On November 7, 2011, the U.S. Chamber of Commerce (the “Chamber”) filed an amicus brief in support of the motion by KPMG LLP (“KPMG”) to set aside the Southern District of New York’s denial of its application for a protective order. The protective order sought to limit the number of employee hard drives that KPMG is required to preserve while awaiting a decision on the plaintiffs’ motion for collective action certification. Specifically, KPMG requested to preserve a random sampling of 100 hard drives rather than thousands of hard drives. The Court denied KPMG’s motion even though the cost of preserving the hard drives is extremely high (e.g. KPMG has spent more than $1.5 million on maintaining these hard drives since January 2011).
The lawsuit, entitled Pippins, et al. v. KPMG LLP, is brought by a group of former auditors who allege that KPMG intentionally misclassified entry level auditors as exempt to avoid paying them overtime. The hard drives in question contain data relating to the employees’ job duties and activities. By all accounts, such information is necessary to determine whether the employees fall within one of the exemptions to the overtime requirements under federal and state law.
The Chamber argues that the Court erred in denying KPMG’s for a protective order. The Chamber asserts that the Court ignored the “test of proportionality,” which requires courts to restrict discovery when the cost outweighs the potential benefits. Additionally, the Chamber claims that the Court incorrectly labeled each of the potentially thousands of class members as “key players.” The Chamber explains that the identification of “key players” should be used to “focus discovery” and achieve “savings in time and expense.” However, this did not happen in Pippins.
Employers should be crossing their fingers that the decision by the Court is set aside and the protective order entered. Should the decision stand, employers may be required to preserve the hard drives for every potential class member in a lawsuit. This could result in a company being ordered to maintain hard drives for tens of thousands of employees going back three years, or possibly longer. The cost of such an exercise would be astronomical.