It is sad when good arguments fail. Taxation of cost cases frequently deny processing costs of native files, unless there is conversion to a static image. Conversion of native files to static images can significantly increase processing costs, opposed to keeping native files in their original format.
In Country Vintner of N.C. v. E. & J. Gallo Winery, the Court summarized Gallo’s arguments as follows:
Gallo argues that its ESI-processing charges are taxable as fees for “making copies” under § 1920(4) because ESI has “unique features”: ESI is “more easily and thoroughly changeable than paper documents,” it contains metadata, and it often has searchable text. Opening Br. 23, 26-27. Gallo contends that converting native files to PDF and TIFF formats “produce[ d] static, two-dimensional images that, by themselves, [we]re incomplete copies of dynamic, multi-dimensional ESI”; other “processing . . . was necessary to copy all integral features of the ESI.” Id. at 28 (emphasis in original). Gallo argues that it had to remove ESI from container files, extract and index text to make it searchable, copy metadata, and load the data onto a “review platform” to allow “the native files and their associated metadata [to] be viewed and their text [to] be searched as if the native files were being opened in the software applications that created them.” Id. at 28-29. Gallo concedes that this process was far more involved than that necessary to copy paper documents but argues that just as copying a table or dress requires a different approach than copying a paper document, copying ESI also requires a different approach. Id. at 26.
Country Vintner of N.C. v. E. & J. Gallo Winery, 2013 U.S. App. LEXIS 8629, 25-27 (4th Cir. 2013).
Gallo made a very good argument, like a bold cabernet, with a hint of carmel and oak. Unfortunately, the Court poured it down the drain like it was vinegar.
Country Vinter claimed Gallo distorted “the plain meaning of the statute” and “misconstrue[d] the act of processing.” Moreover, Country Vinter argued processing was “not required in order to produce copies to Country Vintner, only to assist Gallo with its review.” Country Vintner of N.C., at *27.
Country Vintner disputed the argument that Gallo “had no choice but to process the ESI . . . in order to comply with its discovery obligations,” because “Country Vintner never demanded that Gallo produce processed ESI replete with metadata and searchable text.” Id.
The Court took a wine tasting tour of Race Tires America, Inc. v. Hoosier Racing Tire Corp and when eDiscovery processing could be recoverable.
The Court summarized Race Tires as follows:
In Race Tires America, Inc., the Third Circuit held that, “of the numerous services [that] [electronic discovery] vendors [had] performed” in that case, “only the scanning of hard copy documents, the conversion of native files to TIFF, and the transfer of VHS tapes to DVD involved ‘copying'” within the meaning of § 1920(4). Race Tires Am. Inc., 674 F.3d at 171. The court reasoned that [s]ection 1920(4) does not state that all steps that lead up to the production of copies of materials are taxable. It does not authorize taxation merely because today’s technology requires technical expertise not ordinarily possessed by the typical legal professional. It does not say that activities that encourage cost savings may be taxed. Section 1920(4) authorizes awarding only the cost of making copies. Id. at 169 (footnote omitted). The court recognized that “extensive ‘processing'” may be “essential to make a comprehensive and intelligible production” of ESI. Id. Hard drives may need to be imaged, the imaged drives may need to be searched to identify relevant files, relevant files may need to be screened for privileged or otherwise protected information, file formats may need to be converted, and ultimately files may need to be transferred to different media for production. Id. Nonetheless, the court reasoned, “that does not mean that the services leading up to the actual production constitute ‘making copies.'” Id. The process employed in the pre-digital era to produce documents in complex litigation similarly involved a number of steps essential to the ultimate act of production. First, the paper files had to be located. The files then had to be collected, or a document reviewer had to travel to where the files were located. The documents, or duplicates of the documents, were then reviewed to determine those that may have been relevant. The files designated as potentially relevant had to be screened for privileged or otherwise protected material. Ultimately, a large volume of documents would have been processed to produce a smaller set of relevant documents. None of the steps that preceded the actual act of making copies in the pre-digital era would have been considered taxable. And that is because Congress did not authorize taxation of charges necessarily incurred to discharge discovery obligations. It allowed only for the taxation of the costs of making copies. Id. The Third Circuit further reasoned that the Supreme Court has “accorded a narrow reading to the cost statute in other contexts,” and “[n]either the degree of expertise necessary to perform the work nor the identity of the party performing the work of ‘making copies’ is a factor that can be gleaned from § 1920(4).” Id. at 169, 171. “Nor may the courts invoke equitable concerns . . . to justify an award of costs for services that Congress has not made taxable.” Id. at 170.
Country Vintner of N.C., at *27-29.
Despite rejecting Gallo’s processing cost argument, the Court stated the following in footnote 19:
We are mindful that converting ESI from editable to non-editable formats, or copying ESI in its native format, often encompasses the copying of metadata. If, for instance, a case directly or indirectly required production of ESI-unique information such as metadata, we assume, without deciding, that taxable costs would include any technical processes necessary to copy ESI in a format that includes such information. This case does not fall within those limited circumstances.
Country Vintner of N.C., at *30, fn 19.
Based on the above, the Court upheld the District Court’s holding that the only recoverable costs for “making copies” under § 1920(4) were the conversion of native files to TIFF and PDF formats, and the transfer of files onto CDs. Country Vintner of N.C., at *32.
Bow Tie Thoughts
I think the legal definition of “making copies” only applying to converting native files to static images is wrong legally and technically. I believe one of these cases can be successful if the moving party understands the issue and has an expert who can explain how data is “copied” in eDiscovery processing to a judge knowledgeable about eDiscovery workflow.
A copy of ESI is made by the very act of data collection and processing the data for a review platform. After conducting review, data is often processed again from the producing party to the requesting party, due to privilege or the simple fact the parties have different review platforms. Moreover, producing “metadata” or searchable text is not “extensive processing”; it is normal processing.
To put it bluntly, a request for production of electronically stored information not to include metadata or searchable text is like asking for a paper production without ink on the pages.
Let’s consider the following:
The taxation of cost statute states:
Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case;
28 USCS § 1920(4).
Federal Rule of Civil Procedure Rule 34(a)(1)(A) permits a party to request electronically stored information that is “stored in any medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form.” The requesting party can state its form of production. In the event no form is stated, the ESI must be produced in the form it is “ordinarily maintained or in a reasonably usable form or forms.” Federal Rule of Civil Procedure Rule 34(b)(2)(E). Electronically stored information is ordinarily maintained in its native applications with metadata.
The defensible “collection” of ESI produces a copy of the data. This data is then “processed” to be loaded into a review platform for discovery review.
Many Court opinions recognize the need for substantive or embedded metadata. Moreover, many opinions recognize that a production as non-searchable static images is not in a reasonably useable form (see Jannx Med. Sys. v. Methodist Hosps., Inc., 2010 U.S. Dist. LEXIS 122574 (N.D. Ind. Nov. 17, 2010)). Additionally, metadata is needed to leverage the search technology that can organize communications based on time and other analytical tools vital to understand electronically stored information.
The fact that the Federal Rules of Civil Procedure create a default for ESI to be produced as it is ordinarily maintained should not be a prohibition on later recovering processing costs. Each step in the process of collecting data and processing it for a review platform and ultimately production is a technological necessity to make a copy. Simply put, requiring native files to be be converted into static images for taxation of costs drives up the production costs. Worse yet, producing static images dramatically reduces the data’s utility in any review platform. This is contrary to Federal Rule of Civil Procedure Rule 1’s mandate to control costs, creating a cost incentive for inefficiency.
Josh Gilliland is a California attorney who focuses his practice on eDiscovery. Josh is the co-creator of The Legal Geeks, which has made the ABA Journal Top Blawg 100 Blawg from 2013 to 2016 and was nominated for Best Podcast for the 2015 Geekie Awards. Josh has presented at legal conferences and comic book conventions across the United States. He also ties a mean bow tie.