Third Circuit Rules File Conversion Costs Covered by 28 U.S.C. § 1920 After Voluntary Dismissal

This month the Third Circuit issued a decision, Camesi v. Univ. of Pittsburgh Med. Ctr., Nos. 17-3476 & 18-1112, 2019 U.S. App. LEXIS 1602 (3d Cir. Jan. 15, 2019), affirming the judgment of the Western District of Pennsylvania that file format conversion costs were recoverable under 28 U.S.C. § 1920.

The Appellants filed a complaint which contended that a policy of automatically deducting 30 minutes from their paychecks for a meal break violated the Fair Labor Standards Act. The Appellees filed a bill of costs in the amount of $319,000. (These are only one third of the total electronic discovery costs.) The District Court Clerk taxed costs for $317,000, which were charged by the Appellees' e-discovery vendor, Kroll Ontrack, and described as, "Process to Ontrack Inview". Id. at *4. The Appellants moved to deny the request for costs because of the Appellants' bad conduct in discovery; because the four named plaintiffs could not pay; and because assessing the costs against the named plaintiffs would be inequitable when there were potentially 2,800 unnamed plaintiffs in a class on whose behalf they sought to bring their suit. The Appellants dismissed their claims in order to appeal the de-certification of their class. The District Court affirmed the award.

In a prior decision, the Third Circuit held that it could not determine if the electronic discovery costs at issue were one of the types of costs found to be recoverable under Race Tires America, Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir. 2012). It vacated and remanded, suggesting that the District Court hold an evidentiary hearing. Camesi v.Univ. of Pittsburgh Med. Ctr., 818 F.3d 132, 673 F.App'x 141, 144, 149 (3d Cir. 2016). After testimony by the Appellees' lead counsel and a Kroll vice president, the District Court reinstated its order denying the motion to vacate or reduce the award.

Judge Rendell rejected the Appellants' argument that the costs concerned were not copying for the purposes of 28 U.S.C. § 1920. Kroll's representative testified that "Process to Ontrack Inview" involved the conversion of files to TIFF images and loading files into a review platform. Race Tires established that the conversion of native files to TIFF images and scanning paper documents were activities covered by Section 1920. He also disagreed that the files were not obtained for use in this case, as required by Section 1920, because they were never produced. He noted that the documents were processed pursuant to a court order that adopted the Appellants' discovery protocol. "Moreover, they would have been produced but for the discovery stay to which Appellants agreed. Therefore, we agree with the District Court that the taxed activities were for making copies that were 'necessarily obtained for use in the case.'" Camesi, 2019 U.S. App. LEXIS 1602, at *10-11.

The Appellants contended that Federal Rule of Civil Procedure 54(d)(1), which only awards costs to prevailing parties, should not be applied to them because they did prevail. Judge Rendell disagreed finding that, "]A]lthough very few other courts have addressed this particular issue, the vast majority of those courts have concluded that a defendant can be a prevailing party against unnamed plaintiffs who have voluntarily dismissed their claims." Id. at *13.

Judge Rendell rejected the argument that the FLSA has a provision rejecting the award of costs to prevailing defendants, which would control over the requirements of Rule 54(d)(1).

The Court refused to adopt the position that the District Court abused its discretion in awarding costs, because of the Appellees' misconduct. The opinion notes that planned production was demanded by the Appellants, and states that, "Appellees openly communicated with Appellants on the particularly high volume of data that would be produced and their inability to review it before the deadline set by the court and that Appellants." Id. at 15. The fact that the award might make the losing party indigent does not mean that they should be exempted from paying costs.

Note that this decision was an opinion written solely by Judge Rendell. As asterisk to the opinion notes that it is not a decision of the full court and does not constitute binding precedent.