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The Same, but Different: Taxation of E-Discovery Costs under the Amended U.S. Code

Connor Cafferty

The Same, but Different: Taxation of E-Discovery Costs under the Amended U.S. Code
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28 U.S. Code § 1920 (“the taxation statute”) allows for taxation of costs. At the end of a typical case and at the discretion of the court, a prevailing party may bill costs to the loser. U.S. ex rel. Harry Barko v. Halliburton Co., et al., No. 19-7064, *2 (D.C. Cir. Mar. 27, 2020). And though the taxation statute once only provided for copying costs, it is now understood that these costs extend to certain e-discovery costs as well.

But how generous is this taxation statute when it comes to reimbursing the prevailing party for e-discovery-related expenses? In part, that’s what the U.S. Court of Appeals for the District of Columbia Circuit answered in Barko v. Haliburton. The court clarified what e-discovery and processing expenses are recoverable as litigation “costs” under the taxation statute.

In that case, the appellee won summary judgment and subsequently filed a bill of costs seeking over $100,000 in costs. The appellee sought to recover the associated costs to prepare, print, and scan into e-discovery software more than 171,000 potentially responsive documents totaling about 2.4 million pages. Over the appellant’s objections, the clerk taxed the full bill and the district court denied the appellant’s motion to retax. The appeal to the D.C. Circuit followed.

The appellee argued that Congress’s 2008 amendment of the taxation statute was intended to “make allowable both the costs of the copies themselves (whether hard copy or electronic) and the costs incurred in the process of making such copies.” The court rejected that argument, and reversed the district court in part.

The court said that the appellee was limited in the scope of e-discovery-related costs it could recover from the appellant. The costs the appellee sought came from five different stages in the e-discovery process:

  1. initial conversion (converting files from native to e-discovery-compatible format)
  2. subscribing to a hosting platform to facilitate various steps of e-discovery
  3. processing documents (organizing, keyword-searching, etc.)
  4. conversion from production (converting to shareable formats for production)
  5. production processing (i.e. drafting production of cover letters, etc.)

The court found that nearly all these costs were beyond the scope of what the taxation statute allowed the appellee to recover. The court said that Congress “allowed only for the taxation of costs of making copies.” Id. at *9. As such, only those costs associated with step (4) – converting electronic files to the production format, were taxable. The other steps associated with the process were not taxable because they were either undertaken for the convenience of the company or amounted to what the pre-digital discovery world would refer to as “doc review.” Id. Neither of these are allowed under the taxation statute.

The court affirmed that 28 U.S. Code § 1920 should be construed narrowly when taxing e-discovery copying costs. Many costs associated with the e-discovery process cannot be taxed under the taxation statute, including the cost of tasks taken on for convenience of the party, costs of reviewing documents, and cost of processing documents. The court confirmed that while the taxation statute was amended to allow for recovery of copies made in e-discovery, “none of the steps that preceded or followed the actual act of making copies in the pre-digital era would have been considered taxable, [and] such tasks are untaxable now, whether performed by law-firm associate or algorithm.” Id.