#CaseoftheWeek Episode 57: Recovering Costs Related to Electronic Discovery

Episode 57 of the #CaseoftheWeek is an analysis of Stephen vs. D.B. Roberts. We’ll discuss whether the District Court expanded the ability to recover costs related to electronic discovery under 28 USC 1920 (4), and what constitutes “making copies”.

Good morning, and welcome to our #CaseoftheWeek for February 15, 2022. My name is Kelly Twigger, and as you know, if you join us each week, I am the CEO and founder of eDiscovery Assistant, as well as the principal at ESI Attorneys. I am so happy to be here with you today. Thank you so much for joining us for this week’s #CaseoftheWeek.

In terms of our partnership with ACEDS, if you join us, you know that each week we choose a case from the eDiscovery Assistant database and try to highlight key issues for litigators to give you some practical guidance on what to do in specific situations that deal with electronic discovery.

This week’s decision comes to us from a case titled Stephens versus D.B. Roberts. We are before Judge Anna Brown, who is a senior United States district judge in the District of Oregon within the 9th Circuit. This is a decision from September 8th, 2021, just a few months ago. The reason I selected this case today is because it really reiterates concepts that had been pretty developed in terms of what costs are recoverable following a favorable judgment. Those costs are governed under Rule 54 and then under US Code 28 USC 1920. We’re going to look at how the 9th Circuit has analyzed those and reiterated earlier editions of case law in Race Tires and Country Vintner.

In this particular case, the defendants had just received a grant of summary judgment in their favor and at this point, have submitted a bill of cost to the district court for recovery. Those amounts are provided by, as I mentioned, Rule 54 and 28 USC 1920. Of the amount that the defendants sought was a total of about $5,000. They sought two specific categories of information related to electronic discovery. One was $2,617 for “printing, reproduction and electronic document storage fees.” Then a second amount that was the same, that was recorded by their vendor that was provided to the Court with the following language, that same $2,617 were related to “loading, processing, tiffing, batching hosting, exporting, managing, and producing electronic data” for this case. What’s really important there is that all of those things are lumped together in the submission to the Court seeking recovery of that $2,617.

That sets us up for what the Court’s analysis is here. The Court first looked to 28 USC 1920 and the previous case law underlining the statute to determine what electronic discovery costs are recoverable. The language of section 1920 allows the federal court to tax specific items as costs against a losing party pursuant to Federal Rules Procedure 54 (d)(1), and that Section 1920 provides that a judge or clerk of any court of the United States may tax cost for the following, and it lists out multiple categories. The one that is key here is section four, which allows for cross recovery for fees for exemplification, and the cost of making copies of any materials where the copies are necessarily obtained for use in the case. That’s the section we’re really paying attention here is 28 USC 1920, section four and that language of, “making copies.” (It reminds me of an SNL sketch, but we’ll get to that another time.)

The Court also notes that Federal Rule of Civil Procedure 54 (d)(1), creates a presumption in favor of awarding costs to a prevailing party, but vests the discretion in the district court to refuse to award those costs. The Court can’t decide what costs are recoverable, but the Court can decide whether, in fact, you’re going to get any cost at all.

Now let’s look specifically at the breakdown of what the Court views as discoverable for electronic discovery under section 1920.

Again, we talked about the fact that the defendant is seeking cost recovery for just $2,617. Now, this is obviously a very low dollar amount in this situation, but the principles of this case are really what’s at issue. I do kind of question the ROI and actually seeking to recover these cost as it seems like it might have cost more money to do the bill of costs and do the second follow up that we’ll discuss here in a minute, then to recover that actual $2,600.

The plaintiffs argue here that the fees should not be allowed, as they do not constitute making copies under section four of 1920, and the Court looked at whether the 9th Circuit had previously addressed this issue and found that it had not. As a result, it looked to a couple of other seminal cases across the country on these issues, Race Tires and Country Ventnor, and we’ll add the links to those decisions to the comments section. I don’t think I provided them to Deja to add right at this moment, but we’ll add those to them so you can follow up on those. Those two cases are really the seminal cases in the country on dealing with what is recoverable for “making copies” under 28 USC 1920, section four.

The Court looked at those cases and said that other courts have concluded that limited eDiscovery costs relating to scanning hard copy documents, converting electronic files to none editable formats such as TIFF, and burning files onto disks may be recovered under section four of 28 USC 1920. The Court also noted that courts have not permitted costs for collecting and preserving electronically stored information, processing and indexing ESI, extracting metadata, keyword searching, or OCR, on the ground that they do not fall within the scope of section four.

Now, the Court also looks very specifically at the Race Tires decision and lists a couple of really great quotes that if you’re on a bill of costs, you want to take a look at this case and how it really articulates what was set forth in Race Tires. Race Tires is a longer decision because it was one of the first to articulate what was recoverable in terms of costs associated with ESI, but this case really does a very nice job of calling it down to what’s crucial and really important for you to consider.

One of the quotes that the Court cites is this one:

Section 1920 (4) does not state that all steps that lead up to the production of copy of the materials are taxable. It does not authorize taxation merely because today’s technology requires technical expertise, not ordinarily possessed by the typical legal professional. It does not say that activities that encourage cost savings may be taxed. Section 1920 (4) authorizes awarding only the cost of making copies.

The Court here looks at what the Court in Race Tires did to compare the new process of handling ESI with the old process of handling paper. Essentially, the Court noted in Race Tires that all steps taken prior to “making copies”, locating and collecting files, reviewing them, screening for privilege; none of those are recoverable costs. Looking at what we used to do with paper and what we do now with ESI, nothing prior to the actual making of the copies of information was recoverable then and the Court says that it is not recoverable now, even with the change in the rules related to ESI.

The Court notes also in Race Tires that the Supreme Court has:

…accorded a narrow reading of the cost statute in other contexts, and that neither the degree of expertise necessary to perform the work nor the identity of the party performing the work of making copies is a factor that can be gleaned from Section 1920 (4).

That’s really important because essentially the Court is affirming, we don’t care about this additional expertise that’s required to deal with ESI, where the statute says making copies and only making copies is what’s covered.

The Court in Race Tires allowed cost only for the cost of conversion of native files to TIFF and PDF formats and the transfer of files onto CDs. Similarly, the Court here looks to the Fourth Circuit in Country Ventnor that followed Race Tires and also allowed for that same conversion cost of the conversion of native file to TIFF and PDF formats, as well as the transfer of files to CD.

The Court here looks at Race Tires and Country Ventnor and adopts exactly what they’re saying and concludes that the defendant’s eDiscovery costs related to scanning hard copy documents, converting electronic files to none editable formats such as TIFF, and burning files onto disks were allowable under Section 1920 (4).

The Court also concludes that the defendant’s costs for collecting and preserving ESI, processing and indexing ESI, extracting metadata, keyword searching, and OCR do not fall within 28 USC 1920 section four, and therefore are not taxable costs that can be recovered. All of that is consistent with the decisions in Race Tires and Country Ventnor.

Having decided that, the Court then looked at the submitted documentation by the plaintiffs, and this is where the rubber meets the road, the defendant didn’t break down its costs sufficient to allow the Court to determine what of the costs they were seeking were actually making copies. Instead, as I mentioned to you earlier, the defendant submitted that overall summary of all the work done by the vendor with a cost of $2,617 associated with it.

I think all of us know, just based on quantities of data, that those costs were probably substantially higher, but what happened here is that the defendant didn’t specifically articulate exactly what the costs were associated with making copies, which is all that’s allowed under Section 1920 (4), so the Court denied their motion for costs for the electronic discovery costs.

The Court did allow the defendants to resubmit an additional bill of costs or a new bill of costs that would specifically articulate those costs associated with making copies that are recoverable, but because they had not yet done so, the Court denied the motion.

What are our takeaways from this case? Well, what’s interesting about this one is that the 9th Circuit, which is a huge jurisdiction associated with ESI just generally, but a ton of case law that comes out of the 9th Circuit, it’s interesting if they hadn’t addressed the cost issue previously and so now we’re finding just more consistency in the interpretation of 28 USC Section 1920, that only conversions of data that falls under making copies will be covered.

What does that mean for you practically? It means that you need to make sure that your bills from your providers or from your in-house department are detailing the cost of conversion, or you need to to prepare and submit an affidavit with supporting documentation that can substantiate those costs once you are successful in the litigation.

Here, the costs that were being sought in recovery suggests that the defendants would have been better off being upfront about what they could recover under Race Tires and Country Ventnor, as opposed to trying to submit a bill with broader categories, because the cost of submitting the second round of papers and a revised bill of cost is essentially going to eat through the $2,600 that they are seeking to recover.

As always, you’ve got to do a cost benefit analysis. Yes, it’s always good to see what arguments you can make, but there was nothing differentiating here for the defendants that would have allowed the 9th Circuit to come up with a different interpretation of what was recoverable under 28 USC 1920 section four.

Know what you can recover, plan to have that categorized so that if you win, you can substantiate cost discovery with very little effort, particularly in cases where the cost recovery is low, like here.

That’s our #CaseoftheWeek for this week. Thanks so much for joining me. We’ll be back again next week with another decision from our eDiscovery Assistant database.

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Thanks so much! Staying be safe and healthy out there and I look forward to seeing you next week.

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