Bill of Costs was Approved in Part After Finding Certain E-Discovery Costs were Reasonably Attributed to Electronic Copying and/or Transcriptions

4 Oct 2022

In CONSUMER FINANCIAL PROTECTION BUREAU v. WELTMAN, WEINBERG, & REIS, CO., LPA., Case No. 1:17 CV 817 (N.D. Ohio, Eastern Div., Oct. 19, 2018), before the Court was Defendant’s Bill of Costs submitted pursuant to Fed. R. Civ. P. 54(d)(1) and 28 U.S.C. § 1920.

The total costs Defendant sought amounted to $67,379.08. Plaintiff challenged Defendant’s requests for several categories of expenses included within the submitted Bill of Costs. Plaintiff argued that Defendant submitted only $6,347.63 in reimbursable costs.

The Sixth Circuit recognizes “a presumption in favor of awarding costs” under Rule 54(d) and Section 1920. Soberay Mach. & Equipment Co. v. MRF Ltd., Inc., 181 F.3d 759, 770 (6th Cir. 1999). The presumption, however, only applies to those costs authorized under 28 U.S.C. § 1920. See, Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 445, 107 S.Ct. 2494, 96 L.Ed.2d 385 (1987); Colosi v. Jones Lang LaSalle Americas, Inc.,781 F.3d 293, 295 (6th Cir. 2015). 

Where costs are allowed, the “Court must exercise discretion in assessing costs, only allowing for materials ‘necessarily obtained for use in the case’. . . and in an amount that is reasonable.” Berryman v. Hofbauer, 161 F.R.D. 341, 344 (E.D. Mich. 1995). 

Plaintiff challenged Defendant’s request for reimbursement of expenses “related to hosting the e-discovery platform storing scanned and electronic documents,” and for “user licensing” and “date hosting”, which totaled $53,576.50. The supporting invoices showed that these charges included $50,123.10 in “user licensing” and “data hosting” expenses. Another $3,453.40 was attributed to expenses for loading and exporting data into “Relativity,” “volume creation,” processing, and “Audio File Transcription.”

Defendant included these costs in its request for costs under 28 U.S.C. § 1920(4), which covers copying and exemplification costs. Plaintiff argued, however, that these costs were not for exemplification or copying but for “data hosting,” “user licensing,” and other related expenses for maintaining and using an e-discovery database, and were, therefore, not authorized costs permitted by the statute.

Defendant cited the case of O’Donnell v. Genzyme Corp., in support of its position in favor of taxing such costs. The O’Donnell court awarded costs associated with the maintenance and management of electronically stored information because the plaintiff in that case “made the discovery requests that caused Defendants to create and keep electronically stored information at Defendant’s expense… [and] argued against Defendants efforts to reduce the ESI costs.” O’Donnell v. Genzyme Corp., 2016 WL 1165156, *2 fn. 14 2016 U.S. Dist. LEXIS 39456, fn. 14 (N.D. Ohio 2016). The O’Donnell court did not explain how these expenses qualified as copying expenses or otherwise fit the requirements of 28 U.S.C. § 1920(4).

Defendant also cited In re Aspartame Antitrust Litig., 817 F.Supp.2d 608, 615 (E.D. Pa 2011), which consolidated numerous class action complaints against a variety of defendants. That court found that “in cases of this complexity, e-discovery saves costs overall by allowing discovery to be conducted in an efficient and cost-effective manner” and “allows parties to ‘save costs associated with manually producing, handling, storing, and delivering thousands (and often millions) of pages of hard-copy documents’” to multiple parties. 

The present Court found the case at issue was distinguishable from the cases Defendant cited. There was no evidence or argument that the need for the electronic discovery system was caused by the Plaintiff, or that it was more cost effective than copying and distributing information in a more traditional manner. There were not multiple plaintiffs and defendants, which would have exponentially increased the copying costs required.

In addition, Defendant did not submit an affidavit or other information that would have allowed the Court to determine which portions of these costs were necessary to the case, and which were merely for the convivence of the attorneys.

Finally, there was no indication in the Bill of Costs or the supporting documents filed by Defendant that the costs for “user licensing” and “data hosting” were incurred for the actual copying or imaging of any papers or other form of discovery materials necessarily obtained for use in the case, which is required by the plain language of 28 U.S.C. § 1920. Rather, Defendant stated that these costs were incurred to maintain a database used for the storage and to assist Defendant’s review of the materials, neither of which was recoverable under the statute.

The Court found that although the information contained in the system was necessary for use in the case, there was nothing to support a finding that the licensing and hosting costs included, or were limited to, the actual copying of materials necessary to the litigation of the case. The summaries provided did not sufficiently explain the purpose and scope of the licensing and data hosting fees.

Defendant did not claim that this electronic information management system was less costly than traditional paper discovery would have been under the circumstances of this case. They also did not provide any explanation as to why, in this type of case, electronic document management was necessary, rather simply a permissible means of facilitating attorney review. The Court was accordingly bound to follow the plain language of the current statute and the dictates of the Sixth Circuit, both of which lead to the denial of $50,123.10 in charges for “user licensing” and “data hosting” sought by the Defendant.

Another $3,453.40 sought under Section 1940(4) was attributed to expenses for loading and exporting data into “Relativity,” “volume creation,” processing, and “Audio File Transcription.” Although Defendant did not explain or itemize these costs as clearly as the Court would have preferred, it was reasonable to infer, based on the services described in the invoices and Defendant’s limited explanation, that these charges qualify as copying or transcription costs that were recoverable under Section 1920(2) and (4).

Data conversion, audio transcription, and export of data, all suggested a replication of data that would fit the broader definition of electronic “copying” adopted by the Sixth Circuit in Colosi. The Court, therefore, found that $3,453.40 of the costs sought under Section 1920(4) was reasonably attributed to electronic copying and/or transcription costs necessary for use in the case at hand.