Federal Circuit Clarifies Standard for Recovery of eDiscovery Costs

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As many recent litigants know, the costs of eDiscovery can be enormous. Therefore, the ability to recover those costs can have a significant impact on a company’s bottom line – from tens to hundreds of thousands of dollars. In a recent case, CBT Flint Partners, LLC v. Return Path, Inc., 2013-cv-1036 (Fed. Cir. December 13, 2013), the U.S. Court of Appeals for the Federal Circuit addressed the recoverability of eDiscovery costs. This decision is important because it offers a guideline for making such determinations, and also purports to be “consistent with” other circuits that have interpreted section 1920(4).

By way of background, 28 U.S.C. § 1920 enumerates certain expenses that a federal court may tax as a cost under the discretionary authority found in Rule 54(d). Among those expenses are “the costs of making copies of any materials where the copies are necessarily obtained for use in the case.” 28 U.S.C. § 1920(4). District courts have been all over the map when deciding what constitutes “making copies” for purposes of recovering taxable costs associated with eDiscovery.

In CBT Flint, the Federal Circuit analyzed the legislative history of section 1920, and reviewed the Sedona Conference principles and other federal court decisions. The opinion contains a detailed analysis regarding which costs are recoverable under section 1920(4). In a nutshell, the Federal Circuit found that section 1920 applies only to documents produced pursuant to Rule 26 or other discovery rules, and thus does not apply to documents a party creates for its own litigation or other use. The Federal Circuit broadly stated the guideline as follows:

" [R]ecoverable costs under section 1920(4) are those costs necessary to duplicate an electronic document in as faithful and complete a manner as required by rule, by court order, by agreement of the parties, or otherwise . . . . But only the costs of creating the produced duplicates are included, not a number of preparatory or ancillary costs commonly incurred leading up to, in conjunction with, or after duplication.

Opinion at p. 9. The Federal Circuit’s focus was on whether various tasks were necessary to fulfill a party’s discovery obligations. As the court acknowledged, “[j]udgment calls in the nature of line-drawing are required.”

Here are some of the guidelines set forth in the opinion:

  • If a party must convert electronic documents to a uniform production format (e.g., TIFF, or with metadata included), those steps are considered “making copies” for purposes of recovery. If such processing steps are unnecessary, they are not recoverable. For example, if metadata can be preserved without first using imaging and extraction techniques, then those additional steps are not recoverable; 
  • If a vendor works on a large volume of documents before culling to produce only a subset, awarded costs must be confined to the subset actually produced; 
  • Costs incurred in preparing to copy are generally not recoverable. For example, keyword searching, reviewing documents for responsiveness and privilege, training to use review software, etc. are not recoverable. Rather, they are part of “the large body of discovery obligations, mostly related to the document-review process, that Congress has not included in section 1920(4).” 
  • Deduplication and decryption costs are not recoverable. 
  • The creation of “load files” is covered to the extent those files contain information required by the requested production. 
  • The costs of slip sheets are recoverable. 
  • The costs of copying responsive documents to production media are recoverable.

The opinion contains a dissent from Circuit Judge O’Malley, who would impose an even more restrictive interpretation of taxable costs under section 1920. He accused the majority of “rewrit[ing] § 1920 to address the increasing cost of electronic discovery [which] is not our role.”