Case Law: Race Tires Am., Inc. v. Hoosier Racing Tire Corp
Court Affirms Taxation of E-Discovery Costs to Prevailing Party Under 28 USC §1920
Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 2011 WL 1748620 (W.D. Pa. May 6, 2011). In this antitrust litigation, the plaintiffs moved to appoint a special master and to review the taxation of electronic discovery costs awarded to the defendants. Refusing to appoint a special master to review the reasonableness of the ediscovery costs this late in litigation, the court remarked that its “understanding that ediscovery has become a necessary and sometimes costly function of civil litigation” was the only special expertise necessary. Turning to the clerk of court’s taxation of electronic discovery costs – totaling $143,007.05 and $246,101.41 for the respective defendants – the court considered the plaintiffs’ objection that the costs were not taxable pursuant to Title 28 U.S.C. § 1920. As a matter of first impression for the court, it reviewed the varying case law among the jurisdictions but noted that since the section’s language was amended in 2008, “no court has categorically excluded ediscovery costs” under § 1920. Finding that the costs paid to third party vendors were necessary for highly technical services and not merely for the convenience of the parties, the court held they were properly taxable to the plaintiffs.
This case has received notable attention throughout the industry as is to be expected from a decision that rules the taxation of costs pursuant to Title 28 U.S.C. § 1920 is permissible for costs incurred using an ediscovery vendor. As the court noted in its decision, there have been several cases on both sides of the “cost fence,” but it could find no court decision that excluded ediscovery costs as being an appropriate consideration under § 1920 following Congress’ amendment to the language in 2008. The court discusses this point in footnote 6 of this decision, citing the following language: “[a] judge or clerk of any court of the United States may tax as costs the following: … fees for exemplifications and copies of papers” to “fees for exemplification and the costs of making copies of any materials.” (emphasis added in the court decision). Based on this language, the court concluded that it is proper to consider the costs incurred for ediscovery under this statute.
In affirming the award of costs, the court also noted specifically that the costs requested by the defendants were not associated with any legal fees charged by attorneys or paralegals for document review. Instead, the costs were for the imaging of nineteen hard drives and data processing of five custodians for one defendant and for the imaging of four servers which contained over 490 gigabytes of data and 270,000 files for the other defendant.
Among the cases the court cited that awarded the taxation of ediscovery costs was a decision from the Northern District of Georgia, CBT Flint Partners, LLC v. Return Path, Inc., 2009 WL 5159761 (N.D. Ga. Dec. 30, 2009). In that case, the defendants enlisted an ediscovery vendor to aid compliance with the production of 1.4 million electronic documents and six versions of source code. Due to the excessive cost and time connected with the collection of the documents, the defendants filed a motion to tax the costs associated with the use of the vendor. Overruling the plaintiff’s objections and ordering recovery of taxable costs, the court sent a strong message to ediscovery litigants. According to the court, the highly technical nature of ediscovery in the electronic age, more often than not, requires the use of outside vendors. Therefore the “[t]axation of these costs will encourage litigants to exercise restraint in burdening the opposing party with the huge cost of unlimited demands for electronic discovery.”
Throughout the opinion the court also noted the fact that the parties had entered into an extensive ediscovery Case Management Order agreed to by the attorneys. The ediscovery that occurred was in accordance with this agreement and many of the costs incurred by the defendants were due to sizeable requests by the plaintiffs. While perhaps not the driving decision for the court, the fact that there was an agreement in place the defendants abided by undoubtedly helped make their case for taxation of ediscovery costs. We have blogged numerous times about the importance of cooperation and entering into smart agreements regarding ediscovery. In order to make the most of the meet and confer process, counsel must be prepared and understand the client’s data universe that may be at issue. In addition, counsel should engage in early data assessment processes and technology to conduct such acts as testing keywords to determine if they are appropriate and will result in a targeted set of responsive data (in this case, one of the plaintiffs imposed over 442 search terms). Conducting ediscovery in a targeted, well-thought out manner will help control costs and reduce the amount of data that must then be reviewed.