It is undisputed that electronic discovery has greatly increased the costs associated with litigation. In an opinion that should give some relief to in-house counsel and give plaintiffs some reason to pause before issuing sweeping requests for electronic discovery, a judge in the Western District of Pennsylvania affirmed a clerk's approval of a reimbursement of nearly all of the costs associated with electronic discovery.
The plaintiff in Race Tires America Inc. v. Hoosiers Racing Corp. commenced an action against Hoosier Racing Tire Corp. (Hoosier) and Dirt Motor Sports Inc. (DMS) alleging violations of various antitrust laws. During the course of discovery, the plaintiff issued over 200 requests for discovery, demanded that the defendants use over 400 search terms and provided specific details regarding the form in which documents should be produced. After prevailing on their motion for summary judgment and in the subsequent appeal, the defendants filed a bill of costs, seeking principally the costs associated with electronic discovery.
In affirming the clerk's decision to award nearly all of the costs of electronic discovery, the district court first had to determine whether such costs are authorized by 28 U.S.C. ? 1920. Section 1920(4) allows the recovery of "fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case." Prior to 2008, that provision had contained a specific reference to "copies of papers" instead of "copies of any materials." The court observed that while prior to that amendment courts had "struggled with the issue of whether e-discovery costs were recoverable under Section 1920(4)" "[a]fter the amendment, no court has categorically excluded e-discovery costs from allowable costs." Accordingly, it could be appropriate to award costs associated with electronic discovery in accordance with this Section.
The court concluded that the fees requested in this case were authorized by the statute because "the requirements and expertise necessary to retrieve and prepare these e-discovery documents for production were an indispensible part of the discovery process." In reaching that conclusion, the court took into account (i) whether the costs included those associated with scanning and imaging-- the modern day equivalent of copying; (ii) whether the tasks were merely for the convenience of counsel and not necessary for production; (iii) whether the services provided by a vendor required the expertise of a consultant and could not have been performed by a paralegal or attorney; and (iv) whether the parties had agreed that documents would be produced in electronic form.
The court next looked at whether the fees that were charged by the vendors were both necessary and reasonable. The court noted the scope of the requests that were made by the plaintiff and the specific requirements of the Rule 26(f) report, which dictated the format of production. Based on the history of discovery in the case, the court concluded that the fees assessed, given the scope of the work completed, were reasonable.
It its concluding remarks, the court was careful to caution that the opinion reflects "facts and circumstances that were unique" and that the opinion "should not be read as a pronouncement or representation" of how the court will rule in future discovery disputes. Despite this warning, the case highlights the trend to award the costs of electronic discovery--vendor fees, processing fees, and the like-- to a prevailing party. This should come as welcome relief for in-house counsel.
Read Matthew Ingber's previous column.