Court Rules Against Taxing ESI Costs Related to Building and Maintaining ESI Database
In Associated Electric & Gas Insurance Services, et. al. v. BendTec, Inc., Case No. 14-1602 (D. Minn., Feb. 24, 2016), Defendant filed a motion to review the court’s denial of certain ESI costs. Plaintiffs had sued Defendant, claiming $30 million in damages due to foreign objects in Defendants’ fabricated piping. The court entered judgment for Defendant, and Defendant filed a bill of costs.
Plaintiff objected to certain items in the bill of costs, and the court agreed, denying over $125,000 in ESI costs for creating and maintaining an electronic database to 1) hold documents produced by Plaintiffs, and 2) collect and secure its own documents. Defendant built a platform to host the documents in viewable format and hired a security firm to process and secure its own data for production.
The court noted that it had to review the order under an “abuse of discretion” standard, and that 11 U.S.C. § 1920(4) allows fees for “exemplification and the costs of making copies.” The court also noted that the Eighth Circuit had not yet ruled on the issue but that other courts had addressed it and found that such costs are only recoverable if they qualify as “exemplification fees” or “the costs of making copies.” The “costs of making copies” could include TIFF conversion and scanning to create digital duplicates, but not processing of electronically stored information or keyword searching ESI. Other Eighth Circuit courts had held that costs associated with storing ESI were not recoverable. Following this precedent, the court denied the disputed ESI costs.