Federal Court Awards $367k in E-discovery Costs to Prevailing Parties

 Duane Morris reported today concerning a decision in Race Tires America, Inc. v. Hoosier Racing Tire Corp., 2011 U.S. Dist. LEXIS 48847 (W.D. Pa. May 6, 2011). There, the U.S. District Court for the Western District of Pennsylvania held that the prevailing defendants at trial  may recover a whopping $367,000 in e-discovery costs because such costs are the modern-day equivalent of duplication costs.  Although the court took care to limit its ruling to the "unique" facts associated with this case, should litigants consider more narrowly tailoring their discovery requests and seeking early agreement on the scope of electronic productions?  Following an affirmance of an award of summary judgment to defendants by the Third Circuit, the defendants sought to recover their costs—the vast majority of which were related to e-discovery. The plaintiff objected, contending that the costs were not taxable pursuant to 28 U.S.C. § 1920(4), which permits recovery of "[f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case." The issue before the district court was the applicability of § 1920(4) to electronically stored information, an issue which has not yet been addressed by the Third Circuit. In its ruling, the district court first focused on the words "exemplification" and "copying." While recognizing that these terms "originated in and were developed in the world of paper," it viewed the steps a vendor takes to produce electronic data as the "electronic equivalents of exemplification and copying."  Defendants were able to demonstrate that plaintiff  aggressively pursued e-discovery under the case management plan, and the court found that the requirements and expertise necessary to retrieve and prepare documents for production were an indispensable part of the discovery process.  Although the district court limited the holding to the facts presented by the case, it is likely that the expanded view of 1920(4) will be debated in other district courts around the United States in the months to come. Although many courts have attempted to allocate the costs of e-discovery fairly before a party undertakes this obligation, this cases suggests that courts may seek to revisit the allocation of e-discovery costs following entry of judgment.  According to the decision, it is up to the party seeking to recover these costs to demonstrate that the costs at issue were incurred for the sole purpose of complying with an adversary’s demands rather than, for example, improving the appearance of documents for trial presentation purposes.