Source: https://blog.logikcull.com/millions-dollars-hang-courts-cant-figure-e-discovery-costs-recoverable
Timestamp: 2019-04-24 04:02:09+00:00

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Several years ago, when electronic discovery was still in its youth, federal courts wrestled mightily with the question of whether certain e-discovery costs can be recovered by parties who prevail at trial or win a dispositive outcome.
Prior to a 2008 amendment, which was supposed to account for the fact that ESI has largely replaced paper as the de facto object of discovery, the law only allowed for “fees for exemplification and copies of papers.” The amended language and the commentary that accompanied it was widely accepted to mean that some activities associated with e-discovery should be interpreted to represent the modern-day equivalents of "copying" and "exemplification" -- and their associated costs, thus, could be recovered.
Until the beginning of 2012, parties moving to make their opponents pay their e-discovery costs were largely rolling the dice. Whether those costs would be reimbursed generally hinged on the presiding judge's interpretation of the cost-taxing language, his or her technical knowledge of the e-discovery process, and the parties' own knowledge of e-discovery and how each framed the recovery debate.
Then two important rulings emerged.
First, in March 2012, the Third Circuit Court of Appeals disallowed in the Race Tires America case more than $300,000 in e-discovery costs previously awarded to a prevailing defendant by a Pittsburgh district court. That decision, the first appellate ruling of its kind, struck down a broad range of costs associated with the collection, processing, and production of ESI, and concluded that only costs for scanning and file format conversion -- less than 10 percent of all e-discovery costs by some estimates -- could be recouped under 1920(4).
Then in May of that year, the Supreme Court decided in Taniguchi v. Kan Pacific Saipan, Ltd., 132 S.Ct. 1997 (2012) that a prevailing defendant seeking costs of translating documents could not recover those by Section 1920(6), which allows costs for "interpreter" fees. Though e-discovery costs were not at issue in that the case, the High Court's decree that all taxable costs are "limited by statute and modest in scope" was thought to have closed the door on the awarding of any expenses that weren't expressly outlined in the cost-taxing statute.
These would-be decisive opinions have done pretty much nothing to settle the taxation issue, or to build consensus around which costs are recoverable and which are not. While many courts have fallen in line with the Third Circuit's Race Tires rationale, many others have charted their own course, some simply by sticking their fingers to the wind. To be sure, determining which costs should be allowed and which shouldn't is not an easy decision -- especially given the highly complex, case-specific, and jargon-filled nature of these disputes. And there are seemingly no "right" answers given the myriad conflicts across circuits.
But the lack of coherence is nonetheless startling.
What's ironic is that the taxation issue has largely faded from the profession's (and industry's) conscience even though it is inarguably more important than ever. Today, due to the ubiquity of ESI in almost all litigation, many, many millions of dollars hang in the balance as courts flip coins to decide how to allocate e-discovery costs. Litigants and prospective litigants have little way of knowing whether they will have to foot the other side's e-discovery bill should they lose -- a prospect that may weigh particularly heavily on under-resourced requesting parties.
To complicate matters, it appears as though e-discovery vendors are beginning to write their invoices in such a way that courts will be more likely to find those expenses recoverable based on how they are described. Some have said that Congress can and should come to the rescue simply by re-writing the arcane language of the law with more specificity, but that outcome seems out of reach.
And in lieu of such action, chaos ensues. The first five month of this year have shown this to be the case. Below is a sampling of the completely arbitrary consequences.
Recovered Costs: Costs for copying software; imaging "digital devices"; "collection," "evaluation," "processing," and "production" of ESI.
Non-Recovered Costs: Costs for "in-house OCR scanning," "project preparation," "client communications," and "data set size inventory"; physical media such as "evidence storage media," "external hard drives," "media for encrypted data," "USB flash media."
Decision: U.S. Ex Rel. Marshall v. Woodward Governor Co.
Recovered Costs: Costs for TIFF rendering, "Post-review TIFFing," and electronic Bates stamping.
Non-Recovered Costs: Costs for "extracting metadata from native files" and "loading electronic information into document review (platform)" (a.k.a. "native rendering").
Decision: Madison Oslin, Inc. v. Interstate Resources, Inc.
Non-Recovered Costs: Costs for "Digital Tech Time per GB" associated with "OCRing"; "endorsing & exporting" for the purpose of creating "searchable PDFs"
Non-Recovered Costs: Costs for document collection, processing, and hosting; users licenses fees; costs of building an electronic database; TIFFing and file conversion performed at party's discretion; electronic Bates stamping.
Decision: Associated Electric & Gas Insurance Services v. BendTEC, Inc.
Non-Recovered Costs: "Costs incurred by creating and maintaining an electronic database to hold documents produced by (opposing party) and collecting and securing its own documents."
Decision: Procaps SA v. Pantheon Inc.
Recovered Costs: Costs for extracting metadata from native files.
Non-Recovered Costs: Costs for "OCR/Text extraction."
Recovered Costs: Costs for blowbacks; PDF and TIFF conversion.
Non-Recovered Costs: Costs for hosting Concordance; making documents searchable; slip sheet insertion; text extraction and OCR; "volume mastering," "unitization," "document imaging," "CD duplication," and "media formatting."
Decision: Lawson v. Sun Microsystems, Inc.
Non-Recovered Costs: "Costs to scrub privileged information from (opposing side's) computer."
If you're interested in learning how the rise of easy-to-use, cloud-based technology has complicated the cost-taxing determination, or if you'd just like to learn more about modern discovery, request a consultation with Logikcull below.

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