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  • Circuit Split Exists Regarding Costs of E-discovery under 28 U.S.C. § 1920(4)

    Over the past several years, the various circuits have been split regarding the costs of litigation associated with the scanning and printing of electronic documents. The source of the conflict is derived from Federal Rules of Civil Procedure (“Rule”) 54(d)(1) and 28 U.S.C. § 1920 (“§ 1920”) also known as the Cost Statute. Rule 54(d)(1) states that the “prevailing party” may recover litigation costs “unless a federal statute these rules, or a court order provides otherwise.”  In the e-discovery context, the cost that has been particularly at issue is under 28 U.S.C. § 1920 subsection (4) (“§ 1920(4)”).  This provision states that courts may award costs associated with the copying of documents. However, the circuits have been divided as to whether “copying” under 28 U.S.C. § 1920 (4) refers only to the copying of hardcopy documents, or whether it also includes the scanning and printing of electronic documentation.

    The Fifth Circuit and Seventh Circuit have held that the production of electronic documents for review is a necessity, not a “convenience,” for opposing counsel. Accordingly, these Circuits have held the costs associated with this type of production fall under the Cost Statute and should be taxed.  For example, in Richo Co. v. AMI Semiconductor, 661 F.3d 1361 (Fed. Cir. 2011), the Fifth Circuit held that the Cost Statute extends to all “costs of producing a document electronically.” Similarly in the Seventh Circuit case, Hecker v. Deere, 556 F.3d 575 (7th Cir. 2009), the Seventh Circuit affirmed the district court’s decision and awarded $ 164,814.43 in costs associated with the selection and conversion of electronic documents.

    Acknowledging the increasing costs of discovery, the majority of the federal circuits have generally followed the approach of the Fifth and Seventh Circuits by awarding the prevailing parties at least some of the costs relating to electronic data. However, in the Third Circuit case, Hoosier Racing Tire Corp. V. Race Tires America., Inc.,  614 F.3d 57 (3d Cir. 2010), the Court held that § 1920(4) only applied to the “scanning of hard documents, the conversion of native files to TIFF, and the transfer of VHS tapes to DVD.” This narrow interpretation created a stir among the circuits. Due to the large debate that ensued, the prevailing party of Hoosier filed a petition for certiorari with the Supreme Court on June 14, 2012, asking the Court to define the scope of recoverable costs as to the production of documents during electronic documents.

    Although the Supreme Court denied cert on Hoosier in the Fall of 2012, the effects of Hoosier and the circuit split still live on. Recently, the Fourth Circuit in Country Vintner of North Carolina, LLC v. E. & J. Gallo Winery, Inc., No. 12-2074, 2013 WL 1789728 (4th Cir. April 29, 2013), denied the defendant’s e-discovery costs. Relying on Hoosier, the Fourth Circuit held the scope of § 1920(4) does not extend to Electronically Stored Information (“ESI”) processing charges. In its decision, the Court stated that “copying” under § 1920(4) does not include electronic documents.

    With the circuits not getting any closer to a uniform decision, stay tuned as other circuits weigh in on this critical issue.

    If you or your company has any questions or concerns regarding e-discovery related issue, contact James G. Ryan at jryan@cullenanddykman.com or via his direct line at (516) 357-3750.

    A special thanks to Melissa Cefalu a law clerk at Cullen and Dykman LLP, for help with this post.