C.A. Holds That Electronic Discovery Costs Claimed by Defendant in Connection With Dropped Action Against it By City of Los Angeles Based on Allegedly Defective Software Used in DWP’s Billings Were Improperly Taxed
By a MetNews Staff Writer
The Court of Appeal for this district, addressing costs awarded to PricewaterhouseCoopers LLC after the City of Los Angeles in 2019 dropped a breach of contract/fraud action against the multi-national network of professional services firms, has reversed an order taxing the roughly $1.1 million the prevailing defendant sought in electronic discovery costs.
Div. Eight, in an unpublished opinion by Justice Carl H. Moor, on Thursday clarified that a 1995 decision from the Fourth District’s Div. One disallowing electronic discovery costs does not bar an award of such costs in all instances, but only where the prevailing party is not entitled to attorney fees and the computer related tasks are akin to those conventionally performed by paralegals.
Moor said it appears from the transcript of the hearing on costs, though a portion is unintelligible, that Los Angeles Superior Court Judge Elihu M. Berle supposed that all such costs are precluded under the Oct. 27, 1995 decision in Science Applications International Corp. v. Superior Court, rather than an award being within his discretion. This impression is fortified, he noted, by the fact that the judge taxed the entirety of the $1,087,812.63 that was sought.
The opinion affirms the order to the extent that Berle taxed $1,257,076.25 in travel costs: $169,263.62 relating to lawyers coming here for depositions and $67,596.46 for expenses incurred in them traveling here for hearings. Moor had no quarrel with Berle’s view that there was no need for PricewaterhouseCoopers LLC to have New York lawyers fly to Los Angeles given that it has local counsel.
PricewaterhouseCoopers was sued over billing software it sold to the city. It was the defectiveness of that software, the city alleged, that resulted in its hundreds of millions of dollars in liability to Department of Water and Power ratepayers who were mistakenly billed excessive amounts.
The city explained, in dropping its suit after four-and-a-half years of litigation, that its chances of prevailing were impeded by the former head of DWP and a former attorney for it invoking the Fifth Amendment.
In Science Applications, Charles Froehlich, a retired justice of the Fourth District’s Div. One, sitting on assignment, wrote:
“We hold the prevailing party in this case is not entitled to litigation expenses which represent high-powered computer support akin to paralegal services or document retrieval.”
The prevailing party in that case had successfully sued the state for breach of contract and secured a judgment for $1 million in damages. On Jan. 18, 1995, the San Diego-based Div. One affirmed the judgment except as to $1.2 in attorney fees and certain costs; there was a recalculation on remand; the Oct. 27, 1995 opinion, relied upon by Berle, disallowed certain electronic discovery costs.
These included costs relating to “document control and database charge” which Froehlich said “represents the State’s expenditure for an outside firm to keep track of the voluminous records in the case—that is, to ‘Bates-stamp’ the documents, input them for retrieval, maintain a document library, create databases to search for records by date, author or subject, etc.”
“The expense is the cost of hiring assistants to help counsel organize documents and access them in discovery and at trial—in other words, the cost of a ‘high tech’ paralegal. Because we have concluded attorney fees are not compensable, we cannot condone payment of paralegal fees. The item is not recoverable.”
Moor took note of the Sixth District Court of Appeal’s May 28, 2020 opinion in Hooked Media Group, Inc. v. Apple Inc. which approved of an award of $92,000 in costs for the conversion of “native electronic files into usable form.” He quoted the concurring justice, Nathan D. Mihara, as observing that these costs “were not akin to paralegal or attorney expenses.”
In Thursday’s opinion, Moor said:
“We note all of the relevant case law has consistently acknowledged that the costs associated with electronic discovery are not expressly allowed or prohibited, but may be awarded in the trial court’s discretion.”
Agreeing with Science Applications, he declared:
“Common sense dictates that a prevailing party who may not recover attorney fees or costs associated with the storage, management, photocopying, search, or production of physical documents, cannot recover equivalent labor or discovery costs simply because the documents are in electronic form.”
Also embracing Hooked Media Groups, Moor added:
“On the other hand, a prevailing party may show costs unique to the electronic format of the data were reasonably necessarily incurred and are not equivalent to work performed by paralegal or administrative support, such as the cost of a technical process to convert data files to a useable form to respond to a document production request.”
He went on to say:
“Although it is a close question in this case, given the City’s primary argument that the costs associated with electronic discovery are never recoverable under Science Applications and the lack of clarity in the transcript of the hearing, we cannot presume the trial court understood the extent of its discretion to award costs related to electronic discovery. We remand the matter to allow the trial court to either exercise its discretion to award electronic discovery costs or confirm the prior exercise of its discretion to deny electronic discovery costs.”
Addressing costs related to travel expenses, Moor wrote:
“Whether a cost is reasonably necessary to the litigation, however, and whether a cost is reasonable in amount, is a determination within the trial court’s discretion. In this case, the trial court found that Pricewaterhouse’s New York-based counsel had qualified, experienced attorneys available in the firm’s Los Angeles office to conduct depositions and attend hearings, and who in fact took several of the depositions in this case. Under the circumstances, the trial court found the travel costs for out-of-town attorneys were not reasonably necessary to the litigation and the court exercised its discretion to tax the travel costs of out-of-town attorneys. We cannot say that the court’s assessment was clearly wrong; no abuse of discretion has been shown.”
The case is City of Los Angeles v. PricewaterhouseCoopers, LLP, B305583.
Casey J. McCracken and Daniel J. Thomasch of Gibson, Dunn & Crutcher represented Pricewaterhouse. Arguing for an affirmance were Deputy City Attorney Joseph A. Brajevich and Eric M. George, Maribeth Annaguey and Kim S. Zeldin of Brown George Ross O’Brien Annaguey & Ellis.
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