Hosting ESI is Not “Making Copies” for Cost Recovery

Judge Young B Kim posed an interesting question for a party seeking costs for the hosting of ESI to review: Applying these principles [Race Tires, Rawal, & Johnson] to the specific question of online hosting costs, this court finds that these costs may be recoverable only if hosting amounted to “copying” of ESI for production. Massuda v. Panda Express, Inc., 2014 U.S. Dist. LEXIS 4956, at *21 (D. Ill. 2014).

The issue: does hosting ESI equal “making copies”?

Sadly, you do not need a fortune cookie to see the Court would reject the hosting argument.

Chinese Fortune Cookie broken with blank paper, on white background

The Court held no, but not in a way to block any future arguments for cost recovery. The Court reviewed the Defendant’s hosting invoices and stated they “did not demonstrate that the Relativity services included some form of conversion of data akin to “making copies” for use in this case. Without evidence of this critical nature, this court has no authority to award the hosting costs in this case.” Massuda, at *21 [emphasis added].

The service provider’s invoices said the three boxes of documents were hosted for “Document Search and Retrieval” and “Monthly Relativity Disk Storage.” The attorneys explained that the review application allowed them to “organize, manage and review documents.” Id. 

The Court further noted that “§ 1920(4), for better or worse, is not concerned with attorney efficiency or convenience,” in response to the defense argument that the hosting was “reasonable and necessary” because they had little time to process the documents. Massuda at *21-22. As such, the Court denied the hosting cost of $3,087.92. Massuda at *22.

Bow Tie Thoughts

In my opinion, one of the biggest obstacles to recovering eDiscovery costs is explaining the use of the technology. I strongly believe that making a mirror image of a hard drive IS making a copy of ESI.  However, this has to be explained by an expert.

Service provider invoicing is almost always not written by an attorney who also is an eDiscovery expert (however, many do exist). A judge looking at an invoice that simply says “data hosting” understandably might think the application is an online warehouse. This could not be further from the truth, given the steps taken to collect the ESI, process it, and then host it in a system that has conceptual search tools, data clustering, de-duplification, and the many advantages of predictive coding.

It is my hope that attorneys educate their service providers on what the local discovery judges want to see in an invoice in a cost case. Alternatively, service providers should start thinking about this issue, so invoices for processing and hosting will contain enough information for a judge to grant a cost motion.

One last point: the Court noted that § 1920(4) “is not concerned with attorney efficiency or convenience.” However, Federal Rule of Civil Procedure Rule 1 is concerned with the “just, speedy, and inexpensive determination of every action.” I hope that the principles of Rule 1 would trump any rule NOT concerned with efficiency that drives down costs, instead of inefficiencies that drive up costs. In my view, denying costs for processing for native review and instead awarding costs for conversion to static images, which is usually an increase in processing costs, violates Rule 1 by creating an incentive to not conduct a case in a “just, speedy, and inexpensive” manner.

4 thoughts on “Hosting ESI is Not “Making Copies” for Cost Recovery

    • It is a problem that requires Congress. Judge Laporte highlighted one part of this challenge in the Alzheimer’s Institute of America v Elan Corp, 2013 U.S. Dist. LEXIS 31952 (Jan. 2013) opinion:

      Enacted in 1853, well before the era of e-discovery, the statute is technologically antiquated. Yet unless and until Congress chooses to update it to address the new and rapidly evolving era of computer and cloud-stored, processed and produced data, courts must do their best to select and apply the most appropriate analogy from the era of paper documents which the statute addressed.

  1. Pingback: Georgia Moves Closer to Regulating E-Discovery and More News and Trends of the Week | E-Discovery Beat

  2. Your BowTiedness:

    I rarely take issue with you on ESI matters (probably as a consequence of your being right with regularity). But however anyone feels about what *should* be the law, it’s noteworthy that the statute that you speak of as having been enacted “before the era of e-discovery” was, in fact, last amended in 2008, two years after the FRCP were amended to encompass ESI. The Committee recommending amendments was expressly asked to consider whether the list of taxable costs should be amended to include expenses associated with emerging technologies. They elected to forego such changes. So, for good or ill, this is what Congress wants in this century…until they change their mind. Wait, did I just credit Congress with a mind?

    I agree that imaging a hard drive is copying ESI. I don’t agree that hosting data is copying. If it were, then the copying metaphor would end upon ingestion; but, I don’t see how hosting can be seen as akin to copying that data again-and-again, month-after-month.

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