Court Denies Motion to Re-Tax Costs Related to Conversion of ESI, Including Costs for “Project Management”

Jardin v. DATAllegro, Inc., No. 08-CV-1462-IEG (WVG), 2011 WL 4835742 (S.D. Cal. Oct. 12, 2011)

Here, the court denied Plaintiff’s “motion to stay, deny, or re-tax the Clerk’s taxation of costs awarded to Defendants.”  Specifically, the court declined to deny or re-tax costs awarded for converting data to the .TIFF format or to deny or re-tax costs related to a project manager who “oversaw the process of converting data to the .TIFF format to prevent inconsistent or duplicative processing.”  Regarding the latter, the court reasoned that “[b]ecause the project manager’s duties were limited to the physical production of data, the related costs are recoverable.” 

“Rule 54(d) creates a presumption in favor of awarding costs to prevailing parties, and it is incumbent upon the losing party to demonstrate why the costs should not be awarded.”  However, "the court’s discretion in awarding costs . . . is limited to awarding costs that are within the scope of 28 U.S.C. § 1920."  28 U.S.C. § 1920 lists taxable costs, including “[f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.”

After establishing the relevant legal standard, the court first addressed plaintiff’s motion to deny costs entirely and quickly rejected plaintiff’s arguments that costs should be denied because "he litigated the action in good faith," because "the issues in the case were close and difficult" or because "there is a significant economic disparity between Microsoft and him."  The court then turned to the question of whether the costs should be reduced.

Addressing costs related to the conversion of data to the .TIFF format, the court recognized that “federal courts are divided over whether converting e-data from one format to another is a valid exemplification cost.”  However, after noting that the Federal Rules require the production of ESI, the court recognized that “converting data into a format that all parties can utilize not only allows for more efficient and less expensive discovery, but is often necessary for any meaningful discovery at all” and that “the processes required . . . are ‘highly technical’ and ‘substantially different from ‘the types of services that attorneys or paralegals are trained for or capable of providing’’” and thus concluded:

Thus, a categorical rule prohibiting costs for converting data into an accessible, readable, and searchable format would ignore the practical realities of discovery in modern litigation.  Therefore, where the circumstances of a particular case necessitate converting e-data from various native formats to the .TIFF or another format accessible to all parties, costs stemming from the process of that conversion are taxable exemplification costs under 28 U.S.C. § 1920(4).

In the present case, the court noted that the information sought in discovery included “massive” amounts of ESI stored in various digital formats (including formats that required special software and proprietary licenses), that “electronic conversion was ‘in lieu of making conventional copies,’” that “the parties agreed to produce documents in the .TIFF format because the .TIFF conversion made discovery easier, more efficient, and less expensive for all parties,” and that “”Defendants [sought] only those costs stemming from the conversion process itself” and not reimbursement for legal fees for the review of those documents.  Thus, plaintiff’s motion was denied.

Turning to the “Project Management” costs, the court acknowledged that per the statute, fees are permitted “only for the physical preparation and duplication of documents, not the intellectual effort involved in their production.”  However, the court also indicated that “where . . . a third-party technician is engaged to perform duties limited to technical issues related to the physical production of information, related costs are recoverable under § 1920.”  In this case, the court noted that the “project manager did not review documents or contribute to any strategic decision-making; he oversaw the process of converting data to the .TIFF format to prevent inconsistent or duplicative processing.”  Thus, “because the project manager’s duties were limited to the physical production of data, the related costs [were] recoverable.”