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Judge sets rules for e-mail retrieval

A federal judge orders financial firm UBS to pay most of the cost of restoring lost e-mail in a lawsuit against it, but she does shift some of the burden to the plaintiff.

A federal judge has ordered financial firm UBS to pay most of the cost of restoring lost e-mail in a gender discrimination suit against it, but she did shift some of the burden to the plaintiff.

In a decision with wide-ranging ramifications for any company that keeps electronic records, U.S. District Judge Shira Scheindlin outlined and applied a set of legal principles that judges and parties in a lawsuit must consider when deciding who should pay for electronic evidence retrieval. These include whether the information sought is relevant to the case and whether the costs of retrieving the documents would be too costly.

Based on those principles, she determined that UBS must pay 75 percent of the estimated costs of restoring the documents from backup tapes. She also ruled that UBS must pay the entire cost of "producing" them, which includes costs such as hiring a lawyer to review the restored documents for privileged information before releasing them. That brings the UBS share of the costs to about $232,000.

Laura Zubulake, a former UBS equities trader who is suing the company for gender discrimination, must pay 25 percent of the estimated cost of restoring the data from backup tapes, or about $41,488, according to court documents. Zubulake is seeking e-mails she said would prove that UBS employees failed to promote her and then terminated her because she's a woman.

Traditionally, the party that turns over the papers in a case pays the full cost of doing so, unless some other arrangement is made. However, the issue of electronic documents is complicated because, unlike paper records, they can be retrieved once deleted. Such recovery is often quite costly.

"We are pleased that the judge has shifted a portion of the cost of restoration of the e-mails to the plaintiff," UBS spokesman Paul Marrone said.

The judge said she decided that Zubulake must pay 25 percent of the restoration costs based on several factors, including her salary, which had been $650,000 a year before her termination, and the possibility of a multimillion-dollar payout from the case.

"A share that is too costly may chill the rights of litigants to pursue meritorious claims," Scheindlin wrote in her decision. "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' expenses will not be unduly burdensome."

Although the dispute involves a fairly common claim of gender discrimination, legal experts said the decision is significant, because it helps to establish parameters for turning over electronic evidence--an issue that's becoming increasingly common, as more companies keep electronic records, and as e-mail becomes a more sought-after form of evidence.

Jonathan M. Redgrave, a lawyer for Jones Day who is an expert in electronic discovery but is not involved in the case, called the decision a "must read" for in-house counsel at businesses of all types.

"This obviously has large implications for a spectrum of cases out there," said Redgrave. "Practically all cases today involve some form of electronic documents."

Redgrave said facts in other cases might result in a different split of the costs, but he said the principles used by the judge will likely be cited in many other cases.

He said companies should examine the decision and study their document management and archival policies to make sure that they are up to date, in order to save on any future litigation costs.