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Judge Won't Let KPMG Toss Hard Drives In OT Fight

Law360 - Django Gold

A New York federal judge on Friday rejected KPMG LLP's bid to limit the number of employee hard drives it is required to present in defending against a putative class's allegations of overtime pay violations, saying the accounting firm hadn't proven it was unfairly burdened.

U.S. Magistrate Judge James Cott said KPMG would have to hold on to thousands of hard drives until the resolution of a motion to certify a group of accountants who say their employer illegally classified them as exempt so as to avoid paying overtime.

KPMG “has failed to demonstrate that the discovery materials contained on the hard drives are of only marginal relevance, and that it would be unduly burdensome to continue its current preservation efforts while the motion to certify is pending,” Judge Cott 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 “such data as the usage information, log-in/log-out information, application records, forms and other contents stored on the laptops in the course of the business day, which would be helpful in showing both the range of hours during which they worked and the substance of their work.”

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

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But Judge Cott said Friday 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.

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The case is Pippins et al. v. KPMG LLP, case number 1:11-cv-00377, in the U.S. District Court for the Southern District of New York.