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KPMG Loses E-Discovery Appeal in 'Pippins' Labor Case

Law Technology News - Evan Koblentz

Auditing firm KPMG has lost its appeal of a controversial e-discovery ruling in the Pippins v. KPMG labor case.

KPMG, one of the Big Four in its field, wanted to sample 100 hard drives for e-discovery. Lawyers for Pippins won a November 2011 ruling to use all available drives, which sparked a debate among e-discovery watchers -- how much data preservation is reasonable? The sides appeared close to a compromise last month, but no deal was reached.

"Based on Plaintiff's recollections regarding their former hard drives, I agree with [Magistrate Judge James] Cott that the hard drives are likely to contain relevant information," wrote District Court Judge Colleen McMahon, of the Southern District for New York, in a bluntly written ruling Friday afternoon.

"It smacks of chutzpah ... to argue that the Magistrate failed to balance the costs and benefits of preservation when KPMG refused to cooperate with that analysis by providing the very item that would, if examined, demonstrate whether there was any benefit at all to preservation," McMahon asserted.

"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."

"We're thrilled that Judge McMahon saw the issue the way we see it," said Outten & Golden partner Justin M. Swartz, representing Pippins. "All we're asking for is the chance to look at a few hard drives, find out what's on them, and negotiate a resolution."There is no specific deadline for doing so, Swartz said. The schedule depends on other decisions, such as which associates are exempt from the case. "My understanding is, the next step is for us to try to negotiate a resolution with KPMG," he added, in New York.