News & Events

“No, really, you can keep it.”

It’s no secret that the discovery of electronically stored information, or ESI, is the bane of many a trial lawyer’s existence. In fact, a recent article in the American Bar Association’s “Tips from the Trenches” begins with the sentence, “E-discovery has become the bête noire of litigation, and not without cause.” Not only is the discovery of ESI expensive; it can consume an inordinate amount of time. ESI “may be lurking in every communication medium,” the article cautions, and with the now-ubiquitous smart phone, “[s]earching the company computer for email is not enough.” In light of these concerns, a new decision that makes shifting the costs of e-discovery to the losing party more difficult is receiving quite a bit of attention.

Last week, in the first federal appellate court ruling on the subject, the Third Circuit Court of Appeals reversed the trial court’s award of $335,000 in e-discovery costs under the federal “taxation of costs” statute – 28 U.S.C. § 1920. The case – Race Tires America, Incorporated v. Hoosier Racing Tires Corporation, No. 11-2316 – now stands for the proposition that “[n]either the language of [the cost statute], nor its history, suggests that Congress intended to shift all the expenses of a particular form of discovery – production of ESI – to the losing party.” Thus, the court held, “federal courts lack the authority to do so, either generally or in particular cases, under the cost statute.”

The decision has disquieted many in the e-discovery community, who feel that the ruling is contrary to the purpose of § 1920 and contravenes the correct construction given the statute by a number of district courts across the country. The lesson for litigants, of course, is not to undertake needless e-discovery in the belief that, should they prevail, they will not have to bear its costs. Instead, a healthy respect for the burdens of e-discovery will stand prevailing parties in good stead if Race Tires America becomes the enduring standard, and should encourage litigants to be more circumspect in all their dealings with electronically-stored information.

Gadson William (Will) Perry