Massuda v. Panda Express, Inc. et al

Filing 100

MEMORANDUM Opinion and Order Signed by the Honorable Young B. Kim on 1/15/2014. (ma,)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DR. FORTUNEE MASSUDA,
Plaintiff,
v.
PANDA EXPRESS, INC., PANDA
RESTAURANT GROUP, INC.,
CITADEL PANDA EXPRESS, INC.,
ANDREW CHERNG, and PEGGY
CHERNG,
Defendants.

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No. 12 CV 9683
Magistrate Judge Young B. Kim

January 15, 2014

MEMORANDUM OPINION and ORDER
Before the court is the motion of Defendants Panda Express, Inc., Panda
Restaurant Group, Inc., Citadel Panda Express, Inc., Andrew Cherng, and Peggy
Cherng (collectively, “Defendants”) for costs in the amount of $7,195.58 pursuant to
Federal Rule of Civil Procedure 54(d)(1) and 28 U.S.C. § 1920 as the prevailing
parties in this action. The parties have consented to the jurisdiction of this court for
resolution of this motion. (R. 98, Limited Consent.) For the following reasons,
Defendants’ motion is granted in the amount of $768.61:
Background
The facts of this case are detailed in the Memorandum Opinion and Order
dated July 16, 2013. (R. 58, Mem. Op. & Order at 1-2.) In a nutshell, this case
revolves around a rather complex web of business dealings dating back to the 1990s
between Panda Express and various Tony Rezko-controlled companies, including

Rezko Concessions, Inc., Rezko Enterprises, LLC, and PE Chicago, LLC. (Id.) The
seminal event occurred in June 2006 when Rezko’s precarious financial situation
resulted in Panda Express buying out PE Chicago’s 50% interest in the so-called
“Rezko-Citadel partnership”—a joint venture between Panda Express and Rezko
Concessions, Inc.—but at a price well below the fair market value of that interest.
(Id.) Plaintiff, who had invested $4 million in Rezko Enterprises, claimed that this
transaction negatively affected her investment. (Id.) Ultimately, however, each of
Plaintiff’s claims against Defendants was dismissed with prejudice. (R. 58; R. 76.)
Defendants now move for costs in the amount of $7,195.58, (R. 83, Defs.’ Mot.
at 2), which Plaintiff contests as too high, (R. 88, Pl.’s Resp.). The parties conferred
and then submitted a joint memorandum outlining their respective positions on
each category of costs Defendants seek to recover. A summary of their respective
positions are illustrated below:

Clerk Fees

Defendants’
Request
$200

Plaintiff’s
Position
$200

Subpoena Service

$490

$360

Printing

$3,189.05

$0

Exemplification

$228.61

$228.61

Hosting

$3,087.92

$0

Total

$7,195.58

$788.61

Costs

Analysis
Federal Rule of Civil Procedure 54(d)(1) 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.” The decision to award
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costs is firmly within the discretion of the district court, O.K. Sand & Gravel, Inc. v.
Martin Marietta Techs., Inc., 36 F.3d 565, 571 (7th Cir. 1994), and the Seventh
Circuit has recognized a strong presumption in favor of awarding costs to the
prevailing party, Park v. City of Chicago, 297 F.3d 606, 617 (7th Cir. 2002).
The definition of “costs” as used in Rule 54(d) is set forth in 28 U.S.C. § 1920,
which states that the court may tax as 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 the costs of making copies of any materials where
the copies are necessarily obtained for use in the case; (5) Docket fees
under section 1923 of this title; (6) Compensation of court appointed
experts, compensation of interpreters, and salaries, fees, expenses, and
costs of special interpretation services under section 1828 of this title.
Although district courts are permitted only to award costs falling within the six
enumerated categories, many circuits recognize that the courts have freedom to
interpret the meaning of these categories. See, e.g., SK Hand Tool Corp. v. Dresser
Indus., Inc., 852 F.2d 936, 944 (7th Cir. 1988), cert. denied, 492 U.S. 918 (1989)
(agreeing that courts may interpret “the meaning of the phrases used in § 1920”);
see also Alflex Corp. v. Underwriter’s Labs., Inc., 914 F.2d 175, 177-78 (9th Cir.
1990) (discussing fees “encompassed” within § 1920(2)). This freedom is somewhat
circumscribed, however, by the Supreme Court’s recent decision in Taniguchi v. Kan
Pacific Saipan, Ltd., __U.S.__, 132 S. Ct. 1997, 2006 (2012), in which the Court
narrowly interpreted the scope of § 1920(6)’s application and at the same time
reminded lower courts that “we have never held that Rule 54(d) creates a

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presumption of statutory construction in favor of the broadest possible reading of
the costs enumerated in § 1920.”
With respect to those costs Plaintiff opposes―subpoena service, printing, and
hosting electronically stored information (“ESI”)―Defendants, as the ones seeking
the award, bear the burden of demonstrating that the costs were necessary and
reasonable. Trs. of the Chicago Plastering Inst. Pension Trust v. Cork Plastering
Co., 570 F.3d 890, 906 (7th Cir. 2009). If this burden is satisfied, Plaintiff must
then show that the costs are inappropriate. Beamon v. Marshall & Ilsley Trust Co.,
411 F.3d 854, 864 (7th Cir. 2005).
A.

Subpoena Service Costs
Defendants seek $490 in subpoena service costs. The bills for these costs

reflect five “rush” premiums that increased the cost of normal service to $95 per
subpoena, as well as a $15 charge for an affidavit of non-service on PE Chicago.
(R. 93 at 3; R. 83, Ex. 3.) Defendants explain that the rush service was necessitated
by Plaintiff’s delay in responding to their discovery request. (R. 93 at 3 & Ex. B,
Miari Decl. ¶¶ 3-7.) Plaintiff agrees that Defendants are entitled to recover this
category of costs, but argues that she should not be responsible for the “rush”
premium and asks this court to reduce the amount claimed by $130. (Id. at 3-4.)
Section 1920(1) permits the court to assess costs for clerk and Marshal fees, a
category that includes costs related to service of subpoenas. 28 U.S.C. § 1920(1);
Lalowski v. Corinthian Sch., Inc., No. 10 CV 1928, 2013 WL 3774002, at *2 (N.D.
Ill. July 18, 2013). However, the cost must be reasonable and necessary, see Soler v.

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Waite, 989 F.2d 251, 255 (7th Cir. 1993), and “may not exceed the U.S. Marshal’s
rate at the time process was served,” Hernandez–Martinez v. Chipotle Mexican
Grill, Inc., No. 11 CV 4990, 2013 WL 2384251, at *2 (N.D. Ill. May 30, 2013) (citing
Collins v. Gorman, 96 F.3d 1057, 1060 (7th Cir. 1996)).

The cost for personal

service of a subpoena by the United States Marshal’s Service is $65 per hour “plus
travel costs and any other out-of-pocket expenses.”

28 C.F.R. § 0.114(a)(3).

Therefore, even when a private process server is employed the Marshal’s rate must
be used to calculate the recoverable costs. Collins, 96 F.3d at 1060 (finding it “best
to resolve the ambiguity of § 1920 in favor of permitting the prevailing party to
recover service costs that do not exceed the marshal’s fees, no matter who actually
effected service”).
Defendants are not entitled to recover $95 per subpoena served in this case
because this rate exceeds the Marshal’s rate. Their two subpoena invoices, (R. 83-3
at 10-11), do not indicate how many hours the process server took to effectuate
service or whether they had to pay travel expenses in connection with the service of
any of the five subpoenas. Accordingly, Defendants are entitled to recover $340
($65 per subpoena served and $15 for the attempted service on PE Chicago), which
is $20 less than what Plaintiff was willing to pay.
B.

Printing Costs
Defendants seek $3,189.05 in printing costs. The complaint Plaintiff filed in

this case is apparently identical to that filed in Sirazi v. Panda Express, Inc., No. 08
CV 2345 (N.D. Ill.), a case that was tried to a jury and ultimately dismissed with

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prejudice pursuant to a joint stipulation, (No. 08 CV 02345, R. 379). Defendants
argue that because their attorneys were not the attorneys in Sirazi, they were
obligated to print the entire Sirazi trial record, including the trial transcripts and
evidence deemed necessary to create trial exhibits. (R. 93 at 2.) Plaintiff counters
that Defendants’ attorneys could have secured the Sirazi file and reviewed it
without having to duplicate it, (id. at 2-3), and that there was no need to print every
exhibit from the Sirazi trial given that this case never got past the motion to
dismiss phase, (R. 88, Pl.’s Resp. at 2).

Plaintiff also argues that Defendants’

invoices fail to provide any breakdown or explanation for the charges. (Id.)
“The burden is on the party seeking reimbursement for photocopying costs to
show that the photocopied items were necessary; if that party fails to meet the
burden, the court should not award costs for those items.” Ochana v. Flores, 206 F.
Supp. 2d 941, 946 (N.D. Ill. 2002). While a prevailing party need not provide a
detailed breakdown of the documents copied that is so descriptive as to make it
economically impossible to recoup copying costs, the party must provide enough
information to allow the court to know what is taxable and what is not. Northbrook
Excess & Surplus Ins. Co. v. Procter & Gamble Co., 924 F.2d 633, 643 (7th Cir.
1991). Furthermore, only those costs for copies of “materials actually prepared for
use in presenting evidence to the court” are recoverable. Perry v. City of Chicago,
No. 08 CV 4730, 2011 WL 612342, at *2 (N.D. Ill. Feb. 15, 2011); see also McIlveen
v. Stone Container Corp., 910 F.2d 1581, 1584 (7th Cir. 1990). That includes “copies
attributable to discovery and copies of pleadings, motions, and memoranda

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submitted to the court,” but not “copies made solely for the convenience of counsel.”
Id.; see also Alexander v. CIT Tech. Fin. Servs., Inc., 222 F. Supp. 2d. 1087, 1089
(N.D. Ill. 2002) (finding that copy charges for discovery and courtesy copies to the
court are recoverable, but not charges of copies made for attorney convenience).
Defendants fail to satisfy their burden of demonstrating that they needed to
copy the entire Sirazi file. While Defendants assert that it was necessary to print
the record from Sirazi to become familiar with the case, they fail to explain why
they could not have simply reviewed the file or why they deemed it necessary, as
Plaintiff correctly argues, to print all of the trial exhibits.

Although this court

recognizes the value in reviewing the Sirazi case in preparing for this case,
Defendants’ conclusory statements that they needed to copy the entire trial record
are not enough to satisfy the narrow constraints of § 1920(4). See Fait v. Hummel,
01 CV 2771, 2002 WL 31433424, at *5 (N.D. Ill. Oct. 30, 2001) (finding that
conclusory affidavit averring that copying costs were necessary does not assist the
court in determining the propriety of taxing costs); Mi–Jack Prods. v. Int’l Union of
Operating Engrs., 94 CV 6676, 1996 WL 139249, at *2 (N.D. Ill. Mar. 26, 1996)
(“Generally, conclusory assertions that copying costs were necessary are not
convincing.”).
Defendants also failed to provide the requisite information needed to
determine whether the charges themselves are reasonable.

They submitted 47

pages of invoices for “in house duplication,” (R. 83-4), but none of them provide any
description of the documents copied, the number of copies made, or the price

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charged per copy. Instead, the vast majority of the line items (roughly 60 lines per
page) are ascribed an identical “code” for “in house duplication” and an identical
“narrative” of “in house duplication charge via Equitrac,” as well as the total
printing cost ranging from 10 cents to $117.50 per line item. (R. 83-4 at 6-48.) The
court cannot discern from these pages what documents were copied and for what
purpose. Accordingly, Defendants’ request for $3,189.05 in printing costs is denied.
See Trading Techs. Intern., Inc. v. eSpeed, Inc., 750 F. Supp. 2d 962, 979 (N.D. Ill.
2010) (holding that where the prevailing party has failed to provide sufficient
information to ascertain that the costs are authorized, denial is an appropriate
outcome); see also Telular Corp. v. Mentor Graphics Corp., No. 01 CV 431, 2006 WL
1722375, at *5 (N.D. Ill. June 16, 2006) (denying costs where prevailing party failed
to provide sufficient information to show which copies were for the court, for
opposing counsel, or for attorney convenience); Vigortone Ag Prods., Inc., v. PM Ag
Prods., Inc., No. 99 CV 7049, 2004 WL 1899882, at *8 (N.D. Ill. Aug. 12, 2004)
(noting that a court “should deny photocopying costs where the prevailing party
fails to address the purpose of the copies, whether multiple copies were made of the
same documents, or what documents were copied”).
C.

Hosting Costs
Defendants seek $3,087.92 they spent to upload and to host three boxes of

documents Plaintiff produced during discovery on a platform called “Relativity.”
(R. 83, Defs.’ Mot. ¶ 14 & Ex. B, Mircheff Decl. ¶ 9.) Relativity is “a standard
document management service that allows attorneys to organize, manage and

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review documents electronically in connection with litigation.” (Id. Ex. B, Mircheff
Decl. ¶ 9.) Defendants assert that these costs were “reasonable and necessary”
expenses related to their defense “particularly in light of the extremely short time
frame in which Panda Express had to process these documents in order to conduct
follow-up discovery and/or use them in connection with depositions that were
scheduled.”

(Id.)

Plaintiff objects to these costs in their entirety because, she

argues, ESI “hosting” costs are not recoverable and the amount is unreasonably
high and unnecessary. (R. 88, Pl.’s Resp. at 1-2.) She points out that Defendants
provided her attorney with ESI on CD-ROMs but that her counsel was able to “host”
it on his computer at no cost. (R. 93 at 1-2.)
Defendants’ request for their ESI hosting costs is governed by § 1920(4),
which addresses “fees for exemplification and the costs of making copies of any
materials where the copies are necessarily obtained for use in the case.” 28 U.S.C.
§ 1920(4). The question of whether prevailing parties may recover ESI hosting costs
has not been expressly answered by the Seventh Circuit, although the court has
opined twice on the topic of ESI discovery in slightly different contexts.

In

Northbrook Excess, 924 F.2d at 643, the prevailing party sought costs relating to a
computerized system “designed, in part, to reduce the time and expenses of
reviewing documents, and reduce storage and duplication expenses.” The Seventh
Circuit declined to accept this expenditure as a taxable cost.

Id. at 643-44.

Additionally, the Seventh Circuit noted that “there appears to be no authority for

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recovery of storage costs pursuant to 28 U.S.C. § 1920.” Id. at 644 n.14.1 More
recently in Hecker v. Deere & Co., 556 F.3d 575, 591 (7th Cir. 2009), the Seventh
Circuit affirmed an award of costs associated with “converting computer data into a
readable format in response to plaintiffs’ discovery requests.” The court concluded
that such costs are recoverable under § 1920. Id.
A number of courts within this district have also addressed the topic of ESI
discovery under § 1920. In Rawal v. United Airlines, Inc., No. 07 C 5561, 2012 WL
581146, at *2 (N.D. Ill. Feb. 22, 2012), the prevailing party sought over $14,000 in
costs for “electronically producing and processing email accounts and user-created
files into searchable format in order to search relevant electronic mail and files.”
The court limited the award, however, to those costs it considered to be the modernday equivalent of exemplification or making copies, such as the electronic scanning
of documents. Id. Similarly, in Windy City Innovations, LLC v. America Online,
Inc., No. 04 CV 4240, 2006 WL 2224057, at *3 (N.D. Ill. July 31, 2006), the court
rejected costs associated with Optical Character Recognition conversion, coding
services, and keyword searching, reasoning that these costs were for services
typically performed by attorneys or other legal personnel. The Windy City court
also rejected costs associated with document conversion because the opposing party
did not request the more expensive conversion, but simply sought the production of

In Johnson v. Allstate Ins. Co., No. 07-cv-0781-SCW, 2012 WL 4936598, at *3 n.2
(S.D. Ill. Oct. 16, 2012), discussed infra, the court discounted the controlling effect of
Northbrook Excess as to its findings on the computerized litigation system, noting
that since § 1920(4) was amended in 2008, it is fair to assume that “Northbrook
Excess is no longer sufficient to understand the contours of § 1920(4).”

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documents maintained in any format—hard, magnetic, or electronic. Id. at *4; but
see Comrie v. IPSCO Inc., No. 08 CV 3060, 2010 WL 5014380, at *3-*4 (N.D. Ill.
Dec. 1, 2010) (allowing costs for conversion, processing, and extracting “where
necessary to IPSCO’s ESI production”).
As for the specific question of costs related to hosting ESI, a few courts have
approached this issue head-on with varying results. In Johnson, 2012 WL 4936598,
at *2, *5, the court examined whether to allow the defendant to recover nearly a
million dollars in costs under § 1920(4), including almost $500,000 in “electronic
data hosting” costs and another $450,000 for the creation of a litigation database for
“processing and producing electronic copy documents,” “converting documents from
one format to another, more searchable form,” and for “processing and producing
hard copies.”

Relying in large part on Heckler and on the Third Circuit’s

comprehensive analysis in Race Tires America, Inc. v. Hoosier Racing Tire Corp.,
674 F.3d 158 (3d Cir. 2012), the Johnson court concluded that costs associated with
converting data into a readable format are compensable under § 1920(4), but that
costs related to the “gathering, preserving, processing, searching, culling and
extracting of ESI simply do not amount to ‘making copies.’” Id. at *6 (quoting Race
Tires, 674 F.3d at 170). The court also rejected those costs associated with the
storage of data produced by the conversion of documents into a readable form on
grounds that “[n]either the language of § 1920(4), nor its history, suggests that
Congress intended to shift all the expenses of a particular form of discovery—
production of ESI—to the losing party.” Id. at *7. In contrast, the court in Goldberg

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v. 401 North Wabash Venture LLC, No. 09 CV 6455, 2013 WL 4506071, at *7 (N.D.
Ill. Aug. 23, 2013), permitted 50% of the costs related to “electronic discovery”—a
category

that

included

“electronically

processing,

hosting,

and

producing

documents.” In deciding to reduce the amount sought by half, the court observed
the “scant legal authority in this circuit and district giving litigants guidance in
seeking these costs under Rule 54(d)(1) and Section 1920(4).” Id.
The Third Circuit in Race Tires took a long historical look at Rule 54(d) and
§ 1920 in its effort to resolve the question of “whether all charges imposed by
electronic discovery vendors to assist in the collection, processing, and production of
electronically stored information (‘ESI’) are taxable against the losing party”
pursuant to § 1920(4). 674 F.3d at 159. The court noted the “significant role that
electronic discovery plays in litigation today” as its guiding reason for wanting to
clarify the bases upon which electronic discovery expenses are taxable.2 Id. at 160.
That case involved more than $365,000 in ESI discovery charges, including charges
for file format conversion, data processing, and keyword searching. Id. at 159-60.
Focusing on whether the services the vendors performed were akin to copying, the

The court noted that in 2004, “approximately 95% of all documents were created
by electronic means.” 674 F.3d at 160 n.1. The effect of this technological explosion
on the Federal Rules can be seen in changes to Federal Rule of Civil Procedure
26(b)(2)(B), which now requires parties to produce ESI unless they can show that
the information “is not reasonably accessible because of undue burden or cost,” Fed.
R. Civ. P. 26(b)(2)(B), as well as in the adoption of Federal Rule of Evidence 502.
Id.; see also Fed. R. Evid. 502, Advisory Committee Notes (explaining how Rule 502
was adopted in part to respond to problems associated with electronic discovery).
This fact notwithstanding, the court declined to equate the extension of these rules
and their provision for the discovery of ESI as a basis upon which to expand
recoverable expenses under § 1920(4). Race Tires, 674 F.3d at 170-71.

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Third Circuit concluded that “only the scanning of hard copy documents, the
conversion of native files to TIFF, and the transfer of VHS tapes to DVD” could be
considered copying. Id. at 171. In approving about $30,000 in costs, thus reversing
the bulk of the district court’s award, the Race Tires court narrowly construed §
1920, stating:
[t]he decisions that allow taxation of all, or essentially all, electronic
discovery consultant charges, such as the District Court’s ruling in this
case, are untethered from the statutory mooring. Section 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.
It may be that extensive “processing” of ESI is essential to make a
comprehensive and intelligible production. 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. But that does not mean that the services leading up to the
actual production constitute “making copies.”
Id. at 169.
The Third Circuit’s narrow interpretation of § 1920(4) finds support in the
Supreme Court’s decision two months later in Taniguchi. There the Supreme Court
confronted the issue of whether costs associated with the translation of documents,
as opposed to oral translation services, from Japanese to English were recoverable
under § 1920(6). Taniguchi, 132 S. Ct. at 2002-07. The Court refused to expand the
definition of “interpreter” to include interpretation of written materials and
emphasized that “[t]axable costs are limited to relatively minor, incidental
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expenses” and “are a fraction of the nontaxable expenses borne by litigants for
attorneys, experts, consultants, and investigators.” Id. at 2005-06.
This court agrees with Race Tires, Rawal and Johnson that ESI discovery
costs associated with the conversion of ESI into a readable format, such as scanning
or otherwise converting a paper version to an electronic version or converting native
files to TIFF (if agreed upon by the parties to be the production format), are
compensable under § 1920(4).

But costs related to the “gathering, preserving,

processing, searching, culling and extracting of ESI simply do not amount to
‘making copies’” and thus are non-taxable.

Johnson, 2012 WL 4936598, at *6

(quoting Race Tires, 674 F.3d at 170); see also Rawal, 2012 WL 581146, at *2 (costs
under § 1920(4) “do not encompass work that goes beyond ‘merely converting a
paper version to an electronic format’” (quoting Francisco v. Verizon S., Inc., 272
F.R.D. 436, 446 (E.D. Va. 2011))). Applying these principles to the specific question
of online hosting costs, this court finds that these costs may be recoverable only if
hosting amounted to “copying” of ESI for production.
In this case the hosting of three boxes of Plaintiff’s documents did not
constitute “copying.”

Defendants’ two vendor invoices show that the services

rendered

“DOCUMENT

were

for

SEARCH

“MONTHLY_RELATIVITY_DISK_STORAGE.”

AND

RETRIEVAL”

(R. 83-4 at 45-48.)

and

for

Defendants

describe these services as “uploading and hosting,” and explain that Relativity
allows “attorneys to organize, manage and review documents.” (R. 83, Defs.’ Mot.,
Ex. B, Mircheff Decl. ¶ 9.) Defendants also did not demonstrate that the Relativity

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services included some form of conversion of data akin to “making copies” for use in
this case. Without evidence of this critical nature, this court has no authority to
award the hosting costs in this case. See Ancora Techs., Inc. v. Apple, Inc., No. 11CV-06357 YGR, 2013 WL 4532927, at *3 (N.D. Cal. Aug. 26, 2013) (noting the tight
construction mandated by Taniguchi and accordingly denying electronic discovery
storage costs as not falling within the narrow limits of § 1920(4)).

Defendants

explain that it was “reasonable and necessary” for them to have used Relativity
because they had very little time to process the documents. (R. 83, Ex. B, Mircheff
Decl. ¶ 9.)

But § 1920(4), for better or worse, is not concerned with attorney

efficiency or convenience. It is also significant to note that the documents uploaded
onto Relativity were documents already copied and produced by Plaintiff.
Accordingly, Defendants’ request for $3,087.92 in hosting cost is denied.
Conclusion
For the foregoing reasons, Defendants’ Motion for Costs is granted in the
amount of $768.61.
ENTER:

____________________________________
Young B. Kim
United States Magistrate Judge

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