Motion To Tax Costs Denied To The Extent Certain Costs Were Part Of Non-Taxable Preparatory Steps Preceding Actual Production
- ILS Team
CARE ONE MANAGEMENT, LLC v. UNITED HEALTHCARE WORKERS EAST, No. 12-6371 (SDW) (D. NJ. June 26, 2020) was a Clerk’s opinion granting in part and denying in part Defendant’s motion to tax costs following entry of judgment. Defendant sought, among others, costs of making copies pursuant to 28 U.S.C. § 1920(4).
According to the parties’ Production of Documents Protocol, documents were to be produced as TIFF image files for black and white, and JPEG files for color documents. Defendants sought reimbursement of $47,031.17 and described them as costs “for scanning of hard copy documents and converting native files to image files (TIFF/JPEG) for production to Plaintiffs under the parties’ Production of Documents Protocol.” Defendants stated that its vendor’s invoice for “imaging” was for the cost of scanning hard copy documents and/or converting native files to image files (TIFF/JPEG), and that its vendor’s invoice for “file conversion” and “processing for image review” was for the costs of conversion of native files to image files (TIFF/JPEG). Included in Defendants’ request were also the invoiced costs of “technical labor,” which counsel represented as “the costs of technical time for performing image/TIFF conversion.”
Plaintiffs did not oppose taxing the costs of the “File Conversion” entries on the vendor’s invoices. However, Plaintiffs objected to the bulk of Defendants’ request, contending that at least $42,970.83 of such costs should be disallowed. Plaintiffs objected as taxable: items invoiced between February 7 and March 31, 2014; for invoices post-dating March 31, 2014, all costs of “Imaging” and “Processing for image review”; and costs of “Technical Labor.”
The parties agreed that the taxability of the requested costs is controlled by the Third Circuit’s binding decision in Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir. 2012), widely recognized as one of the most restrictive decisions in the nation on this topic. In Race Tires, the Third Circuit held that only the costs incurred for the physical preparation of ESI were taxable reasoning “that is because Congress did not authorize taxation of charges necessarily incurred to discharge discovery obligations. It allowed only for the taxation of the costs of making copies.” Citing Camesi v. Univ. of Pittsburg Med. Ctr, 673 F. App’x 141, 148 (3d Cir. 2016), the Clerk stated that the Third Circuit subsequently clarified its Race Tires ruling such that “[e]ven the term `scanning,’ as used in Race Tires, applied only to the `scanning of hard copy documents’ as `making copies’ for the requesting party.”
As to the invoices dated February 7-March 31, 2014, Plaintiffs argued such invoices were not allowable because they “were not incurred for the purposes of making copies of documents in order to produce them to Plaintiffs in discovery,” but rather, “for the purpose of collecting and reviewing documents in anticipation of a future document production.” The Clerk agreed. Looking at a docket entry during that time frame, the Clerk pointed to a status report from Defendants’ counsel to the Court in which counsel indicated that Defendants collected more than 2 million documents from 77 custodians and that Defendants had ingested that into their review platform and were in the process of reviewing the collection. In the letter, counsel also estimated that they were approximately two months from being able to produce a “critical mass” of documents and that the processing of ingesting the data into the review platform was a step that “preceded actual review and production of materials.”
Based upon Defendants’ counsel’s status report, the Clerk determined that Defendants were clearly in the preparatory stages of discovery preceding actual production and in accordance with Race Tire, these were non-taxable preparatory steps. The Clerk also dismissed Defendants’ argument “[i]t would defy common sense — and standard discovery practice — to incentivize parties not to scan hard-copy documents or convert electronic files to accessible image formats until after all document review has been completed, as that would further slow down the discovery process.” The Clerk citied again to Race Tire that “Congress did not authorize taxation of charges necessarily incurred to discharge discovery obligations. It allowed only for the taxation of the costs of making copies.”
Plaintiffs also argued for the disallowance of costs which the vendor described as “Imaging” and “Process for image review,” that do not otherwise indicate that the charges were for scanning hard copies or converting file formats. The Clerk agreed and found that the vendor’s services of “Process for image review” were non-taxable under the Race Tires where the Third Circuit clearly equated “processing” with services leading up to the actual copying of documents. Similarly, the Clerk also viewed the phrase “image review” as suggesting a step prior to the actual copying and production of documents. The Clerk did, however, allow two entries which appeared to be the scanning of two documents.
Finally, Plaintiffs challenged costs labeled as “Technical Labor.” The Clerk agreed that almost of all charges for “Technical Labor” were not taxable including an entry for “TIFF Conversion/OCR/Concordance” which the Clerk stated was associated with underlying activities that are non-taxable under Race Tires.