Proportionality

In Ancora Technologies, Inc. v. Apple, Inc., (N.D. Cal. Aug. 26, 2013), California District Judge Yvonne Gonzalez Rogers granted in part and denied in part Ancora’s Motion for Review of Clerks’ Order on the Bill of Costs of prevailing party Apple, reducing the awarded amount from $111,158.23 down to $20,875.48, including disallowing over $71,000 in storage and hosting costs.

On May 13 of this year, after the court granted Apple summary judgment in the case, Apple filed with the Clerk of the Court a Bill of Costs seeking $116,366.87 in costs, including $94,400.71 for “fees exemplification and the costs of making copies.”  On May 28, Ancora filed objections to that Bill of Costs.  Ancora specifically objected to recovery of many of Apple’s fees based on the Supreme Court’s recent decision in Taniguchi v. Kan Pacific Saipan, Ltd, 132 S. Ct. 1997, 182 L. Ed. 2d 903 (2012), which had reversed the Ninth’s Circuit’s decisions reading the items of recoverable costs under Rule 54(d)(1) and Section 1920 broadly.  On June 24, the Clerk of the Court issued an order awarding Apple $111,158.23, leading to the motion by Ancora discussed in this ruling.

In its motion, Ancora sought review of the Clerk’s Order on Apple’s Bill of Costs as to six categories of costs.  Here are the categories and the judge’s ruling regarding each:

1. Conversion of documents produced by Ancora in eDiscovery: As Judge Gonzalez noted, “Ancora produced many documents in a format that was not ‘text searchable’ and did not provide the associated load files or OCR data in a .TXT file format”, which was contrary to their own production format agreement.  So, the judge denied the motion and upheld Apple’s request for $3,471.61 for conversion costs.
2. Storage and hosting of electronic documents: Apple sought “online hosting costs for several hundred gigabytes (GB) of electronic document storage, though it only produced documents amounting to around 3.5 GB of data”. Finding that “Taniguchi did not directly address the issue of taxing e-discovery costs, it did establish the principle that section 1920 does not cover all costs that are necessarily incurred in litigation, but only a narrow subset”, Judge Gonzalez upheld Ancora’s motion and reduced Apple’s award by $71,611.52.
3. “Custom work” and “replacement” costs for electronic documents: Apple claimed costs incurred for “replacing corrupted electronic documents and resolving technical issues during the processing of documents for production”, but Judge Gonzalez found no support or justification for the costs and reduced Apple’s award by $5,375.46.
4. Printing of documents in connection with deposition preparation and Markman hearing: Finding that “Local Rule 54-3(d)(3) allows the ‘cost of reproducing disclosure of formal discovery documents when used for any purpose in the case’”, Judge Gonzalez upheld Apple’s request for $3,998.05 for those costs.
5. Costs related to visual aids, including equipment rental and graphics services: Again, adopting the narrow interpretation of Taniguchi, Judge Gonzalez denied $13,097.75 of the $13,227.95 requested.
6. Costs associated with deposition transcripts: With regard to deposition transcripts, because “Local Rule 54-3(c)(1) allows costs for an original and a copy”, Judge Gonzalez upheld Apple’s request for $4,891.95, which included a second copy.

So, what do you think?  Were the correct decisions made regarding cost reimbursement?   Please share any comments you might have or if you’d like to know more about a particular topic.

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.

When it comes to reimbursement of eDiscovery costs, sometimes courts feel like a nut and sometimes they don’t.  In other words, there appears to be no consistency.

In The Country Vintner of North Carolina, LLC v. E. & J. Gallo Winery, Inc., No. 12-2074, 2013 U.S. App. (4th Cir. Apr. 29, 2013), when deciding which costs are taxable, the Fourth Circuit chose to follow the Third Circuit’s reasoning in Race Tires America, Inc. v. Hoosier Racing Tire Corp.,674 F.3d 158 (3d Cir. 2012), which read 28 U.S.C. § 1920(4) narrowly. Specifically, the court approved taxation of file conversion and transferring files onto CDs as “[f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case” but no other tasks related to electronically stored information (ESI).

In this case, the defendant balked at the plaintiff’s discovery requests, arguing that the requests created an undue burden, rendering the documents sought inaccessible. The plaintiff filed a motion to compel, which the district court granted. The defendant then collected more than 62 gigabytes of data for review.

After prevailing on a motion to dismiss several claims and having the rest dismissed at summary judgment, the defendant filed a bill of costs seeking $111,047.75 for e-discovery-related charges, including the following:

• “$71,910 for ‘flattening’ and ‘indexing’ ESI,”
• “$15,660 for ‘Searching/Review Set/Data Extraction,’”
• “$178.59 for ‘TIFF Production’ and ‘PDF Production,’”
• “$74.16 for electronic ‘Bates Numbering,’”
• “$40 for copying images onto a CD or DVD,” and
• “$23,185 for ‘management of the processing of the electronic data,’ ‘quality assurance procedures,’ ‘analyzing corrupt documents and other errors,’ and ‘preparing the production of documents to opposing counsel.’”

Following the Third Circuit’s reasoning in Race Tires America, the district court found that the defendant was entitled to costs for tasks that were the equivalent of copying or duplicating files, but not for “any other ESI-related expenses.” Here, the only reimbursable tasks were converting files to TIFF and PDF format and transferring files to CDs. Therefore, the court taxed $218.59.

On appeal, the defendant claimed its ESI-related charges were taxable because “ESI has ‘unique features’: ESI is ‘more easily and thoroughly changeable than paper documents,’ it contains metadata, and it often has searchable text.” The defendant argued converting native files to PDF and TIFF formats resulted in “‘static, two-dimensional images that, by themselves, [we]re incomplete copies of dynamic, multi-dimensional ESI,’” such that other processing was required to copy the “‘all integral features of the ESI.’”

The Fourth Circuit rejected the defendant’s argument.  The court noted that “the presumption is that the responding party must bear the expense of complying with discovery requests.” Moreover, the U.S. Supreme Court has opined that “‘costs almost always amount to less than the successful litigant’s total expenses’” and that Section 1920 is “‘limited to relatively minor, incidental expenses.’” Finally, the appellate court also relied on Race Tires in finding that Section 1920(4) limited the taxable costs to file conversion and burning files onto discs. The ESI-related charges were not taxable as “fees for exemplification” under the statute because they did not involve the authentication of public records, exhibits, or demonstrative aids.

Although the court’s reasoning meant the defendant would be reimbursed for only a fraction of its costs, it did not mean its interpretation of the statute was “too grudging in an age of unforeseen innovations in litigation-support technology.” Rather, the court suggested that where parties believe costs are excessive, they can file a motion seeking a protective order.

So, what do you think?  Should the costs have been awarded?  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.