It's finally here, the Southern District of New York's court ruling on Pippins v. KPMG (S.D.N.Y. Feb. 3, 2012)! E-discovery pundits, bloggers and attorneys have anxiously awaited this decision, hoping it would add more clarity to questions surrounding proportionality, how 'key players' in a matter are defined, and what constitutes relevant evidence for preservation purposes.
Judge McMahon did not disappoint, delivering a strong, deliberate opinion upholding the lower court's discovery order that KPMG preserve all existing hard drives. (Read about Judge Cott's lower court decision here). The primary theme in Judge McMahon's ruling was this: With better cooperation between the two parties, this drawn out mess could have been resolved long ago.
Here is a quick recap of the salient points:
- The class employees' hard drives contain relevant information. Under FRCP 26(b)(1), relevant information is deemed “any nonprivileged matter that is relevant to any party's claim or defense." The court cites a prior ruling, In re Flag Telecom Holdings, Ltd. Secs. Litig. (S.D.N.Y 2006), to fully explain its definition of relevancy stating, “Relevancy 'is to be interpreted broadly' and includes 'any matter that bears on, or that…reasonably could lead to other [information] that could bear on, any issues that is or may be in the case." KPMG could have refuted Pippins contention that all audit associates are non-exempt to the class action had they simply produced a sample of the hard drives to the plaintiffs and the court to prove otherwise.
- Rejected proportionality claim because cost-benefit analysis could not be conducted since the court never knew the benefit of preserving the hard drives. FRCP 26(b)(2)(iii) requires courts to limit the “frequency or extent of discovery" where “the burden or expense of the proposed discovery outweighs its likely benefit." The plaintiffs and the judge were not given the opportunity from KPMG to ascertain what the benefit of preservation would be, making it impossible for the court to conduct a proportionality test. The court went on to proclaim, “It smacks of chutzpah 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."
- All audit associates currently qualify as “key players." Key players are non-party corporate employees who are “likely to have discoverable information that the disclosing party may use to support its claims or defenses." The court deemed that every audit associate that may opt into the class action “is a potential plaintiff in this action," and all parties to the applicable lawsuit are considered “by definition key players." KPMG's claim that only audit associates who are currently named parties to the lawsuit need to be preserved was rejected and deemed “nonsense" by the court.
This ruling highlights how cooperation and transparency between parties can prevent drawn out discovery battles from occurring, thereby reducing costs. Even though they disagreed on several issues, both parties agreed that a sampling of data was necessary. Communication broke down when neither party could agree on a sampling method. The conversation was quickly reduced to a “series of take it over leave it offers," which led each party to a point of intransigence.
After reading through 22 pages essentially detailing how Pippins and KPMG couldn't get along, it becomes clear that both parties, especially KPMG, would have greatly benefited from revisiting the everyday principles taught about cooperation back in elementary school:
- Think before acting
- Communicate calmly
- Put competition aside
- Follow as well as lead
Astonishingly, the five tips intended for grade schoolers can easily be applied to the interactions between attorneys engaged in litigation. Remember the fundamental rule of the FRCP, Rule 1, it secures the right to a “just, speedy, and inexpensive determination of every action and proceeding." Somehow the legal culture has gotten away from this, becoming an adversarial system that invokes behavior that even an elementary school teacher would not tolerate (see Kippins v. KPMG).
Now the question is how to get the legal system to change? Judge David Waxse summed it up best by stating, “If the client who is paying the bill says cooperate, I think lawyers will cooperate."
Mike Hamilton, J.D. is a Sr. E-Discovery Analyst at Exterro, Inc., focusing on educating Exterro customers, prospects and industry experts on how to solve e-discovery issues proactively with technology. His e-discovery knowledge, legal acumen and practical experience give him a valuable perspective on bridging the gap between IT and legal teams. You can find him on Google+, Twitter and Linkedin.