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Third Circuit Disallows Cost Shifting of the Majority of ESI Expenses

Authors: Evan J. Shenkman (Morristown), Ryan T. Warden (Morristown)

Published Date: April 4, 2012

Race Tire America, Inc. v. Hoosier Racing Tire Corp., 2012 WL 887593 (3d Cir. Mar. 16, 2012): In a matter of first impression (for any federal appeals court), the Third Circuit has determined that the majority of costly activities related to the discovery and production of electronically stored information (ESI) undertaken by the defendants’ ESI vendor, such as hard drive imaging, data processing and keyword searching, were not litigation expenses recoverable by the prevailing defendants.

28 U.S.C. § 1920(4) provides that “fees for exemplification and the costs of making copies” may be recoverable by a prevailing party. Federal district courts across the country have split over the categories of ESI vendor costs recoverable by a prevailing party under §1920(4), with some courts finding all ESI costs recoverable (as being necessary for discovery in today’s day and age), and with other courts holding that only ESI expenses akin to exemplification and copying are recoverable. Unfortunately for defendant-employers, the Third Circuit took the conservative position, concluding that §1920(4) extends only to the prevailing defendants’ (approximately $30,000 worth of) tasks akin to “exemplification” and “making copies,” i.e., scanning and file format conversion, and disallowed recovery of costs for defendants’ additional ($335,000 worth of) ESI-related expenses, such as imaging, data processing and keyword searching. As emails and other ESI evidence are relevant in many labor and employment cases, the cost of being a frequently-sued employer has now increased dramatically in the Third Circuit and perhaps elsewhere.

Note: this article was published in the April 2012 issue of the New Jersey eAuthority.

Evan J. Shenkman  (Morristown)

Evan J. Shenkman
Evan J. Shenkman is a member of Ogletree Deakins’ Knowledge Management Department, serving as the firm’s Senior Manager of Knowledge Management Counsel and Research. In his role, Mr. Shenkman is responsible creating processes, practices, and software to allow firm attorneys to work smarter, faster, and more in sync; creating internal and client-facing collaborative tools; and managing the firm's team of Knowledge Management Counsel and the firm's Legal Researchers. He also manages...

Ryan T. Warden  (Morristown)

Ryan T. Warden
Ryan T. Warden defends employers against all types of employment-related claims, including allegations of discrimination, retaliation and harassment. Ryan is a member of the Firm’s Class Action Group and Wage and Hour Group and has extensive experience defending employers against class, collective and single plaintiff actions arising out of alleged violations of state and federal wage and hour laws. Ryan has defended clients in the retail, trucking and transportation and food service...