For all of its zeal in squelching what it considers unfounded class actions against U.S. businesses, the Chamber of Commerce rarely strays from appellate courts to venture into the weeds of a federal district court discovery dispute. But Monday, the Chamber filed an amicus brief in an uncertified wage-and-hour class action against the accounting firm KPMG, warning that if U.S. District Judge Colleen McMahon of Manhattan federal court adopts the order of a magistrate judge, the ruling will set “a dangerous precedent” that will be of “profound significance to businesses in America.” Piling on in their own Nov. 8 amicus brief, the Washington Legal Foundation and the International Association of Defense Counsel assert that the magistrate’s ruling could fundamentally distort class-action litigation by potentially making it cheaper to settle a case than to comply with discovery orders.

So what is this supposedly devastating, albeit preliminary, ruling? On Oct. 11, 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.

“These audit associates are, at the very least, key players in any one of many potential actions that could result if the motion to certify is denied,” Cott wrote. “With so many unknowns involved at this stage in the litigation, permitting KPMG to destroy the hard drives is simply not appropriate at this time.”

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