- The E.D. Pa. Clerk of Courts’ opinion suggests a strong inclination to awarding a prevailing party’s e-discovery costs.
- The opinion reflects a relatively broad interpretation of what e-discovery costs are taxable under Federal Rule 54(d)(1) and 28 U.S.C. § 1920(4).
- Litigants seeking to recover e-discovery costs should consider a Clerk’s award as merely the first step, and prepare for de novo review by the district court.
Dechert published in May 2011 an update regarding a federal district court decision, Race Tires America, Inc. v. Hoosier Racing Tire Corp, No. 2:07-cv-01294-TFM (W.D. Pa.), that highlighted a potential trend to permit a prevailing party to secure reimbursement for e-discovery costs incurred during litigation. In In re Aspartame Antitrust Litigation, No. 06-cv-01732 (E.D. Pa.), the Clerk of Courts for the Eastern District of Pennsylvania this week issued a taxation opinion awarding three prevailing defendants more than $565,000 in e-discovery costs. The Clerk’s opinion takes a broad view of allowable e-discovery costs under the governing law. Moreover, because a Clerk’s decision can be influential in a district court’s de novo review of taxation of costs, litigants should consider what they are doing right now to best position themselves to potentially recover e-discovery costs should they prevail.
In re Aspartame involved a group of consolidated class actions brought by food and beverage manufacturers against suppliers of ingredients containing aspartame, an artificial sweetener. The plaintiffs alleged that defendants Ajinomoto Co., Nutrasweet Co. and Holland Sweetener Co. had violated federal antitrust laws. Judgment was entered in favor of defendants in August 2008, and that judgment was affirmed by the Third Circuit in February 2011.
As in Race Tires, the prevailing defendants then filed bills of cost against the plaintiffs under Federal Rule 54(d), which provides that “costs” be “allowed to the prevailing party.” 28 U.S.C. § 1920 enumerates the kinds of “costs” (other than attorneys’ fees) that may be awarded under Rule 54(d)(1) . Section 1920(4) was broadened in 2008: where it formerly covered “fees for exemplifications and copies of papers,” it now covers “fees for exemplification and the costs of making copies of any materials.” A number of district courts have since concluded that this amendment was intended to permit taxation of at least some e-discovery costs. The Clerk in In re Aspartame awarded substantial e-discovery costs to each defendant: $161,419 to Ajinomoto; $211,513 to Nutrasweet; and $192,374 to Holland Sweetener.
E.D. Pa. Clerk Found “Heavy Presumption” in the Law to Tax E-Discovery Costs
District courts have differed in how broadly they interpret section 1920(4) to cover certain e-discovery costs, if at all, and those decisions are further governed by local rules of procedure that may limit the recovery of certain types of costs. As highlighted by Race Tires, the federal district courts in Pennsylvania have been taking a more inclusive view of e-discovery costs for taxation, as no specific local rules limit what costs are taxable under Rule 54(1).
The Race Tires court recognized that the complexity of e-discovery in litigation warrants some analysis of the appropriateness of e-discovery costs for which a prevailing party seeks reimbursement. Indeed, most courts that award e-discovery costs have required that the e-discovery costs were, at least, incurred to perform “highly technical” tasks and necessarily triggered by discovery obligations in the case.
The Clerk’s opinion in In re Aspartame espouses a relatively low standard for taxation. The Clerk stated that there is a “heavy presumption” that the prevailing party is “automatically entitled” to costs that “arguably” fall under section 1920, and that to deny the prevailing party these costs would be punitive. The Clerk explained that this “heavy presumption” places the burden on the non-prevailing party to show that costs should not be awarded. Moreover, the Clerk emphasized that any objection to taxing costs on the grounds that the prevailing party acted in bad faith in incurring them would need to involve “extremely egregious” or “very, very bad” conduct.
Broader Definition of Taxable E-Discovery Costs
Consistent with most decisions on this issue, the Clerk awarded requested costs for hiring a vendor to “search for and/or recreate, copies of evidence in electronic form” because such tasks are not generally within the competence of attorneys or their staff (i.e., “highly technical” tasks as required by Race Tires). Regarding necessity, the Clerk stated that such costs need to “relate to the production of copies of documentary evidence . . . in discovery” that were “necessarily incurred for the effective preparation” of the prevailing party, regardless of whether the materials were actually used. This definition may be somewhat constrained in that any requested award must be “judged in light of the situation existing when the costs in question were incurred,” such as the complexity of the issues presented and the amount of money at stake in the litigation.
Flexibility in Documentation and Form of Taxation Request
The Clerk stated that a prevailing party is not required to submit receipts, nor is it required to use the court’s standard bill of costs form. Rather, a bill of costs need only be “neat and legible” and “sufficiently explained” to permit objections to be made and for the court to make an informed decision.
Prepare for a District Court Review of the Clerk’s Award
Prevailing parties should be encouraged by the trend in court decisions to consider certain e-discovery costs taxable under Rule 54(d)(1). That said, litigants should remain cautious about any easy road to recovery. The bill of costs submitted to the Clerk should contain the information and documentation necessary to ultimately persuade the district court. Although not required by the Clerk, the In re Aspartame defendants submitted receipts with their bills of costs. Such documentation will better position them to demonstrate to the district court that costs were actually incurred at a point in the litigation that they were necessary to perform. In addition, any descriptive narratives in those receipts of the work performed will help differentiate the work as highly technical—i.e., of the type permitted to be taxed.
The Clerk’s opinion in In re Aspartame suggests that losing parties in the Eastern District of Pennsylvania will likely face a steep, uphill battle to avoid paying the prevailing parties’ e-discovery costs. Because the Clerk is often the first judicial official to opine on the validity of a taxation request, his or her disposition to consider them valid is an important consideration. In addition, litigants should be further preparing themselves for fighting these battles before the district court—where e-discovery cost taxation disputes of any real magnitude are likely to be resolved.