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Chamber Backs KPMG In OT Action Discovery Row

Law360 - Django Gold

The U.S. Chamber of Commerce on Friday threw its support behind KPMG LLP, saying the accounting firm should not be required to retain thousands of employee hard drives in a putative overtime class action filed by a group of former auditors.

In an amicus brief filed in New York federal court, the Chamber said that a magistrate judge erred last month when he rejected KPMG's bid to limit the number of hard drives the company would have to hold onto while waiting on a motion for certification of a class of accountants who said their employer had misclassified them as exempt.

U.S. Magistrate Judge James Cott “made two errors of law that led to this novel conclusion,” the Chamber said. “First, he held that the duty to preserve electronically stored information was not limited by any test of proportionality.”

“Second, he held that every member of the proposed plaintiff class or collective action was a 'key player' for purposes of discovery and the retention of electronic information,” the business lobbying group said.

KPMG was sued in January by a number of former employees who said the Big Four accounting firm violated the Fair Labor Standards Act by deliberately misclassifying its entry-level auditors as exempt from receiving overtime pay.

The KPMG employees, classified as audit associates and audit associate seconds, were required by the accounting firm to work hours in excess of 40 hours per week without receiving proper overtime compensation, despite serving in an “entry-level job that requires no advanced-level training and primarily involves performance of routine duties,” according to the complaint.

The former employees filed a motion for certification in April. That motion is still pending.

In August, KPMG asked U.S. District Judge Colleen McMahon to absolve the accounting firm of its obligation to preserve thousands of employee hard drives containing data related to its employees' job duties and activities.

KPMG had incurred expenses of more than $1.5 million in preserving the hard drives, the firm said, offering up an alternative plan under which a random sampling of 100 hard drives would instead be offered for discovery.

But Judge Cott said on Oct. 7 that KPMG had failed to demonstrate “a clearly defined, specific and serious injury” as mandated by the Third Circuit in its 2005 Shingra v. Skiles ruling, which determined the foundation for issuance of a protective order.

In the absence of a precise precedential formula that determines just what a defendant can keep and what must be tossed, “prudence favors retaining all relevant materials,” Judge Cott said.

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The plaintiffs are represented by Outten & Golden LLP and the Shavitz Law Group PA.