Facts
- Audit Associates sued KPMG under the FLSA and New York Labor Law, alleging they were misclassified as exempt and denied overtime.
- Plaintiffs demanded preservation of the hard drives from thousands of former Audit Associates’ company-issued laptops, asserting the drives might contain ESI bearing on hours worked and job duties.
- KPMG sought a protective order under Fed. R. Civ. P. 26(c) to (a) preserve only a 100-drive sample and discard the rest, or (b) shift to plaintiffs the cost of retaining roughly 7,500 drives.
- The magistrate judge denied KPMG’s motion and ordered preservation of all drives, while staying broader discovery pending further court order or an agreed sampling method.
- Plaintiffs proposed limited sampling and depositions to determine what the drives contained; KPMG declined.
- KPMG objected to the magistrate judge’s order and renewed its Rule 26(c) request before the district judge.
Issues
- Whether Rule 26 permits limiting preservation to a sample, rather than preserving all former Audit Associate laptop hard drives, in an overtime misclassification case involving a large putative class/collective.
- Whether the cost and burden of preserving thousands of hard drives justified a Rule 26(c) protective order or cost-shifting.
Decision
- The district court denied KPMG’s objections and upheld the order requiring preservation of all Audit Associate hard drives.
- The court found KPMG failed to show that full preservation was unduly burdensome or disproportionate on the existing record.
- The court treated the drives as potentially relevant, and potentially non-duplicative, sources of evidence about hours worked and duties performed.
- The court relied on KPMG’s refusal to permit sampling or discovery about the drives’ contents as defeating its proportionality and burden arguments.
- The court distinguished preservation costs from later review and production costs, concluding asserted expense did not justify discarding potentially relevant ESI at the preservation stage.
Legal Principles
- A party seeking a Rule 26(c) protective order narrowing preservation bears the burden to show undue burden or disproportionality.
- Where large numbers of individuals are potential class/collective members and fact witnesses, their ESI may fall within “key player” preservation obligations.
- Proportionality arguments about preservation generally require a factual basis about likely relevance and duplication; refusing reasonable sampling or limited inquiry may prevent that showing.
- Preservation duties are separate from later disputes over search, review, and production; anticipated production expense does not, by itself, justify destruction of potentially relevant ESI.
Conclusion
The court required KPMG to preserve all former Audit Associate laptop hard drives because the drives could contain relevant, possibly unique ESI, and KPMG’s lack of cooperation in sampling or discovery about the drives’ contents left it unable to prove that narrowed preservation or cost-shifting was warranted under Rule 26(c).