The COUNTRY VINTNER OF NORTH CAROLINA, LLC, Plaintiff-Appellee, v. E. & J. GALLO WINERY, INC., Defendant-Appellant.
No. 12-2074.
United States Court of Appeals, Fourth Circuit.
Argued: March 19, 2013. Decided: April 29, 2013.
718 F.3d 249
Before SHEDD, DAVIS, and KEENAN, Circuit Judges.
Affirmed by published opinion. Judge DAVIS wrote the opinion, in which Judge SHEDD and Judge KEENAN joined.
OPINION
DAVIS, Circuit Judge:
In this case we clarify what expenses related to electronically stored information (ESI) are taxable under the federal taxation-of-costs statute as [f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.
I.
In January 2005, the winery Bodegas Esmeralda selected Appellee The Country Vintner of North Carolina, LLC (Country Vintner), as the exclusive North Carolina wholesaler of Alamos, an Argentinian wine. In January 2009, E. & J. Gallo Winery (Gallo) began supplying the wine to a network of wholesalers in the state, excluding Country Vintner. Country Vintner sued Gallo, alleging violations of the North Carolina Wine Distribution Agreements Act (the Wine Act) and the North Carolina Unfair and Deceptive Trade Practices Act.
Almost immediately, the parties clashed over the discovery of ESI. Among other things, Country Vintner sought emails and other writings that refer[red] to or relate[d] to the establishment of the business relationship between Gallo and Bodegas Esmeralda, Gallo‘s relationship with wine distributors, and Gallo‘s appointment.... to import Alamos. J.A. 65-66, 69. During a phone conference to draft a discovery plan, Gallo complained that retrieval of all potentially relevant electronically stored information [was] not reasonably accessible because of the undue burden and expense it would impose. Id. at 58, 673-74. Gallo asserted that it would have to interview each of ... more than forty employees, search at least seven or eight servers in various locations, and review every single document wherein it communicated with anyone ... concerning the Alamos brand. Id. at 586-87. Country Vintner agreed to consider any proposal [to] narrow[] the field of potential employees ... and develop key words, search terms, and/or date restrictions in order to search specific repositories of electronically stored information, but otherwise refused to limit its discovery requests. Id. at 674-75.
Gallo moved for a protective order, arguing that Country Vintner‘s discovery requests were overbroad, vague, ambiguous, and not reasonably calculated to lead to the discovery of admissible evidence. J.A. 746-47. Gallo asserted that it would cost $30,000 to process the email data of 24 employees, and up to $432,000 to review the data to guard against privilege waiver. Id. at 748. Gallo further asserted that Country Vintner ha[d] refused to offer any meaningful assistance in narrowing the field of potential employees or assisting Gallo to develop key words, search terms, and/or date restrictions. Id. at 748-49.
Country Vintner opposed the motion and moved to compel Gallo to provide more complete responses to its interrogatories and requests for documents and admission. J.A. 832-43. Country Vintner accused Gallo of a strategic decision to avoid responding to discovery, and asserted that Country Vintner ha[d] suffered prejudice because it continue[d] to lack information ... to adequately prosecute its case.... Id. at 842.
The district court denied Gallo‘s motion for a protective order and adopted Country Vintner‘s proposal for handling ESI: the court ordered Gallo to run searches on archived email and documents created [in a one-year period] by an initial set of eight identified custodians, using 16
In response to the court‘s order, Gallo collected more than 62 GB of data and forwarded it to its lawyers’ firm for processing and review. J.A. 930. The firm process[ed] the data into a searchable format, remove[d] system files and exact duplicates, and then [ran] three variations of the phrases and search terms set forth in the [district court‘s] order. Id. Country Vintner proposed applying 19 search terms to the 62 GB of data, and noted a preference for receiving [the] ESI in a format compatible with Summation. Id. at 961-62.1 Gallo had used different litigation support software, IPRO eCapture and kCura Relativity, to process the data. Id. at 930.
Less than two months after Gallo began producing documents, the district court granted Gallo‘s motion to dismiss Country Vintner‘s claim under the North Carolina Unfair and Deceptive Trade Practices Act. The parties then filed cross-motions for summary judgment on the remaining Wine Act claims, and the court granted summary judgment in favor of Gallo. Upon Country Vintner‘s appeal of the order granting summary judgment in favor of Gallo, we affirmed. Country Vintner of N.C., LLC v. E & J Gallo Winery, Inc., 461 Fed.Appx. 302, 308 (4th Cir.2012).
Gallo thereafter filed in the district court a bill of costs, seeking to recover $111,047.75 from Country Vintner for charges related to ESI. Gallo sought costs in the following six categories:
First, $71,910 for flattening and indexing ESI. J.A. 1229-30. This initial processing of data involved decompressing container files2 (e.g., ZIP files or Microsoft PST files); making the data searchable by extracting text and creating Optical Character Recognition3 for text that could not be extracted; indexing the data; removing system files that were known not to contain any user-generated content; and removing duplicate files. Id. 1224.
Second, $15,660 for Searching/Review Set/Data Extraction. J.A. 1229-30. This process involved extracting metadata4
Third, $178.59 for TIFF Production and PDF Production. J.A. 1229-31. This process involved converting original or native documents to a .tif5 or .pdf format6 to render them non-editable. Id. at 1225.
Fourth, $74.16 for electronic Bates Numbering. J.A. 1230. In this higher-tech version of Bates stamping, the TIFF or PDF documents were endorsed with a unique number that allow[ed] all parties to track the document[s]. Id. at 1226.
Fifth, $40 for copying images onto a CD or DVD. J.A. 1226, 1230.
Sixth, $23,185 for management of the processing of the electronic data, quality assurance procedures, analyzing corrupt documents and other errors, and preparing the production of documents to opposing counsel. J.A. 1227, 1232-37.
The parties having vigorously contested the propriety of the bill of costs filed with the clerk, and having filed numerous legal memoranda, the clerk of the district court deferred the matter of costs to the presiding district judge.
The district court granted in part and denied in part the bill of costs. Adopting the reasoning of the Third Circuit, the court concluded that, under
| 1. | 19 March 2010, TIFF production: | $ 8.46 |
| 2. | 19 March 2010, CD Copy: | $ 10.00 |
| 3. | 2 April 2010, TIFF Production: | $ 4.20 |
| 4. | 16 April 2010, PDF Production: | $ 6.84 |
| 5. | 19 April 2010, CD Copy: | $ 10.00 |
| 6. | 19 April 2010, TIFF Production: | $ 21.96 |
| 7. | 22 June 2010, CD Copy: | $ 10.00 |
| 8. | 23 June 2010, TIFF Production: | $134.10 |
| 9. | 25 June 2010, TIFF Production: | $ 3.00 |
| 10. | 1 July 2010, CD Copy: | $ 10.00 |
| 11. | 1 July 2010, TIFF Production: | $ .03 |
| TOTAL: | $218.59 | |
Id.
The court noted that it [was] possible that the bill of costs ... contain[ed] other ESI-related expenses that [were] taxable, but concluded that such costs were not readily discern[able] because Gallo ha[d] included various multi-task entries. Country Vintner of N.C., LLC, 2012 WL 3202677, at *3 n. 5. The district court also concluded that none of the the ESI-related costs in this case ... qualif[ied] as fees for exemplification under any established construction of the term. Id. *2 n. 4. Approving $350 for [f]ees of the clerk, the court awarded total costs of $568.59. Id. at *3.
We exercise jurisdiction pursuant to
II.
On appeal, Gallo argues that
A.
Under
Generally, we review the district court‘s award of ... costs for abuse of discretion. Bosley v. Mineral Cnty. Comm‘n, 650 F.3d 408, 411 (4th Cir.2011). However, where a district court‘s decision is based on a premise and interpretation of the applicable rule of law, and the facts are established, we review that decision de novo. Id. (internal quotation marks omitted).
Because the parties dispute whether the district court properly interpreted
B.
The taxation-of-costs statute,
At common law, costs were not allowed, Alyeska Pipeline Serv. Co. v. Wilderness Soc‘y, 421 U.S. 240, 247 (1975), but federal courts in the early years ... award[ed] costs in the same manner as the courts of the relevant forum State, Taniguchi, 566 U.S. 560. This resulted in great diversity in practice among the courts, with losing litigants often unfairly saddled with exorbitant fees for the victor‘s attorneys. Alyeska Pipeline Serv. Co., 421 U.S. at 251.
In 1853, Congress enacted a predecessor to
[t]he bill of fees of clerk, marshal, and attorneys, and the amount paid printers, and witnesses, and lawful fees for exemplifications and copies of papers necessarily obtained for use on trial in cases where by law costs are recoverable in favor of the prevailing party, shall be taxed by a judge or clerk of the court, and be included in and form a portion of a judgment or decree against the losing party.
Act of Feb. 26, 1853, 10 Stat. 161, 168 (emphasis added). The statute‘s comprehensive scope and the particularity with which it was drafted demonstrated that Congress meant to impose rigid controls on cost-shifting in federal courts. Crawford Fitting Co., 482 U.S. at 444.
The 1853 Act was carried forward in the Revised Statutes of 1874 and by the Judicial Code of 1911. Alyeska Pipeline Serv. Co., 421 U.S. at 255. Its substance, without any apparent intent to change the controlling rules, was also included in the Revised Code of 1948 as
The 1948 version of
[a] judge or clerk of any court of the United States may tax as costs the following:
(1) Fees of the clerk and marshal;
(2) Fees of the court reporter for all or any part of the stenographic transcript necessarily obtained for use in the case;
(3) Fees and disbursements for printing and witnesses;
(4) Fees for exemplification and copies of papers necessarily obtained for use in the case;
(5) Docket fees under section 1923 of this title.
62 Stat. 955 (1948) (emphasis added). In 1978, Congress amended the statute to add a sixth category of taxable costs:
(6) Compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under section 1828 of [title 28].
Pub.L. No. 95-539, 92 Stat. 2040, 2044 (1978).
(1) [f]ees for printed or electronically recorded transcripts necessarily obtained for use in the case; [and]
* * *
(2) [f]ees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case[.]
Judicial Administration and Technical Amendments Act of 2008, Pub.L. No. 110-406, 122 Stat. 4291, 4292 (2008) (codified at
These amendments originated with the Judicial Conference of the United States (the Judicial Conference) and its Committee on Court Administration and Case Management (the Committee). Judicial Conference, Report of the Proceedings of the Judicial Conference of the United States 9-10 (March 18, 2003) [hereinafter Judicial Conference Report];
In December 2002, the Committee considered whether technological advances that ha[d] occurred over the past twenty-five years ma[d]e it appropriate to reevaluate the cost provisions in
Therefore, the Committee decided to recommend that the Judicial Conference endorse two limited statutory amendments to
Congress enacted the proposed amendments verbatim, as part of the Judicial Administration and Technical Amendments Act of 2008. Judicial Conference Report 10;
III.
On appeal, Gallo seeks the $111,047.75 in ESI-related charges it initially sought, less (1) $218.59 the district court awarded, (2) $74.16 in charges for Bates numbering, and (3) $8,897 in charges for any billable time related to Bates numbering, searching, or production-related activities. Opening Br. 22 & n. 7. Gallo argues that the remaining $101,858 in ESI processing charges is taxable under
A.
As a preliminary matter, we reject Country Vintner‘s contention that
B.
Turning to the merits of Gallo‘s appeal, we must first determine whether Gallo‘s ESI processing charges constitute costs of making copies ... necessarily obtained for use in the case.
1.
As with any issue of statutory interpretation, we focus on the plain language of the statute, seeking first and foremost to implement congressional intent. WEC Carolina Energy Solutions LLC v. Miller, 687 F.3d 199, 203 (4th Cir.2012) (internal quotation marks and ellipsis omitted). To determine a statute‘s plain meaning, we not only look to the language itself, but also the specific context in which that language is used, and the broader context of the statute as a whole. In re Total Realty Mgmt., LLC, 706 F.3d 245, 251 (4th Cir.2013) (internal quotation marks omitted).
Here, the relevant statutory language is making copies.
Copies has appeared in the taxation statute since its enactment in 1853, when copy meant a transcript,10 a writing like another writing,11 or an imitation.12 Today, copy still refers to an imitation, transcript, or reproduction of an original work.13 To make means to cause to happen,14 to bring into being by forming, shaping, or altering material,15 to produce (a material thing)16 or to
Although the ordinary meaning of the phrase is expansive, its application is limited by the broader context of [§ 1920] as a whole. In re Total Realty Mgmt., LLC, 706 F.3d at 251. The Supreme Court has observed that taxable costs under the statute are modest in scope and limited to relatively minor, incidental expenses. Taniguchi, 566 U.S. at 573:
[Section] 1920 ... lists such items as clerk fees, court reporter fees, expenses for printing and witnesses, expenses for exemplification and copies, docket fees, and compensation of court-appointed experts. Indeed, the assessment of costs most often is merely a clerical matter that can be done by the court clerk. Taxable costs are a fraction of the non-taxable expenses borne by litigants for attorneys, experts, consultants, and investigators. It comes as little surprise, therefore, that costs almost always amount to less than the successful litigant‘s total expenses in connection with a lawsuit.
Id. (internal quotation marks and citations omitted).18
Gallo argues that its ESI-processing charges are taxable as fees for making copies under
just as copying a table or dress requires a different approach than copying a paper document, copying ESI also requires a different approach.
Id. at 26.
Country Vintner counters that Gallo distorts the plain meaning of the statute and misconstrue[s] the act of processing, which was not required in order to produce copies to Country Vintner, only to assist Gallo with its review. Resp. Br. 17, 22 (emphasis in original). Country Vintner disputes that Gallo had no choice but to process the ESI ... in order to comply with its discovery obligations, because Country Vintner never demanded that Gallo produce processed ESI replete with metadata and searchable text. Id. at 20. Country Vintner thus asks us to affirm the district court‘s adoption of the Third Circuit‘s approach in Race Tires America, Inc. v. Hoosier Racing Tire Corp.
In Race Tires America, Inc., the Third Circuit held that, of the numerous services [that] [electronic discovery] vendors
[s]ection 1920(4) does not state that all steps that lead up to the production of copies of materials are taxable. It does not authorize taxation merely because today‘s technology requires technical expertise not ordinarily possessed by the typical legal professional. It does not say that activities that encourage cost savings may be taxed. Section 1920(4) authorizes awarding only the cost of making copies.
Id. at 169 (footnote omitted). The court recognized that extensive ‘processing’ may be essential to make a comprehensive and intelligible production of ESI. Id.
Hard drives may need to be imaged, the imaged drives may need to be searched to identify relevant files, relevant files may need to be screened for privileged or otherwise protected information, file formats may need to be converted, and ultimately files may need to be transferred to different media for production.
Id. Nonetheless, the court reasoned, that does not mean that the services leading up to the actual production constitute ‘making copies.’ Id.
The process employed in the pre-digital era to produce documents in complex litigation similarly involved a number of steps essential to the ultimate act of production. First, the paper files had to be located. The files then had to be collected, or a document reviewer had to travel to where the files were located. The documents, or duplicates of the documents, were then reviewed to determine those that may have been relevant. The files designated as potentially relevant had to be screened for privileged or otherwise protected material. Ultimately, a large volume of documents would have been processed to produce a smaller set of relevant documents. None of the steps that preceded the actual act of making copies in the pre-digital era would have been considered taxable. And that is because Congress did not authorize taxation of charges necessarily incurred to discharge discovery obligations. It allowed only for the taxation of the costs of making copies.
Id. The Third Circuit further reasoned that the Supreme Court has accorded a narrow reading to the cost statute in other contexts, and [n]either the degree of expertise necessary to perform the work nor the identity of the party performing the work of ‘making copies’ is a factor that can be gleaned from
We find the Third Circuit‘s reasoning persuasive. The court properly took into account the statute‘s history, its plain language, and the Supreme Court‘s narrow contemporary interpretation of the costs taxable under
For all these reasons, we agree with the district court‘s finding that, in this case, only the conversion of native files to TIFF and PDF formats, and the transfer of files onto CDs, constituted making copies under
2.
We next determine whether Gallo‘s ESI processing charges are taxable as [f]ees for exemplification.
Gallo argues that [e]xtracting text and metadata constitutes exemplification because they illustrate by example [the] important features of the native files. Opening Br. 36-37 (internal quotation marks omitted). Gallo further argues that loading ... ESI into a review platform constitutes exemplification because it illustrates by example the important features of the ESI as if someone were seeing the ESI in its native computer environment. Id. at 37 (internal quotation marks omitted).
Exemplification has appeared in the statute since 1853, when the word meant an illustration by example23 or [a]n offi-
Other circuits are split over the meaning of exemplification as used in
We need not determine in this case which view is most harmonious with the statute. Gallo‘s charges include neither authentication of public records nor exhibits or demonstrative aids. Accordingly, the district court correctly concluded that the ... costs in this case [do] not qualify as fees for exemplification. Country Vintner of N.C., LLC, 2012 WL 3202677, at *2 n. 4.
IV.
In sum, for the reasons set forth, we agree with the district court‘s finding that only the conversion of native files to TIFF and PDF formats, and the transfer of files onto CDs, constituted making copies under
AFFIRMED