Pursuant to 28 U.S.C. § 1920, a prevailing party may have a right to recover certain costs associated with the litigation.  Many prevailing parties seek to recoup costs attendant to e-discovery, given the expense associated with collecting, processing and producing electronically stored information (“ESI”).  However, most federal courts confronting the issue have determined that e-discovery costs are recoverable only in very limited circumstances.

A recent decision out of the Circuit Court in Washington, D.C., provides guidance into which e-discovery costs may be recoverable under 28 U.S.C. § 1920 (See U.S. v Halliburton Co., 954 F3d 307 [D.C. Cir. 2020]).

Factual Background of Halliburton

Harry Barko (“Barko”) brought a lawsuit against his former employer, Kellogg Brown & Root Services (“KBR”), alleging that KBR and various subcontractors defrauded the U.S. Government by inflating costs and accepting kickbacks while administering military contracts in wartime Iraq, whereby violating the False Claims Act.  During discovery, KBR collected for review more than 2.4 million documents.  Eventually, KBR produced 171,000 documents to Barko.

KBR then moved successfully for summary judgment and filed a bill of costs seeking in excess of $100,000 ($65,000 of which was for expenses attributable to e-discovery, copying and printing).  Subsequently, the clerk taxed the full bill of costs for KBR.  Barko appealed arguing that the costs were not recoverable within the meaning § 1920 because some of the e-discovery costs did not qualify as “making copies” and/or were not “necessarily obtained for use in the case.”  In response, KBR argued that Congress amended the statute in 2008 to “make allowable both the costs of copies themselves (whether hard copy or electronic) and the costs incurred in the process of making copies.”

On appeal, the D.C. Circuit determined that scope of what was recoverable within the meaning of § 1920 was narrow and rejected recovery of the following e-discovery costs: (i) the initial conversion of the documents; (ii) subscribing to a hosting platform; (iii) processing documents (e.g., organizing and keyword-searching); and (iv) production processing.  In reaching this decision, the Court examined the meaning of 28 U.S.C. § 1920, particularly section four, which authorizes a district court to award “the costs of making copies of any materials where the copies are necessarily obtained for use in the case.”

The Court noted that the authors of the 2008 amendment “intended the amendment to have limited effect” and permitted “taxing the costs associated with copying materials whether or not they are in paper form.”  In remanding the case to the District Court, the Circuit Court compared KBR’s requested e-discovery costs to those of the pre-digital era, and reasoned they were:

[C]omparable to the steps that law-firm associates took in the pre-digital era in the course of “doc review”—identifying stacks of potentially relevant materials, culling those materials for documents containing specific keywords, screening those culled documents for potential privilege issues, Bates-stamping each screened document, and mailing discovery materials to opposing counsel.  Because “[n]one of the steps that preceded [or followed] the actual act of making copies in the pre-digital era would have been considered taxable,” such tasks are untaxable now, whether performed by law-firm associate or algorithm.

Conclusion:

The Halliburton decision is consistent with other recent decisions that have addressed the issue of what costs a prevailing party may recover when it comes to ESI (See, e.g., Peterson v Nelnet Diversified Solutions, LLC, (2020 WL 3978756 [D. Colo. May 20, 2020] [permitting certain e-discovery costs associated with the costs of making copies]).  And, the general view among the federal courts is that 28 U.S.C. § 1920  is of a “limited nature.”  As a result, practitioners are encouraged to continue to work cooperatively to keep discovery proportional to the needs of a case.  Moreover, litigants are strongly encouraged not to anticipate recovering e-discovery costs even as a prevailing party.

*Thank you to second year associate, James Maguire in the Firm’s Uniondale office, for his research assistance related to today’s blog.

Have questions?  Please contact me at kcole@farrellfritz.com.