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A federal judge in New York ordered sanctions Tuesday against UBS Warburg for destroying backup e-mail messages sought in an employment discrimination case. Southern District Judge Shira Scheindlin said the global financial firm, not its lawyers, was to blame. The destruction was the result of a failure to communicate between UBS and its counsel, the New York law firm Kramer Levin Naftalis & Frankel, she said. Judge Scheindlin said she was addressing long-running discovery problems in what she characterized as a “relatively routine” discrimination suit. She ordered UBS Warburg to pay expenses and attorney fees incurred by the plaintiff, Laura Zubulake, in pursuing missing e-mails and other data. The judge said she would also give a negative jury instruction on the missing evidence in the case, Zubulake v. UBS Warburg, 02 Civ. 1243. The case has already attracted attention because of an earlier ruling by Scheindlin on cost-shifting in electronic discovery disputes. Zubulake filed a sex discrimination suit against UBS Warburg in 2002 after being fired as an equities trader. Immediately afterward, in-house counsel for UBS instructed employees not to destroy relevant documents. The instructions, however, did not mention e-mails stored on backup tapes, which the bank regularly recycled. Employees were later told to save the backup tapes. In July 2003, Scheindlin, applying what she said was a new formula for cost-shifting in electronic disputes, ordered UBS to pay the bulk of the cost of restoring backup tapes that Zubulake said were relevant to her case. When the restoration showed that some tapes were missing, Scheindlin ordered UBS to pay for the re-deposition of several “key” UBS employees. Those depositions, she said Tuesday, allowed Zubulake to present evidence that UBS employees deleted relevant e-mails, some of which were later recovered and “some of which were lost altogether.” Zubulake, the judge said, also showed that she had been deprived of some documents for almost two years. “The proof is clear: UBS personnel unquestionably deleted relevant e-mails from their computers after August 2001, even though they had received at least two directions from counsel not to,” Scheindlin said. “Some of those e-mails were recovered … but some — and no one can say how many — were not. And even those e-mails that were recovered were produced to Zubulake well after she originally asked for them.” ROLE OF COUNSEL Addressing the role of counsel, Judge Scheindlin said “it is not sufficient to notify all employees of a litigation hold and expect that the party will retain and produce all relevant information. Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched.” She said UBS counsel, both in-house and outside, “repeatedly advised UBS of its discovery obligations” and “came very close” to taking precautions that could have saved the evidence. But counsel also “failed to properly oversee UBS in a number of important ways, both in terms of its duty to locate relevant information and its duty to preserve and timely produce that information,” she said. And while more “diligent action on the part of counsel would have mitigated some of the damage caused by UBS’s deletion of e-mails, UBS deleted the e-mails in defiance of explicit instructions not to,” she said, concluding that UBS “acted wilfully” in destroying the relevant information. On sanctions, Scheindlin said she would give the jury an adverse inference instruction on e-mails deleted after August 2001. She also ordered UBS to pay the costs of any depositions or re-depositions required by the late production and ordered UBS to pay Zubulake’s costs of bringing the motion. James A. Batson of Liddle & Robinson represented Zubulake. Kevin B. Leblang and Norman C. Simon of Kramer Levin represented UBS.

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