KPMG Case Fuels Preservation Debate

Law Technology News - Evan Koblentz
November 15, 2011

Outten & Golden, representing former KPMG auditor Kyle Pippins and others, won a ruling from Magistrate Judge James Cott of the U.S. District Court for the Southern District of New York stating that KPMG must preserve the computer hard drives of all possible members in the not-yet certified class. KPMG argued that it should only work with 100 sampled drives.

KPMG is appealing to District Court Judge Colleen McMahon, also in the Southern District of New York, and a ruling is expected following a reply from Pippins’ team early in December.

Outten & Golden attorney Lauren Schwartzreich said the lesson is just to cooperate when your side has the opportunity.

“I’m not really concerned about this decision having too broad of an impact on the unintended consequences of mass preservation expectations,” Schwartzreich said. “I think that the judge made it pretty clear in his ruling that the basis in his ruling was what he observed to be a lack of cooperation.”

Others aren’t so sure, expressing concern about Cott’s decision and the possibility of a widespread impact if KPMG loses its appeal.

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Former U.S. Magistrate Judge Ron Hedges of the U.S. District Court for the District of New Jersey, now a special master and Georgetown Law Center adjunct professor, also cautioned against overreacting. “If this decision stands the way it is, it’ll probably put corporations in the same place they’re in now, in class actions,” he said. “It’s a single judge deciding in a single case in a single court.”

“The worst-case scenario of this, and I’m afraid this may happen, is corporations will say here’s all this information and we have to preserve it as broadly as possible,” Hedges continued. But considering how inexpensive storage is per megabyte, that may not be so bad — “buy a warehouse in Montana, put a server farm in it, and keep everything,” he said — and argue about what’s discoverable later.

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