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Court Orders Payment of E-Discovery Costs Pursuant to Title 28 U.S.C. § 1920(4)

Posted in CASE SUMMARIES

Race Tires Amer., Inc. v. Hoosier Racing Tire, Corp., No. 2:07-cv-1294, 2011 WL 1748620 (W.D. Pa. May 6, 2011)

Following summary judgment, the Clerk of Court issued his Taxation of Costs which allowed for recovery of defendants’ e-discovery costs.  Plaintiffs objected, arguing that such costs were not taxable pursuant to Title 28 U.S.C. § 1920 and sought review of the issue.  Following careful analysis, the court upheld the determination of the Clerk of Court.

Defendants in this antitrust case were granted summary judgment upon the court’s determination that plaintiffs failed to establish they had “sustained an antitrust injury.”  Following the subsequent appeal (in which defendants prevailed), defendants each filed a Bill of Costs “in which the majority of amounts requested involve[d] e-discovery costs.”  Plaintiffs objected but were overruled and the Clerk of Court thereafter issued his Taxation of Costs which allowed for defendants’ recovery of their e-discovery costs in a reduced amount.  Plaintiffs sought review.

The court first established that its review of the Taxation of Costs would be de novo and identified the relevant statute at issue, which allows assessment of costs including, “fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.”  The court went on to note that “[a] finding that costs incurred were ‘necessary’ to the proceedings requires more than mere assertions from the party requesting payment” and that “[t]he dividing line between ‘necessary’ and ‘for the convenience of counsel’ . . . is not particularly well established.”

The court then turned to its discussion of the present case and established that at the outset of litigation the parties anticipated that “discovery would be in the form of electronically stored information (“ESI”)” and entered into a detailed Case Management Order requiring production in a specific format and according to specific parameters.

The court’s analysis began with its discussion of the question of how to apply the terms “exemplification” and “copying,” terms which “originated in and were developed in the world of paper” and which have been defined differently by different courts.  The court then looked to the opinions of other courts that had previously addressed the issue of the recovery of e-discovery related costs.  Among the opinions discussed, recovery of e-discovery costs was rejected for reasons including: a determination that scanning the documents was not necessary and was merely for the convenience of counsel; a determination that processes intended to create searchable documents were different than those intended to convert a paper document into an electronic one and that the costs of the former were not recoverable; and a determination that recovery was not available for costs related to tasks that “in a non-electronic document case” would usually be performed by a paralegal or associate, e.g., collecting the documents from where they were stored.  Conversely, at least one court has allowed for recovery of costs related to e-discovery, including for collection, processing, etc. performed by a third-party vendor, where the court reasoned that such services were “necessary in the electronic age,” “highly technical” and “not of the type” that attorneys or paralegals are trained to do and that the “services of the vendor ‘are the 21st Century equivalent of making copies.’”  Another court allowed recovery for the creation of a litigation database.  In particularly relevant cases, courts allowed recovery “where the parties agreed that responsive documents would be produced in an electronic format,” as was the case here.

Turning to the facts before it, the court noted that defendants sought reimbursement for costs related to the collection and processing of ESI, including (as to one defendant) the creation of a litigation database and further noted that the parties had agreed to production in electronic format, and that plaintiffs had “aggressively pursued e-discovery” during the litigation.  The court further reasoned that:

Defendants are seeking the costs they paid to their third party vendors to produce electronic documents as requested by STA.  There is no indication that electronic scanning was used merely for the convenience of the parties or the attorneys.  STA requested, and Defendants produced, a massive quantity of data.  A careful review of the vendor’s invoices reveals that the services provided were not the type of services that attorneys or paralegals are trained for or are capable of providing.  The services were highly technical.

Accordingly, noting again that “[c]ourts have distinguished between costs incurred to allow a party to present non-electronic evidence electronically, such as scanning, imaging and conversion of non-electronic materials. . . and costs incurred to improve the format and design of electronic evidence” the latter of which “tend[s] to serve a party’s aesthetic preferences rather than exemplification of evidence,” the court found that in the present case, “the requirements and expertise necessary to retrieve and prepare these e-discovery documents for production were an indispensable part of the discovery process” and that plaintiffs’ objection to the taxation of e-discovery costs would be denied.

Addressing the reasonableness and necessity of the costs at issue, the court reviewed the Clerk’s Taxation of Costs and determined that the award of costs should be affirmed.

Concluding its opinion, the court cautioned that because of the unique facts and circumstances of the case, this opinion “should not be read as a pronouncement or representation of how this Court or any other member of this Court will rule on future disputes regarding costs of e-discovery.”