue to be recycled according to the company’s routine policy. However, a party


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