D. Minn.: Unidentified Processing Cannot be Taxed Under 28 U.S.C. § 1920

This past Friday, Judge Ann D. Montgomery of the United States District Court for the District of Minnesota, issued a decision, In re Wholesale Grocery Prods., No. 09-MD-2090 ADM/TNL, 2019 U.S. Dist. LEXIS 16496 (D. Minn. Feb. 1, 2019), granting in part and denying in part motions filed by both the Plaintiffs and the Defendants for review of cost judgments entered for the Defendants. This is an antitrust case brought against C&S and SuperValu for conspiring to allocate grocery markets. A jury found in favor of C&S in April 2018, and the Court granted summary judgment for SuperValu in July 2018.

The Defendant DeLuca argued that it should not be liable for costs because it did not help decide what discovery should be conducted. Its only discovery costs were $1,015.50 for its deposition. If it is held jointly and severally liable with the other Plaintiffs for costs it could be forced out of business. In the Eighth Circuit, the general rule is for pro rata liability for costs unless equity dictates otherwise. Judge Montgomery noted DeLuca's counsel was appointed co-lead counsel and was expressly made responsible for discovery. She directed DeLuca to re-allocate the share of costs with other Plaintiffs rather than seeking a reduction from C&S.

C&S argued that the Clerk improperly denied its request for $372,000 in electronic discovery costs, which it argued were analogous to copying under 28 U.S.C. §1920(4). While acknowledging that the Eighth Circuit had not ruled on what electronic discovery costs were taxable under § 1920(4), the Court noted several decisions, including Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir. 2012), which found that scanning and the conversion of native files are taxable. Judge Montgomery awarded costs of $41,000 for scanning, converting files to TIFF images and OCRing, but declined reimbursement for ESI processing, bibliographic coding, email restoration, and loading data. "Just as the preparatory measures taken in pre-digital discovery to locate, collect, and review documents before producing copies were not taxable, so too the preliminary steps required to meet electronic discovery obligations are not recoverable under § 1920(4)." In re Wholesale Grocery Prods., 2019 U.S. Dist. LEXIS 16496, at *16. She faulted C&S for not explaining in detail what processing was performed on ESI.

C&S also disputed the limiting of costs for expert depositions to the appearance fee and travel expenses. Judge Montgomery did not agree that costs should be awarded for time spent preparing for these depositions.

DeLuca and Village Market argued that SuperValu agreed to bear all of its costs against any party when it entered into a settlement agreement with two other plaintiffs, Champaign and D&G. Noting that the agreement to seek to costs served as consideration for the release of the Champaign and D&G claims, Judge Montgomery ruled that, ". . . to the extent that the costs requested in SuperValu's 2013 Bill of Costs are taxable, Village Market and DeLuca's will be jointly and severally liable for one half of those costs, and the other half is deemed to have been satisfied by SuperValu's Settlement Agreement with D&G and the Champaign Non-Arbitration Class." Id. at *25.

In ruling on SuperValu's Motion for Review, the Court also awarded it costs for scanning and converting native files to TIFF images, but not for processing and coding. "Coding paper documents is not taxable because it is a preparatory step that falls outside the purview of 'making copies'. 'ESI Processing' is a broad term, and SuperValu provides no explanation of the tasks performed in this subset of costs." Id. at *29-30. She faulted the Defendant for not describing its costs with sufficient specificity. Judge Montgomery also denied SuperValu costs for time spent preparing for expert depositions.

Ernst & Young on Information Governance

If you're looking for a simple guide to information governance from a respected authority in the field, see Ernst & Young's Information Governance for the Real World, and its Information Governance Solution guide. Ernst & Young is one of the 'Big Four' accounting firms and also one of world's largest professional services firms. It advises businesses on how to implement an information governance program.

Ernst & Young has identified seven key principles of information governance:

1. Know your information: develop search criteria to find certain document types.

2. Know where you have information: be able to find PII that must be deposed of.

3. Access: limit data access to certain teams.

4. Protection: find gaps in data protection policies.

5. Response to external events: run gap analysis of processes to respond to data breaches.

6. Keep data no longer than necessary: emphasize the right to erase PII and be forgotten under the GDPR.

7. Dispose: delete redundant and outdated data

Information governance policies help organizations:

• Make informed decisions quickly.

• Comply with regulations and discovery requests.

• Reduce the cost of data storage.

Ernst & Young recommends:

a. Conform to the regulations of FINRA; the SEC; the FDA; and other government bodies to help protect privacy rights.

b. Don't rely on IT to take a black box approach to preservation and collection. Develop an in-house discovery preparedness program.

c. Address the proliferation of information systems.

d. Data maps should be used to track records subject to regulations.

e. Identify critical data assets.

f. Implement a defensible disposition program.

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.