When Somebody Wants to See Your E-Mails
You’ve sorted them, surveilled them, and stored them. And now, somebody wants to see them.
What should you do when asked to hand over your e-mails to a regulator, plaintiff’s counsel, or SEC examiner? The most recent guidance comes in the form of a July 20 court opinion in the case of Zubulake vs. UBS Warburg, an employment discrimination case.
The opinion focused on UBS’s duty to preserve e-mails in the face of a "litigation hold." Zubulake, the plaintiff, asked the judge to sanction UBS for failing to hand over relevant e-mails she had requested. The judge found that despite instructions from both outside and inside counsel to preserve relevant e-mails, certain UBS employees deleted e-mails. She also found that counsel failed to safeguard backup tapes that might have contained some of the deleted e-mails. The judge concluded that UBS willfully deleted relevant e-mails and sanctioned the firm by allowing an "adverse inference instruction" about the missing e-mails to be given to the jury that ultimately hears Zubulake’s case. UBS also was ordered to pay deposition costs and legal costs.
Judge Shira Scheindlin made a point of providing guidance to lawyers on their obligations to preserve e-mails in the litigation setting. This guidance may be instructive for firms facing a regulatory request for
e-mails, as well.
Put a "litigation hold" in place. At the outset of litigation, or when a firm "reasonably anticipates" litigation, the firm should suspend its routine document retention/destruction policy and institute a "hold" to ensure that all relevant documents are preserved. Employees should be told that they should not destroy any e-mails. If backup tapes are the only means of retrieving certain e-mails or are actively used to retrieve information they should be part of the hold and should not be recycled (particularly those back-up tapes containing e-mails of the "key players").
Periodically re-issue the hold. This will ensure that new employees are aware of the hold and will keep it fresh in the minds of all employees.
Actively monitor compliance with the hold. It’s not enough to simply tell employees about the hold and then expect that they will keep and produce all of the relevant information. "Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched," said the judge. She warned that outside counsel "must become fully familiar with her client’s document retention policies, as well as the client’s data retention architecture." This, she added, "will invariably involve speaking with information technology personnel, who can explain system-wide backup procedures and the actual (as opposed to theoretical) implementation of the firm’s recycling policy."
The judge also emphasized the importance of understanding how individuals are maintaining e-mails. To that end, she said, counsel should communicate directly with each of the key players in the litigation.
Guard those back-up tapes! The judge emphasized that counsel should ensure that relevant backup tapes are identified and stored in a safe place. "One of the primary reasons that electronic data is lost is ineffective communication with information technology personnel," noted the judge. She suggested that if the number of tapes is small, counsel could take physical possession of them.
Find out who has what. If opposing counsel has requested certain types of e-mails, find out who within your firm has e-mails that are responsive to the requests.
Produce what has been preserved. When requests for specific types of e-mails are made, make sure to actually obtain those e-mails from people who have them. In other words, it’s not enough to preserve them, you must make sure to hand them over when the time comes.
Turning from the litigation context to the regulatory context: The topic of e-mail production was a hot topic at the NASD’s May 2004 securities conference. "The reality is that regulators have gotten very, very aggressive in getting their arms around documents or e-mails quickly," said Wilmer Cutler partner Harry Weiss. He cautioned firms to take the time to review all e-mails before handing them over to regulators to ensure that privileged e-mails are not inadvertently handed over. "If you’re a lawyer," he noted, "it is malpractice to produce something that’s privileged."
Weiss said that firms should assure regulators that they will provide the requested e-mails quickly and reasonably, and that appropriate resources will be dedicated to responding to the request. He predicted that the staff will respect the need to review e-mails for privilege prior to production. But, he added, "don’t let them push you into submission at a cost of not reviewing for privilege," said Weiss. "You have the right to do that."
Weiss’s co-panelist, David Katz, director of NASD Market Regulation, said that if he was approached by outside counsel in a time-sensitive investigation who "establishes some credibility with me or with my staff" and asks to be able to review requested documents in an expeditious way and then produce them as soon as possible, "we would obviously allow that to happen."
Interestingly, Weiss said he believed that regulators do not have the authority to obtain purely personal e-mails. But he added that it was an issue not worth "going to war" over. "Chances are, there will be only a handful of personal e-mails that will be embarrassing [or] compromising," said Weiss. "So the vast majority of personal things you wouldn’t want to fight over. You wouldn’t want to use this forum as a venue to vindicate the privacy interest of your employees if it doesn’t matter."
If the review unearths a few truly embarrassing personal e-mails that have nothing to do with the subject at hand, Weiss noted that firms can ask that they be withheld from the production. If you tell regulators what is in the e-mails, "you are likely to get some kind of accommodation if you do it quickly," he said.
Co-panelists Katz and Barry Goldsmith, the NASD’s executive vice president for enforcement, disagreed with Weiss’s view that personal e-mails were not covered. Goldsmith noted that there have been some circumstances in which what would be viewed as an ordinary personal e-mail "turned out to be a key document in establishing a relationship or time in a sequence." He said that "it is very often difficult to make those cuts, particularly right at the outset."
Regulators "cannot start making . . . relevance calls at an early stage of an investigation," agreed Katz. But, he added, if outside counsel wants to attempt to negotiate in an effort to narrow the scope of the request, "we’re always willing to listen and if it’s reasonable, we’ll try to accommodate it."
Less than a year ago, former Fred Alger Management executive James Connelly was sentenced to one to three years in prison for, among other things, instructing subordinates to delete e-mails after SEC examiners began investigating his former firm for market timing misconduct.