By Michael Palumbo
Much has been written about the exploding costs of commercial litigation as a result of discovery of electronically store information ("ESI"), in legal opinions, in law reviews, blogs and in the growing number of publications produced by service providers in this cottage industry. For example, for the year 2009, electronic discovery vendors had revenues equaling approximately $2.8 billion. See Erin Greenwood, Law Practice: A New View, Part 2: E-Discovery Changes Have Some Seeing a Career in Document Review, 97 ABA J. 27 (2011).
To date, a great deal of the discussion has related to duties and obligations of the litigants to preserve and produce ESI and the various techniques and methods available to accomplish those duties and obligations in the most cost-effective manner. Now that a few years have gone by and cases where e-discovery has played a significant role in the litigation have wound their way through the court system to a conclusion, a new issue that is of significant interest to litigants in these cases is coming to the fore: that issue is can a successful litigant recover the tens of thousands (maybe even hundreds of thousands) of dollars spent on e-discovery from the other side as taxable costs. A relatively few appellate courts have addressed this issue, and, as might be expected, there is no uniformity of opinion.
Every jurisdiction has a cost recovery statute (or rule of court). These statutes define what litigation expenses can be "taxed" to the losing party (meaning recovered from). In Arizona, the cost recovery statute is A.R.S. § 12-331, et seq. A.R.S. § 12-332 provides that the following categories of litigation costs can be taxed to the other party: fees of officers and witnesses, costs of taking depositions, compensation of referees, costs of certified copies of papers or records, sums paid to a surety company for any bond or other obligation, and other disbursements incurred pursuant to a court order or agreement of the parties. Of course, this statute, and the opinions interpreting it, arose in the pre-ESI era. In fact, A.R.S. § 12-332 was last amended in 2001.
The pertinent question is how is the taxable cost statute and similar statutes to be applied to ESI-era cases. An opinion from the United States Third Circuit Court of Appeals, Race Tires of America, Inc. v. Hoosier Racing Tire Corp, et al., 674 F.3d 158 (3rd Cir. 2012), provides some insight.
Hoosier Racing involved antitrust claims in federal court, so the federal cost recovery statute, 28 USC § 1920, was the focal point of the analysis. Expenses that can be recovered per the federal statute are similar to those approved in the Arizona statute. They are (1) fees of the clerk [of the court] and [federal] marshal; (2) fees for printed or electronically recorded transcripts necessarily obtained for the use in the case, (3) fees and disbursements for printing and witnesses, (4) fees for exemplification and the costs of making of any materials where the copies are necessarily obtained for use in the case, (5) docket fees, and (6) compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of [other] special interpretation services.
Hoosier Racing was the successful party, and it applied to the District (trial) Court for the recovery of more than $365,000 in charges imposed by its electronic discovery vendors for such services as hard drive imaging, data processing, keyword searching and format conversion. The District Court, concluding that the E-discovery services fell within sub-section (4) of the statute-fees for exemplification and making copies, awarded Hoosier the amount that it sought, and RTA appealed.