Federal Circuit Court Emerging on Electronic Discovery Federal Rules and Cost Taxation

A November 23, 2011 decision published by the U.S. Court of Appeals for the Federal Circuit has shed new light on interpretation of federal rules relating to electronic discovery and cost taxation. This decision adds to an evolving body of case law regarding e-discovery.  As an e-discovery company, Advanced Discovery aims to educate you on the emerging e-discovery industry.

electronic-discovery-federal-rulesThe Decision

In re Ricoh Company, Ltd., Patent Litigation, the U.S. Court of Appeals for the Federal Circuit in Washington DC disallowed $557,217 in e-discovery costs awarded to prevailing party, Synopsys, by the San Jose US District Court upon granting its’ motion for summary judgment of non-infringement. Ricoh challenged Synopsys’ bill of costs, the amount of which exceeded one million dollars, claiming three categories of costs should not be allowed under 28 USC §1920. Applying the law of the Ninth Circuit (the regional circuit in this case) in ruling on Ricoh’s challenges, the court taxed costs of $938,957.72 against Ricoh under Rule 54(d) of the Federal Rules of Civil Procedure, which allows for an award of non-attorney’s fees costs to the prevailing party.

Although the appeals court found the district court had properly awarded costs for making certain requested e-mail available under §1920(4), it also found the district court had improperly disregarded the parties’ agreement to share in such costs. Therefore, it reversed $234,702 of the award (Synopsys’ share of this cost) and vacated $322,515 for the cost of “electronic copies,” due to inadequate documentation of which amounts were for the purpose of response to discovery requests and which amounts were for other litigation purposes.

Taxation of e-Discovery Costs

The application of §1920(4) to e-discovery expanded when Congress amended this section in 2008. Where this law previously allowed taxation only for “fees for exemplification and copies of papers,” the 2008 amendment allows taxation for “fees for exemplification and the costs of making copies of any materials where the costs are necessarily obtained for use in the case.”

Although “exemplification” can be considered to mean simply copies of required documents, it lacks specificity as to electronic production of documents. Some experts feel that parties should agree on its meaning and application to e-discovery costs at the outset.

Also, the words “necessarily obtained” seem both open to interpretation and subject to dispute. If an attorney could have performed the tasks that incurred such costs themselves, it has been argued, then such amounts should be considered “attorney’s fees” and excepted from an award of costs to prevailing parties under Rule 54(d).

Adequate Documentation of Costs

The appeals court cited a lack of detail in Synopsys’ documentation supporting its cost for “electronic copies,” stating: “…the prevailing party must establish…that the reproduced documents were produced by it pursuant to Rule 26 or other discovery rules; that they were copied at the prevailing party’s expense and at the request of the opposing party; and that the copies were tendered to the opposing party.”

Because the firm representing Synopsys had changed during the litigation, lack of specific information as to certain costs incurred may be due to lack of access to records supporting those costs. This should be a cautionary tale, not only for attorneys and their litigation teams but also for the vendor and consulting companies that support them, to compile and maintain defensible descriptions of all costs incurred in e-discovery. Such costs may later be awarded and reported in detail on a bill of costs.

e-discovery-cost-shiftingEvolving Thought Processes

Parties involved in litigation are not generally focused so far in the future that they anticipate, at the time of discovery, possibly having to pay the other side’s bill. The focus is toward prevailing on summary judgment or at trial, not “what if” mechanics should the other side prevail.

If the parties employ “what if” thinking in constructing their discovery requests, however, and consider that what they request from the other side now might come out of their pocket later; this kind of forward thinking may help toward reducing the overall cost of discovery by requiring focus on targeted e-discovery requests that are most likely to lead to relevant information.

As the Federal Circuit Court continues to issue rulings from its unique position and to construct models that impact e-discovery (such as Chief Judge Randall R. Rader’s e-discovery model order for patent cases), choosing an e-discovery provider that understands their impact is crucial. For strategies to defensibly reduce e-discovery costs, call Advanced Discovery at (866) 560-5898 or visit the Contact Us section of our website.

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