Source: http://www.ediscoveryllc.com/taxation-of-e-discovery-costs-under-28-u-s-c-sec-19204-after-taniguchi-v-kan-pacific-saipan/
Timestamp: 2019-04-20 13:17:07+00:00

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Note: This post was first published in “The Daily Record” on Aug. 12, 2012. The original may be viewed by clicking here.
When it comes to electronically stored information (“ESI”), “[t]he fuss is about money. Discovery is expensive, and electronic discovery is really expensive.” A.L. Brown, “The Manageable Challenge of Electronic Discovery,” formerly posted at www.rkmc.com/. Nevertheless, courts have split on which e-discovery costs may be awarded to a prevailing party under 28 U.S.C. §1920(4). One recent article describes “[a]n enormous divergence of opinion” among the courts, “with outcomes that range from almost complete reimbursement to total denial.” M. Austrian, “Taxation of Costs and Offer of Judgment,” For the Defense (DRI June 2012), 13 (suggesting use of an offer of judgment to pursue a request for costs); see generally, S. Bennett, “Are E-Discovery Costs Recoverable by a Prevailing Party?,” 20 Albany J.L.Sci.&Tech. 537 (2010).
Section 1920(4) must be read in conjunction with Fed.R.Civ.P. 54(d)(1) which generally provides for an award of costs to the prevailing party. See Crawford Fitting Company v. International Woodworkers of America, AFL-CIO, CLC, 482 U.S. 437, 441 (1987).
In Taniguchi v. Kan Pacific Saipan, Ltd., __ U.S. __, 132 S.Ct. 1997, 2006 (2012), the Supreme Court wrote that “[t]axable costs are limited to relatively minor, incidental expenses, as is evident from §1920. . . .” They are “limited by statute and modest in scope. . . .” Id. Kan Pacific was decided under §1920(6)(taxation of cost of interpreters).
Some courts have held that §1920(4) has a broad sweep. In In Re Aspartame Antitrust Litigation,817 F.Supp.2d 608 (E.D.Pa. 2011), the court wrote that taxation of e-discovery costs “is a new area of law” with divergent approaches. Because the court was persuaded that e-discovery saves overall costs in complex cases, it broadly taxed costs for creation of a litigation database, storage of data, imaging of hard drives, keyword searches, de-duplication, data extraction, hosting data, technical support, optical character recognition, creation of load files, and processing, including a privilege screen. It refused, however, to tax the cost of a document review tool with visual clustering, the cost of concept-based review, as well as certain “tech usage fees,” and confidentiality and bates labeling. Id. at 616, 618.
The court in In Re: Online DVD Rental Antitrust Litigation, 2012 WL 1414111 (N.D.Ca. Apr. 20, 2012), concluded that “broad construction of section 1920 with respect to electronic discovery production costs – under the facts of this case – is appropriate,” although it stayed the award pending appeal. Costs for TIFF conversion and “blowback” were taxed, while the court disallowed costs such as production of duplicative slides and re-stamping documents due to prior mistakes.
Similarly, in In re Ricoh Company, Ltd., Patent Litigation, 661 F.3d 1361, 1365 (Fed.Cir. 2011), the court determined that the costs of producing documents are not narrowly construed to cover only printing and bates-labeling. It determined that making ESI available through a database constituted “electronic production.” On the facts presented, however, it determined that the parties’ contractual, cost-sharing agreement overrode §1920(4).
In short, at least some of the cost of converting electronic data into a readable format has been taxed under §1920(4). Petroliam Nasional Berhad v. GoDaddy.com, Inc., 2012 WL 1610979, *4 (N.D.Ca. May 8, 2012)(taxing cost of technicians); Tibble v. Edison International, et al., 2011 WL 3759927, *6-8 (C.D.Ca. Aug. 22, 2011)(third-party e-discovery technicians); Parrish v. Manatt, Phelps & Phillips, LLP, 2011 WL 1362112, *3 (N.D.Ca. Apr. 11, 2011) (costs for “warming up their electronic discovery engine” were taxed); Farrar & Farrar Dairy, Inc. v. Miller-St. Nazianz, Inc., 2012 WL 776945, *4-5 (E.D.N.C. Mar. 8, 2012)(scanning cost held to be taxable; fact that documents became searchable was “simply an added benefit”).
Kan Pacific signals a different approach. In a post-Kan Pacific decision, one court rejected taxation of bates labeling, binding, hole punching, tabbing, and express shipping of documents. Minemyer v. R-Boc Representatives, Inc., 2012 WL 2422982 (N.D.Ill. Jun. 26, 2012); cf. Ricoh, 661 F.3d at 1368 n. 3. It held that any costs not enumerated in §1920(4) are not recoverable and also rejected taxation of electronic scanning because adequate supporting information was not provided in the bill of costs.
The narrow view of taxable costs is exemplified by Race Tires America, Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3rd Cir. 2012), decided shortly before Kan Pacific. After reviewing the legislative history of §1920, the Third Circuit permitted taxation of scanning, conversion of native files to TIFF images, and transferring VHS recordings to DVD format, but denied taxation of charges for data collection, preservation, and culling. It criticized contrary decisions as “untethered from the statutory mooring.” While the non-taxable steps were “necessary” for production, the court decided that necessity did not equate to “making copies” within the reach of §1920(4). An unopposed petition for writ of certiorari is scheduled for conference on September 24, 2012.
In Cordance Corp. v. Amazon.com, Inc., 2012 WL 1194211 (D.Del. Apr. 11, 2012), the court held that costs of converting ESI to “an agreed-upon production format” are taxable, because they are the functional equivalent of making copies; however, it refused to tax the costs of processing, searching, culling, and de-duplicating the ESI. Accord Rawal v. United Air Lines, Inc., 2012 WL 581146 (N.D.Ill. Feb. 22, 2012)(taxing costs for electronically scanning and processes limited to the equivalent of exemplification and copying; tasks to prepare documents for review fall under the rubric of attorneys’ fees, not costs); Jardin v. Datallegro, Inc., 2011 WL 4835742, *6-9 (S.D.Ca. Oct. 12, 2011)(services for general project management and assembling records for production not taxable; quality control for physical preparation and duplication are taxable; case-by-case analysis); Specht v. Google, Inc., 2011 WL 25565666, *3 (N.D.Ill. June 27, 2011)(cost to convert QuickBooks not recoverable); Mann v. Heckler & Koch Defense, Inc., 2011 WL 1599580 (E.D.Va. Apr. 28, 2011)(cost of creating database, de-duping, and metadata extraction not taxable); Fells. v. Virginia Dep’t. of Transportation, 605 F.Supp.2d 740 (E.D.Va. 2009) (refusing to tax costs of processing, extracting metadata, and converting to searchable format); seeMerigan v. Liberty Life Assurance Co., 839 F.Supp.2d 445, 448 (D.Mass. 2012)(denying costs for airfare, messengers, parking, and taxis).
The opinion in Kan Pacific, __ U.S. at __ n. 8, implies that the expense of a forensic expert may not be a taxable cost under §1920. Although decided under §1920(6), Kan Pacific brings the broad view of §1920(4) into question. See J. Barkett, “Un-taxing E-Discovery Costs: Section 1920(4) after Race Tire Amer. Inc. and Taniguchi (ACEDS Jun. 29, 2012)(asserting that the Supreme Court has stopped taxation of e-discovery costs).
If it grants the certiorari petition in Race Tire, the Supreme Court may define the scope of §1920(4) in connection with the multiple steps necessary to produce ESI. ESI billing can be more complicated than the rule against perpetuities. M. Berman, “Tips to Avoid Mistakes with ESI Vendors” (ABA Technology for the Litigator 2009). Race Tires, Minemyer, and others demonstrate that invoices submitted for taxation must be detailed and accurate, and even then any award will likely be limited.
Because of the limitations of §1920(4), litigants may consider using other procedures to recover e-discovery costs, such as a protective order under Rule 26(c), a cost-shifting order pursuant to Rule 26(b)(2)(B), a limiting order under Rule 26(b)(2)(C), an offer of judgment under Rule 68, or sanctions under Rule 11(“appropriate sanction”) or 28 U.S.C. §1927 (“costs, expenses, and attorneys’ fees”), if substantively appropriate. See generally Marens v. Carrabba’s Italian Grill, Inc., 196 F.R.D. 35, 39(D.Md. 2000)(limiting search time); Mancia v. Mayflower Textile Servs. Co., 253 F.R.D. 354, 364 (D.Md. 2008)(discovery budget).
The Supreme Court denied certiorari in Race Tires. 133 S.Ct. 233 (2012).
The Country Vintner of North Carolina, LLC v. E&J Gallo Winery, Inc., 2013 U.S.App.Lexis (4th Cir. Apr. 29, 2013) ( rejecting request to tax costs in the amount of $111,047.75; approving award of $218.59 in ESI costs). The Fourth Circuit was “mindful” that converting ESI “often encompasses the copying of metadata.” It note that, if “a case directly or indirectly required production of ESI-unique information such as metadata,” it assumed, without deciding, “that taxable costs would include any technical processes necessary to copy ESI in a format that includes such information.” See n. 19. The Court also expressly wrote that it was “not confronted with a case in which the parties clearly agreed to the production of ESI on a particular database or in native file format.” See n. 20. Finally, the Court noted that block billing obscured many details. See n. 22.
U.S.Dist.Ct.Md., Local Rule 109.1 (requiring affidavit and memorandum of grounds and authorities with a bill of costs).
Md. Cts. & Jud. Proc. Art. §7-301(c)(costs in civil case).
A. Howell, “Using Taxation of Costs to Collection Some Litigation Expenses and Maximize Client Recovery, “ 84 Am.Jur.Trials 367 (2002), §§43-44 (Maryland).
STANDARD COMMUNICATIONS, INC. v. THE UNITED STATES, .2012 U.S. Claims LEXIS 982 (Ct.Claims August 2, 2012).
See Kate Paslin, “Show Me the Money: Proposed Rule Changes Take on the Spiraling Costs of Discovery” (Aug. 21, 2012).
A. Hocevar, “Supreme Court Should Clarify “Taxation of Costs” Statute (ACEDS Sep. 15, 2012).

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