United State District Court determined, as a matter of first impression, that the costs related to the creation of an e-discovery platform are not taxable

Associated Electric & Gas Insurance Services, v BendTec, Inc.
United States District Court District of Minnesota

In this question of first impression in the Eighth Circuit regarding an unusual analysis of taxable costs and disbursements following the conclusion of a case, United States District Court Judge Michael J. Davis found that costs related to the creation and management of an e-discovery platform were not recoverable, but e-discovery costs that qualify as “exemplification fees” comparable to the cost of making copies are recoverable.

After resolution of the underlying case in BendTec, Inc’s favor, BendTec moved for the recovery of more than $120,000 in costs incurred in creating and maintaining an electronic database to hold documents produced by the plaintiffs and to collect and secure its own documents.  During discovery, the plaintiffs produced 19 gigabytes of data.  In addition, BendTexc secured and processed 192 gigabytes of its own data for litigation, including 302,445 individual emails, and 247,241 additional documents which would have cost $534,000 to print.  All of this data was hosted at the rate of $90.00/pr month by an outside data service.  BendTec argued that an electronic database was necessary to maintain and preserve litigation data and to avoid spoliation arguments.

The court acknowledged that the Eighth Circuit has not yet addressed this question of taxation, but incorporated the reasoning in Race Tires America, Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir. 2012).   The courts have acknowledged that §1920(4) should encompass more than simply paper copies.  Therefore, to the extent that e-discovery costs claimed represent conversion of native files to TIFF, scanning document to create digital duplicates, and the conversion of VHS to DVD format, those costs are taxable.  However, costs associated with the collection and preservation of ESI, keyword searching, processing, and indexing, such costs are not recoverable.   The court found that BendTec’s claim for the creation and maintenance of an electronic platform for e-discovery fell into the second category, and denied its request for taxation of those costs.