A party that prevails in federal court may be entitled to recover some e-discovery costs, but only those directly related to making copies. The U.S. Court of Appeals for the D.C. Circuit is the latest jurisdiction to weigh in on which tasks constitute “the costs of making copies” for the purpose of recovery pursuant to 28 U.S.C. § 1920(4) (Section 1920), the statute that governs post-litigation cost awards in federal district court. Falling in line with similar decisions in other jurisdictions, the D.C. Circuit held in U.S. ex rel. Barko v. Halliburton that Section 1920 applies to electronic file conversion costs, but not to hosting, organizing, or Bates stamping documents. ABA Section of Litigation leaders say the decision emphasizes that Section 1920, which was last revised in 2008, is out of touch with the practical realities of e-discovery in 2020.
In Barko, defendant KBR prevailed at summary judgment, defeating a False Claims Act suit that alleged it had inflated costs and accepted kickbacks while administering military contracts in wartime Iraq. The litigation was lengthy and contentious, with 2.4 million pages of documents produced. Accordingly, the district court awarded KBR more than $100,000 in costs pursuant to Section 1920.
When the plaintiff appealed to the D.C. Circuit, KBR argued that it was entitled to reimbursement of more than $65,000 for “the costs of making copies.” Part of its argument was that the Judicial Administration and Technical Amendments Act of 2008 (the 2008 Act) expanded Section 1920 to include electronic document discovery costs when it replaced the word “papers” with “materials.” But the plaintiff objected, arguing that Section 1920 was still limited only to the costs incurred in making copies.
The court held that the 2008 Act did not expand Section 1920’s application beyond “making copies” that were “necessarily obtained for use in the case.” In support of that position, it cited commentary from the 2008 Act’s authors, who stated their intent that the revision have a “limited effect.”
The court rejected taxation of costs associated with “converting files from their native formats into a format compatible with an e-discovery hosting platform.” It also rejected taxation of the defendant’s e-discovery hosting platform subscription fee, costs associated with “organizing, keyword-searching, and Bates stamping” documents, and costs arising from “drafting production cover letters and shipping discovery materials to opposing counsel.” The court stated that these costs were not taxable, either because the defendant did not incur them out of necessity as required by the statute or because they preceded or followed “the actual act of making copies.”
The Barko decision aligns with several other recent interpretations of Section 1920. For example, in CBT Flint Partners, LLC v. Return Path, Inc., the U.S. Court of Appeals for the Federal Circuit vacated an award for more than $240,000 in e-discovery costs because some of the tasks (such as deduplication and keyword searching) were not “the 21st Century equivalent of making copies.” And in Race Tires America v. Hoosier Racing Tire Corp., the U.S. Court of Appeals for the Third Circuit vacated an order taxing all of one prevailing party’s e-discovery costs, which exceeded $240,000, for the same reason. For another prevailing party in the same case, it reduced the taxation from more than $125,000 to approximately $30,000, because only those costs were for tasks that “involved copying.”
Section of Litigation leaders see these cases as a signal that Section 1920 has not kept pace with technological advancements in discovery practice. “E-discovery and electronic filings [require] different processes than paper-based discovery and practices,” observes Eleni C. vanRoden, Bel Air, MD, Newsletter Subcommittee Editor of the Section’s Solo & Small Firm Committee. Marc J. Zucker, Philadelphia, PA, cochair of the Section’s Commercial & Business Litigation Committee, agrees, noting that the applicable statute has failed to bring the “policy considerations underlying taxation of costs into the 21st century.” The Barko case put the court “in the awkward position of figuring out which e-discovery functions mimic more traditional functions,” says Zucker.
Some Section leaders believe that the taxation of e-discovery costs may affect settlement negotiations. For example, it may now make more sense for a litigant to ask an adversary to consider settlement before incurring taxable e-discovery costs, suggests Ronald J. Hedges, New York, NY, cochair of the Section’s Pretrial Practice & Discovery Committee. vanRoden agrees that e-discovery costs may play a greater role in deciding to settle and hopes decisions like Barko will “assist parties and attorneys to be more realistic about their case and the potential outcomes of it.”
But in “the heat of a lawsuit,” litigants cannot necessarily rely on these decisions to affect settlement leverage because they cannot assume they “will be a prevailing party, or that a case won’t settle, or even that an assessment of costs will be collectible at the end of the case,” Zucker adds. Hedges agrees, noting that it is “a little speculative to be concerned about what is taxable” at an early stage of litigation. Furthermore, he notes, Barko is not precedent in state court disputes, and thus has no effect on litigants in those cases.
Richard D. Rivera, Jacksonville, FL, Membership Chair of the Section’s Young Advocates Committee, identifies another potential impact. Rivera believes that decisions like Barko may put smaller or less wealthy parties at a disadvantage because it may pressure them “to go on the offensive, seeking protective orders or trying to get the larger businesses that are their adversaries to share or cover e-discovery costs,” which they might not otherwise be able to recover after litigation concludes.
