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Class Action Countermeasures Discussions of the Strategic Considerations Involved In Class Action Defense

What Counts as “Making Copies” – Costs under Johnson v. Allstate Insurance Co.

Posted in Discovery

In 2007, four customers of Allstate Insurance Company sued it, alleging that it used outdated scoring algorithms to calculate their premiums, in violation of the Illinois Consumer Fraud Act.  They were later joined by another 19 named plaintiffs. Three years later, in 2010, the judge in the case denied certification and dismissed twelve of the named plaintiffs (leaving eleven total). Seven months later, the remaining eleven named plaintiffs voluntarily dismissed their claims with prejudice.

All in all, not bad for Allstate, right? Well, that depends. It had not been found liable, but it did incur more than $980,000 in costs defending the suit. Since it was a prevailing party, it sought costs under 28 U.S.C. § 1920 and Fed. R. Civ. P. 54(d)(1). (When dismissing, the plaintiffs stipulated that Allstate could seek costs.)

In the case, Johnson v. Allstate Ins. Co., No. 07-cv-0781-SCW, 2012 U.S. Dist. LEXIS 148282 (S.D. Ill. Oct. 16, 2012), Allstate asked for three categories of costs–the most expensive by far was its itemization for "exemplification and costs of making copies of any materials where the copies are necessarily obtained for use in the case," which tracks the language of section 1920.

So, relying on two recent cases, Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir. 2012), and Hecker v. Deere & Co, 556 F.3d 575 (7th Cir. 2009), the court went through the various costs that the defendant had listed out, including:

  • Creation of Litigation Database, processing of ESI, extraction of metadata, & rendering ESI word searchable
  • Deduplication of ESI
  • Creation of TIFF images
  • Electronic data hosting
  • Preparation of productions of ESI
  • Creation of hard copy productions (what we lawyers often call "blowbacks"
  • Photocopies
  • Graphics used at hearings

The court found that most of these costs could not be recovered, primarily because they did not constitute "making copies" as contemplated in the statute. It did find that rendering word-searchable, creation of TIFF images, blowbacks, and actual photocopying, fell under the definition of "making copies." Although it did pass through approximately $22,000 to the named plaintiffs, to be divided up into pro rata shares. Otherwise, however, Allstate was responsible for its own costs.

So what can defense lawyers use from this opinion?

(1) Costs can be shifted under certain circumstances, but the rule is largely not equipped to deal with the modern realities of e-discovery.
(2) On the other hand, for those times that a defendant needs to show that mere discovery is excessively costly, they now have a line-item by line-item account to show the court.

 

[Disclosure, I worked on Hecker v. Deere & Co. during my time at OMM. I had left the firm by the time of this appeal.]