In two recent decisions, the First Department of the New York State Supreme Court, Appellate Division, which has jurisdiction over New York and Bronx Counties, adopted e-discovery standards from the well-known Zubulake opinions by Judge Shira Scheindlin of the U.S. District Court for the Southern District of New York.
In the first decision, the First Department held that the Zubulake tests control when a party has a duty to preserve evidence and may be sanctioned for spoliation. In the second decision, the court approved the Zubulake standard to determine which party must pay for the costs of locating and producing electronically stored information ("ESI").
Voom HD Holdings v. EchoStar Satellite L.L.C.
In Voom, 2012 WL 265833 (N.Y. App. Div. Jan. 31, 2012), the First Department held that the standard set out in Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003), controls when a party must preserve evidence, including ESI. Under that standard, "'[o]nce a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a 'litigation hold' to ensure the preservation of relevant documents.'" The court also applied the Zubulake test for deciding when a party can be subject to sanctions for spoliation, as that test was further developed by Judge Schiendlin in Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, LLC, 685 F. Supp. 2d 456 (S.D.N.Y. 2010).
In applying the Zubulake preservation standard, the First Department concluded that the defendant EchoStar failed to preserve evidence in violation of its obligations. EchoStar, the court held, should have reasonably anticipated litigation with Voom in June 2007, when it sent Voom a letter threatening to terminate the contract between the parties. EchoStar did not issue a litigation hold until after Voom commenced the lawsuit in January 2008, and did not suspend the automatic deletion of emails until June 2008.
The First Department upheld the motion court's imposition of an adverse inference that EchoStar destroyed relevant evidence as a sanction for spoliation. Applying Zubulake and Pension Committee, the court found that: (1) EchoStar acted in bad faith or with gross negligence in failing to preserve ESI because it had been sanctioned in a prior case for the same conduct; (2) thus the relevance of the evidence was presumed; (3) in any event, Voom had demonstrated relevance by presenting a handful of "snapshots" of EchoStar executives' email accounts that had been produced in other litigations and that showed relevant communications during the time period from which emails were deleted; and (4) EchoStar could not rebut the presumption of prejudice to Voom.
U.S. Bank National Association v. GreenPoint Mortgage Funding Inc.
The question before the First Department in U.S. Bank N.A., 2012 WL 612361 (N.Y. App. Div. Feb. 28, 2012), was which party must incur the costs of searching for, retrieving, and producing ESI and physical documents requested in discovery. Because the New York Civil Practice Law and Rules is silent on the issue, the court once again looked to Zubulake and held that the producing party must initially bear the costs of e-discovery.
The First Department explained that "Zubulake presents the most practical framework for allocating all costs in discovery, including document production and searching for, retrieving and producing ESI." Requiring the requesting party to pay might, in the court's view, deter the filing of claims, especially by individuals. A producing party should first move to limit burdensome discovery requests and then seek to shift costs if those costs are still prohibitive after the court resolves the motion to limit the requests.
Significance of the Decisions
Voom and U.S. Bank N.A. harmonize the law on at least some aspects of e-discovery between the federal and state courts in Manhattan, among the most prominent commercial courts in the country. They also signal that New York state courts will likely continue to look to Zubulake and its progeny for guidance on e-discovery issues as the state courts become more conscious of e-discovery issues.
Litigants in New York state courts, just like parties to cases in New York federal court, need to pay careful attention to the process of preserving, locating, reviewing, and producing ESI. The success of their claims or defenses may depend on it.
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