Electronic Discovery Fees

Litigation + Practice + Tech
May 2, 2013
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On April 29, 2013 the U.S. Court of Appeals for the Fourth Circuit further detailed the scope of fees chargeable to a party under 28 U.S.C. §1920(4), which speaks to “the costs of making copies of any materials where the copies are necessarily obtained for use in [a] case.” This clause includes discovery, not just materials actually introduced at trial or attached to dispositive motions.

It’s originally FRCP 54(d)(1) that allows cost-shifting to a prevailing party in the discretion of the court. Section 1920 enumerates the expenses that courts may tax as a cost under that discretionary authority.

The Fourth Circuit was asked to explore the bounds of §1920(4), in particular the meaning of “making copies” and whether a host of preparation and due diligence procedures related to the management of electronically stored information turned over in the case fit within those bounds.

  • decompressing container files
  • making the data searchable using OCR
  • indexing the data
  • removing files not containing user-generated content
  • removing duplicates
  • extracting and indexing metadata
  • reviewing for quality and corrupt files
  • converting to tiff and pdf
  • bates numbering
  • transferring to disc

Country Vintner sued Gallo under state wine distribution and unfair trade practice laws on a dispute over an exclusive wholesaling deal. Country Vintner sought discovery of electronically stored information and Gallo moved for a protective order based primarily on cost. There was also disagreement about the scope of Country Vintner’s requests and how to limit them using keywords.

The district court denied Gallo’s motion for a protective order and ordered it to “run searches on archived email and documents created [in a one-year period] by an initial set of eight identified custodians” using 16 search terms proposed by Country Vintner and any other terms that might produce relevant documents. Gallo forwarded the resulting 62 GB of data to its lawyers for review. Naturally, this is when the bulk of due diligence and prep costs were incurred.

Shortly after Gallo began producing documents the district court granted its motion to dismiss the unfair trade practice claim. The parties filed cross-motions for summary judgment on the remaining claims and the court granted summary judgment in favor of Gallo. Country Vintner appealed, but lost. Gallo then filed in the district court the bill of costs considered here.

The Fourth Circuit gave a narrow interpretation of §1920(4). The operative quote came out of a Third Circuit opinion in Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir. 2012).

Section 1920(4) does not state that all steps that lead up to the production of copies of 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 affirmed the district court’s finding that only the tiff and pdf conversion and the transfer of files to disc constituted “making copies” under §1920(4).

Read the Fourth Circuit’s opinion in The Country Vintner of North Carolina, LLC, v. E. & J. Gallo Winery, Inc.

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