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March 19, 2012

3rd Circuit Issues Race Tires Decision on Taxing EDD Costs

32247070.thbThe 3rd U.S. Circuit Court of Appeals issued its long-awaited decision in Race Tires America, Inc. v. Hoosier Racing Tire Corp on March 16, 2011. The court took a narrow view of whether all the charges imposed by electronic discovery vendors to produce ESI can be taxed against the losing party per the cost-taxation statute, 28 U.S.C. 1920(4).

In short, the court held that only costs of making copies were taxable and that many costs associated with other tasks performed by the e-discovery vendor were not recoverable under the statute.

The court acknowledges that there may be good reasons to award e-discovery costs to a prevailing party; however, the courts lack authority to do so under the cost-taxation statute.

Instead, the court suggests that the appropriate approach is cost-shifting pursuant to Federal Rule of Civil Procedure 26 and as a potential post-trial sanction for vexatious litigation.

If you are interested in the events leading up to the 3rd Circuit's decision, read Philip Yannella's November 1, 2011, LTN article "Could E-Discovery Taxation Alter Discovery Paradigm?" and my post "3rd Circuit Hears Oral Arguments in Race Tires," EDD Update, December 14, 2011.

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