Monday, March 19, 2012

3d Circuit Weighs in on Recovering E-Discovery Costs

Last Friday, the Third Circuit released a definitive opinion regarding taxation of e-discovery costs against losing litigants. Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 11-2316, 2012 WL 887593 (3d Cir. Mar. 16, 2012)(marked for publication in F.3d). Judge Vanaskie (who I'll note is pretty hip to technology issues) largely vacated an order awarding $360,000 in e-discovery costs to the defendant, slashing it by more than 90%.

The highlights from the opinion:
The District Court in this case concluded that more than $365,000 in charges imposed by the electronic discovery vendors, covering such activities as hard drive imaging, data processing, keyword searching, and file format conversion, are taxable . . . . In view of the significant role that electronic discovery plays in litigation today, involving the collection, processing, and production of huge volumes of data generated as a result of the information technology and communication revolutions, we believe it imperative to provide definitive guidance to the district courts in our Circuit on the question of the extent to which electronic discovery expenses are taxable . . . . We further conclude that only scanning and file format conversion can be considered to be "making copies," an activity that amounts to approximately $30,000 of the more than $365,000 in electronic discovery charges taxed in this case.
And the conclusion:
Neither the language of [28 U.S.C.] § 1920(4), nor its history, suggests that Congress intended to shift all the expenses of a particular form of discovery—production of ESI—to the losing party . . . . Although there may be strong policy reasons in general, or compelling equitable circumstances in a particular case, to award the full cost of electronic discovery to the prevailing party, the federal courts lack the authority to do so, either generally or in particular cases, under the cost statute. 
In sum, we conclude that of the numerous services the vendors performed, only the scanning of hard copy documents, the conversion of native files to TIFF, and the transfer of VHS tapes to DVD involved "copying," and that the costs attributable to only those activities are recoverable under § 1920(4)'s allowance for the "costs of making copies of any materials."
And that settles that!

HT: The Legal Intelligencer - 3rd Circuit Slashes E-Discovery Costs to be Recovered.

UPDATE (3/19/2012): You can read the opinion here. Commenter Nicholas Wagoner dropped a link to his excellent blog, Circuit Splits, for his analysis of the circuit split on this issue: Recovering the Cost of E-Dscovery.

Image: Third Circuit seal used in commentary on Third Circuit. Not official use.