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Plaintiffs in Antitrust Case Must Pay Over $360,000 in E-Discovery Costs

Created on June 8, 2011

By Mike Hamilton

ATTENTION LEGAL PLAINTIFFS: make sure to only request relevant electronically stored information (ESI) within litigation discovery when negotiating in 26(f) Conferences or else if you happen to lose be ready to pay the prevailing defendant's e-discovery bill.  Case in point, Race Tires America, Inc. (RTA) v. Hoosier Racing Tire Crop. (HRT).  After ruling in favor of co-defendants HRT and Dirt Motor Sports, Inc. (DMS), the United States District Court in Pennsylvania made the losing plaintiffs, RTA, pay more than $367,000 in e-discovery costs.

In 2007, RTA, a tire supplier, brought antitrust claims against fellow tire competitor, HRT, and DMS, a motorsport sanctioning body, for entering into an exclusive contract, which required racers to exclusively use HRT tires.  RTA claimed that this contract completely inhibited them from selling and competing within the motorsport industry, thus violating Section 1 and 2 of the Sherman Act.

In 2009, the federal judge granted summary judgment for the defendants, holding that STA did not demonstrate that it sustained an antitrust injury from the exclusive dealing between HRT and DMS.  After this ruling, defendants sought the cost they incurred from paying third party e-discovery vendors to produce the ESI requested by STA.  The court agreed, granting defendants motion and ordered RTA to pay more than $367,000 in e-discovery costs!

The court came to this ruling by finding that the “fees charged by the e-discovery vendors are reasonably and necessary" and that “such costs were, in fact, incurred – and in significant respects at the discovery demands of Plaintiffs."  Plaintiffs argued to no avail that these fees should be categorized as legal costs, thus disallowing defendants from recouping these e-discovery costs.  Judge McVerry ruled that the costs were highly technical, being that they were services that legally trained professionals were not capable of providing.

The judge went on to state that even though “the amount of costs assessed in this action is significant, the cost could not be described as 'puffed, exorbitant, or contrived."  In most cases, old strong armed tactics making opposing parties produce an unnecessary amount of data through numerous discovery requests will signal to the courts that the losing parties should bear the costs of such requests (RTA filed 273 discovery requests, including 119 document requests).

This outcome and other recent rulings by the courts should make corporations and their legal departments aware of the risk associated with failing to conduct a proper cost estimation/analysis before requesting outlandish and exorbitant e-discovery requests.  Looking back, if RTA had conducted such a proactive analysis, they likely would have saved more than $367,000 in this matter.

Costs incurred by defendants based on plaintiff's discovery requests:

1. Hoosier

- 19 Imaged Hard Drives

- Processed Data on five custodians (included extraction, processing, loading, production of Data)

Total Cost: $125,580.55

2. DMS

- 4 Imaged Servers (490 GB's of data/270,000 files)

- Production of documents in native format

Total Cost: $ 241,778.81

Mike Hamilton, J.D. is the E-Discovery Market Analyst at Exterro, Inc. Hamilton works in a product management and marketing role to ensure Exterro's Fusion e-discovery applications closely reflect the needs of legal teams. Within the complex e-discovery world, Hamilton's knowledge, legal acumen and experience give him a valuable perspective on bridging the gap between IT and legal teams.