U.S. Department of Justice. Civil Division Office of Immigration Litigation. TCH:th (202) MEMORANDUM

Transcription

1 U.S. Department of Justice TCH:th (202) MEMORANDUM Civil Division Office of Immigration Litigation Washington, DC TO: Ted Hirt FROM: Carlin Moore RE: E-Discovery Expenses as Taxable Costs DATE: May 8, 2013 to be distributed in December PLEASE NOTE: This is a memorandum prepared within the Civil Division of the U.S. Department of Justice, distributed for the internal use of federal agencies. The opinions in this memorandum do not necessarily represent the position of the Department of Justice, the United States, or any agency thereof, regarding the legal issues discussed herein. Relevant Statutes 1. Federal Rule of Civil Procedure, Rule 54(d)(1) Costs other than attorney s fees a. Unless a federal statute, these rules, or a court order provides otherwise, costs-other than attorney s fees-should be allowed to the prevailing party. But costs against the U.S., its officers, and its agencies may be imposed only to the extent allowed by law U.S.C. 1920(4) a judge or clerk of any court of the U.S. may tax as costs the following: a. Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case; A. Cases Refusing to Tax E-Discovery Costs Highlights: -Services done by e-discovery vendors do not constitute making copies, including services that an attorney or paralegal could do such as electronic searches, coding, and keyword searching. -Prior agreements can be used in order to prevent electronic stored info expenses from being taxable -Costs for creating electronically searchable documents are not taxable since Congress revised Section 1920 still requires copying (which includes burning to CDs); however, in cases where a party is responding to a specific discovery request, the costs incurred may be allowed for providing documents in specified formats. -If there is not proper documentation of the costs, the court may deny certain costs for a lack document support. Third Circuit

2 Race Tires America, Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir.); cert. denied, 133 S. Ct. 233 (2012)(none of the electronic discovery vendors activities in this case can be regarded as exemplification, and only scanning and file format conversion (including the transfer of VHS tapes to DVD) can be considered to be making copies. 674 F.3d at 167. Services leading up to the actual production does not necessary constitute making copies. Id. at 169. Neither degree of expertise nor identity of party performing the work of making copies is a factor that can be gleaned from 1920(4). Id. a. Reversed the western district of Pennsylvania s decision that awarded $365,000 in taxable costs for activities related to E-discovery, specifically, hard drive imaging, data processing, keyword searching, and file format conversion. Id.at b. Important Note: The Third Circuit distinguished Ricoh (p. 6) in the Federal Circuit by holding that since the parties had agreed to share the costs of the vendor to create a review database, this converted the costs in connection with the creation of the database into a taxable cost. Id. at 171 n Cordance Corp. v. Amazon.com, Inc., 855 F.Supp.2d 244 (D. Del. Apr. 11, 2012)(holding 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). 855, F.Supp.2d, at Fourth Circuit 1. Mann v. Heckler & Koch Defense, Inc, 2011 WL (E.D. Va. April 28, 2011) a. The defendant sought over $36,000 for costs paid to an outside vendor for electronic document production WL , at *1. The vendor performed services such as compiling electronic files into an electronic database to be turned over to the plaintiff, converted the files to TIFF format, branded the images, and burned CDs for production. Id. Following Fells (p.3), the court found that only approximately $1,500 was associated with actual production of documents given to plaintiff copied; but refused to tax the costs associated with creating the database. Id. at *8. Tasks such as searching and de-duping and creation of native file database with full text and metadata extraction are not taxable costs. Id. 2. Francisco v. Verizon South, Inc. 272 F.R.D. 436 (E.D. Va. March 2, 2011) a. Court found that defendant did not meet its burden of supporting its request for reimbursement of e-discovery costs, and therefore the court found the defendant was not entitled to recover for the processing, storage, and production of ESI. 272 F.R.D. at United States, ex rel. Davis v. U.S. Training Center, Inc., 829 F.Supp.2d 329 (E.D. VA. Dec. 8, 2011) a. Contractor s request for $216,438 in costs incurred for exemplification fees and copying costs, predominantly related to contractor s retention of outside agencies to produce and process electronically-stored information throughout discovery and pretrial proceedings, warranted reduction to $59,384, reimbursable upon prevailing in

3 - 3 - relator s False Claims Act suit, since parties joint discovery report included their express agreement to bear their own electronically stored info related expenses, and any shipping or labor-related costs were also disallowed, but all other nonelectronically stored info copying expenses, including those related to preparation of trial exhibits and any hard-copying or printing costs readily discernible from submitted invoices, were deemed necessary and awarded in full. 829 F.Supp.2d at Fells v. Virginia Dept. of Transp., 605 F.Supp.2d 740 (E.D. Va. March 25, 2009) a. Costs of processing electronic records, extracting data, and converting files, which served to create electronically searchable documents to facilitate discovery, were not taxable expenses under section of taxation of costs statute permitting recovery of expenses for exemplification and making copies of materials. 605 F.Supp.2d at The court distinguished between copying and creating where copying could involve starting with an electronic document and burning it to a CD to be turned over for discovery. Id. The court found that the defendant did not meet its burden in showing how these processes could be allowed under Section 1920 as scanning or imaging costs which may be recoverable. Id. 5. The Country Vintner of NC v. E & J Gallo Winery, Inc., --- F.3d ---, 2013 WL (4th Cir. April 29, 2013). a. Following the reasoning in Race Tires, the Court found that the district court correctly concluded that only the conversion of native files to TIFF and PDF formats, and the transfer of files onto CDs, constituted making copies under Section 1920(4), and that fees for processing ESI are not taxable WL , at *9-10. Fifth Circuit 1. Eolas Technologis Inc. v. Adobe Systems, Inc., 891 F.Supp.2d 803 (E.D. Tex. July 19, 2012) a. Defendants sought to tax over $2 million for document collection, processing, and hosting in which the court held were not recoverable costs under section 1920(4). 891 F.Supp.2d at 806. The court held that the statute does not cover general electronic discovery costs that pre-cede copying or scanning. Id. at Fast Memory Erase, LLC v. Spansion, Inc WL (N.D. Tex. Nov. 10, 2010) a. The disputed costs were for services provided by idiscover Global Inc., an e- discovery vendor. The costs included 1) $860,533 for collecting and processing more than 2,100 gigabytes of electronically stored information, or ESI; and 2) $197,637 for creating TIFF/OCR images of documents responsive to plaintiff s discovery requests WL , at *4. The court found that since the plaintiff s discovery request specified the format of the documents, the defendants were entitled to recover the costs of creating TIFF/OCR images of documents that were responsive to that discovery request. Id. at *5. However, in regards to the collecting and processing of ESI, the court held that these costs were not recoverable due to the weight of authority declining to tax costs for data extraction and storage. Id.

4 - 4 - b. Cites Kellogg, Fells (p. 3), Klayman (p. 5), Windy City (p.4) and cites CBT as an example where costs were allowed for services provided by an e-discovery consultant. Id. at *5. 3. Kellogg Brown & Root Intern., Inc. v. Altanmia Commerical Marketing Co., 2009 WL (S.D. Tex. May 26, 2009) a. KBR used a third party vendor, RenewData, to extract and store information responsive to discovery requests, and asserted that the costs for this service fell under Section 1920(4) WL , at *1. The court held that these costs did not fall within the exemplification and copying category of Section 1920(4). Id. at *4-6. Seventh Circuit 1. Minemyer v. R-Boc Representatives, Inc., 2012 WL (N.D. Ill. Jun. 26, 2012)(holding that any costs not enumerated in Section 1920(4) are not recoverable and also rejected taxation of electronic scanning because adequate supporting information was not provided in the bill of costs) WL , at *4. 2. Rawal v. United Airlines Inc., 07 C 5561, 2012 WL (N.D. Ill. Feb. 22, 2012) (refused to award electronic processing costs). a. The court refused to award the costs because United failed to carry its burden of demonstrating the amount of its recoverable costs by separating those costs from the unrecoverable costs associated with creating a searchable database WL , at *3. b. The court further held that tasks to prepare documents for review fall under attorneys fees, not costs. Id. 3. Comrie v. IPSCO Inc., 2010 WL (N.D. Ill., Dec. 1, 2010)(electronic search costs are equivalent to having an attorney or paralegal read through the documents, at an hourly rate, to determine whether documents are responsive) WL , at *5. 4. Loomis v. Exelon Corp., 2010 WL (N.D. Ill. 2010)(denying reimbursement of E- discovery costs to successful defendants because the defendants did not describe the costs in sufficient detail to allow the court to determine whether or not the costs were reasonable and necessary) WL , at * Windy City Innovations LLC v. Online Inc., 2006 WL (N.D. Ill. July 31, 2006) (coding and keyword searching services expense not included as taxable costs because such systems perform the work an attorney, paralegal or law clerk would have to perform in its absence) WL , at *3. 6. Johnson v. Allstate Ins. Co., 2012 WL (S.D. Ill. Oct. 16, 2012) a. Allstate requested appx. $958,000 for fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for sure in the case. These costs comprised of processing and producing electronic copy documents necessarily obtained for use in this case, payment to third party KPMG for converting documents from one electronic format into another, more searchable

5 - 5 - form, and processing and producing hard copies for use in the case WL , at *2. b. Under Hecker and Race Tires, the Court found that the costs of converting data into readable format are compensable under Section 1920(4). Id., at *5. This also includes the TIFF creations which are compensable costs. Id., at *7. However, the Court also followed the reasoning in Race Tires, to come to the conclusion that gathering, preserving, processing, searching, culling, and extracting ESI simply do not amount to making copies. Id., at *6. Therefore, the services leading up to the actual production do not constitute making copies, such as deduplication. Id. The Court also held that collecting and preserving ESI is not taxable, thus Section 1920(4) does not allow taxation of costs for electronic data hosting. Id., at *7. Further, the Court held that costs for preparing ESI production are noncompensable under Section 1920(4). Id., at *8. Eighth Circuit 1. Little Rock Cardiology Clinic P.A. v. Baptist Health, 2009 WL (E.D. Ark. Mar. 19, 2009)(costs for reproducing electronically stored information, scanning, and CD-ROM production incurred in responding to discovery requests were not covered under Section 1920 because such costs for production in discovery are not taxable) WL , at *4. 2. Hallmark Cards, Inc. v. Monitor Clipper Partners, LLC, 2013 WL (W.D.Mo. Mar. 20, 2013) a. The Court, agreeing with Race Tires, held that the costs associated with storing ESI are not recoverable WL , at *1. Ninth Circuit 1. Gabriel Techs. Corp. v. Qualcomm Inc., 2010 WL (S.D. Cal. Sept. 20, 2010) a. Under section 1920(4), fees are permitted only for the physical preparation and duplication of documents, not the intellectual effort involved in document production WL , at *11. The court held that a consultant hired at a fee of $1.5 million to review and manage defendants electronic documents to respond to plaintiff s broad discovery requests engaged in intellectual effort related to discovery, and thus, the consultant performed discovery related tasks usually performed by lawyers, and those costs were not recoverable. Id. 2. Oracle America, Inc. v. Google Inc., 2012 WL (N.D.Cal. Sept. 4, 2012) a. Google sought almost $3 million in fees incurred by an E-discovery vendor WL , at *3. The court found that Google s e-discovery bill of costs included many items for intellectual effort such as organizing, searching, and analyzing the discovery documents. Id. Google also attempted to get costs reimbursed for conferencing, preparing for and participating in kickoff call, and communications with co-workers, other vendors, and clients. Id. The court held that these were all non-taxable intellectual efforts, and denied Google s request for fees incurred by the E-discovery vendor. Id.

6 - 6 - Tenth Circuit 1. Tomlinson v. El Paso Corp., 2011 WL (D.Colo. Jun. 9, 2011) a. Defendants sought approximately $20,775 in copying costs, and approximately $13,736 associated with converting documents into electronic format for discovery purposes WL , at *2. The court found that defendants had not adequately demonstrated that these costs were necessarily incurred in the preparation of the case, and held that costs are not recoverable when there is no explanation regarding the use made of such materials and therefore no showing of the nature or necessity of the copied documents. Id. b. The defendants also sought reimbursement of $98,000 in costs incurred for creating a website to give plaintiffs access to software used to administer a pension plan. Id. at *1. The court held that this was not a cost that was in their power to award under section 1920, and found that some of the costs for E-discovery could have been shifted during discovery upon showing that the expense was undue. Id. The court pointed to Federal Civil Procedure Rule 26(b)(2)(B). Id. Eleventh Circuit 1. Klayman v. Freedom s Watch, Inc WL (S.D. Fla. Dec. 4, 2008) a. The court rejected costs for third-party experts hired at a huge hourly cost (the experts charged $350 on average per hour) to search for and retrieve discoverable electronic documents which in a non-electronic document case would be performed by paralegals and associate attorneys and would not be compensable as costs under Section WL , at *1. B. Cases Allowing for E-Discovery Costs Highlights: -Costs allowed where the e-discovery costs are considered necessarily incurred expenses since they are unavoidable, and the services are an indispensable part of the discovery process. -Costs allowed where there is the use of highly technical services that attorneys and paralegals are not trained to do. -Most courts hold that electronic scanning and imaging costs are taxable pursuant to Section 1920(4). -Costs allowed in complex cases where E-discovery would save in costs. -Costs relating to creating TIFF images of documents in response to specific discovery requests may be allowed to be taxed in most cases. -Costs may be allowed if they are agreed upon in contracts, and are found to be reasonably incurred. Federal Circuit 1. In re Ricoh Co., Ltd Patent Litigation, 661 F.3d 1361 (Fed. Cir. 2011)

7 - 7 - a. Two companies, Synopsys and Ricoh, entered into an agreement with Stratify to perform electronic discovery services, including the electronic production of s requested in discovery. 661 F.3d at The agreement was characterized as a costsharing agreement, and the court held that the two must split the costs. Id. at The court, applying Ninth Circuit law, also held that the basic costs to produce the s would be recoverable under Section 1920(4)). Id. at b. The Federal Circuit concluded that if the parties either agree or must of necessity use certain electronic techniques to make information available in a certain electronic format, then a court can tax the associated fees as costs. Id. at Third Circuit 1. In re Aspartame Antitrust Litig., 817 F.Supp.2d 608 (E.D. Pa. October 5, 2011) a. The defendant was required to collect documents from over 28 different document custodians that totaled the equivalent to copying 4.4 to 6.1 million pages of documents. 817 F.Supp.2d at A second defendant collected over 75 million pages, and a third defendant amassed several million pages of documents. Id. at 615. The defendants all used third party electronic discovery vendor services. Id. The court awarded costs for the creation of a litigation database, storage data, imaging hard drives, keyword searches, de-duplication, data extraction and processing. Id. The court also found that in cases of this complexity, e-discovery saves costs associated with manually producing, handling, storing, and delivering thousands (and often millions) of pages of hard-copy documents. Id. b. The court stated that courts have discretion to award costs within the statutory categories and proceeded to rule that the costs incurred in creating an E-discovery database to process the information was necessary rather than merely convenient for the counsel. Id. at 614. c. Important Note: Compare to Race Tires (p. 1). Sixth Circuit 1. BDT Products, Inc. v. Lexmark Int l, Inc., 405 F.3d 415 (6th Cir. 2005) (found that the district court did not abuse its discretion in taxing of electronic scanning and imaging costs). 405 F.3d at 420. a. Important Note: This decision was abrogated by Tanaguchi v. Kan Pacific Saipan, Ltd., 132 S. Ct (2012) (p. 11) which held that the cost of document translation may not be awarded under Section 1920(6). They do not discuss e-discovery as it relates to Section 1920(4). 2. White v. Baptist Memorial Healthcare Corp., 2012 WL (W.D. Tenn., Aug. 29, 2012) a. White brought action against Baptist Memorial claiming a violation of the Fair Labor Standards Act (FLSA) in which the court rejected her claims. Baptist Memorial moved for a Bill of Costs including a request to recover exemplification fees granted by the Clerk of Court. In this case, White argued that the FLSA is a remedial statute that does not provide for taxing costs; Baptist was not a prevailing party, entitled to costs; the Bill of Costs included amounts not necessary to resolve White s substantive

8 - 8 - rights; and White would be impoverished by the Bill of Costs WL , at *1. b. The Court found that costs are recoverable to a prevailing party in an FLSA case. Id., at *3. In regards to the costs, the Court found that Baptist could recover costs for electronic scanning and imaging of documents under Section 1920(4), including OCR capture which was a necessary part of the discovery process. Id., at *7. Seventh Circuit 1. Hecker v. Deere & Co., 556 F.3d 575 (7th Cir. 2009) (affirmed the district court s award of costs for document processing and holding that costs for converting computer data into a readable format in response to plaintiff s discovery requests are recoverable under Section 1920). 556 F.3d at 591. a. Seventh Circuit provided broad authority to tax broad, necessary E-discovery costs such as key word searching, de-duplication, and filtering. 2. Promote Innovation LLC v. Roche Diagnostics Corp., 2011 WL (S.D. Ind. August 9, 2011)(following Hecker v. Deere & Co., the district court allowed the recovery of E- discovery costs because the electronic discovery process used was not proved to be unnecessary for preparing for litigation) WL , at *2. Eighth Circuit 1. Amana Soc., Inc. v. Excel Engineering, Inc., 2013 WL (N.D. Iowa, Feb. 4, 2013) a. The Court found that scanning for Summation purposes qualified as making copies of materials and that those costs were recoverable, thus taxing Excel s TIFF conversion expenditures under Section 1920(4) WL , at *6. The Court noted that this differs from Race Tires because Excel didn t incur these costs in order to comply with a court directive to produce discovery in TIFF format, and found that the costs associated with the conversion of native files to TIFF format are taxable. Id. The Court also found that they would only tax these costs if it is clear on the invoice that the charge was for TIFF conversion. Id. Ninth Circuit 1. Lockheed Martin Idaho Technologies Co. v. Lockheed Martin Advanced Environmental Systems, Inc., 2006 WL (D. Idaho July 27, 2006)(court awarded $4.6 million for creating a computer database) WL , at *2. a. The court took a broad interpretation of Section 1940(4). It stated, Turning to the first category, the litigation database was necessary due to the extreme complexity of this case and the millions of documents that had to be organized. While the creation of the database is expensive, it is not unreasonably so, and it saved immense time for counsel who otherwise would have to sift through the documents by hand. Given these circumstances, the court finds that these costs are recoverable under Section 1920(4). Id.

9 Tibble v. Edison Int l, 2011 WL (C.D. Cal. August 22, 2011) (electronic processing costs where the defendant used a computer technician to unearth electronic data - were necessarily incurred in responding to discovery requests, and are included as making copies cost; additionally the amount of the cost was challenged, but allowed because the court found that defendant selected the vendor based on expertise after a competitive bidding process, and the technician charged the market rates) WL , at * In re Online DVD Rental Antitrust Litigation, 2012 WL (N.D.Cal. April 20, 2012)(court refused to follow Race Tire, and allowed costs for TIFF conversion, copying/blowback costs, document productions, professional fees regarding visual aids) WL , at *1-2. a. The court also cited its prior decision in Taniguchi v. Kan Pacific, Ltd., 633 F.3d 1218, 1221 (9th Cir. 2011)(p. 11), which stated that district courts are free to interpret the meaning of the cast of categories listed within Section Id. at Hynix Semiconductor Inc. v. Rambus Inc., 697 F.Supp.2d 1139 (N.D. Cal. 2010) b. Court approved costs for a third-party consultant s services related to the collection, identification, and preparation of e-data for production, noting that such services are highly technical and certainly necessary in the electronic age. 697 F.Supp.2d at Parrish v. Manatt, 2011 WL (N.D. Cal. Apr. 11, 2011) c. The court allowed taxation of costs for making copies of documents for review and potential production in addition to copies made for actual production. The court stated that during the five months before defendants motion to dismiss was granted, the parties were obliged to commence the investigation and discovery phases of litigation. The tasks of collecting client documents, reviewing those documents, and determining which documents are relevant are essential and often costly parts of investigation and discovery WL , at *2. d. The court also stated, the reproduction costs defendants incurred in collecting, reviewing, and preparing client documents for production were necessary expenditures made for the purpose of advancing the investigation and discovery phases of the action. As such, they are properly taxable. Id. 6. Jardin v. DATAllegro, Inc., 2011 WL (S.D. Cal. October 12, 2011) a. The court considered whether the costs associated with converting electronic documents from one format to another as exemplification should be taxed WL , at *6. The court held that there is no categorical rule prohibiting costs for converting data into an accessible, readable, and searchable format, and 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 Section 1920(4). Id. Additionally, the costs associated with hiring a project manager who oversaw the process of converting the data to prevent inconsistent or duplicative processing, were recoverable. Id. at Adidas America, Inc. v. Payless Shoesource, Inc., 2009 WL (D. Or. Feb. 9, 2009)

10 a. The court approved costs incurred by converting documents and e-data to the.tiff format done by an outside vendor. The court stated that we are well past the day when all copies are basic photocopies the electronic storage of documents, especially when they are numerous, allows a more efficient way to litigate the case and to present the evidence at trial WL , at *6. 8. ebay Inc., v. Kelora Systems, LLC, 2013 WL (N.D. Cal. April 5, 2013) a. The court found that costs recoverable under Section 1920(4) include: scanning paper documents, electronic scanning and conversion to PDF, TIFF conversion, OCR, image endorsements/bates stamping, slip sheet preparation, blowback scanning paper documents, media hardware used for production, electronically stamping Bates numbers, slipsheet preparation, blowback preparation, and OCR conversion WL , at *7. b. The Court ordered that all the requested e-discovery costs be awarded. Id. at 9. Eleventh Circuit 1. CBT Flint Partners, LLC v. Return Path, Inc., 676 F.Supp.2d 1376 (N.D. Ga. December 30, 2009) a. This case involved a requested production of 1.4 million electronic documents, and after a discovery dispute, the court required the plaintiff and its counsel to pay E- discovery related costs. 676 F.Supp.2d at The court stated, The services are certainly necessary in the electronic age. The enormous burden and expense of electronic discovery are well known. Taxation of these costs will encourage litigants to exercise restraint in burdening the opposing party with the huge cost of unlimited demands for electronic discovery. The objection to taxation as costs of the E- discovery consultant s fees is overruled and denied. Id. b. Expenses that competitor incurred in retaining a computer consultant (e-discovery vendor) to collect, search, identify, and help produce electronic documents from its network files and hard drives in response to patentee s discovery requests were taxable as costs in patent infringement action, where highly technical services provided by computer consultant were not the type of services that attorney s or paralegals were trained for or were capable of providing. Id. c. Important Note: This case was vacated by the Federal Circuit in CBT Flint Partners, LLC v. Return Path, Inc., 654 F.3d 1353 (Fed. Cir. 2011) on other grounds, and did not discuss E-discovery costs. C. Other Cases Involving E-Discovery The following are cases that involve situations where the cost of E-discovery have been allowed through various procedures such as cost shifting, and including certain costs under Section 1920(3). Third Circuit 1. Boeynaems v. LA Fitness International, LLC, 285 F.R.D. 331 (E.D.Pa. Aug. 16, 2012)

11 a. Plaintiffs in this case signed contracts to become members of LA Fitness, and sued alleging they encountered deception and breaches concerning their desire to terminate their memberships, and thus filed a class action complaint. 285 F.R.D. at 332. There were disputes about the scope of discovery and sharing of costs that divided the parties. Id. b. The court suggested in this case that where the cost of discovery is very significant, the plaintiff s (if they have confidence in the merits of its case) should not object to sharing in the costs with defendant. The court concluded that where 1) class certification is pending, and 2) the plaintiffs have asked for very extensive discovery, compliance with which will be very expensive, that absent compelling equitable circumstances to the contrary, the plaintiffs should pay for the discovery they seek. If the plaintiffs have confidence in their contention that the court should certify the class, then the plaintiffs should have no objection to making an investment. Where the burden of discovery expense is almost entirely on the defendant, principally because the plaintiffs seek class certification, then the plaintiffs should share the costs. Id at 341. c. In this case, the court held that since the defendants bore all the costs up to date, that the costs should now shift to the plaintiffs if they need any additional discovery, especially since the defendants already provided large amounts of information. Id at d. Implications: In class action disputes, defendants are often faced with having to produce discovery, where defendants may have to produce millions of documents. This case seems to suggest that litigants faced with pre-class certification discovery may obtain relief in the form of cost-shifting. 1 Ninth Circuit 1. Cannata v. Wyndham Worldwide Corp., 2012 WL (D.Nev. Feb. 17, 2012). a. Over the course of the litigation, the plaintiffs sought to broaden the scope of E- Discovery by increasing the number of search terms and custodians while the defendants insisted on strictly adhering to a prior court order requiring narrow search terms WL , at *1. b. The court decided that the plaintiffs and defendants must agree to appointment of a Special Master to oversee the process. The court stated that the process would include only narrowly tailored search terms, and provided the methods for conducting the searches. Id. at 2. c. Regarding costs, the court ordered that plaintiffs would be required to reimburse defendants for the E-discovery costs incurred in complying with the order if the final set of combined search terms and sites searched exceeded 40. p. 5. For each term over 40, plaintiffs would reimburse defendants 5% of their E-discovery compliance costs from the date of the Feb. 17, 2012 order through the end of discovery. Id. d. Important note: This case seems to suggest that the court is willing to tax E- discovery costs. 1 See Court Orders Cost-Shifting for Pre-Class Certification Discovery, August 28, 2012, available online:

12 Eleventh Circuit 1. Tampa Bay Water v. HDR Engineering, Inc WL (M.D. Fla. Nov. 2, 2012) a. Tampa Bay Water and HDR both agreed by contract that the prevailing party in any litigation arising from their agreement would be entitled to recover all of its attorneys fees, costs, and litigation expenses WL , at *1. HDR was the prevailing party, and Tampa Bay Water challenged the reasonableness of HDR s costs. Id. b. The Court held that copies attributable to discovery, copies of pleadings, correspondence, documents tendered to the opposing party, copies of exhibits, and documents prepared for the Court s consideration are recoverable, whereas copies obtained for the convenience of counsel are not. Id. at *20. c. The Court considered Race Tires, but since there was a contract in place, the Court found that the precise scope of Section 1920(4) was immaterial and HDR was entitled to recover its reasonable ESI costs under the contract. In this case, the case involved 17 million pages of documents, and under these circumstances, the electronic discovery costs incurred by HDR were found to be reasonable, even those costs related to the storage and hosting of ESI. Id., at *21. Costs Incurred Under Section 1920(3) 1. Section 1920(3) provides for taxation of costs incurred for fees and disbursements for printing and witnesses. a. Chenault, et al v. Dorel Indus., Inc., 2010 WL (W.D. Tex. Aug. 2, 2010)(granting costs under Section 1920(3) for creation of electronic database) WL , at *3-4. b. Neutrino Dev. Corp. v. Sonosite Inc., 2007 WL (S.D. Tex. Mar. 30, 2007)( The electronic production in response to plaintiff s discovery request falls within costs recoverable for fees and disbursements for printing. ) WL , at *4. D. Taniguchi v. Kan Pacific Saipan, Ltd., 132 S. Ct (2012) The Ninth Circuit in Taniguchi v. Kan Pacific Saipan, Ltd., 633 F.3d 1218 (9th Cir. 2011) broadly interpreted Section 1920(6), which permits taxation of costs for the compensation of interpreters. The Ninth Circuit held that this phrase encompassed translation of a document: In Section 1920(6), the word interpreter can reasonably encompass a translator, both according to the dictionary definition and common usage of these terms, which does not always draw precise distinctions between foreign language interpretations involving live speech versus written documents. 132 S. Ct. at The Supreme Court rejected the Ninth Circuit s broad statutory interpretation and vacated the cost judgment. It held that, Because the ordinary meaning of interpreter is someone who translates orally from one language to another, we hold that the category compensation of interpreters in Section 1920(6) does not include costs for documentation translation. Id at

13 The Supreme Court made a more general statement regarding the narrow interpretation of costs under Section 1920: Taxable costs are limited to relatively minor, incidental expenses as is evident from Section 1920, which lists such items as clerk fees, court reporter fees, expenses for printing and witnesses, expenses for exemplification and copies, docket fees, and compensation of court-appointed experts, indeed, the assessment of costs most often is merely a clerical matter that can be done by the court clerk. Taxable costs are a fraction of the nontaxable expenses borne by litigants for attorneys, experts, consultants, and investigators. It comes as little surprise, therefore, that costs almost always amount to less than the successful litigant s total expenses in connection with a lawsuit. Because taxable costs are limited by statute and are modest in scope, we see no compelling reason to stretch the ordinary meaning of the cost items Congress authorized in Section Id at Conclusion The District courts are split between whether or not they will allow E-discovery costs to be taxed; specifically the courts are split between what E-discovery activities can be taxed (most courts have allowed the taxing of imaging and scanning, but differ on any activities beyond that). Some districts courts, continuing to follow the Ninth Circuit s broad statutory interpretation of Section 1920, have generally allowed the costs to be taxed, while refusing to follow the Third Circuit s narrow decision in Race Tires (p. 1). The Federal Circuit and Seventh Circuit have also provided for the authority to allow for E-discovery costs to be taxed, though the Northern District of Illinois has denied taxing costs in many cases. Courts in the Fourth Circuit, especially the Eastern District of Virginia, have overall held that E-discovery costs are not taxable, along with the Third Circuit Court of Appeals. The impact of the Supreme Court s Taniguchi decision, though not specifically addressing Section 1920(4), gives some support for interpreting that section narrowly which could lead to more courts refusing to allow E-discovery costs to be taxed. 2 However, it seems that courts are going to continue applying the law in their districts that they continued to apply until the Supreme Court specifically resolves the issue related to Section 1920(4) and E-discovery costs. Parties may also decide to cooperate and deal with taxable costs in agreements between them, as was the case in Ricoh in order to avoid the courts all together. Though the courts differ across the country, they all require the submission of very detailed and accurate documentation of the costs being sought to be taxed as described in Ricoh (p.6), and Rawal (p.4). 3 Attorneys are also emphasizing the necessity of the costs, especially in more complicated cases. Attorneys may turn to other options for litigants to recover costs including a protective order under Rule 26(c), a cost-shifting order pursuant to Rule 26(b)(2)(B)(as suggested in Tomlinson (p. 5), and found in Boeynaems (p.9)), a limiting order 2 See Barkett, John, Un-taxing E-Discovery Costs: Section 1920(4) After Race Tire Amer. Inc. and Taniguchi June 29, 2012, available online: 3 See Berman, Michael D., Taxation of E-Discovery Costs Under 28 U.S.C. Sec. 1920(4) after Taniguchi v. Kan Pacific Saipan August 14, 2012, available online:

14 under Rule 26(b)(2)(C), an offer of judgment under Rule 68, sanctions under Rule 11, or 28 U.S.C. Sec (costs, expenses, and attorneys fees). 4 There is also the possibility of finding some E-discovery costs may fall under Section 1920(3), as was held in the Milligan and Neutrino cases (p. 10). 4 Id.; See Austrian, Mark L., Getting Your E-Discovery Money Back: Taxation of Costs and Offer of Judgment, 54 No. 6 DRI For Def. 12 (June, 2012).