ESI Discovery Costs Denied, Not Allowed As Taxable Costs in ERISA Lawsuit
Medina et. al. v. Catholic Health Initiatives, et. al., Case No. 13-01249 (D. Colo., Jan. 17, 2017) was a class action lawsuit filed against Catholic health care systems. The Plaintiffs alleged that the Defendants’ health plans did not qualify as a church health plans under ERISA requirements, and therefore, Defendants failed to meet funding and other requirements for non-ERISA health plans. Plaintiffs specifically argued that the Defendants’ plans were underfunded by hundreds of millions of dollars. The court granted summary judgment in favor of Defendants, finding that the plans were church plans, and dismissing all of Plaintiffs’ claims against all Defendants. Defendants then submitted their proposed bill of costs upon entry of judgment. After two hearings and further negotiations, the clerk taxed costs against Plaintiffs including over $75K in data management and processing costs associated with ESI discovery. Plaintiff objected to this category of costs, which were charges issued by an ESI vendor. The ESI vendor’s charges consisted of two things: 1) pre-process filtering, whereby raw data collected from various sources was processed and converted to a format for filtering and loading into a document review database so counsel could review for responsiveness and privilege; and 2) native processing, whereby the converted data was processed and filtered by applying search terms and by de-duplication so it could be loaded to the database.
Defendants contended that these processes were essential to handling the ESI in the manner Plaintiffs requested and to be consistent with the court ordered ESI protocol. Defendants argued that because the charges were necessary, they should be allowed as taxable costs under 28 U.S.C. Section 1920(4), which permits recovery of costs for making copies. The court, however, joined with the large number of federal courts that have determined that recovery of ESI discovery costs under that section is limited to those costs that actually constitute “making copies.” The court found that the costs incurred here for the management of data and the database did not constitute the making of copies, and therefore, granted Plaintiffs’ request to disallow the costs.