Electronic Discovery

In some cases, such as this case and this case, the prevailing party received reimbursement of eDiscovery costs, whereas in this case, this case and this case requests for reimbursement of costs was denied (or reversed) by the courts.  In this case, the prevailing party was awarded a reduced amount, but still received reimbursement of eDiscovery costs.

In Moore v. The Weinstein Company LLC, No. 3:09-cv-0166, 2012 U.S. Dist. (M.D. Tenn. Dec. 18, 2012), noting it had wide discretion to determine costs recoverable by a prevailing party under federal statutes providing for the taxation of costs, a court reduced costs awarded for eDiscovery expenditures based on its analysis of which costs were reasonable, necessary, and taxable.

In this case involving Samuel David Moore, professionally known as Legendary Soul Man Sam Moore, and others as plaintiffs, the defendants prevailed on a motion for summary judgment and subsequently filed a bill of costs. The plaintiffs, however, objected to the costs, and therefore U.S. Magistrate Judge Joe B. Brown (not to be confused with TV’s Judge Joe Brown) reviewed the case. One category of costs the plaintiffs objected to involved eDiscovery expenses.

The court noted that the defendants requested over $40,000 in costs for eDiscovery, approximately half of which was to compensate a third-party vendor for its services. Other costs were for expenses related to in-house eDiscovery work performed by defendants’ counsel Waller, Lansden, Dortch & Davis, LLP. The court also noted that the parties had agreed to the eDiscovery procedures they would use in their Case Management Order, and these processes included producing electronic data in a TIFF format.

Noting simply that precedent gives courts wide discretion in determining which costs are taxable, the court concluded that certain eDiscovery expenditures submitted by the defendants in their bill of costs were reasonably taxable and some were not:

The Magistrate Judge has reviewed these charges and believes some are unreasonable and should be reduced or eliminated. The Document Solutions charges are reasonable and necessary. Pursuant to the Case Management Order, costs for processing documents into specific formats were required to be borne by each party. Moreover, further processing that document for production by, for example, searching for specific custodians, is also a necessary cost of this litigation.

With respect to the in-house “Technology Services” charges, however, the Magistrate Judge is persuaded that the per hour charge of $150 is unreasonable. Document Solutions billed “tech time” at $175 per hour, which would presumably be significantly higher than the rates billed to Waller clients by Waller’s in-house technical staff. The Magistrate Judge believes that a rate comparable to an experienced paralegal would be more appropriate. The technology services technologists have specialized expertise and training similar to a paralegal. Therefore, the Magistrate Judge will set a more reasonable billing rate of $100/hour for Technology Services billing.

Additionally, the Magistrate Judge concluded that several other costs were “not properly taxed” to the plaintiffs, including costs for “[w]ork on discovery budget”; and “[p]reparation of deposition transcripts for review” and “[p]reparation of documents for hearing,” as they represented “paralegal work.” Finally, an entry for an attorney to “[p]repare for and attend [a] telephonic deposition of IT vendor” was deemed non-taxable by the court as it was “unnecessary.”

Accordingly, the court reduced the total taxable costs for eDiscovery to $36,196.90.

So, what do you think?  Should the costs have been reimbursed?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case Summary Source: Applied Discovery (free subscription required).  For eDiscovery news and best practices, check out the Applied Discovery Blog here.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

Last year, the trend seemed to be to award the prevailing party reimbursement of eDiscovery costs, including in this case and this case.  Now, that trend appears to have been reversed with those requests being denied (or reversed) by the courts, including this case and this case.  Now, here is another case where reimbursement of eDiscovery costs was denied.

In adhering to the Third Circuit’s 2012 decision in Race Tires America, Inc. v. Hoosier Racing Tire Corp., a district court declined to permit a prevailing party to bill its opponent under 28 U.S.C. § 1920(4) in Abbott Point of Care, Inc. v. Epocal, Inc., No. CV-08-S-543-NE, 2012 U.S. Dist. (N.D. Ala. Nov. 5, 2012) for costs associated with its eDiscovery database because such a request did not comport with a strict interpretation of the statute.

In a lawsuit originally based on Abbott’s allegations that Epocal infringed four of its patents and tortiously interfered with the employment contracts of some of its former employees, a jury awarded Epocal a fully favorable decision. The judgment provided that all costs associated with the lawsuit were taxed to Abbott; accordingly, Epocal filed a bill of costs with the court. This dispute arose when Abbott objected to Epocal’s bill of costs.

The points of the bill that Abbott disputed included “$175,390 in eDiscovery database charges through discovery (item 5) [and] $165,108 in eDiscovery database charges through trial (item 6).” The court pointed out that although “Abbott object[ed] to Epocal’s recovery of any costs for the creation and maintenance of an electronic discovery database under § 1920(4),” the Eleventh Circuit had not issued any controlling guidance on how courts within its limits should interpret the language of Section 1920(4). {emphasis added}

The court noted that Abbott relied on, and many district courts—including those within the Eleventh Circuit—also turned to Race Tires, where “[t]he Third Circuit emphasized that the determination of whether a particular cost can be awarded pursuant to § 1920 is purely a matter of statutory construction.” Section 1920(4) permits taxation only for “‘exemplification’ or ‘making copies,’” and the Third Circuit further explained that those actions meant “‘produc[ing] illustrative evidence or the authentication of public records.’” The court noted that because the statute did not provide for such relief, “[t]he Third Circuit refused to give any weight to equitable considerations, including the importance of database services to the ultimate act of production, the technical skill required to create a database, and the ‘efficiencies and cost savings resulting from the efforts of electronic discovery consultants.’” Moreover, the Third Circuit “refused to allow costs for any of the steps that might lead up to the actual copying of documents or other materials, including ‘gathering, preserving, processing, searching, culling, and extracting’ discoverable information.”

Although the court was “sympathetic to the practical arguments advanced by Epocal,” it declined to extend the scope of the Third Circuit’s interpretation of Section 1920(4). Noting that “[u]nfortunately . . . the law does not always favor efficiency or practicality,” the court followed the Third Circuit’s “thorough, reasonable, and persuasive interpretation of that statute.” As such, it found that Epocal would “not be permitted to recover any costs for the maintenance of an electronic discovery database” and therefore it did not need to distinguish between the costs Epocal requested for eDiscovery charges incurred at different times during the litigation.

So, what do you think?  Should the costs have been reimbursed?  Should prevailing parties have some means for recouping their eDiscovery costs?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case Summary Source: Applied Discovery (free subscription required).  For eDiscovery news and best practices, check out the Applied Discovery Blog here.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.