In a series of employment law decisions, a New York judge in 2003-2005 laid down the law, interpreting the Federal Rules of Civil Procedure, on management of corporate records and timely compliance with demands in litigation for disclosure of corporate records in pre-trial discovery. See Zubulake1 decisions of Justice Shira Scheindlin (NY Co. Sup. Ct.). As a result of violations of these evidentiary rules, the employer was barred from effectively defending itself and lost a multi-million dollar court judgment. The judge directed jurors that they could presume the documents would have been adverse to the employer who had failed to maintain, protect and disclose them. A series of similar cases were decided in Florida and New Jersey, also with multimillion dollar losses..
Evidentiary foreclosure poses a significant threat to any enterprise. Where any records are in the custody of third parties, there is a question whether the records are more secure than if records management was entirely insourced. In the Zubulake case, the employer had outsourced the records management but had failed to timely instruct the outsourcer to stop recycling backup tapes and to preserve the evidence.
Liability for records management and notification to preserve records should be allocated in the outsourcing contract.
1. Zubulake v. UBS Warburg LLC, 2003 U.S. Dist. LEXIS 18771 (S.D.N.Y., Oct. 22, 2003)