And that’s what we have today. The United States District Court for the Southern District of New York released a blunt, controversial ruling last week, slamming down accounting firm KPMG for requesting a less intense preservation obligation. The case has unsettling implications for attorneys and corporations who have big hopes in the future of less costly and less invasive e-discovery standards.
The case has been causing headaches for some time now….
In Pippins v. KPMG, several former KPMG auditors sued the company, saying they were owed overtime wages. In the course of the lawsuit, the company was ordered to preserve (a lot of) hard drives containing information about thousands of former employees.
Back in the fall, KPMG made a motion to limit the scope of its preservation obligations, which the court dismissed without prejudice. The Big Four accounting firm appealed. The court denied the appeal on Friday (PDF).
The dispute, by now familiar to all in the legal technology sector, is about how many computer hard drives to evaluate. Pippins’ side won a Nov. 2011 ruling by Magistrate Judge James Cott in favor of using all available drives, while KPMG argued to use 100 sampled drives. The decision caused an uproar and KPMG appealed.
“KPMG could have established [that producing all the drives was unnecessary] by producing several hard drives to Plaintiffs and Magistrate Judge Cott. … But KPMG has established nothing of the sort,” McMahon stated.
McMahon added, “Even assuming that KPMG’s preservation costs are both accurate and wholly attributable to this litigation — which I cannot verify — I cannot possibly balance the costs and benefits of preservations when I’m missing one side of the scale (the benefits).”
“I gather that KPMG takes the position that the only Audit Associates who are presently ‘parties’ are the named plaintiffs, and so only the named plaintiffs’ hard drives really need to be preserved. But that is nonsense,” she continued. “Under Zubulake IV, the duty to preserve all relevant information for ‘key players’ is triggered when a party ‘reasonably anticipates litigation.’ … At the present moment, KPMG should ‘reasonably anticipate’ that every Audit Associate who will be receiving opt-in notice is a potential plaintiff in this action.”
Well, it sucks to be KPMG right now. I guess the lesson is, even with all the advancement in handling electronic discovery, at some level it is still like a box of chocolates. It doesn’t seem like the company (or its Sidley Austin attorneys) seriously screwed up here. The arguments were simply not convincing to Judge McMahon. And not all judges (or lawyers) are on the same page with regard to handling this stuff.
As Magistrate Judge Andrew Peck said last week at LegalTech, if you end up in a discovery dispute with the judge, and you know you are right and the judge is wrong [not that this is necessarily the case here]: “Rule #1: be reasonable. Rule #2: politely educate your judge.” That’s the best you can do.
As they say, sometimes you eat the bar. And sometimes the bar eats you.
KPMG Loses E-Discovery Appeal in ‘Pippins’ Labor Case [Law Technology News]
Pippins v. KPMG [Decision and Order, S.D.N.Y.]