Andrea Resnick v. Netflix, Inc.

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE ONLINE DVD-RENTAL No. 11-18034
ANTITRUST LITIGATION,
D.C. No.
4:09-md-02029-
ANDREA RESNICK; BRYAN PJH
EASTMAN; AMY LATHAM; MELANIE
MISCIOSCIA; STAN MAGEE;
MICHAEL OROZCO; LISA SIVEK;
MICHAEL WIENER,
Plaintiffs-Appellants,
v.
NETFLIX, INC.; WAL-MART STORES,
INC.; WALMART.COM USA LLC,
Defendants-Appellees.
2 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
IN RE ONLINE DVD-RENTAL No. 12-16160
ANTITRUST LITIGATION,
D.C. No.
4:09-md-02029-
ANDREA RESNICK; BRYAN PJH
EASTMAN; AMY LATHAM; MELANIE
MISCIOSCIA; STAN MAGEE;
MICHAEL OROZCO; LISA SIVEK;
MICHAEL WIENER,
Plaintiffs-Appellants,
v.
NETFLIX, INC.,
Defendant-Appellee,
and
WAL-MART STORES, INC.;
WALMART.COM USA LLC,
Defendants.
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 3
IN RE ONLINE DVD-RENTAL No. 12-16183
ANTITRUST LITIGATION,
D.C. No.
4:09-md-02029-
ANDREA RESNICK; AMY LATHAM; PJH
MELANIE MISCIOSCIA; STAN
MAGEE; MICHAEL OROZCO; LISA
SIVEK; MICHAEL WIENER; BRYAN OPINION
EASTMAN,
Plaintiffs-Appellees,
v.
NETFLIX, INC.,
Defendant-Appellant,
and
WAL-MART STORES, INC.;
WALMART.COM USA LLC,
Defendants.
Appeal from the United States District Court
for the Northern District of California
Phyllis J. Hamilton, District Judge, Presiding
Argued and Submitted
February 13, 2014—San Francisco, California
Filed February 27, 2015
4 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
Before: Sidney R. Thomas, Chief Judge, Stephen
Reinhardt, Circuit Judge, and Lloyd D. George, Senior
District Judge.*
Opinion by Chief Judge Thomas
SUMMARY**
Antitrust
The panel affirmed the district court’s summary judgment
and affirmed in part and reversed in part its award of costs in
consolidated antitrust actions arising out of a promotion
agreement whereby Walmart transferred its online DVD-
rental subscribers to Netflix, and Netflix agreed to promote
Walmart’s DVD sales business.
The plaintiffs, individuals representing a class of Netflix
subscribers, contended that this arrangement violated §§ 1
and 2 of the Sherman Act by illegally allocating and
monopolizing the online DVD-rental market. The panel held
that the subscribers did not raise a triable issue of fact as to
whether they suffered antitrust injury-in-fact on a theory that
they paid supracompetitive prices for one of Netflix’s
subscription plans because Netflix would have reduced the
*
The Honorable Lloyd D. George, Senior District Judge for the U.S.
District Court for the District of Nevada, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 5
price of that plan but for its allegedly anticompetitive
conduct.
In light of Taniguchi v. Kan Pac. Saipan, Ltd., 132 S. Ct.
1997 (2012), which underscored the narrow scope of taxable
costs under 28 U.S.C. § 1920, the panel affirmed in part and
reversed in part the district court’s cost award. Finding
persuasive the reasoning of the Third, Fourth, and Federal
Circuits, the panel held that certain charges for “data upload”
and “keywording” were not recoverable as costs for making
copies under § 1920(4). The panel remanded for
consideration of whether costs were properly awarded for
“professional services.” The panel concluded that of the costs
challenged as non-taxable under § 1920(4), only those costs
attributable to optical character recognition, converting
documents to TIFF, and “endorsing” activities¯all of which
were explicitly required by the plaintiffs¯were recoverable
on the record before it. The panel held that the district court
did not abuse its discretion in awarding costs for preparation
of visual aids, for TIFF conversions, and for copying of paper
documents. The district court also did not abuse its discretion
in declining to award Netflix costs for production of certain
PowerPoint documents.
6 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
COUNSEL
Robert G. Abrams and Gregory Lynn Baker, Baker Hostetler
LLP, Washington, D.C.; William G. Caldes, Eugene A.
Spector, and Jonathan M. Jagher, Spector Roseman Kodroff
& Willis, P.C., Philadelphia, Pennsylvania; Merrill G.
Davidoff, H. Laddie Montague, Jr., Sarah Rebecca
Schalman-Bergen, and David Francis Sorensen, Berger &
Montague, P.C., Philadelphia, Pennsylvania; Guido Saveri
and Lisa Saveri, Saveri & Saveri, Inc., San Francisco,
California; Todd A. Seaver and Joseph J. Tabacco, Jr.,
Berman DeValerio; San Francisco, California, for Plaintiffs-
Appellants/Cross-Appellees.
Jeffrey Bank, Tiffany L. Lee, Jonathan M. Jacobson and
David Reichenberg, Wilson Sonsini Goodrich & Rosati, New
York, New York; Keith Edward Eggleton, Dylan James
Liddiard, Maura L. Rees, and Anthony Weibell, Wilson
Sonsini Goodrich & Rosati, Palo Alto, California; Scott Sher,
Wilson Sonsini Goodrich & Rosati, Washington, D.C.;
attorneys for Defendant-Appellee/Cross-Appellant Netflix.
Lawrence C. DiNardo and Paula W. Render, Jones Day,
Chicago, Illinois; Richard Wolf Hess and Neal Manne,
Susman Godfrey, LLP, Houston, Texas; Kathryn Parsons
Hoek and Marc M. Seltzer, Susman Godfrey L.L.P., Los
Angeles, California; Stephen E. Morrissey and Genevieve
Vose, Susman Godfrey LLP, Seattle, Washington, for
Defendants Wal-Mart Stores, Inc. and Walmart.com USA
LLC.
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 7
OPINION
THOMAS, Chief Judge:
These consolidated antitrust actions arise out of an
agreement (“Promotion Agreement”) between Netflix and
Walmart1 whereby Walmart transferred its online DVD-rental
subscribers to Netflix, and Netflix agreed to promote
Walmart’s DVD sales business. The plaintiffs, individuals
representing a class of Netflix subscribers (“Subscribers”),
contend that this arrangement violated §§ 1 and 2 of the
Sherman Act by illegally allocating and monopolizing the
online DVD-rental market. The Subscribers’ theory of injury
is that they paid supracompetitive prices for one of Netflix’s
subscription plans because Netflix would have reduced the
price of that plan but for its allegedly anticompetitive
conduct.
We agree with the district court that the Subscribers have
not raised a triable issue of fact as to whether they suffered
antitrust injury-in-fact, and we affirm the district court’s grant
of summary judgment. We vacate in part the district court’s
cost award, and remand for consideration in light of this
opinion.
I
In 1997, Reed Hastings and Marc Randolph co-founded
Netflix, the first internet-based DVD rental service. Netflix
commenced operations in 1998, offering customers through
1
For ease of reference, “Wal-Mart Stores, Inc.” and “walmart.com USA
LLC” shall be collectively referred to as “Walmart” throughout this
opinion.
8 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
its website the option to rent or buy DVDs by mail. Netflix
initially offered DVD rentals on a pay-per-rental basis, but
soon replaced that system with a monthly subscription model.
In 2000, it discontinued its DVD sales business altogether.
Several Netflix subscription plans permitted customers to rent
an unlimited number of DVDs, differing in how many DVDs
a customer could borrow at a given time. For example, in
2003, Netflix offered its “3U” plan, which permitted three
DVDs to be rented at a time, for $19.95 per month, while its
“4U” plan cost $24.95 per month and allowed four DVDs at
a time. Netflix’s DVD-rental business flourished under the
new model, and by 2005 it had a 77.8% share of the online
DVD-rental market, rising to 92.3% by 2010.
Netflix faced no serious competition in its early years.
However, in 2003, Walmart, one of the nation’s largest retail
companies, launched its own online DVD-rental service.
Walmart initially offered its 3U plan for $18.76 a month.
Although Walmart’s 3U plan was cheaper than Netflix’s
($19.95 per month), Netflix did not alter its 3U plan price for
a full year. When Netflix eventually did change its 3U price,
in June 2004, it increased the price to $21.99 per month.
Two months later, in August 2004, Blockbuster, the
largest store-based DVD rental company, launched its own
online DVD rental service, becoming the third major
competitor in the market. Blockbuster offered its 3U plan at
$19.99 per month and included with it two free coupons per
month for in-store rentals.
In October 2004, in apparent response to rumors that
Amazon planned to enter the online DVD-rental market as
well, Netflix announced that it would lower the price of its
3U plan from $21.99 to $17.99 per month. Blockbuster
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 9
responded the next day by announcing that it would cut its 3U
price to $17.49 per month. In November 2004, Walmart
reduced its 3U price to $17.36 per month. In December 2004,
Blockbuster again reduced the price of its 3U plan, this time
to $14.99 per month—the lowest 3U plan price in the market.
Netflix maintained its $17.99 price until August 2007, when
it lowered the price to $16.99.
During this period, Walmart’s online DVD-rental
business performed poorly. Walmart never had more than
60,000 subscribers. In contrast, in mid-2004 Netflix had over
2 million subscribers, and Blockbuster had 400,000
subscribers. From June 2003, when Walmart opened its
online DVD-rental business, until it signed the Promotion
Agreement with Netflix in March 2005, Walmart gained an
average of 5,000 subscribers per quarter. Netflix added
250,000 subscribers per quarter over the same period.
Walmart’s subscriber share peaked at 2.4% in early 2004 and
declined from that point. By February 2005, Walmart had
only a 1.4% market share. In contrast, Netflix controlled
77.8% of the market in 2005. Walmart lost 7,000 subscribers
during the final quarter of 2004.
In October 2004, Netflix’s CEO Reed Hastings sought a
meeting with Walmart CEO John Fleming. Hastings testified
that he requested the meeting because he hoped to form a
partnership with Walmart that would strengthen Netflix’s
position before Amazon entered the market. Hastings was
aware that Walmart’s online DVD-rental service was
performing poorly, and hoped that Walmart might therefore
be open to a partnership. The two CEOs met on October 27,
2004. Hastings recounts that Walmart seemed uninterested
in a deal at the time and that there was no discussion about
10 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
Netflix selling new DVDs. Fleming provided a similar
account. No agreement was reached at the meeting.
Unbeknownst to Hastings, Walmart was entertaining
other suitors. Walmart considered a potential partnership
with Yahoo!, and a draft partnership agreement to that effect
was prepared as early as December 1, 2004. Walmart
considered a similar deal with Microsoft.
Walmart began considering alternative strategic options
for its online DVD-rental business, and ultimately looked in
depth at four possibilities: (1) continuing to run the business
with a low subscriber amount, (2) aggressively building the
business, (3) partnering with Yahoo!, and (4) exiting the
online DVD-rental business. After carefully analyzing each
option, Walmart concluded that none would be profitable and
that, in fact, it would probably suffer multi-million dollar
financial losses under all four scenarios.
Walmart made the final decision to exit the market by
early January 2005. It established an impairment reserve to
cover any losses incurred from the closure and stopped
accepting new subscribers for its 3U and 4U plans. By
February 2005, Walmart had incurred $3 million of costs
associated with shuttering its online DVD-rental business.
By March 2005, Netflix had 3 million subscribers. Walmart
had 52,000. Walmart employees speculated that Walmart’s
online DVD-rental business did not succeed because Walmart
devoted insufficient resources to marketing, could not match
Netflix’s guaranteed one- to two-day delivery, had a poorly
designed website, and offered a relatively limited selection of
DVDs.
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 11
Aware of Walmart’s market share decline, but unaware of
its plan to discontinue its online DVD-rental business,
Hastings renewed his efforts to meet with Fleming. The two
CEOs met on February 9, 2005. Fleming did not inform
Hastings that Walmart had decided to leave the online DVD-
rental business. Although no agreement was reached at the
meeting, Hastings’s efforts did eventually bear fruit. By
March 17, 2005, Hastings and Fleming had reached a verbal
agreement, the key terms of which were that: (1) Walmart
DVD-rental subscribers and their rental queues would be
transferred to Netflix, for those customers who so chose, free
of charge, and customers would be offered the same
subscription price for one year; (2) Walmart would promote
on its website Netflix’s online DVD-rental business; (3)
Netflix would pay Walmart a 10% revenue share for each
subscriber who transferred, as well as a $36 bounty for each
new Netflix subscriber gained from Walmart’s referrals; and
(4) Netflix would promote Walmart’s DVD sales business.
These key terms were incorporated into the Promotion
Agreement. The Promotion Agreement did not include a
covenant not to compete, did not prohibit Netflix from selling
new DVDs, and explicitly permitted Walmart to offer an
online DVD-rental service.2 The Promotion Agreement was
publically announced May 19, 2005.
Despite the earlier rumors, Amazon did not initiate an
online DVD-rental service. Thus, after Walmart’s exit in
mid-2005, Netflix and Blockbuster remained as the two major
competitors in the market. Blockbuster eventually filed for
2
In fact, in February 2010, Walmart acquired the streaming video
service VuDu, which competes directly with Netflix by offering rentals to
consumers through Internet streaming.
12 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
bankruptcy in September 2010, leaving Netflix as the sole
major competitor, with over 90% of the online DVD-rental
market.
Netflix kept its 3U price at $17.99 from November 2004
to August 2007, when it reduced the price to $16.99, which
is where it remained through the end of the class period.
During the class period, Netflix began offering video
streaming over the Internet, and Netflix has since focused on
developing that aspect of its business.
The Subscribers filed several actions, alleging antitrust
violations by Netflix, Walmart Stores, and Walmart.com, and
seeking to represent a class of Netflix subscribers. The
actions were consolidated and an amended complaint filed.
The thrust of the Subscribers’ complaint is that the Promotion
Agreement reflected an illegal allocation of the online DVD-
rental market. The Subscribers assert four causes of action:
(1) a § 1 Sherman Act violation for unlawful market
allocation of the online DVD-rental market (against all
defendants); (2) a § 2 Sherman Act claim for monopolization
of the online DVD-rental market (against Netflix); (3) a § 2
Sherman Act claim for attempted monopolization of the
online DVD-rental market (against Netflix); and (4) a § 2
Sherman Act claim for conspiracy to monopolize the online
DVD-rental market (against all defendants).
The district court granted the Subscribers’ motion for
certification of a litigation class, defining the class as “[a]ny
person or entity in the United States that paid a subscription
fee to Netflix on or after May 19, 2005 up to and including
[December 23, 2010,] the date of class certification.” The
district court subsequently approved Walmart’s settlement
with the class.
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 13
Netflix moved for summary judgment pursuant to Federal
Rule of Civil Procedure 56 as to all claims asserted against it.
The district court granted the motion, concluding that there
was no per se antitrust violation, and that the Subscribers had
failed to raise a triable issue as to antitrust injury-in-fact. The
district court also excluded tendered evidence of agreements
Netflix had with Amazon, Best Buy, and Musicland, because
the agreements raised new theories of liability that were not
expressly pleaded in the complaint.
The district court entered final judgment against the
Subscribers, after which Netflix filed a bill of costs seeking
$744,740.11 in discovery costs. The district court
subsequently awarded Netflix $710,194.23 in costs. The
Subscribers filed a timely notice of appeal, and Netflix cross-
appealed.
We have jurisdiction pursuant to 28 U.S.C. § 1291. “We
review de novo the district court’s grant of summary
judgment.” Cascade Health Solutions v. PeaceHealth,
515 F.3d 883, 912 (9th Cir. 2008). Summary judgment is
appropriate when “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). A genuine issue of
material fact exists when “the evidence is such that a
reasonable jury could return a verdict for the nonmoving
party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). Until recently, “[s]ummary judgment [was]
disfavored in antitrust cases,” High Tech. Careers v. San Jose
Mercury News, 996 F.2d 987, 989 (9th Cir. 1993), but “any
presumption against the granting of summary judgment in
complex antitrust cases has now disappeared,” In re ATM Fee
Antitrust Litig., 554 F. Supp. 2d 1003, 1010 (N.D. Cal. 2008)
14 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
(citing Philip E. Areeda & Herbert Hovenkamp, Antitrust
Law ¶ 308c2 (3d ed. 2007)).
II
The district court properly concluded that the Subscribers
failed to raise a triable issue of fact as to antitrust injury-in-
fact, and that Netflix was thus entitled to summary judgment.
As with all federal claims, a plaintiff must establish Article
III standing, which requires proof of (1) injury-in-fact,
(2) causation, and (3) redressability. Gerlinger v.
Amazon.com Inc., 526 F.3d 1253, 1255 (9th Cir. 2008). “For
Article III purposes, an antitrust plaintiff establishes
injury-in-fact when he has suffered an injury which bears a
causal connection to the alleged antitrust violation.” Id.
(internal quotation marks and citation omitted).
In addition to Article III standing, private antitrust
plaintiffs must also demonstrate antitrust injury, which is
(1) “injury of the type the antitrust laws were intended to
prevent” that also (2) “flows from that which makes
defendants’ acts unlawful.” Brunswick Corp. v. Pueblo
Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). This can be
established by showing that consumers paid higher prices for
a product due to anticompetitive actions of a defendant, such
as a horizontal market allocation scheme. See In re Cardizem
CD Antitrust Litigation, 332 F.3d 896, 910–11 (6th Cir.
2003).
The Subscribers’ injury-in-fact theory is that Netflix
subscribers paid supracompetitive prices for their DVD-rental
subscriptions once Walmart exited the online DVD-rental
market pursuant to the allegedly anticompetitive Promotion
Agreement. Specifically, the Subscribers contend that Netflix
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 15
would have reduced its 3U subscription price to $15.99 per
month but for Netflix’s allegedly anticompetitive conduct.
Free from the competitive threat of Walmart, the Subscribers
allege, Netflix was able to maintain this artificially high price
point.
Applying the standards applicable to antitrust cases, the
district court properly concluded that the Subscribers had not
raised a genuine issue of material fact as to antitrust injury-in-
fact. The Subscribers failed to adduce evidence raising a
triable issue of fact that if Walmart remained in the market,
Netflix would have reduced its prices.
The undisputed record belies this assertion. Netflix never
lowered its 3U price at any time in response to Walmart.
Even though Walmart entered the market with a lower price
($18.76 to Netflix’s $19.95) for a comparable 3U plan,
Netflix did not alter its 3U plan price for a full year after
Walmart entered the market. When Netflix eventually did
change the price, a year later, it increased the price to $21.99
per month. Netflix also did not reduce its price when
Blockbuster offered a 3U plan for $14.99 (while Netflix’s
was $17.99), even though Blockbuster had a much greater
share of the market than Walmart, and even though Netflix
rightfully viewed Blockbuster as a competitive threat. Thus,
the district court properly determined that no reasonable juror
could conclude that Netflix was going to lower its 3U price
to $15.99 in response to Walmart when (1) Netflix had never
lowered its prices in response to Walmart at any time and (2)
Netflix did not lower its price in the face of the $14.99 price
cut by Blockbuster, which was objectively a greater
competitive threat.
16 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
Walmart never had more than 60,000 subscribers, in
contrast to Netflix’s two million subscribers in mid-2004.
Moreover, Walmart gained an average of just 5,000
subscribers per quarter between when it entered the online
DVD-rental market in June 2003 and when the Promotion
Agreement was announced in March 2005; during this same
time period, Netflix was adding 250,000 subscribers per
quarter. Thus, Walmart’s subscriber market share peaked at
2.4% in early 2004 and declined from there, hitting 1.4% in
February 2005. This subscriber decline was most prevalent
during the final quarter of 2004, when Walmart lost 7,000
subscribers. Walmart.com’s director of entertainment and
photo opined that, in mid-2004, it had become clear that
Walmart’s venture would fail. Walmart attributed this self-
described “increased rate[] of attrition” from an already
anemic subscriber base to a host of factors, including
Walmart’s inability to match Netflix’s guaranteed 1- to 2-day
delivery and Walmart’s confusing, poorly designed website.
Not only was Walmart’s online DVD-rental business
lagging, it was perceived as such by Netflix, Blockbuster, and
Amazon. For example, Blockbuster’s senior Vice President
testified that Blockbuster was not surprised that Walmart
exited the business, in part because Walmart was unable to be
“the low-cost provider” and received negative reviews from
consumers. He concluded that Walmart’s exit was “logical.”
Amazon held similar views. As one Amazon employee
stated, he and his colleagues “spent next to no time thinking
about Wal-mart” because Walmart wasn’t “taking it
seriously; they had one distribution center; they had limited
selection; they had faulty systems that didn’t really work.”
The Subscribers’ evidence consists of some internal
documents produced by Netflix and Walmart employees that
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 17
purportedly indicate that Walmart was regarded and treated
and as a true competitor. For example, the Subscribers note
that in November 2003 Walmart described its expectations of
growth in the online DVD-rental market over the coming
months, and that Hastings said in October 2002 that
Walmart’s entrance into the DVD-rental market was
“unsettling.” However, these communications pre-dated
Walmart’s entry into the market and subsequent poor
performance.
The Subscribers also cite a number of documents in
which Walmart claimed that its service was successful, such
as a “talking points” memo. However, these documents were
meant for promotional and motivational purposes, not
performance analysis, and the memos do not contain any hard
market data. Rather, the documents contain language best
described as puffery. The Subscribers also rely on certain
news articles that purportedly show that outside observers
also considered Walmart a threat. However, many of the
documents pre-date Walmart’s entry into the market, and
others refer to the market challenges posed by Blockbuster,
not Walmart. Indeed, Netflix’s internal documents indicate
that it was analyzing a potential price cut to $15.99 in
response to Blockbuster, not Walmart. Further, as the district
court emphasized, any Netflix price decrease was “(1) in
response to Blockbuster (not Walmart); (2) always couched
in terms of possibility; and (3) never actually occurred.”
Netflix’s internal documents show that by late 2004, Netflix
treated Walmart as a negligible threat. Indeed, much of the
Subscribers’ documentary evidence actually supports
Netflix’s position and convincingly reveals that Walmart did
not view itself and was not viewed by others as a competitive
threat in late 2004 and early 2005.
18 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
The Subscribers also rely on expert testimony. “As a
general rule, summary judgment is inappropriate where an
expert’s testimony supports the nonmoving party’s case.”
Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134,
1144 (9th Cir. 1997) (internal quotation marks and citation
omitted). See also Dolphin Tours, Inc. v. Pacifico Creative
Serv., Inc., 773 F.2d 1506, 1511 (9th Cir. 1985)
(anticompetitive injury could be inferred from an expert’s
conclusion that the plaintiff would have attained “a market
share of roughly twenty percent” instead of the two percent
it did reach). However, the mere proferring of unsupported
expert testimony does not create a triable issue as to antitrust
injury-in-fact. “In the context of antitrust law, if there are
undisputed facts about the structure of the market that render
the inference economically unreasonable, the expert opinion
is insufficient to support a jury verdict.” Rebel Oil Co., Inc.
v. Atl. Richfield Co., 51 F.3d 1421, 1435–36 (9th Cir. 1995).
“Expert testimony is useful as a guide to interpreting market
facts, but it is not a substitute for them,” and it “has little
probative value in comparison with the economic factors that
may dictate a particular conclusion.” Brooke Group Ltd. v.
Brown & Williamson Tobacco Corp., 509 U.S. 209, 242
(1993) (internal quotation marks and citation omitted). We
agree with the district court that the Subscribers’ experts’
testimony is contrary to the undisputed market facts. The
opinions are founded on speculation about Walmart’s
potential to remain in the market based on its general retail
strength, untethered to its actual performance in this
particular market. The testimony also ignores the fact that the
Promotion Agreement allowed Walmart to rent DVDs.3
3
The district court also did not abuse its discretion in excluding
evidence at summary judgment that supported new, unpled liability
theories, even though the evidence had been adduced in discovery. See
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 19
Gerlinger confirms the conclusion that, as a matter of
law, the Subscribers have failed to raise a triable issue of
antitrust injury-in-fact. In Gerlinger, Amazon.com and
Borders book store entered into an agreement pursuant to
which Borders’ website directed customers to a site hosted by
Amazon.com. 526 F.3d at 1255. In return for referring its
online customers to Amazon, Borders received a commission
for each book sold and agreed to abandon the online book
sales market during the term of the agreement. Id. The
plaintiff alleged that the agreement was an unlawful market
allocation and that he paid supracompetitive prices as a result
of it. Id. Like the Netflix Subscribers, Gerlinger’s theory of
injury-in-fact was that, if Borders continued competing in the
market, book prices would have fallen. Id. But, as here,
defendants presented evidence that prices in fact remained the
same or even went down following the agreement. Id. This
Court concluded that the plaintiff had not raised a triable
issue as to whether he would have paid less for a book absent
the allegedly anticompetitive agreement. Id. at 1256.
Thus, even considering the facts in the light most
favorable to the plaintiffs, the district court properly
concluded that the Subscribers did not raise a genuine issue
of material fact as to antitrust injury-in-fact. Accordingly, we
affirm the district court’s summary judgment as to the four
Sherman Act claims. Because the Subscribers have not
shown injury-in-fact, we need not—and do not—reach the
merits of their antitrust claims. See Gerlinger, 526 F.3d at
1256 (“We do not reach the merits, however, because the
plaintiff has not shown any injury-in-fact caused by the
Oliver v. Ralphs Grocery Co., 654 F.3d 903, 908–09 (9th Cir. 2011) (a
disclosure made during discovery is unlikely to cure lack of notice, which
generally must be provided by a well-pled complaint).
20 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
agreement, and he therefore lacks Article III standing to bring
this claim . . . .”).
III
Both parties contest the district court’s cost award. We
review a cost award under the abuse of discretion standard.
Arakaki v. Lingle, 477 F.3d 1048, 1069 (9th Cir. 2007). “A
district court abuses its discretion if it does not apply the
correct law or if it rests its decision on a clearly erroneous
finding of material fact.” Jeff D. v. Otter, 643 F.3d 278, 283
(9th Cir. 2011) (internal quotation marks and citation
omitted). However, we review the threshold question of
whether the district court has the authority to award costs de
novo. Russian River Watershed Protection Comm. v. City of
Santa Rosa, 142 F.3d 1136, 1144 (9th Cir. 1998).
During discovery, the Subscribers sought production of
electronically stored information. The Subscribers required
that electronic information other than spreadsheets be
produced in the static Tagged Image File Format (“TIFF”).4
The Subscribers also requested that these images contain
searchable text and relevant metadata,5 and that the produced
4
TIFF is a “widely used and supported graphic file format for storing
bit-mapped images, with many different compression formats and
resolutions. TIFF images are stored in tagged fields, and programs use the
tags to accept or ignore fields, depending on the application.” Race Tires
America, Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158, 161 n.2 (3d
Cir. 2012) (internal quotation marks, citations, and alterations omitted).
5
“Metadata is simply data that provides information about other data.”
Country Vintner of N.C., LLC v. E. & J. Gallo Winery, Inc., 718 F.3d 249,
253 n.4 (4th Cir. 2013) (internal quotation marks and citation omitted).
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 21
documents be numbered sequentially and include certain
identifying information. Netflix enlisted electronic discovery
vendors to assist with responding to the Subscribers’
discovery requests.
As can be expected from a case of this magnitude,
discovery was extensive, and Netflix ultimately produced
almost 15 million pages in response to the Subscribers’
discovery requests. After summary judgment was granted,
Netflix requested $744,740.11 as costs for discovery-related
tasks, and was ultimately awarded $710,194.23 by the district
court. The Subscribers appeal portions of that award, and
Netflix cross-appeals.
The Subscribers argue that the district court (1) erred by
broadly construing § 1920(4) in its taxing of e-discovery and
data management costs totaling $317,616.69, and (2) abused
its discretion in taxing consulting fees, TIFFs, and copying
costs totaling $245,471.31. Netflix cross appeals, arguing
that the district court abused its discretion in disallowing
$21,000 in costs to copy certain PowerPoint files.
A
The district court’s decision rested upon a “broad
construction of section 1920 with respect to electronic
discovery production costs.” That determination was largely
founded on our decision in Taniguchi v. Kan Pacific Saipan,
Ltd., 633 F.3d 1218, 1221 (9th Cir. 2011), which was
subsequently reversed by the Supreme Court, 132 S. Ct. 1997
(2012). In light of the intervening Supreme Court precedent,
It is “[s]econdary data that organize, manage, and facilitate the use of
primary data.” Black’s Law Dictionary 1141 (10th ed. 2014).
22 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
we vacate the award of some of the costs the Subscribers
have challenged as “non-recoverable” and remand for further
consideration of some of those costs pursuant to a narrow
construction of § 1920(4).
1
In awarding costs, the district court explicitly adhered to
a broad interpretation of § 1920(4) pursuant to our decision
in Taniguchi. After the Supreme Court’s reversal of
Taniguchi, we must reassess what electronic discovery costs
may be properly taxed as costs of “making copies of any
materials where the copies are necessarily obtained for use in
the case” under 28 U.S.C. § 1920(4). In conducting this
assessment, we find persuasive the reasoning of the Third
Circuit in Race Tires, the Fourth Circuit in Country Vintner,
and the Federal Circuit in CBT Flint Partners, LLC v. Return
Path, Inc., 737 F.3d 1320 (Fed. Circ. 2013). We are also
guided by the Supreme Court’s reiteration, in Tanaguchi, of
the limited reach of § 1920. In that decision, the Supreme
Court reversed our determination that costs of a translator of
written documents can constitute the costs of an “interpreter”
under § 1920(6). 132 S. Ct. at 2005. In doing so, the Court
underscored “the narrow scope of taxable costs” and
reminded us that “[t]axable costs are limited to relatively
minor, incidental expenses as is evident from § 1920.” Id. at
2006.
In establishing the boundaries that must be given to
§ 1920(4), some historical perspective is useful. “Although
the taxation of costs was not allowed at common law, it was
the practice of federal courts in the early years to award costs
in the same manner as the courts of the relevant forum State.”
Taniguchi, 132 S. Ct. at 2001 (citing Alyeska Pipeline Serv.
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 23
Co. v. Wilderness Soc’y, 421 U.S. 240, 247–48 (1975)). This
diversity of rules led to a great diversity of awards, which in
turn led to some losing litigants being “unfairly saddled with
exorbitant fees.” Alyeska, 421 U.S. at 251.
“In 1853, Congress undertook to standardize the costs
allowable in federal litigation.” Id. In doing so, they sought
to “simplify the taxation of fees, by prescribing a limited
number of definite items to be allowed.” Country Vintner,
718 F.3d at 255 (quoting Cong. Globe, 32nd Cong., 2d Sess.
App. 207 (1853) (statement of Sen. Bradbury)). The result
was the Fee Act of 1853, ch. 80, 10 Stat. 161, which was a
predecessor to § 1920. The Fee Act “depart[ed] from the
English practice of attempting to provide the successful
litigant with total reimbursement.” Race Tires, 674 F.3d at
164 (quoting 10 Charles Alan Wright, Arthur R. Miller,
Mary Kay Kane & Richard L. Marcus, Federal Practice and
Procedure § 2665 (3d ed. 1998)). The Supreme Court has
since held that Congress intended with the Fee Act to
“impose rigid controls on cost-shifting in federal courts.”
Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 444
(1987). Thus, § 1920 “define[s] the full extent of a federal
court’s power to shift litigation costs absent express statutory
authority to go further.” W. Va. Univ. Hosps., Inc. v. Casey,
499 U.S. 83, 86 (1991).
The language of § 1920(4) first appeared in § 3 of the Fee
Act, stating that “lawful fees for exemplifications and copies
of papers necessarily obtained for use on trial . . . shall be
taxed by a judge or clerk of the court.” 10 Stat. at 168. The
language was altered over the years to apply to “cases,” not
just trials, and courts were later given discretion to award the
costs, rather than being mandated to do so. Race Tires,
674 F.3d at 165. The statute originally applied to making
24 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
only “copies of paper,” but now applies to the “costs of
making copies of any materials.” Judicial Administration and
Technical Amendments Act of 2008, Pub. L. No. 110-406,
§ 6, 122 Stat. 4291, 4292; see also In re Ricoh Co., Ltd.
Patent Litig., 661 F.3d 1361, 1365 (Fed. Cir. 2011)
(“[E]lectronic production of documents can constitute . . .
‘making copies’ under section 1920(4).”).
As a general rule, costs and fees should be awarded to the
prevailing party. Fed. R. Civ. P. 54(d)(1) (“Unless a federal
statute, these rules, or court order provides otherwise,
costs—other than attorney’s fees—should be allowed to the
prevailing party.”). However, a district court’s discretion to
award costs is limited to particular types of costs enumerated
in 28 U.S.C. § 1920. See Crawford Fitting, 482 U.S. at 441
(“[Section] 1920 defines the term ‘costs’ as used in Rule
54(d).”).
As with all statutory construction questions, we “begin
with the language employed by Congress and the assumption
that the ordinary meaning of that language accurately
expresses the legislative purpose.” FMC Corp. v. Holliday,
498 U.S. 52, 57 (1990) (internal quotation marks omitted).
Section 1920(4) provides that a judge or clerk may tax “the
costs of making copies of any materials where the copies are
necessarily obtained for use in the case.” We first focus on
the phrase “making copies.” 28 U.S.C. § 1920(4). Because
this language is not defined in the statute, we apply “its
ordinary meaning.” Taniguchi, 132 S. Ct. at 2002.
As the Fourth Circuit explained in Country Vintner,
“‘[c]opies’ has appeared in the taxation statute since its
enactment in 1853, when ‘copy’ meant a ‘transcript,’ a
‘writing like another writing,’ or an ‘imitation.’” 718 F.3d at
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 25
258 (footnotes omitted). The noun retains an almost identical
meaning today.”6 The definitions for the verb “make”
relevant to the context of § 1920(4) include “to cause to exist,
occur, or appear” and “to bring (a material thing) into being
by forming, shaping, or altering material.”7 These definitions
are consistent with our previous observation that “[s]ection
1920(4) speaks narrowly of ‘[f]ees for exemplification and
copies of papers,’ suggesting that fees are permitted only for
the physical preparation and duplication of documents, not
the intellectual effort involved in their production.” Romero
v. City of Pomona, 883 F.2d 1418, 1428 (9th Cir. 1989),
abrogated in part on other grounds by Townsend v. Homan
Consulting Corp., 929 F.2d 1358, 1363 (9th Cir.1991) (en
banc); see also Zuill v. Shanahan, 80 F.3d 1366, 1371 (9th
Cir.1996).
Section 1920(4) further defines the awarding of costs for
making copies, requiring that recoverable costs be restricted
to the making of copies “necessarily obtained for use in the
case.” Applying the statutory construction maxim expressio
unius est exclusio alterius (the express mention of a thing
implicitly excludes others in its class), we presume that
Congress recognized that costs can also be incurred in
litigation for making copies that are not necessarily obtained
for use in the case, and that such costs are not taxable.
Nevertheless, the statute is not so restrictive as to
“specifically require that the copied document be introduced
6
See Webster’s Third New International Dictionary of the English
Language Unabridged 504 (1993) (defining “copy” as “an imitation,
transcript, or reproduction of an original work”).
7
Id. at 1363.
26 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
into the record to be an allowable cost.” Haagen-Dazs Co.,
Inc. v. Double Rainbow Gourmet Ice Creams, Inc., 920 F.2d
587, 588 (9th Cir. 1990). Section 1920(4) allows for the
recovery of costs where the copies were obtained to be
produced pursuant to Rule 34 or other discovery rules. See
Country Vintner, 718 F.3d at 257 n.9 (noting decisions of the
Federal Circuit—applying the law of this circuit—as well as
the Fifth, Seventh, and Eleventh Circuits recognizing that
costs are recoverable under § 1920(4) for copying costs for
document production).
The faithful production of electronically stored
information may require processes such as optical character
recognition (which renders material text-searchable),
preservation of metadata, and conversion to a non-editable
file format. Parties might agree to employ a particular file
format or methodology for electronically stored information
production, or the court might order them to produce
electronically stored information with certain characteristics.
See In re Ricoh, 661 F.3d at 1365 (parties agreed that a third
party vendor would process and store e-mails in a secure
document review database). The Federal Circuit held in CBT
Flint Partners that
To the extent that a party is obligated to
produce (or obligated to accept) electronic
documents in a particular format or with
particular characteristics intact (such as
metadata, color, motion, or manipulability),
the costs to make duplicates in such a format
or with such characteristics preserved are
recoverable as “the costs of making copies . . .
necessarily obtained for use in the case.”
28 U.S.C. § 1920(4).
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 27
737 F.3d at 1328. See also Country Vintner, 718 F.3d at 260
n.19 (“If, for instance, a case directly or indirectly required
production of [electronically stored] unique information such
as metadata, we assume, without deciding, that taxable costs
would include any technical processes necessary to copy
[electronically stored information] in a format that includes
such information.”). When copies are made in a fashion
necessary to comply with obligations such as these, costs are
taxable so long as the copies are also “necessarily obtained
for use in the case.”
That § 1920(4) restricts the award of costs to those
incurred for copies necessarily obtained for use in the case is
not, in itself, a justification permitting the award of costs for
any task necessary to the prosecution or defense of a case. As
noted by the Third Circuit in Race Tires, “[s]ection 1920(4)
does not state that all steps that lead up to the production of
copies of materials are taxable.” 674 F.3d at 169; see also
CBT Flint Partners, 737 F.3d at 1328 (“[O]nly the costs of
creating the produced duplicates are included [as
recoverable], not a number of preparatory or ancillary costs
commonly incurred leading up to, in conjunction with, or
after duplication.”). The Third Circuit further explained,
again in the context of producing electronically stored
information, that “[i]t may be that extensive ‘processing’ of
[electronically stored information] is essential . . . . But that
does not mean that the services leading up to the actual
production constitute ‘making copies.’” 674 F.3d at 169.
The proper application of a narrowly construed § 1920(4)
requires that the tasks and services for which an award of
costs is being considered must be described and established
with sufficient specificity, particularity, and clarity as to
permit a determination that costs are awarded for making
28 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
copies. “‘Document production’ and other similarly generic
statements on the invoices are unhelpful in determining
whether those costs are taxable.” In re Ricoh, 661 F.3d at
1368. Further, a description of a task is useful only to the
extent it accurately reflects the task for which copying costs
are sought.
2
In support of its opposition to the Subscribers’ motion for
the district court to review costs, Netflix submitted the
declaration of Vivian Liu-Somers, a project manager for
Esquire Litigation Solutions, a vendor that provided litigation
support services to Netflix. In her declaration, Liu-Somers
identified 44 different charges appearing on Esquire
Litigation’s invoices, and combines those charges into 21
groups. For each of the 21 groups, Liu-Somers provided a
brief description of the services to which the charges refer.
The Subscribers challenge certain of these groups of
charges as not taxable under § 1920(4), further combining
them into four broader task categories: (1) “data upload,”
(2) “endorsing,” (3) “keyword,” and (4) “professional
services.” The Subscribers also challenge a charge invoiced
by SFL Data, a different litigation support vendor providing
services to Netflix, for “Electronic Data Discovery” tasks.
We review each of the five challenged categories of charges
asserted by the Subscribers in turn.
a
As challenged by the Subscribers, the “data upload”
category of charges refers to two different groups of charges
described by Liu-Somers in her declaration. She grouped the
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 29
charges of “Data Upload,” and “Catalyst Data Upload,” and
indicated that these charges referred “to the reproduction of
documents for potential production into a database where
they could be viewed.” Separately, Liu-Somers described the
charge of “Upload Production Documents” as referring “to
the process of reproducing the collection of the documents
actually being produced for viewing after all the processes
necessary to prepare the documents in the required formats
and with the required labels have been completed.”
The Subscribers’ challenge to these costs rests on the use
of the word “upload” in the description of the charge. They
note that an “upload” of electronically stored information is
the movement of data from one location to another, and
indicates the data is being transmitted.8 The Subscribers
argue that the costs incurred for such a task are not
recoverable under § 1920(4) because the task is “akin to the
costs of moving boxes of information from client site to law
firm to the room where reviewers would review them.”
Focusing on the word “reproduction” in both of Liu-Somers’
descriptions of the services performed, Netflix responds that
the task of uploading data was not merely for moving data,
but necessarily involved “making copies.” Neither argument
fully responds to the question of whether the charges are
taxable under § 1920(4).
8
“Upload: To move data from one location to another in any manner,
such as via modem, network, serial cable, internet connection or wireless
signals; indicates that data is being transmitted to a location from a
location.” The Sedona Conference, The Sedona Conference Glossary: E-
Discovery & Digital Information Management 48 (Sherry B. Harris et al.
Eds., 4th ed. 2014).
30 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
Consideration of whether certain tasks are taxable
pursuant to § 1920(4) “calls for some common-sense
judgments guided by a comparison with the paper-document
analogue.” CBT Flint Partners, 737 F.3d at 1331. Instead of
moving boxes of information, an upload of data is more akin
to the paper-document analogue of faxing a document from
the client site to the law firm, a process which involves the
transmitting of data from location to location and which also
results in a facsimile copy of the original document.
The cost of making the copy is not rendered non-taxable
merely because it was created by using fax machines rather
than a photo-copier. Conversely, § 1920(4) does not award
costs merely because a process resulted in the creation of a
copy. That the fax process creates a copy does not, by itself,
establish that the cost is taxable under §1920(4). Rather, a
further determination is required: whether the copy was
necessarily obtained for use in the case. Like any other copy,
if the faxed copy was created to be produced in discovery, the
cost of making the fax would be taxable under § 1920(4).
However, if the faxed copy was created solely for the
convenience of counsel, the cost of making the copy would
not be taxable.
Liu-Somers’ description of the “data upload” and
“catalyst data upload” charges indicates the uploading
process created new copies of documents inside a database.
Assuming, without deciding, that the specific uploading task
constituted “making copies,” the further determination is
required whether the copies were necessarily obtained for use
in the litigation. Liu-Somers declared that “the reproduction
of documents was a necessary step in the document
production process because it facilitated a selection of
documents for production from the set of documents for
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 31
potential production.” This description establishes only that
the copies were essential to the document production process,
and fails to establish the copies were necessarily obtained for
use in the litigation.
A narrow construction of § 1920(4) requires recognition
that the circumstances in which a copy will be deemed
“necessarily obtained” for use in a case will be extremely
limited. That a chosen “document production process”
requires the creation of a copy does not establish that the
copy is necessarily obtained for use in the case. A lawyer
may review electronically stored information for privilege
either by viewing the original documents on the client’s
computer or, alternatively, by viewing copies uploaded to the
lawyer’s computer. Although the latter method of review
requires the creation of a copy, the ability to conduct the
review by looking at the original document establishes that
the uploaded copy was not necessarily obtained for use in the
case.
Similarly, Liu-Somers’ description of the charges for
“Upload Production Documents” indicates that the copies
were created as a “necessary step in the document production
process in order to view the documents as they appeared in
the actual production being made.” As with Netflix’s
description of the other “uploading” charges, this description
establishes only that the copy is essential to the document
production process that Netflix (or its litigation support
vendor) elected to employ, and fails to establish the copies
were necessarily obtained for use in the case. Accordingly,
these charges are non-taxable under § 1920(4).
32 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
b
The Subscribers also challenge what they describe as
“endorsing” activities. However, the only indication in the
Subscribers’ opening brief that they have even challenged the
award costs for “endorsing” activities is the cursory mention,
in their Statement of Facts, that “Netflix incurred $21,134.82
for ‘Endorsing’ tasks, which included the ‘branding of image
files with unique sequential production numbers and
confidentiality designations.” Because these matters were not
“specifically and distinctly argued” in the open briefing, we
will not consider them. Christian Legal Soc'y Chapter of
Univ. of Cal. v. Wu, 626 F.3d 483, 487 (9th Cir. 2010).
c
The Subscribers challenge the cost award for what they
term “keywording” activities. As described by Liu-Somers
in her declaration, Esquire Litigation used a variety of terms
to charge Netflix “for the use of automated software
processes to reproduce the set of documents for potential
production into a reduced set of documents that did not
include certain types of documents that did not need to be
produced.” Netflix attempts to shoehorn the filtering process
into the ordinary meaning of “making copies” by arguing that
filtering is “simply a mechanical process of making a copy of
all documents that fit the supplied criteria.” The argument
reveals its own flaw, disclosing that the charge was incurred
for two separate tasks: (a) identifying the documents that fit
the supplied criteria, and then (b) making copies of those
documents. The former task is akin to a person (lawyer,
paralegal, or otherwise) mechanically reviewing a stack of
documents and (based upon criteria supplied by a lawyer)
separating them into two piles: one consisting of documents
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 33
that might be potentially be produced, and the other
consisting of documents that will not be produced. Netflix
argues that its vendor “simply performed the mechanical
process of applying the criteria it received from Netflix’s
attorneys to the documents being reproduced for production
in the required formats” (emphasis added). The argument is
contradicted by Netflix’s implicit acknowledgment that the
filtering process was also applied to documents that were not
copied. As such, the application of automated software
filtering processes to identify which documents to copy and
which documents to not copy is not taxable.9
d
The Subscribers challenge the cost award for
“professional services.” Absent from Liu-Somers’
declaration are descriptions for any charges titled
“Professional Services,” indicating the Subscribers’ label for
this category amounts to a generic statement “unhelpful in
determining whether those costs are taxable.” In re Ricoh,
661 F.3d at 1368. In their opening brief, the Subscribers
further describe this category as including “activities like
processing, native review, data analysis, project management,
and production services.” Liu-Somers’ declaration
demonstrates that the Subscribers have grouped an extremely
broad range of activities into a single category. The
declaration includes descriptions for a variety of narrower
categories, ranging from “the imaging of the documents to
create an electronic ‘page’ ready for bates and confidentiality
9
While the second task of making copies of the documents arguably
falls within the ordinary meaning of “making copies,” the record suggests
that the charges invoiced by Esquire Litigation for the various keywording
tasks were not for making the copies, but for the filtering process.
34 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
branding and redactions” through “prepar[ing] the documents
for production in the required formats.” Netflix’s response is
equally generic and unhelpful, asserting that “these are all
costs required in order to make copies of the information
being produced” and “are akin to the costs of copy center
employees, photocopy technicians, copier repairmen, and
other overhead costs included with the flat per page rate
charged by traditional outside photocopy vendors—costs
which have always been deemed recoverable.” The record
before us leaves us unable to resolve whether any of the large
variety of specific charges that the Subscribers broadly
challenge as “professional services” are taxable under a
narrow construction of § 1920(4). Thus, we must remand the
issue to the district court for its determination in the first
instance.
e
Finally, the Subscribers challenge a specific item on one
invoice from SFL Data, asserting the charge was for “native
review processing.” Netflix counters that the invoice actually
states that the “cost involved the copying of nearly 80GB of
data for production constituting 167,311 documents.” The
$10,000 cost appears to have been incurred (at a flat rate per
agreement with Netflix) for a variety of different tasks,
including native review processing, optical character
recognition, exporting documents, converting documents to
TIFF, populating custom fields, and prepping for further
processing. Although the cost incurred for some of these
tasks appears to be taxable, the present record does not permit
a conclusion that all of the tasks for which SFL charged
Netflix a flat rate of $10,000 are taxable. To the extent the
invoiced tasks exceeded optical character recognition,
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 35
conversion to TIFF, and other activities essential to the
making of copies necessary to the case, they are not taxable.
3
In summary, we conclude that of the $317,616.69
challenged by the Subscribers as non-taxable under
§ 1920(4), only those costs attributable to optical character
recognition, converting documents to TIFF, and “endorsing”
activities—all of which were explicitly required by
Subscribers—are recoverable on the record before us. We
therefore affirm the cost award in part, and vacate it in part.
We remand for taxing of costs in accordance with this
opinion.
B
The district court did not abuse its discretion in awarding
$245,471.31 in consulting fees, TIFF images, and copying
costs.
1
The Subscribers first complain that the district court
failed to explain its findings adequately. However, “a district
court need not give affirmative reasons for awarding costs;
instead, it need only find that the reasons for denying costs
are not sufficiently persuasive to overcome the presumption
in favor of an award.” Save Our Valley v. Sound Transit,
335 F.3d 932, 945 (9th Cir. 2003).
Here, the district court explained in its order that it “read
the parties’ papers and carefully considered their arguments
and the relevant legal authority.” Further, the order
36 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
specifically identified the Subscribers’ arguments concerning
“TIFF conversion costs; copying/‘blowback’ costs . . .
documents productions purportedly not delivered;
professional fees re visual aids.” Under our deferential
standard of review, the district court’s explanation was
sufficient. See Save Our Valley, 335 F.3d at 945 (“[W]e have
never held that a district court must specify reasons for its
decision to abide the presumption and tax costs to the losing
party.” (emphasis in original)).
2
The Subscribers next contend that the costs claimed for
preparing visual aids were actually unrecoverable consulting
fees, relying on invoice descriptions of the title of the person
performing the work. To be sure,“[f]ees for exemplification
and copying are permitted only for the physical preparation
and duplication of documents, not the intellectual effort
involved in their production.” Zuill v. Shanahan, 80 F.3d
1366, 1371 (9th Cir. 1996) (emphasis added) (internal
quotation marks and citation omitted). However, there is no
authority for the proposition that the title of the person doing
the work is relevant to classifying the type of work actually
done. In fact, courts have held otherwise. See Race Tires,
674 F.3d at 169 (“Neither the degree of expertise necessary
to perform the work nor the identity of the party performing
the work of ‘making copies’ is a factor that can be gleaned
from § 1920(4).”). In addition, evidence was presented by
Netflix that the vendors were only paid to perform the tasks
associated with production and not for creating the
substantive content of the visual aids. Thus, the record
supports the district court’s conclusion that the tasks done by
the consultants were not “intellectual effort,” regardless of the
job title listed on the invoices. The district court did not
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 37
abuse its discretion in awarding $14,355.50 in costs for
preparation of visual aids.
3
The district court did not abuse its discretion in awarding
costs for TIFF conversions. The Subscribers argue that they
were taxed $167,399.70 in excessive TIFFing costs because
Netflix paid an unreasonable amount per TIFF page. The
Subscribers’ expert concluded that the rate of seven cents per
page of TIFF conversion was unreasonable because it was
above market and because Netflix’s first invoice from its e-
discovery vendor charged only two cents per page. Netflix’s
expert testified that the costs Netflix charged were
reasonable. He testified that Netflix reviewed proposals from
six electronic discovery vendors and that the firm that Netflix
eventually went with offered the lowest prices to convert
documents to TIFF images out of the six solicited firms.
Netflix’s expert further explained that the two-cent rate was
charged only for a certain type of conversion—PDF to
TIFF—and that the total bill for this batch was a mere $54.08.
The district court fully considered the two expert opinions
and decided in favor of Netflix. Given our deferential
standard of review, there is no basis to disturb that
conclusion.
The Subscribers also contend that Netflix was awarded
costs for documents unnecessarily produced, resulting in an
overcharge of $46,773.71. However, the record does not
support that conclusion, and the district court did not abuse its
discretion in awarding these TIFF-related costs.
38 IN RE ONLINE DVD-RENTAL ANTITRUST LITIG.
4
The district court did not abuse its discretion in awarding
$16,942.40 for copying paper documents. The Subscribers
contend that the documentation for these costs was
inadequate. However, the invoices at issue indicate the
purpose of the charge, such as printing exhibits and copying
deposition transcripts, as well as the dates the work was done.
Moreover, Netflix supported its bill of costs with a
declaration from one of Netflix’s attorneys, who clarified that
certain documents were produced as “exhibits to depositions”
and “disclosure or formal discovery documents.” Netflix
provided sufficient information for the district court to
identify the documents being reproduced and, ultimately, to
determine which costs were taxable. The district court did
not abuse its discretion in awarding these costs.
C
The district court also did not abuse its discretion in
declining to award Netflix $21,000 for producing certain
black and white PowerPoint documents. The Subscribers had
requested “single-page Group IV TIFF files,” which is a
black and white version, and separately requested that all
documents “be produced in the same order as they are kept or
maintained by you in the ordinary course of your business.”
In the usual course of business, Netflix maintained the
PowerPoint in color. However, throughout discovery, Netflix
produced black and white PowerPoint presentations. At some
point during the litigation, Netflix submitted to the court a
color version of a PowerPoint presentation. When the
Subscribers learned that were colored slides available, they
requested them, arguing that Netflix’s failure to do so
previously violated the instruction to produce documents as
IN RE ONLINE DVD-RENTAL ANTITRUST LITIG. 39
they were normally kept by Netflix. Because Netflix
maintained colored slides in the ordinary course of business,
the district court concluded that the Subscribers were entitled
to production of the documents under their previous
discovery requests. Although production of color slides was
in some sense duplicative of the previously-produced black
and white slides, the district court did not abuse its discretion
in denying the cost award given the separate discovery
requests, and the fact that Netflix likely could have avoided
the duplicative production by first producing the color
documents maintained in the usual course of business. The
district court was not confused about the issue, as Netflix
claims. To the contrary, the record reflects that the district
court understood the issue and decided under the
circumstances that a cost award was appropriately denied.
The district court did not abuse its discretion in doing so.
IV
In sum, we affirm the district court’s grant of summary
judgment on the antitrust claims, for lack of antitrust injury-
in-fact. We affirm the cost award in part and reverse it in
part. We need not, and do not, reach any other issue urged by
the parties.
AFFIRMED IN PART; VACATED IN PART;
REMANDED.
Each party shall bear its own costs on appeal.