The Fourth Circuit confirms that while certain costs of ESI copying for discovery are taxable under Rule 54(d)(1), the taxable costs in a plain vanilla ESI production do not include the underlying ESI processing costs. The impact of this will often be substantial—the prevailing party in the case sought $101,858 in ESI-related costs—the court awarded $218.59. The caveat is that in a more complex production that includes metadata or specified formats, the costs to produce the metadata may be taxable.
In Country Vintner of North Carolina, LLC v. E. & J. Gallo Winery, Inc., 718 F.3d 249 (4th Cir. 2013), the court concluded that 28 USC § 1920(4), applied to a basic eDiscovery production, “limits taxable costs to . . . converting electronic files to non-editable formats, and burning the files onto discs.” Opinion at 21. The case involved conversion of PST files to TIFF images, with the production of the TIFF images on CDs. Apparently no load file was part of the production. The Opinion recognized in a footnote that “we assume, without deciding, that taxable costs would include any technical processes necessary to copy ESI in a format that includes such information.” Opinion, n.19 at 21. This covers the load files. A second footnote carves out the situation where the parties have agreed to a specific production format (“the production of ESI on a particular database or in a native file format”). Id. n. 20 at 21.
In a ruling by Judge Brinkema a month before the Country Vintner decision, essentially the same issues were addressed with essentially the same results. In Nobel Biocare USA, LLC v. Tecnhique D’Usinage Sinlab, Inc. 2013 WL 819911 (E.D.Va. 2013), a more factually robust case, the court concluded
. . . all of the cited authorities agree that although the costs of collecting, storing, and extracting electronically stored information may not be taxable, the costs of converting that information into the agreed-upon format and electronically Bates stamping it are analogous to copying costs, and therefore are taxable.
Citing the Parties’ Joint Discovery Plan that provided for “searchable TIFF or PDF format,” Judge Brinkema allowed $30,000 for the production of more than 400,000 TIFF images.
The 4th Circuit’s analysis begins with the Supreme Court’s recent observation that taxable costs under 28 USC § 1920 are “modest in scope” and “limited to relatively minor, incidental expenses.” Taniguchi v. Kan Pacific Saipan, Ltd., 132 S.Ct. 1977 (2012). The analysis then cites approvingly Race Tires America, Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3rd Cir. 2011). In that case, the appellate court reversed the trial judge’s ruling that allowed taxation of $365,000 of eDiscovery costs, and approved only $30,000 for “scanning and file format conversion” as it was “the functional equivalent of making copies” under the statute. The approved file format conversion costs included conversion to TIFF and conversion of video from VHS to DVDs.
The current standard in the Eastern District for taxable eDiscovery costs under 28 USC § 1920(4) seemingly distill to these points:
- When the production is basic (e.g., PST files to PDF to TIFF), the taxable costs are the conversion costs (here PDF to TIFF) plus the costs to transfer to the production media.
- The underlying ESI collection and processing costs are not taxable.
- Ancillary production costs, such as electronic Bates-stamping, are taxable.
- If the production requires metadata (for example, a common Summation or Concordance load file), then the taxable costs likely include the costs to put the data in the production format.
- If in an agreement between the parties or specifications in the discovery Instructions further production (but not processing) requirements are imposed, those costs are likely taxable.
The big-ticket eDiscovery components—the document collection, processing, and attorney review—are not taxable. Only eDiscovery costs analogous to costs of physical copying fall within the scope of 28 USC § 1920(4).
Please note: This blog/Web site is made available by the firm of Redmon, Peyton & Braswell, LLP (“RPB”) solely for educational purposes to provide general information about general legal principles and not to provide specific legal advice applicable to any particular circumstance. By using this blog/Web site, you understand that there is no attorney client relationship intended or formed between you and RPB. The blog/Web site should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.