Zubulake v. UBS Warburg LLC

Citations: 231 F.R.D. 159; 2005 U.S. Dist. LEXIS 1525; 85 Empl. Prac. Dec. (CCH) 41,845; 95 Fair Empl. Prac. Cas. (BNA) 391; 2005 WL 266766Docket: No. 02 Civ. 1243(SAS)

Court: District Court, S.D. New York; February 2, 2005; Federal District Court

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Defendants in this case seek to amend their Answer to introduce an after-acquired evidence defense, asserting that the plaintiff misrepresented her employment history on her application with UBS Warburg LLC (UBS). They claim that had UBS been aware of these misrepresentations, it would have terminated her employment immediately. The alleged misrepresentations include incorrect dates and reasons for her terminations from Credit Suisse First Boston (CSFB) and Salomon Brothers. Specifically, the plaintiff inaccurately stated that her employment at CSFB ended in May 1999 and that her departure was voluntary. In reality, her personnel file indicates she was terminated for performance deficiencies, with her last working day recorded as May 10, 1999, and her official separation as August 16, 1999. Similarly, for Salomon, she claimed her departure was voluntary when records suggest she was terminated for "unsatisfactory performance." In response, the plaintiff provided her Form U-5 termination notices, which indicate "voluntary" for CSFB and "resign mutual" for Salomon, supporting her claims. The court ultimately denied the defendants’ motion to amend their Answer.

Leave to amend a pleading is to be granted freely when justice requires, as per Federal Rule of Civil Procedure 15(a). However, the trial court has discretion in deciding whether to allow such amendments, as reaffirmed by the Supreme Court in Foman v. Davis. A plaintiff should be given the chance to test their claims unless there are valid reasons for denial, such as undue delay, bad faith, prior failures to correct deficiencies, undue prejudice to the opposing party, or futility of the amendment. The Second Circuit emphasizes that undue delay, bad faith, and potential prejudice are key factors in a district court's decision. Prejudice can be assessed by considering whether new claims would require significant additional resources for discovery, cause delays in resolving the dispute, or hinder timely actions in other jurisdictions. Particularly, amendments are more prejudicial if they occur after discovery is completed or after a motion for summary judgment has been filed.

A party must strategically consider which issues can resolve a case, as failing to raise an affirmative defense limits the opposing party's ability to address key issues effectively. Delay in asserting such defenses can lead to prejudice against the non-moving party; thus, courts weigh the duration of the delay against the resulting prejudice. A significant unexplained delay shifts the burden to the party seeking to amend to justify the delay. Courts have discretion to deny amendments if there is excessive delay, insufficient explanation, and potential prejudice to the defendant. In this instance, the defendants delayed for twenty-two months after learning of critical evidence before moving to amend, with no justification provided for the delay. The timing suggests a strategic choice by new counsel, which does not warrant leave to amend if it prejudices the plaintiff. Additionally, if the moving party was aware of the facts that support the amendment but did not include them initially, the court may deny the motion.

Plaintiff would suffer undue prejudice from the proposed amendment related to the affirmative defense because it would require extensive additional discovery. This includes non-party discovery from Salomon and CSFB regarding plaintiff's termination negotiations, with concerns that potential witnesses may be unavailable or have diminished recollections of events from two years prior. Substantial party discovery would also be necessary, focusing on how UBS treated other employees with questionable representations in their applications, including details on the nature of misrepresentations, terminations, and consistency in treatment. To adequately address the defense's claims, plaintiff would need access to employment applications, background checks, and hiring records of similarly situated UBS employees, as well as further depositions of key personnel. Given the history of discovery issues in this case, significant delays in trial readiness are anticipated if the defense is permitted. The court ultimately denies the motion for the affirmative defense due to a twenty-two month delay, concerns over stale evidence, and the impact on trial scheduling. A conference is set for February 8, 2005, to address discovery issues raised by the plaintiff. The proposed affirmative defense alleges that the plaintiff provided false information on her employment application regarding her terminations, claiming these were voluntary when they were not, and asserts that had this information been known, the defendants would not have hired her or would have terminated her employment immediately. Under the doctrine of after-acquired evidence, this defense aims to bar the plaintiff from recovering back pay and front pay following the defendants' discovery of these facts.