Taxing eDiscovery Costs – Ask For About a Million, Get $22k

AAA

Another case on the recovery of eDiscovery costs as “taxable costs!”  Twenty-three customers of an insurer sued the company, alleging that it “treated them unfairly by applying outdated scoring algorithms to calculate their insurance premiums, thus violating Illinois’ Consumer Fraud and Deceptive Business Practices Act.”  The plaintiffs tried for class certification (unsuccessfully), and eventually all of them voluntarily dismissed their claims with prejudice– albeit two putative class representatives held out longer than the rest.

The insurance company, having prevailed in the case, sought to recover its costs from two of the plaintiffs– the above-mentioned holdouts.

The largest item on the insurance company’s Bill of Costs was $958,518 for “”Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case,” which are “compensable” under  28 USC §1920 (4). From the opinion:

Broken down further, the $958,518 comprises four smaller totals. For ‘processing and producing electronic copy documents necessarily obtained for use in this case,’ Allstate’s costs are $896,699. Allstate paid third-party provider KPMG that amount for converting documents from one electronic format into another, more searchable form. Allstate paid KPMG $21,587 ($21,297.47 for “External Duplicating” and $290.30 for “Internal Duplicating”) for processing and producing hard copies for use in the case. Finally, Allstate paid KPMG $40,232.18 for “exemplification necessarily obtained for use in this case.”

Thus, the million (or, in this case, $958,518) dollar question in the opinion was one that keeps popping up in recent case law– what eDiscovery related expenses are recoverable “costs?”

After a great discussion of Hecker  and other law on-point, the Court held that only “the costs of converting data into readable format are compensable,” and went line-by-line through the following Bill of Costs to parse out what exactly was a recoverable eDiscovery cost:

    Creation of Litigation Database,
A   processing of ESI, extraction of    $ 129,243.00
    metadata, & rendering ESI word
    searchable
B   Deduplication of ESI                $ 131,127.00
C   Creation of TIFF images             $  34,332.00
D   Electronic Data Hosting             $ 498,050.00
E   Preparation of Productions of ESI   $ 103,947.00
F   Creation of Hard Copy Productions   $  21,297.47
G   Photocopies                         $     290.30
H   Graphics used at Hearings           $  40,232.18
    Subtotal: Exemplification &
    Copies of Any Materials             $  958,518.95

Which ones made the cut?  Well, only the following were equated to “copies” under the cost statute,:

  • Creation of TIFF images (explanatory footnote: “”Tagged Image File Format,” a file format that is easily searchable for specific terms.”)
  • Creation of Hard Copy Productions
  • Photocopies
  • Graphics used at Hearings

These costs were then awarded against the two hold-out plaintiffs for a total joint-and-several liability tab of $22,213.20.   You can be sure that there will be more case law (and maybe some legislation) on the taxation of eDiscovery costs, and we’ll keep you updated!

  • Email
  • Facebook
  • Twitter
  • LinkedIn
  • RSS

Leave a Comment