E-discovery ruling in KPMG case: Brace for ‘profound’ impact?

http://ow.ly/7pYi4

An article by Alison Frankel on the Reuters blog.

This article discusses the Magistrate's recommendation regarding preservation of evidence that was recently made in a litigation involving KPMG.

The article states, "U.S. Magistrate Judge James Cott issued an order resolving a dispute between KPMG and Outten & Golden, the law firm representing two proposed classes of entry-level auditors who claim the accounting firm owes them overtime wages. The fight involved the computer hard drives of potential class members: KPMG and class counsel agreed that the plaintiffs could use sampling software to limit the electronic information KPMG would have to preserve, but they couldn’t agree on the sampling criteria or the number of computer hard drives to include in the sample. KPMG’s lawyers at Sidley Austin moved for an order limiting the sample size to 100 randomly selected hard drives.

Instead, Cott ruled that KPMG has to preserve the hard drive of every potential class member. “Prudence favors retaining all relevant materials,” Cott wrote, pointing to the seminal e-discovery ruling, Zubulake v. UBS Warburg. The magistrate judge reasoned that because McMahon, the district judge, hasn’t yet ruled on class certification in the KPMG audit associate case, every entry-level auditor in the opt-in action is a potential “key player” under Zubulake, whether in the Manhattan class action or in another case that could be filed depending on how McMahon ultimately defines the class." A link to the opinion is provided in the article.

The article further describes the drastic impact this ruling may have on class action litigation, and states that it may often make it less expensive to settle a dispute than to comply with such an order.

The author points out, "...KPMG nonetheless sent up a howl of protest in its Oct. 28 brief to the district judge. The audit firm said it has already spent $1.5 million to preserve the hard drives of about 2,500 potential New York class members who have left KPMG, at a cost of $600 per drive. Complying with Cott’s order, KPMG said, would cost millions more." A link to the brief is provided in the article."