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Making Copies: What eDiscovery Services are Taxable Costs?

Posted on August 31st, 2012

Is eDiscovery preservation, collecting, culling, searching and production the same as “making copies?” The defendants thought so in Race Tires America, Inc. LLC v. Hoosier Racing Tire Corp. (Race Tires II), No. 11-2316, 2012 WL 887593 (3d Cir. Mar. 16, 2012).  The defense had won the underlying case on a motion for summary judgment and sought reimbursement from plaintiffs for the costs of its electronic data defense production.

Federal Rule 54(d)(1) states that “unless a federal statute, these rules, or court order provides otherwise, costs-other than attorney’s fees-should be allowed to the prevailing party.” So “costs” are subject to fee shifting to the losing party in federal court.

The defendants then sought reimbursement of hundreds of thousands of dollars in electronic data discovery fees under Federal Rule 54(d) for “fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.” The district court granted the defendant’s motion.

The Third Circuit granted the plaintiff’s appeal and looked closely at the language of the statute, focusing on whether the electronic discovery services were the equivalent of “making copies.” The Court examined the delineated services performed in the ESI production:

  • Collecting and preserving ESI
  • Processing and indexing ESI
  • Keyword searching for responsive documents
  • Converting native files to TIFF
  • Scanning documents into electronic images
  • Transferring VHS tapes to DVD format

The Court held that of the above-listed services, only the last three fell under “costs of making copies.” The Court then cut down the amount awarded to defendants from almost $400,000 to around $30,000 for those last three services. It noted that there is a presumption that discovery costs are to be borne by each party, and that the defendants might have sought a cost-shifting order under Rule 26(c) prior to discovery production if they anticipated undue burden and expense.

To avoid the statutory limitation of recoverable ESI costs, plaintiffs must strategize before drafting eDiscovery requests including consideration of a cost-shifting protective order or agreement among the parties.

ILS – Plaintiff Electronic Discovery Experts

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