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To what extent can the prevailing party of a civil case transfer the costs of eDiscovery to the losing party in a case? The Third Circuit Court of Appeals addressed this issue in an opinion filed on March 19, 2012. This is an interesting case, largely due to the fact that it was a matter of first impression for the Third Circuit. While other circuits have addressed the issue, the results are conflicting.
The costs of eDiscovery in litigation can be astronomical. The law currently allows the prevailing party to recover the "fees for exemplification and the costs of making copies of any materials." Once upon a time, this referred to photocopies.
The world has changed, as has the landscape in legal practice. Discovery isn't about going through boxes of contracts and letters anymore. Now, in litigation, companies may have to turn over large amounts of electronic data. So where does this tie in?
In the case of Race Tires America v. Hoosier, an eDiscovery company was retained to help produce 430,733 pages of electronic information. The cost of the eDiscovery was in the hundreds of thousands of dollars.
So, what could be allocated by the prevailing party? The Third Circuit limited the taxable costs to a small category of eDiscovery costs. The court held that the only services for which costs could be transferred to the losing party were the costs associated with copying, namely the "scanning of hard copy documents, the conversion of native files to TIFF, and the transfer of VHS tapes to DVD."
These costs did not take into account the cost of the labor or expertise provided by the eDiscovery vendors.
The lesson for corporate parties who retain eDiscovery specialists: Negotiate the fees! You might not be able to recover them in court.