Defendants’ Motion to Review Taxation of Costs Denied After Court Found Costs Did not Fall Within Categories of Awardable Costs Listed in 28 U.S.C. § 1920

12 Sep 2022

In OBESLO v. GREAT-WEST CAPITAL MANAGEMENT, LLC., Civil Actions Nos. Civil Action Nos. 16-cv-00230-CMA-SKC, 16-cv-01215-CMA-SKC, 16-cv-03162-CMA-SKC (D. Colorado, Aug. 25, 2021), before the Court was Defendants’ Motion to Review Taxation of Costs.

This case was a shareholder derivative action brought under the Investment Company Act (“ICA”). After an 11-day bench trial, the Court entered judgment in favor of Defendants. Defendants then filed a Proposed Bill of Costs that sought $573,635.21 in litigation expenses. After the consideration of both sides’ briefs on the issue, the Clerk of Court awarded Defendants $151,362.89 in costs.

Defendants challenged the Clerk’s cost award. Defendants argued that the Clerk erred by declining to award certain costs related to electronic discovery, trial exhibit preparation, and recorded depositions. Plaintiffs countered that these costs were not awardable because they did not fall within the categories of awardable costs listed in 28 U.S.C. § 1920.

Federal Rule of Civil Procedure 54 provides that “[u]nless a federal statute, these rules, or a court order provides otherwise, costs—other than attorney’s fees—should be allowed to the prevailing party.” Fed.R.Civ.P. 54(d)(1). However, not every litigation expense is an awardable “cost.”

Generally, only the expenses enumerated in 28 U.S.C. § 1920 may be awarded as “costs” under Rule 54(d). These costs include:

“(1) Fees of the clerk and marshal;

(2) Fees for printed or electronically recorded transcripts necessarily obtained for use in the case;

(3) Fees and disbursements for printing and witnesses;

(4) Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case;

(5) Docket fees under section 1923 of this title;

(6) Compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under section 1828 of this title.”

28 U.S.C.A. § 1920.

Defendants argued that the Clerk erred by declining to award “(1) $233,008.43 for services related to the copying and production of electronically stored information (`ESI’) Plaintiffs requested” among other costs.

Defendants sought reimbursement of $297,713.93 paid to a third-party vendor to help process information and documents that were responsive to Plaintiff’s discovery requests. The Clerk awarded Defendants just a fraction of that amount – $64,707.50 – for uploading ESI and converting it a usable format. Defendants argued that the Clerk erred by failing to award them the full amount requested.

Under 28 U.S.C. § 1920(4), a prevailing party can recover “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). When a case involves ESI, this provision allows a party to recover some costs related to the processing of ESI.

However, not all costs associated with the processing of ESI is recoverable under § 1920. Taxable e-discovery costs under § 1920(4) are generally limited to “the costs of making copies, including the cost of initially uploading data and converting native files to other formats, such as TIFF and PDF.”

When applying these principles, the Clerk reviewed the vendor bills in question and found that only two line-items qualified as “costs of making copies” under § 1920(4), which totaled: $36,625 to “Create Tiff, Endorse, and Produce” and $28,080.50 for “native processing”. The Clerk awarded these costs, but declined to award the remaining line-items, which included costs for things like “Technical Analyst/Litigation Support,” “Project Min Chrg,” “External Hard Drive,” and “Project Manager.” The Court found no error in this decision.

Expenses that were not specifically authorized by statute are not recoverable costs. Section 1920 does not allow the Clerk to award costs “associated with the making of copies, or even [costs] necessary to the production of copies. In fact, even costs that “may have prompted efficiency and economy in the discovery process” are not necessarily recoverable.

Rather, “[t]he language of the statute is narrow and controlling.” The statute provides that only the “costs of making copies” are recoverable. 28 U.S.C. § 1920(4). The Court found in this case that the Clerk properly limited awarded such costs and decided to award costs that fell outside the statute’s narrow cost allowance.

Defendants argued, however, that because the ESI in question was responsive to Plaintiffs’ discovery requests, Plaintiffs should pay the cost of processing that ESI: “Plaintiffs made the choice to demand an exceedingly broad and expensive ESI collection effort . . . [and] Defendants incurred substantial costs through the retention of a third-party vendor to process the ESI Plaintiffs demanded of them.”

The Court found this argument to be unavailing. The Court reasoned that discovery costs do not become awardable merely because “the expansiveness of the opposing party’s discovery requests may have contributed to the need for them.” Medina v. Catholic Health Initiatives, 2017 WL 219314 at *1. “Absent specific statutory authorization,” discovery costs are not recoverable – regardless of how “viscerally compelling” a party’s contrary arguments were. 

The Court found that in this case, the Clerk correctly concluded that there was no “specific statutory authorization” for the remaining e-discovery costs Defendants sought, and the Clerk properly declined to award those costs.

Defendants argued, however, that this Court’s decision in Comprehensive Addiction Treatment Center, Inc. v. Leslea, 11-CV-03417-CMA-MJW, 2015 WL 638198 (D. Colo. Feb. 13, 2015), compels the opposite conclusion. The Court disagreed.  In Leslea, the defendant retained an “outside consultant to retrieve and convert [] ESI into a retrievable format.” Leslea, 2015 WL 638198 at *1. The Court found that these costs amounted to “the costs of making copies,” and were therefore awardable under Section 1920(4).

Here, by contrast, Defendants sought reimbursement for numerous expenses that cannot fairly be called “the costs of making copies” – including expenses like “Technical Analyst/Litigation Support,” “Project Min Chrg,” “External Hard Drive,” and “Project Manager.” Unlike the costs that were awarded in Leslea, the expenses here did not fall within the narrow cost allowance set forth in Section 1920(4). Therefore, the Clerk correctly concluded that these charges were not awardable.