Memo to KPMG: When a federal judge sends a strong signal that she doesn’t want to show up her magistrate judge, you should heed the warning.
In January, you may recall, U.S. District Judge Colleen McMahon of Manhattan federal court attempted to moot a hot e-discovery dispute between the audit firm KPMG and a putative class of audit associates suing KPMG for unpaid overtime. The federal magistrate overseeing discovery in the case had ordered KPMG to preserve the computer hard drives of every potential class member, including those who had left the firm. KPMG’s lawyers at Sidley Austin argued that storing the hard drives could end up costing more than the plaintiffs’ claims are worth. The Chamber of Commerce and the International Association of Defense Counsel piled on, asserting that the magistrate’s e-discovery order had the potential to fundamentally change the balance of power in class actions by making it too expensive for KPMG and other defendants in similar situations to continue litigating cases against them.
McMahon was clearly reluctant to second-guess U.S. Magistrate Judge James Cott, so in a Jan. 3 order conditionally certifying a class of audit associates, she hinted that her ruling, which focused on a classwide question of KPMG’s policy rather than individualized facts, had mooted the e-discovery flap. KPMG and the plaintiffs, represented by Outten & Golden, declined to take the hint. KPMG continued its call for McMahon to overturn the magistrate’s discovery order.
On Friday, McMahon said no — and blamed KPMG for the predicament. Significantly, the judge agreed with KPMG’s amici that “proportionality is necessarily a factor in determining a party’s preservation obligations.” She said that it doesn’t make sense for the cost of retaining e-discovery to outweigh the potential value of the information that’s being preserved. But McMahon’s 22-page opinion concluded that KPMG had been so obdurate in refusing access to the hard drives that she couldn’t conduct a proportionality analysis.
via Judge to KPMG: Save the hard drives — and blame yourself.
