Shifting E-Discovery Costs to the Losing Party

The escalating costs of electronic discovery are a major factor in formulating litigation strategy, but state and federal courts are not uniform in the way they assess and allocate those costs after a party prevails.

Recently there was a trend to allow more cost shifting to the losing party, but two recent court decisions appear to reverse that trend. In U.S. Bank National Association v. GreenPoint Mortgage Funding, Inc. in the New York State Supreme Court, Appellate Division, and in Race Tires America, Inc. v. Hoosier Racing Tire Corp (or “Race Tires III”) in the Third Circuit Court of Appeals, courts limited the scope of what costs may be “taxed” to a defeated litigant, while providing some guidance on the method of allocating electronic discovery costs between parties.

These cases clarify the law in their respective jurisdictions, but the rules governing the allocation and taxation of discovery costs remain subject to judicial interpretation in the rest of the country.

Thus, it remains essential for parties to plan electronic discovery strategy in advance in order to control costs. Keep in mind that the courts have not addressed the extent to which costs for non-copying preparatory work is recoverable. That would include costs for early case assessment, or sampling for the advanced development of keywords or the application of predictive coding – costs which are intended to circumscribe the scope of discovery and reduce the overall cost of copying.