For plaintiffs, the cost of losing a case is skyrocketing in antitrust and other complex, document-intensive litigation now that the federal courts are routinely approving hefty bills for e-discovery services in the standard taxation of costs.
Illustrating that trend is the recent decision by the clerk in the Eastern District of Pennsylvania to tax costs of more than $576,000 against the losing plaintiffs in In re Aspartame Antitrust Litigation .
Lawyers for the plaintiffs complained in a lengthy brief that the bills of costs were “nothing short of astronomical.”
Attorneys Dianne M. Nast and Erin C. Burns of Roda Nast in Lancaster argued that the defense team was “apparently under the mistaken impression that plaintiffs are obligated to reimburse defendants for the entire cost of their document management and production protocols.”
Nast and Burns led a team of plaintiffs lawyers who accused the three top manufacturers of aspartame of engaging in a price-fixing scheme.
But the trial judge ultimately dismissed the case after finding that the named plaintiffs’ claims were time-barred and could not be salvaged on a theory of fraudulent concealment. The 3rd U.S. Circuit Court of Appeals upheld the dismissal in January 2011.
Soon after their appellate victory, the defense teams submitted their bills of costs. The Nutrasweet Co. asked for more than $215,000; Ajinomoto Co. Inc. asked for more than $165,000; and Holland Sweetener North America Inc. asked for more than $195,000.
The plaintiffs lawyers cried foul, arguing that the defense teams were “attempting to shoehorn the cost of their entire document collection, processing and production” into the statute that allows awards for “exemplification and copying.”
“This is not the purpose of reimbursement of costs, and the fact that attorneys can now use electronic methods to search for, collect and produce documents changes nothing,” the plaintiffs team wrote.
The defense, in a joint response filed by 11 lawyers from six firms, said they recognized that e-discovery often entails “enormous expense,” but argued that the costs are “the necessary and predictable consequence of burdening defendants with commensurately enormous demands for electronic discovery.”
Now Clerk of Court Michael E. Kunz has issued a 70-page opinion that sides with the defense, explaining that there is a “heavy presumption” that all costs that are “actually incurred” should be “automatically” taxed against the losing party.
Kunz also found that e-discovery costs — which often entail hiring outside consultants to work with large quantities of documents and data — are taxable costs that fall under the same category as making paper copies.
“The costs of hiring a private company that possesses the technology to search for, and/or to recreate, copies of evidence in electronic form, for the purpose of making the alleged facts contained in the exhibits more clear to the finder(s) of fact, are taxable as exemplification under 28 U.S.C. Section 1920(4), as generally, neither attorneys nor employees of attorneys are competent to conduct such a search, or to recreate such documents in paper format,” Kunz wrote.
The plaintiffs have the right to appeal Kunz’s decision to U.S. District Judge Legrome D. Davis.
The appeal would force Davis to tackle several related questions that continue to percolate in the courts about whether consulting fees for e-discovery qualify as exemplification costs and the limits, if any, to awards of e-discovery costs.
Kunz made clear that several of the plaintiffs’ arguments have already been rejected by the 3rd Circuit, including the plaintiffs’ pleas that the costs be disallowed because of economic disparity; the plaintiffs’ good faith in bringing the suit; and the alleged bad faith of the defendants in some of the charges included in the bills of costs.
Kunz wrote: “The clerk has no discretion to disallow otherwise allowable costs based on an argument rooted in economics; economic disparity between the parties is not a basis for disallowing costs, and a very strong presumption exists that consideration of the equities does not favor a disallowance of costs by the court.”
Many of the issues before Davis are also being raised in a case currently on appeal to the 3rd Circuit that challenges a May 2011 ruling by U.S. District Judge Terrence F. McVerry awarding $367,000 in e-discovery costs to the winning defendants in an antitrust case.
McVerry, in Race Tires America Inc. v. Hoosier Racing Tire Corp. , found that courts are increasingly approving awards of e-discovery costs, noting that one judge described them as “the 21st century equivalent of making copies.”
Plaintiffs lawyers argued that such costs should be disallowed because “electronic document collection, hard drive imaging and indexing and searching, commonly referred to as ‘e-discovery charges,’ are not enumerated under Section 1920(4), and thus are not properly deemed recoverable costs.”
But McVerry found that Congress, in the Judicial Administration and Technical Amendments Act of 2008, modified the wording of Section 1920(4), changing the phrase “fees for exemplifications and copies of papers” to read “fees for exemplification and the costs of making copies of any materials.”
Since that amendment, McVerry said, “no court has categorically excluded e-discovery costs from allowable costs.” But even before the 2008 law, McVerry found that “courts in many jurisdictions had come to recognize that ‘exemplification,’ in the modern era, includes electronic copying.”
Neither of the lead plaintiffs lawyers returned calls seeking comment.
NutraSweet was represented by attorney Carolyn H. Feeney of Dechert in Philadelphia, and David Marx Jr., Amanda J. Metts and Jennifer Smulin Diver of McDermott Will & Emery in Chicago.
Ajinomoto was represented by attorney Mark C. Cawley of Saul Ewing in Philadelphia and Michael R. Lazerwitz and Patricia M. McDermott of Cleary Gottlieb Steen & Hamilton in Washington, D.C.
Holland Sweetener was represented by attorneys Richard L. Scheff and Lathrop B. Nelson III of Montgomery McCracken Walker & Rhoads, along with Andrew S. Marovitz and Britt M. Miller of Mayer Brown in Chicago.
(Copies of the 70-page opinion in In re Aspartame Antitrust Litigation , PICS No. 11-3807, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.) •