The saga of Pippins v. KPMG took another just turn today as Judge Colleen McMahon of the Southern District of New York emphatically sustained Magistrate Judge Cott’s refusal to allow KPMG to destroy thousands of hard drives.  I don’t title this post “Justice 1, Bullies 0” as a slap at KPMG.  Though I thought KPMG’s position anemic and oddly out-of-touch with an expert’s appreciation of user data on hard drives, KPMG isn’t the bully here.  No, the bully in my bullseye was the U.S Chamber of Commerce, which threw its fat wallet into the fray, selfishly attacking Magistrate Cott’s well-reasoned discovery order.  No friend of the court, the Chamber has been buying influence at the statehouse for so long, it must have decided to see what it could peddle down at the courthouse.  Happily, all that lobbyist lucre went right down the drain.  Kudos Judge McMahon!

Pippins grows out of collective claims on behalf of current and former KPMG Audit Associates who contend they were improperly classified as “learned professionals” exempt from the overtime provisions of the Fair Labor Standards Act.  To make their case and demonstrate damages, the plaintiffs must prove the nature of their duties and the hours they put in.  Like most modern knowledge workers, the Audit Associates used personal computers throughout the day.  The Plaintiffs contend that their work laptops hold evidence of what they did and when they did it.  Much of that would be metadata; that is, information about their work product and system usage, such as (and please forgive the forensic jargon) LNK files, MRU values, Registry logs, MFT entries and so forth.  A skilled forensic examiner can tell a lot about what someone’s done with a computer–a heck of a lot more than just the times they logged in and out!

So, clearly the hard drives from the Audit Associates’ machines hold probative evidence, and to its credit, KPMG preserved many of the drives–2,500 at last count.  Less commendable was KPMG’s effort to block discovery while  (on the eve of the collective class being certified) trying to persuade the court to let KPMG destroy 2,400 of the Audit Associates’ drives.  This effort is particularly troubling because it appears that KPMG strove mightily to prevent the probative value of the drives from being determined.  So far as I can tell from the various opinions, KPMG’s briefing and the declaration of its expert, KPMG never looked at the contents of the drives it sought to destroy and endeavored to keep the Plaintiffs from nosing around in containers holding the Plaintiffs’ own work.

As I recently argued in a debate at New York LegalTech opposite Ralph Losey, Magistrate Judge Cott had no choice but to preserve the status quo until Judge McMahon defined the parameters of the collective action.  Anything less than caution would necessarily lead to the irreparable loss of evidence; whereas waiting a few weeks carried minimal risk and cost.  KPMG trotted out vague proportionality arguments and went so far as to argue that the plaintiffs themselves–the Audit Associates suing for the overtime–weren’t key players.  The court termed the argument “nonsense;” and truly, if the roles were reversed, wouldn’t KPMG argue that plaintiffs are parties, parties are key players and key players must preserve evidence?  Sauce!  Goose!  Gander!  Honk!

Pulling no punches, Judge McMahon characterized KPMG’s conduct as “hiding behind the stay of discovery”  She wrote, “KPMG has inappropriately used the discovery stay as a shield, relying on it in refusing to produce even a few hard drives so Plaintiffs could examine them. Judge Cott put it perfectly: ‘At this point it is not entirely clear what the hard drives contain, in part because of KPMG’s own efforts to keep that information at bay.'”

She added, “I certainly do not intend to reverse Judge Cott’s Order on the purported ground that he erred by concluding that KPMG failed to demonstrate that preserving the hard drives was unreasonable. Frankly, the only things that were unreasonable were: (1) KPMG’s refusal to turn over so much as a single hard drive so its contents could be examined; and (2) its refusal to do what was necessary in order to engage in good faith negotiations over the scope of preservation with Plaintiffs’ counsel, in purported reliance on an order of this Court that it interpreted unreasonably. It smacks of chutzpah (no definition required) 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.”

Judge McMahon laid the blame squarely at KPMG’s feet:

“KPMG refused to allow Judge Cott, or Plaintiffs examine even a single hard drive to ascertain the ‘benefit’ of preservation, so there is nothing in the record before me to inform any decision. 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). Neither can I conclude that KPMG has kept hard copy data of everything on the drives that might prove relevant to this action. KPMG cannot simultaneously demand that the Court analyze how long every Audit Associate worked and what every Audit Associate did and also ask the Court to sanction the destruction of what is probably the single best source of that information.

In short, KPMG is hoist on its own petard.”

A great phrase, where the term petard derives from an archaic term for flatulence that’s come to be synonymous with blowing oneself up with their own bomb.

I have two quibbles with the otherwise splendid analysis.  First, I wish the Court had been more guarded in tendering whole hard drives to one’s opponent.  Here, the drives are well known to the Plaintiffs and claims of privilege and confidentiality would ring hollow.  Still, I would have liked the Court to consider requiring KPMG or a neutral expert to conduct the initial exams using an agreed-upon protocol.

My second quibble goes to the confusion attendant to the use of keywords to extract usage data.  Judge McMahon writes:

KPMG also demanded that Plaintiffs offer search terms to run against the electronic files on the hard drives in order to narrow the scope of material to be reviewed – which strikes me as not an unreasonable request.”

Ordinarily, I’d agree that a well-implemented, iterative keyword search would be valuable; but, not here.  The relevant usage data is likely to comprise metadata (e.g., logs, dates and encoded values), all poor candidates for identification using keyword search.  The metadata in question is context, not content.  Keyword search–never as effective as we hope–is even less the technology of choice for context and is an unreasonable request (or at least an unavailing one).