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Courts Split in Award of Electronic Discovery Costs to Prevailing Party

Posted in Recent Cases, Supreme Court

Electronic discovery is one of the greatest expenses of modern litigation, encompassing a wide range of actions including electronic scanning, metadata extraction, electronic file conversion, optical character recognition scanning (OCR), using a third-party to collect network files; and costs for the conversion of paper documents into electronic files.  It should come as no surprise then that Courts are increasingly being asked to determine what electronic discovery expenses  may be recovered by a prevailing party in federal court under 28 U.S.C. § 1920, which authorizes the recovery of, inter alia, “fees and disbursements for printing and witnesses” and “fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.”

The Third Circuit, in March of this year, reduced a cost award on appeal by $95,000, excluding costs of the prevailing party’s vendor which were attributable to data collection, preservation of metadata, keyword searching, culling, and production.  Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir. 2012)  (PDF).  A petition for writ of certiorari  to appeal that decision is currently pending before the United States Supreme Court on the issue of whether the Third Circuit erred in concluding that only “scanning and file format conversion can be considered ‘making copies’” under Section 1920(4). (PDF)  That petition highlights the different approaches throughout the Circuits, including that of the Fifth Circuit in affirming an award of costs for optical character recognition scanning (OCR), which expenses were disallowed as costs in Race Tires.  See Rundus v. Dallas,  2009 U.S. Dist. LEXIS 101429, at * 7 (N.D. Tx. Nov. 2, 2009) (PDF), affirmed by 634 F3d 309 (5th Cir. 2011) (PDF). 

Just a few weeks after the Third Circuit’s decision, the Northern District of California expressly declined to follow the Third Circuit’s decision in Race Tires and applied a broad construction of § 1920 to award over $700,000 in electronic discovery costs to the prevailing party.  In re Online DVD Rental Antitrust Litig., 2012 WL 1414111 (N.D. Cal. Apr. 20, 2012) (PDF).  This award of costs is currently on appeal to the Ninth Circuit Court of Appeals.

Find out how the Sixth Circuit has treated the costs associated with electronic discovery under §1920 after the jump.

Under a previous version of §1920, the Sixth Circuit held that the district court did not abuse its discretion in awarding costs for electronic scanning and imaging.  BDT Products, Inc. v. Buro-Datentechnik GMBH & Company KG, 405 F.3d 415, 420 (6th Cir. 2005) (PDF).  That issue is again before the Court in Frye v. Baptist Memorial Hospital, Case No. 12-5371, in which the appellant urges the Sixth Circuit to refuse recovery to the prevailing party its costs for OCR. (PDF)   Whether the Sixth Circuit will take the opportunity to clarify the precise scope of electronic discovery charges recoverable as costs under 28 U.S.C. §1920, whether it will rely on its prior precedent in BDT, or whether the United States Supreme Court will accept the petition for writ of certiorari in Race Tires and resolve the contours of electronic discovery costs remains to be seen.