The opinion of the court was delivered by: Williams, Magistrate Judge:
This case was filed as a putative class action in November 2007. Class certification was denied, and after the two remaining putative class representatives were dismissed with prejudice, final judgment was entered for Defendant Allstate Insurance Company (Allstate). The case now comes before the Court on Allstate's Bill of Costs (Doc. 318). For the reasons explained below, the Court GRANTS IN PART and DENIES IN PART Allstate's Bill of Costs (Doc. 318), and ORDERS Plaintiffs Robert Johnson, Sr., and Lonzie Autrey, Jr., to be taxed in the amount of $22,213.20.
In November 2007, four putative class representatives, including Robert Johnson, sued Allstate on a theory that Allstate treated them unfairly by applying outdated scoring algorithms to calculate their insurance premiums, thus violating Illinois' Consumer Fraud and Deceptive Business Practices Act. Two of those plaintiffs were dismissed for lack of subject-matter jurisdiction in September 2009. (See Doc. 124; Doc. 235). In March 2010, pursuant to Federal Rule 15(a), District Judge Reagan granted leave to amend the complaint so as to add twenty-one individuals- including Lonzie Autrey, Jr.*fn1 -as plaintiffs. (See Doc. 105; Doc. 191). An Amended Complaint with twenty-three named plaintiffs was filed on April 13, 2010. (Doc. 199).
On September 29, 2010, Judge Reagan dismissed one plaintiff for lack of subject-matter jurisdiction, and dismissed without prejudice eleven more. (Doc. 237). Class certification was denied the same day. (Doc. 238). Pursuant to 28 U.S.C. § 636(c) and Rule 73, all parties consented to a trial before a magistrate, and on January 11, 2011, the case-which at the time included eleven plaintiffs-was reassigned to the undersigned magistrate judge. (Doc. 249).
In April 2011, pursuant to Federal Rule 41(a), the parties (including Allstate) stipulated to the voluntary dismissal with prejudice of nine plaintiffs. (Doc. 281; Doc. 282). Only Lonzie Autrey and Robert Johnson remained as plaintiffs. In August 2011, almost four years after the suit was filed, they filed a motion to voluntarily dismiss their case without prejudice pursuant to Federal Rule 41. (Doc. 306). Defendant, arguing it would suffer plain legal prejudice should the case be dismissed without prejudice after such a long period of intensive discovery and motion practice, opposed Rule 41 dismissal. (Doc. 307). To assuage Allstate's concerns about future litigation, Plaintiffs agreed to seek dismissal with prejudice. (Doc. 310).
The Court, in its discretion under Federal Rule 41(a)(2) and Seventh Circuit precedent (see Marlow v. Winston & Strawn , 19 F.3d 300, 304 (7th Cir. 1994)), imposed terms on the dismissal. See also Ratkovich v. Smith Kline , 951 F.2d 155, 158 (7th Cir. 1991) (terms and conditions are the quid pro quo of allowing a plaintiff to dismiss his suit). Plaintiffs were permitted to dismiss with prejudice, but on the condition that Allstate could seek costs pursuant to 28 U.S.C. § 1920 and Fed. R. Civ. P. 54(d)(1). (Doc. 315). Plaintiffs, of course, were allowed to attempt to show they are "incapable of paying court-imposed costs at this time or in the future."
See Rivera v. City of Chi. , 469 F.3d 631, 635 (7th Cir. 2006). Now before the Court is Allstate's timely-filed Bill of Costs, in which it asks for $982,264.24 (Doc. 318).
The Bill of Costs includes subtotals for three categories. Allstate asks for $23,276.13 for "Fees for printed or electronically recorded transcripts necessarily obtained for use in the case." (Doc. 318). For its "Other Costs" incurred, Allstate requests $469.16. (Id.). Allstate's weightiest request is $958,518.95 for "Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case." (Id.).
Unsurprisingly, it is the third category the parties dispute. Broken down further, the $958,518 comprises four smaller totals. For "processing and producing electronic copy documents necessarily obtained for use in this case," Allstate's costs are $896,699. (Doc. 318-1, p. 3). Allstate paid third-party provider KPMG that amount for converting documents from one electronic format into another, more searchable form. (Doc. 318-1, p. 3). Allstate paid KPMG $21,587 ($21,297.47 for "External Duplicating" and $290.30 for "Internal Duplicating") for processing and producing hard copies for use in the case. (Doc. 318-1, p. 4). Finally, Allstate paid KPMG $40,232.18 for "exemplification necessarily obtained for use in this case." (Id.).
Also submitted during briefing were sworn affidavits from Plaintiffs Johnson and Autrey. (Doc. 327-1 and Doc. 327-2, respectively). Johnson is a 66-year-old retiree with $1,400 in monthly income, a financially dependent wife, $600 in his savings account, and $62,000 in debts. (Doc. 327-1). His non-liquid assets, which include a 1992 pickup, a 1973 Johnboat, two lots in East St. Louis and the equity in his home, total $22,200. (Id.). Autrey is a 72-year-old retiree with $1,500 in monthly income, no available cash, and $2,000 in debt. (Doc. 327-2). Autrey's assets are limited to a 2002 Honda which he values at $4,362. (Id.). Both Plaintiffs swear they will not be able to pay Allstate's costs now or in the future. Each Plaintiff's contract with Plaintiff's counsel includes the following fee agreement:
THIS IS A CONTINGENT FEE AGREEMENT - ANY MONETARY OBLIGATIONS OF THE UNDERSIGNED AND THE OTHER CLASS MEMBERS ARISING OUT OF THIS CLASS ACTION LAWSUIT ARE CONTINGENT UPON A FAVORABLE SETTLEMENT, JUDGMENT OR OTHER RESOLUTION ACCEPTABLE TO THE CLASS REPRESENTATIVE AND TO THE COURT, i.e., IF NO RECOVERY IS HAD IN THE CASE, NEITHER I, NOR ANY OTHER MEMBER OF THE CLASS, WILL OWE MY ATTORNEYS ANY MONEY.
The issue is ripe: it has been exhaustively briefed in a series of responses, replies, sur-replies, and notices of supplemental authority. (Docs. 327, 329, 330, 331, 334, 335, 339, and 340). Plaintiffs argue that Allstate's Bill of Costs should be reduced for two reasons: (1) because the Bill of Costs (particularly the $958,518.95 for "exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case") is both non-compensable and overstated, and (2) because the Plaintiffs are indigent. Defendants counter that § 1920(4) permits recovery of all the costs they have outlined, and that Plaintiffs are not entitled to any reduction in taxed costs due to indigency.
Federal Rule of Civil Procedure 54(d) gives courts the discretion to
award costs to prevailing parties. Taniguchi v. Kan Pacific
Saipan, Ltd. , --- U.S. ----, 132 S.Ct. 1997, 2001 (2011). The
Rule provides that "[u]nless a federal statute, these rules, or a
court order provides otherwise, costs-other than attorney's
fees-should be allowed to the prevailing party." FED.R.
CIV. P. 54(d)(1). To be compensable, a particular expense must fall
into one of the categories of costs statutorily authorized for
reimbursement. Cefalu v. Vill. of Elk Grove , 211 F.3d 416,
427 (7th Cir. 2000) (citing Crawford Fitting Co. v. J.T. Gibbons,
Inc. , 482 U.S. 437, 441--42 (1987)). The statutory provision
that limns "costs" under Rule 54(d) is 28 U.S.C. § 1920. Taniguchi
, 132 S.Ct. at 2000--01. Courts may further limit costs, even
when an item qualifies under § 1920, if a court finds the item was not
"necessarily obtained for use in the case," Cefalu , 211
F.3d at 428, or if the amount assessed for that item is unreasonable,
Majeske v. City of Chi. , 218
F.3d 816, 824 (7th Cir. 2000).
Section 1920 enumerates six categories of compensable costs: (1) fees of the clerk and marshal; (2) fees for printed or electronically recorded transcripts necessarily obtained for use in the case; (3) fees and disbursements for printing and witnesses; (4) fees for exemplification and costs of making copies of any materials where the copies are necessarily obtained for use in the case; (5) docket fees under 28 U.S.C. § 1923; and (6) compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under 28 U.S.C. § 1828. 28 U.S.C. § 1920. The parties do not dispute the $23,276.13 claimed by Allstate under § 1920(2) for "fees for printed or electronically recorded transcripts," or Allstate's claim (for which they cite no statutory or common law authority) for "other costs" of $469.16, the price of shipping production documents to Plaintiffs' counsel.
But the parties do dispute the contours of § 1920(4), which allows taxation of fees for exemplification and costs of making copies of any materials where the copies are necessarily obtained for use in the case. Defendant asserts that this case is controlled by Hecker v. Deere & Co. According to the Seventh Circuit, the Hecker district court record supported a prevailing defendant's characterization of costs as "converting computer data into a readable format in response to [the losing side's] discovery requests." Hecker , 556 F.3d 575, 591 (7th Cir. 2009).*fn2 The Seventh Circuit summarily concluded that "such costs are recoverable under 28 U.S.C. § 1920," and affirmed the award of costs to that defendant. Id. The Hecker district court's discussion was limited to the following:
[Defendant] seeks reimbursement of $159,728.40 for exemplification costs. Plaintiff notes that $141.022.00 of these expenses are for "processing." [Defendant] states that the expenses were incurred in responded [sic] to plaintiffs' four sets of documents, which exceeded 97,000 pages. [Defendant] asserts the processing charges relate to the selection and conversion of electronic documents that did not involve attorney review . . . Plaintiffs do not indicate that defendants deviated from any request by them to produce the discovery documents in a specific manner.
Hecker v. Deere & Co. , No. 06-cv-0719-jcs, slip op. at 11 (W.D. Wis. Dec. 31, 2007). The Hecker district court awarded the full $159,728.40 requested by the defendant.
Plaintiffs attempt to distinguish the instant case from Hecker (or at
least Allstate's reading of Hecker), and argue the analysis should be
guided by Race Tires Am., Inc. v. Hoosier Racing Tire Corp., where the
Third Circuit recently held that none of the electronic discovery
activities performed by a third party vendor could be regarded as
"exemplification" of materials, and that only scanning and file format
conversion could be considered to be "making copies." Race Tires
F.3d 158 (3d Cir. 2012). In that case, the Third Circuit reversed an
award of costs under § 1920(4). The Race Tires analysis begins with a
discussion of § 1920 through a historical lens. Id. at 164.
Even in 1853, when Congress first meant to "impose rigid controls on
cost-shifting in federal courts," id. (quoting Crawford
Fitting Co. v. J.T. Gibbons, Inc. , 482 U.S. 437, 441 (1987)),
the controlling statute included language that "lawful fees for
exemplification and copies of papers necessarily obtained for use on
trial . . . shall be taxed by a judge or clerk of the court,"
id. (citing the Fee Act of 1853, ch. 80, 10 Stat.
18(1853)).*fn3 The Third Circuit rejected the notion
that the terms
"exemplification" and "the making of copies" are indistinguishable
(the defendants had not drawn any "real distinction" between the two
terms), and proceeded to hold that, since ESI vendors' work did not
produce illustrative evidence or the authentication of public records,
it could not be considered "exemplification." Turning to the
definition of "copy," the Third Circuit rejected the district court's
conclusion that all electronic discovery charges were compensable as
"copies of any materials" under § 1920(4). Id. at 167--68.
The Third Circuit concluded that "only the scanning of hard copy
documents, the conversion of native files to TIFF,*fn4
and the transfer of VHS tapes to DVD involved 'copying,' and that the
costs attributable to only those activities are recoverable" under §
1920(4). Id. at 171.
Here, it is first worth mentioning that Race Tires and Hecker are not completely incongruous. When it comes to data conversion and the creation of easily-searchable file formats, the Seventh Circuit and Third Circuit are on the same page. Race Tires cites Hecker for the proposition that discovery-related conversion of data into a readable format is taxable under § 1920. Race Tires , 674 F.3d at 167. That proposition will guide the instant analysis.
But the instant case will also be guided by the more detailed Race
Tires decision, which, to start with, delineates between § 1920's
categories of exemplification and making copies under § 1920. Hecker
makes no such distinction. In fact, the Hecker district court taxed
discovery-related ESI costs as exemplification costs,*fn5
a conclusion that seems outside even the Seventh Circuit's
expansive definition of exemplification. See Cefalu v. Vill. of
Elk Grove , 211 F.3d 416, 427--28 (7th Cir. 2000)
(exemplification encompasses authenticating a true copy of a public
record; the expense of preparing maps, charts, graphs, photographs,
motion pictures, photostats, and kindred materials; and the cost of
graphics services for preparing exhibits).
It seems unlikely that the distinct terms "exemplification" and "copies of any materials" should be analyzed without accounting for their differences. See United States v. Alvarenga-Silva , 324 F.3d 884, 887 (7th Cir. 2003) ("Courts should avoid statutory constructions that render another part of the same provision superfluous."). In addition to offering guidance as to which statutory term covers which asserted cost, Race Tires goes even further by distinguishing five categories that comprise the ESI services: (1) collecting and preserving ESI; (2) processing and indexing ESI; (3) keyword searching of ESI for responsive and privileged documents; (4) converting native files to TIFF; and (5) scanning paper documents to create electronic images. In other words, Hecker (which Race Tires parallels on the issue) provides a starting point in articulating that Allstate's discovery-related costs of file conversion are compensable. But the Race Tires analysis, which is more thorough than Hecker simply because the issue was squarely before the Court, is helpful-in the absence of controlling Seventh Circuit caselaw-for determining what other costs are, or are not, compensable under § 1920(4).
One additional consideration is pertinent here under the Rule 54(d)(1) analysis. While there is a presumption that the losing party will pay costs, courts have discretion to direct otherwise. Rivera v. City of Chi. , 469 F.3d 631, 634 (7th Cir. 2006). District courts may consider a plaintiff's indigency in denying taxation of Rule 54(d) costs. Id. (citing Mother & Father v. Cassidy , 338 F.3d 704, 708 (7th Cir. 2003)).
The total costs taxed against Autrey and Johnson requires discussion of three issues:
(1) the amount of Allstate's Bill of Costs compensable under Rule 54(d) and § 1920; (2) the proportion of those costs for which Plaintiffs should be responsible; and (3) whether Plaintiffs Johnson and Autrey are exempt from taxation of costs under the indigency exception. Because § 1920 does not allow for recovery of all the costs sought by Allstate, and because Defendants stipulated to the voluntarily dismissal of nine named plaintiffs, the Court ...