City of LA v. PricewaterhouseCoopers CA2/5

Filed 7/8/21 City of LA v. PricewaterhouseCoopers CA2/5
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
CITY OF LOS ANGELES, B305583
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC574690)
v.
PRICEWATERHOUSECOOPERS,
LLP,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los
Angeles County, Elihu M. Berle, Judge. Affirmed in part,
reversed in part and remanded.
Gibson, Dunn & Crutcher, Casey J. McCracken and Daniel
J. Thomasch for Defendant and Appellant.
Office of the City Attorney, Michael N. Feuer, Kathleen A.
Kenealy, Joseph A. Brajevich; Brown George Ross O’Brien
Annaguey & Ellis, Eric M. George, Maribeth Annaguey and Kim
S. Zeldin for Plaintiff and Respondent.
_______________________
Defendant and appellant PricewaterhouseCoopers LLC
appeals from an order granting a motion to tax costs after
plaintiff and respondent City of Los Angeles voluntarily
dismissed a contract action with prejudice. The trial court taxed
costs for electronic discovery and travel by out-of-town attorneys
to attend local depositions and hearings. On appeal,
Pricewaterhouse contends: (1) the trial court erroneously
believed electronic discovery costs were not recoverable under
Code of Civil Procedure section 1033.5,1 and (2) the trial court
abused its discretion by taxing all travel costs for counsel based
in New York. We conclude that no abuse of discretion has been
shown with respect to travel costs. We cannot presume in this
case that the trial court understood the scope of its discretion to
award electronic discovery costs in light of the City’s primary
argument below that such costs are never recoverable and an
indecipherable statement in the transcription of the trial court’s
ruling. Therefore, we reverse in part with directions.
FACTUAL AND PROCEDURAL BACKGROUND
Pricewaterhouse entered into a contract with the City in
2010 to modernize the billing system for the Los Angeles
Department of Water and Power. Using new billing software
introduced in 2013, the City failed to accurately bill a portion of
its customers. The City filed an action against Pricewaterhouse
in March 2015, alleging that Pricewaterhouse fraudulently
induced the City to enter into the contract and breached the
1 All
further statutory references are to the Code of Civil
Procedure unless otherwise stated.
2
contract. On September 26, 2019, after four and a half years of
litigation, the City voluntarily dismissed the case with prejudice.
On October 21, 2019, Pricewaterhouse filed a memorandum
of costs. Among other items, Pricewaterhouse sought
reimbursement of $379,027.86 for deposition costs, $67,596.46 for
travel costs related to hearings, and $1,087,812.63 for electronic
discovery costs. The electronic discovery costs were listed for
each of five years from 2015 through 2019 with amounts for
processing/loading, hosting, and production of documents.
The City filed a motion to strike or tax costs, including the
costs of $169,263.24 attributed to travel to depositions,
$67,596.46 for travel to hearings, and $1,087,812.63 for electronic
discovery. The City argued that although out-of-town deposition
travel was recoverable when reasonably necessary to the
litigation and reasonable in amount, the travel expenses for
Pricewaterhouse’s New York-based counsel were unnecessary
because the lawsuit was filed and the witnesses were deposed in
Los Angeles. There were no depositions taken out-of-town, and
qualified local counsel was available. Pricewaterhouse’s counsel
maintained an office in Los Angeles with more than 200
attorneys, many of whom attended or conducted several of the
depositions. In addition, the expenses for the travel and lodging
were excessive. It was not reasonably necessary for a second or
third out-of-town attorney to travel to attend depositions, when
highly qualified and knowledgeable local counsel was available.
The City additionally argued that travel expenses to attend
court hearings were not recoverable under California law. The
travel costs were not reasonably necessary to the conduct of the
litigation, because Pricewaterhouse had highly qualified local
3
counsel of record, or out-of-town counsel could have appeared via
CourtCall. The amounts were excessive as well.
Costs for electronic discovery, the City argued, were not
recoverable as a matter of law under Science Applications
Internat. Corp. v. Superior Court (1995) 39 Cal.App.4th 1095(Science Applications). In Science Applications, the appellate
court found it was an abuse of discretion to award costs for an
outside vendor to provide document control and an internal case
management database. The appellate court considered the
expense of high-powered computer support to be similar to
paralegal services or document retrieval and not recoverable.
Based on Science Applications, the City argued that the court
lacked discretion to award costs incurred by a litigant involving
electronic methods of accessing information. Section 1033.5,
subdivision (a)(15), expressly allows recovery of the costs of
hosting electronic documents through an electronic filing service
provider only if required or ordered by the court, and no other
provision of California law provides for the automatic recovery of
electronic discovery costs by a prevailing party.
Pricewaterhouse filed an opposition to the motion to strike
or tax costs on November 21, 2019. Pricewaterhouse argued that
costs for travel to court hearings were within the court’s
discretion to award, because they were not expressly allowed or
disallowed by the cost statute. Pricewaterhouse also argued that
the deposition and hearing related travel expenses were
reasonable and necessary. Pricewaterhouse’s lead attorney
Daniel Thomasch works in the New York office of the
international law firm Gibson, Dunn & Crutcher LLP.
Pricewaterhouse sought costs for 22 trips by its lead attorney to
take depositions, 12 trips by his New York-based partner to take
4
depositions, and 14 trips by New York-based associates to sit as
the second chair for depositions. In addition, Pricewaterhouse
sought travel expenses for its lead attorney to attend 36 hearings,
and for his New York-based partner to attend two hearings.
Pricewaterhouse also argued that it was within the trial
court’s discretion to award costs for electronic discovery, because
the costs were not specifically listed in section 1033.5 as allowed
or prohibited. Pricewaterhouse distinguished the costs of the
internal case management system at issue in Science
Applications, arguing that subsequent cases had narrowed or
rejected the holding of Science Applications. Specifically, El
Dorado Meat Co. v. Yosemite Meat & Locker Service, Inc. (2007)
150 Cal.App.4th 612, 620 (El Dorado), limited Science
Applications to its facts by recognizing that the use of electronic
litigation management was more expensive than traditional
methods at the time it was decided, and Bender v. County of Los
Angeles (2013) 217 Cal.App.4th 968 (Bender), rejected the
argument that litigation technology costs are never recoverable.
In addition, Pricewaterhouse argued that the trial court should
exercise its discretion to award electronic costs in this case,
because the use of electronic discovery vendors was indispensable
to the litigation, provided services that could not be performed by
a lawyer or paralegal, and the costs were reasonable.
Pricewaterhouse submitted the declaration of lead attorney
Daniel Thomasch to support the necessity and reasonableness of
electronic discovery costs. Thomasch explained that
Pricewaterhouse employed one electronic discovery vendor from
2015 to 2019, and a different electronic discovery vendor
beginning in February 2019. The parties had entered into an
agreement governing electronic discovery. Pricewaterhouse could
5
not have complied with the agreement without an electronic
discovery vendor and electronic discovery database. The
agreement required documents to be produced electronically as
an image file with accompanying text files containing searchable
text. It also required files that allow the data to be read by a
computer, so the receiving party could load them. Numerous
metadata fields had to be produced with the documents, such as
the custodian, author, and filename. The parties were also
required to run algorithms to remove duplicate documents and
“de-NIST,” which removes system-generated files. The work
required an electronic discovery database and a vendor who could
perform the technical tasks. The documents in the case were
primarily email and exports from computer systems and
databases.
The first electronic discovery vendor that Pricewaterhouse
hired had collected and loaded 1,284,636 documents into its
database. Pricewaterhouse produced more than 280,000
documents during the course of the case, while the City and third
parties produced 331,889 documents, all of which had to be
processed, loaded into the database, and hosted so the attorneys
could access them. The work could not be accomplished without
an experienced electronic discovery vendor. After
Pricewaterhouse engaged the second vendor, the City produced
719,398 documents.
The vendors had separated their costs into three categories:
processing/loading, hosting, and productions. In certain limited
respects, the work performed by the second vendor had
duplicated work performed by the first because documents were
hosted by both vendors, but Pricewaterhouse was not seeking
reimbursement of costs paid to the second vendor for duplicated
6
work. The tremendous volume of discovery was driven by the
breadth of the City’s allegations. The City served 324 production
requests and Pricewaterhouse agreed to apply 213 search terms
to respond to the discovery requests, including searching for the
word “defect” within five words of 177 specific defects.
The hosting charges were based on the amount of data and
length of time that the data was hosted. Thomasch declared that
the electronic discovery costs were for the use of technology, such
as servers to host data and a software database to facilitate
access and review of documents, and for technical services, such
as eliminating duplication, creating load files, and producing load
files in accordance with the parties’ agreement. These are not
services that a lawyer or paralegal can ordinarily perform. The
electronic discovery costs did not include costs for consulting,
project management, forensics, or analytics.
The City filed a reply on December 3, 2019. The City
argued that California law prohibits recovery of electronic
discovery costs, and the cases cited by Pricewaterhouse were not
relevant to the issue. In addition, the City argued that
Pricewaterhouse failed to show the amount of its electronic
discovery costs were reasonable. The company had not produced
any invoices for electronic discovery or explained the necessity of
hiring a second electronic discovery vendor. In addition, the City
argued Pricewaterhouse had not shown attendance by out-of-
town counsel at local depositions was reasonably necessary,
rather than merely convenient or beneficial to the litigation.
Pricewaterhouse was free to retain any counsel it chose and pay
for any level of travel costs, but Pricewaterhouse could not
require the City to pay for travel costs that were not reasonably
7
necessary and not reasonable in amount. The City also argued
recovery is not permitted for the costs to travel to hearings.
A hearing was held on the motion to strike or tax costs on
December 19, 2019. The City argued again that the costs of
electronic discovery were not allowed under California law, and
in addition, Pricewaterhouse had not shown the amount being
sought was reasonably necessarily incurred. There were no
invoices, they used two companies, and the costs were excessive.
Similarly, Pricewaterhouse’s travel costs were unnecessary,
excessive, and not recoverable, including fully refundable first
class and business class tickets. If the court were inclined to
award travel costs, the City requested that the amounts be
reduced to reasonable amounts.
Pricewaterhouse argued that the electronic discovery costs
were not disallowed by the costs statute, and Science Applications
had nothing to do with the costs at issue in this case. The
electronic discovery services at issue were not similar to
paralegal work. The electronic discovery work had been
completed pursuant to an agreement between the parties which
was submitted to the trial court, although that agreement was
not signed by, nor were its provisions ordered by, the court.
Pricewaterhouse noted that it had not sought reimbursement for
certain activities by the electronic discovery vendor, such as
reviewing or coding documents, and Pricewaterhouse was careful
not to seek costs for duplicative efforts by the two vendors. In
addition, Pricewaterhouse argued the travel costs were
recoverable, necessary, and not excessive.
With respect to travel costs for depositions and court
hearings, the trial court found Pricewaterhouse’s counsel had an
office in Los Angeles with many experienced attorneys. The court
8
did not find the cost of the travel was reasonably necessary to
conduct depositions in Los Angeles. Therefore, the court
excluded the amounts for travel costs and granted the motion to
strike $169,263.62 for deposition-related travel and $67,596.46
for hearing-related travel.
In ruling on electronic discovery costs, the trial court
summarized the holding of Science Applications as follows: “In
that opinion the Court of Appeal stated that the cost related to
document control data bases were not recoverable. The court
reasoned that the document control data base charge, for
example, represents the state’s expenditure for an outside firm to
keep track of the voluminous records in the case, that is, to
Bate[s] stamp the documents, [input] them for retrieval,
maintain a document library, [and create searchable data bases.]
The expense is the cost of hiring assistants to help counsel
organize documents and access them in discovery and at trial, in
other words, the cost of high-tech paralegals.”
The court noted, “Pricewaterhouse argues that [the Science
Applications] case was very fact specific and did not hold that a
court cannot as a matter of law exercise discretion in ordering
electronic discovery costs. [¶] Pricewaterhouse also argues that
Science Application[s] is a product of its time decided in an age
before modern discovery.”
The court acknowledged that Science Applications was
decided at the beginning of the internet era, whereas modern
businesses depend on computer technology services.
“Nevertheless, the Legislature has not seen it necessary to amend
the Code of Civil Procedure with regard to recovery of costs and
electronic discovery. And the Court of Appeal has not addressed
the issues after the Science Applications case. [¶] So it may be a
9
good time for the Court of Appeal to revisit the issue as far as
recovery of costs for electronic discovery in view of the current
state of affairs with regard to the conduct of modern litigation.
[¶] Nevertheless, we’re stuck with that case which is the existing
case law and neither party has cited directly controlling
authorities as to whether electronic discovery costs of a specific
type which were incurred in this case are reasonably necessary
for litigation. [¶] I know of no such authority. It is analogous to
some of the matters that were raised in the Science Applications
case.”
The court ruled, “So based on the authority that has been
cited in reliance on the case of Science Application[s], the court is
going to exercise the discretion and high costs associated with
electronic discovery in this case [sic]. And the court will grant
the motion to strike costs related to electronic discovery.”
On January 21, 2020, the trial court entered an order
taxing the costs of airfare and lodging associated with deposition
travel, the hearing related travel costs, and the costs of electronic
discovery. Pricewaterhouse filed a timely notice of appeal from
the order, but characterized it as an order after a judgment under
section 904.1, subdivision (a)(2).
DISCUSSION
Appealability
The City contends the order taxing costs is not appealable
as an order following a judgment under section 904.1,
subdivision (a)(2), because a voluntary dismissal is not an
appealable judgment. The City is correct, but we conclude the
10
order is appealable as a judgment under section 904.1,
subdivision (a)(1).
An appeal can be taken only from an appealable order or
judgment, as provided by statute and developed in the case law.
(J.H. Boyd Enterprises, Inc. v. Boyd (2019) 39 Cal.App.5th 802,
810; Aixtron, Inc. v. Veeco Instruments Inc. (2020) 52 Cal.App.5th
360, 384 (Aixtron).) Section 904.1 contains the general list of
appealable judgments and orders in civil actions. Section 904.1,
subdivision (a)(1) provides that an appeal may be taken from a
judgment that is not interlocutory, except for specified
interlocutory judgments. This provision incorporates the
common law “one final judgment rule,” which allows parties to
appeal only from a final judgment that disposes of the entire
action. (Aixtron, at p. 384.) Section 904.1, subdivision (a)(2)
provides that an appeal may be taken from an order made after a
judgment made appealable under subdivision (a)(1).
“‘A judgment is the final determination of the rights of the
parties in an action or proceeding.’ (§ 577.) ‘[I]t is the substance
and effect of an adjudication that is determinative, not the form
of the decree. [Citation.] As a general test, an order constitutes
the final determination of a case “where no issue is left for future
consideration except the fact of compliance or noncompliance
with the terms of the first decree.”’ (Otay River Constructors v.
San Diego Expressway (2008) 158 Cal.App.4th 796, 801.)” (Mesa
Shopping Center-East, LLC v. O Hill (2014) 232 Cal.App.4th 890,
898 (Mesa).) Pursuant to the one final judgment rule, an
appellate court cannot review intermediate rulings until the final
resolution of the case. (Aixtron, supra, 52 Cal.App.5th at p. 384.)
A voluntary dismissal is generally not considered an
appealable judgment, because the dismissal is a ministerial
11
action of the clerk and not a judicial act. (Mesa, supra, 232
Cal.App.4th at p. 897.) As a result, the trial court’s ruling on a
motion following voluntary dismissal of the case is not considered
to be an order made following a judgment. (Id. at pp. 897–898.)
An order taxing costs, however, is a final determination in
itself and not interlocutory. (See Mesa, supra, 232 Cal.App.4th at
p. 898 [order denying motion to vacate voluntary dismissal and
award attorney fees constituted appealable final judgment];
Gassner v. Stasa (2018) 30 Cal.App.5th 346, 354–355 (Gassner)
[order of costs after voluntary dismissal was appealable, agreeing
with Mesa]; but see Mon Chong Loong Trading Corp. v. Superior
Court (2013) 218 Cal.App.4th 87, 92 (Mon Chong Loong) [order
taxing costs after nonappealable voluntary dismissal was not
appealable, but appellate court exercised discretion to treat
appeal as a petition for writ of mandate].)
We agree with Mesa and Gassner that an order taxing costs
after the voluntary dismissal of the action is a final judgment,
appealable under section 904.1, subdivision (a). The trial court’s
order constituted a final determination on the issue of costs in
this case. It was not an interlocutory ruling, as it was not simply
a necessary step in the determination of another issue. No issue
was left for future determination. There is no danger of
piecemeal disposition and multiple appeals from the same action,
because the case has been dismissed with prejudice. The order
will otherwise evade appellate review. In addition, review of the
order taxing costs will not require review of the nonappealable
voluntary dismissal.
Our conclusion that the order taxing costs is an appealable
final judgment is consistent with the treatment of collateral final
orders. The collateral order doctrine is an exception to the one
12
final judgment rule, allowing a direct appeal from a collateral
final judgment or order even when issues remain for further
determination. (In re Marriage of Grimes & Mou (2020) 45
Cal.App.5th 406, 418; Aixtron, supra, 52 Cal.App.5th at p. 387.)
“When a court renders an interlocutory order collateral to the
main issue, dispositive of the rights of the parties in relation to
the collateral matter, and directing payment of money or
performance of an act, direct appeal may be taken. [Citations.]
This constitutes a necessary exception to the one final judgment
rule. Such a determination is substantially the same as a final
judgment in an independent proceeding. [Citations.]” (In re
Marriage of Skelley (1976) 18 Cal.3d 365, 368.)
“‘[T]he test is whether an order is “important and essential
to the correct determination of the main issue.” If the order is “a
necessary step to that end,” it is not collateral.’ [Citation.]”
(Muller v. Fresno Community Hospital & Medical Center (2009)
172 Cal.App.4th 887, 903–904.) “The interest that is served by
the collateral order doctrine is the expeditious completion of
appellate review, when that can be accomplished without
implicating the merits of the underlying controversy. The
collateral order doctrine also preserves appellate review when,
without the invocation of this doctrine, appellate review would be
foreclosed.” (Id. at p. 904.)
An order taxing costs on appeal has been found to be
appealable under the collateral order doctrine, even though the
appellate court reversed the trial court’s judgment and ordered a
new trial. (Krikorian Premiere Theatres, LLC v. Westminster
Central, LLC (2011) 193 Cal.App.4th 1075, 1083 [order taxing
costs on appeal is independent of any determination of the
merits, effectively final and immediately enforceable as to the
13
ancillary issue of costs on appeal, and could otherwise escape
review entirely].) Although there is disagreement in the case law
as to whether the collateral order doctrine requires an order
directing the payment of money or performance of an act,
assuming it is required, the Krikorian court found no meaningful
difference between an order awarding costs and an order denying
a motion to tax costs, in whole or in part. (Id. at p. 1084
[persuasively disagreeing with Barnes v. Litton Systems, Inc.
(1994) 28 Cal.App.4th 681, 682–685].)
We conclude the order taxing costs is an appealable final
judgment in this case. Even if the appeal were not properly
before us, however, we would exercise our discretion to treat the
appeal as a petition for writ of mandate. (Mesa, supra, 232
Cal.App.4th at p. 899; Mon Chong Loong, supra, 218 Cal.App.4th
at p. 92.)
Statutory Scheme and Standard of Review
Section 1033.5 sets forth the items of costs that a prevailing
party is entitled to recover under subdivision (a). (Doe v. Los
Angeles County Dept. of Children & Family Services (2019) 37
Cal.App.5th 675, 693.) Recoverable costs include, for example,
filing fees, travel expenses to attend depositions, and attorney
fees when authorized by contract or law. (§ 1033.5, subd. (a)(1),
(3) & (10).) In 2016, the Legislature added to the list of
recoverable costs the fees for hosting electronic documents if a
court orders a party to have documents hosted by an electronic
filing service provider, although this provision will become
inoperable on January 1, 2022. (§ 1033.5, subd. (a)(15); Stats.
2016, ch. 461, § 2.)
14
Costs that are prohibited are listed under section 1033.5,
subdivision (b). (Doe v. Los Angeles County Dept. of Children &
Family Services, supra, 37 Cal.App.5th at p. 693.) These include,
for example, investigation expenses in preparing for trial, postage
costs, telephone charges, and photocopying expenses other than
exhibits. (§ 1033.5, subd. (b)(2) & (3).)
Items that are not expressly listed in subdivision (a) or (b)
are recoverable in the court’s discretion. (§ 1033.5, subd. (c)(2).)
All costs awarded must be “reasonably necessary to the conduct
of the litigation rather than merely convenient or beneficial to its
preparation” (§ 1033.5, subd. (c)(2)) and “reasonable in amount”
(§ 1033.5, subd. (c)(3)).
“Whether a cost item was reasonably necessary to the
litigation presents a question of fact for the trial court and its
decision is reviewed for abuse of discretion. [Citation.]” (Ladas
v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 774
(Ladas).) Under the abuse of discretion standard, we review the
trial court’s findings of fact for substantial evidence and its
conclusions of law de novo, but its application of the law to the
facts will not be disturbed unless the trial court exercised its
discretion in such an irrational or arbitrary manner that no judge
would reasonably make the same order under the circumstances.
(Sargon Enterprises, Inc. v. University of Southern
California (2012) 55 Cal.4th 747, 773; Gaines v. Fidelity National
Title Ins. Co. (2016) 62 Cal.4th 1081, 1100; In re Marriage of
Smith (1990) 225 Cal.App.3d 469, 479–480.)
“However, because the right to costs is governed strictly by
statute [citation] a court has no discretion to award costs not
statutorily authorized. [Citations.]” (Ladas, supra, 19
Cal.App.4th at p. 774.) An abuse of discretion is shown when the
15
trial court acted on a mistaken view about the scope of its
discretion (Olsen v. Harbison (2005) 134 Cal.App.4th 278, 285) or
failed to exercise its discretion (Sanford v. Rasnick (2016) 246
Cal.App.4th 1121, 1133).
“Normally, we must presume the trial court was aware of
and understood the scope of its authority and discretion under
the applicable law. (People v. Stowell (2003) 31 Cal.4th 1107,
1114 [‘[W]e apply the general rule “that a trial court is presumed
to have been aware of and followed the applicable
law.”’]; McDermott Will & Emery, LLP v. Superior Court (2017)
10 Cal.App.5th 1083, 1103 [‘We presume the trial court knew and
properly applied the law absent evidence to the contrary.’]; Keep
Our Mountains Quiet v. County of Santa Clara (2015) 236
Cal.App.4th 714, 741 [‘“It is a basic presumption indulged in by
reviewing courts that the trial court is presumed to have known
and applied the correct statutory and case law in the exercise of
its official duties.”’].) ‘This rule derives in part from the
presumption of Evidence Code section 664 “that official duty has
been regularly performed.”’ (People v. Stowell, at p. 1114.) The
rebuttable presumption under section 664 ‘“‘affect[s] the burden
of proof’ (Evid. Code, § 660), meaning that the party against
whom it operates . . . has ‘the burden of proof’ as to the
nonexistence of the presumed fact. (Evid. Code, § 606 . . . .)”’ (In
re Raphael P. (2002) 97 Cal.App.4th 716, 738.)” (Barriga v. 99
Cents Only Stores (2020) 51 Cal.App.5th 299, 333–334 (Barriga).)
“If the record demonstrates the trial court was unaware of
its discretion or that it misunderstood the scope of its discretion
under the applicable law, the presumption has been rebutted,
and the order must be reversed. (See Noel [v. Thrifty Payless, Inc
(2019)] 7 Cal.5th [955,] 968 [‘“[A]n order based upon improper
16
criteria or incorrect assumptions calls for reversal “‘even though
there may be substantial evidence to support the court’s
order.”’”’].) ‘“[A]ll exercises of legal discretion must be grounded
in reasoned judgment and guided by legal principles and policies
appropriate to the particular matter at issue.” [Citations.]
Therefore, a discretionary decision may be reversed if improper
criteria were applied or incorrect legal assumptions were made.
[Citation.] Alternatively stated, if a trial court’s decision is
influenced by an erroneous understanding of applicable law or
reflects an unawareness of the full scope of its discretion, it
cannot be said the court has properly exercised its discretion
under the law. [Citations.] Therefore, a discretionary order
based on the application of improper criteria or incorrect legal
assumptions is not an exercise of informed discretion and is
subject to reversal even though there may be substantial
evidence to support that order. [Citations.] If the record
affirmatively shows the trial court misunderstood the proper
scope of its discretion, remand to the trial court is required to
permit that court to exercise informed discretion with awareness
of the full scope of its discretion and applicable law.’ (F.T. v.
L.J. (2011) 194 Cal.App.4th 1, 15–16.)” (Barriga, supra, 51
Cal.App.5th at p. 334.)
Electronic Discovery
Pricewaterhouse contends the trial court had discretion to
award electronic discovery costs, which it did not exercise
because the court mistakenly concluded such costs were
17
prohibited under California law. On the record before us,
Pricewaterhouse has rebutted the presumption that the trial
court understood the scope of its discretion, and we must remand
the issue for the trial court to either exercise, or confirm the prior
exercise, of its discretion.
The trial court accurately summarized the holding of
Science Applications. In Science Applications, the trial court
awarded several cost items related to the use of technology,
including $200,000 for document control and a database for
internal case management provided by a third-party vendor.
(Science Applications, supra, 39 Cal.App.4th at p. 1099.) The
appellate court noted that the expenses were not expressly
allowed or prohibited under section 1033.5, so were recoverable
at the discretion of the trial court. (Science Applications, at pp.
1103–1104.) The appellate court found the charge for an internal
case management database and document control in that case,
however, was equivalent to hiring a third party to keep track of
voluminous records in the case, such as numbering the
documents, loading the documents for retrieval, maintaining a
document library, and creating a searchable database. The court
found the expense was similar to hiring a “high tech” paralegal to
organize documents and access them for discovery and at trial.
(Ibid.) Since the prevailing party was not entitled to attorney
fees, the court found the cost for electronic document control
equivalent to paralegal fees was not recoverable. The court also
expressed concern that the prevailing party had unwisely spent
more than $2 million on high-tech litigation methods that
resulted in recovery of $1 million in damages. (Id. at p. 1105.) “If
a party litigant chooses unwisely to expend monies in trial
presentation in excess of the value of the case, utilizing advanced
18
methods of information storage, retrieval and display, when more
conventional if less impressive methods are available, the party
must stand his own costs.” (Ibid.)
The trial court in the instant case acknowledged the
authorities cited by Pricewaterhouse that affirmed orders
awarding electronic litigation costs, but noted the cases were not
directly on point. In El Dorado, the appellate court found the
trial court had discretion to award costs incurred to build a
database in order to process certain data necessary to create an
exhibit for trial. (El Dorado, supra, 150 Cal.App.4th at p. 617.)
The El Dorado court distinguished the cost of processing raw
financial data for an indispensable exhibit from the costs
prohibited in Science Applications for a document library for the
entire litigation. The El Dorado court added that if the cost of
labor for creating an exhibit was recoverable under section
1033.5, the fact that it was the labor of a paralegal was not
relevant.
The appellate court in Bender, supra, 217 Cal.App.4th at
page 990, affirmed an award of costs for courtroom presentations
in a case where attorney fees were also recoverable. The expense
for courtroom presentations included creating excerpts from
deposition transcripts and video, converting exhibits to computer
formats, producing electronic presentations, and an aide to
present videotaped deposition excerpts at trial. The Bender court
rejected the argument in that case that the costs were
nonrecoverable under Science Applications, noting that the
Science Applications court had approved some technology costs
awarded by the trial court and disapproved others. (Bender, at
pp. 990–991.) The Bender court also noted that the use of
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technology in the courtroom had become commonplace and the
cost had declined dramatically.
On appeal, Pricewaterhouse contends the recent decision of
Hooked Media Group, Inc. v. Apple Inc. (2020) 55 Cal.App.5th
323 (Hooked Media), which was issued after the order taxing
costs in this case, clarified the trial court’s discretion to award
electronic discovery costs. In Hooked Media, the trial court
awarded $92,000 for electronic discovery costs to convert “native
electronic files into usable form.” (Id. at p. 338.) The appellate
court affirmed the cost award, finding that “Hooked makes valid
arguments that the e-discovery costs may have been incurred
more out of convenience than necessity. But given our
deferential standard of review, reversal is not warranted. The
trial court, having closely observed the litigation as it progressed
over several years, was in a much better position than we are to
decide whether expenses associated with managing electronic
data were necessarily incurred.” (Id. at pp. 338–339.)
Justice Mihara concurred, distinguishing the holding of
Science Applications from the facts of Hooked Media as follows:
“Here, unlike in Science Applications, the third-party vendor
expenses incurred by Apple for data conversion of files into a
‘usable form’ so that those files could be produced to Hooked were
not akin to paralegal or attorney expenses. The costs incurred for
the technical process of converting data files into a usable form so
that those files can be produced in response to document
production requests was not addressed in Science Applications,
and such costs are not addressed in Code of Civil Procedure
section 1033.5. It follows that the superior court had discretion
to allow or disallow these costs. Hooked makes no argument that
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the court abused its discretion.” (Hooked Media, supra, 55
Cal.App.5th at p. 354.)
We note all of the relevant case law has consistently
acknowledged that the costs associated with electronic discovery
are not expressly allowed or prohibited, but may be awarded in
the trial court’s discretion. Common sense dictates that a
prevailing party who may not recover attorney fees or costs
associated with the storage, management, photocopying, search,
or production of physical documents, cannot recover equivalent
labor or discovery costs simply because the documents are in
electronic form. On the other hand, a prevailing party may show
costs unique to the electronic format of the data were reasonably
necessarily incurred and are not equivalent to work performed by
paralegal or administrative support, such as the cost of a
technical process to convert data files to a useable form to
respond to a document production request.
In the current case, we begin with the presumption that the
trial court understood the scope of its discretion and we resolve
any ambiguities in favor of affirming the trial court’s order.
(Winograd v. American Broadcasting Co. (1998) 68 Cal.App.4th
624, 631–632.) Pricewaterhouse contends, however, that the
City’s arguments and the trial court’s statements demonstrate
that the trial court did not understand the extent of its
discretion. In the City’s opening brief on its motion to tax costs,
the City’s sole argument for taxing electronic discovery costs was
that the trial court lacked discretion to award any electronic
discovery costs, because Science Applications precluded an award
of electronic discovery costs as a matter of law. The City
repeated this argument in its reply brief, although added that the
costs being sought were not reasonable in amount. At the
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hearing in the trial court, the City added, albeit briefly, that the
electronic discovery costs at issue were not reasonably necessary.
The trial court accurately summarized the relevant case
law concerning recovery of electronic discovery costs and
acknowledged that there was no law applicable to the cost of
electronic discovery that controlled the outcome in this case. The
parties did not provide, and the trial court’s own research had not
found, directly controlling authority as to whether the specific
type of electronic discovery costs incurred in this case were
reasonably necessary for litigation. The trial court stated,
however, that the electronic discovery costs at issue in this case
were analogous to costs that were not recoverable in Science
Applications as a matter of law. The court’s comments suggest
that it felt constrained by the holding of Science Applications, in
which the appellate court had reversed an award of analogous
costs as an abuse of discretion. The court noted that the
Legislature had not amended the costs statute after Science
Applications, and the appellate court had not addressed the issue
of electronic discovery in the context of modern litigation. As a
result, the court stated it was “stuck” with Science Applications,
since no subsequent law had stated electronic discovery costs of
the specific type incurred in this case were reasonably necessary
for litigation. These comments imply that the trial court felt
compelled to follow Science Applications. We conclude this record
evidence is sufficient to rebut the presumption that the trial
court understood the full extent of its discretion to award
electronic discovery costs.
The trial court’s ruling cannot be clearly deciphered from
the transcription. The trial court stated that it was going to
“exercise the discretion and high costs associated with electronic
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discovery in this case” and grant the motion to strike costs
related to electronic discovery. Standing alone, this phrase could
be interpreted as an exercise of discretion. But in context, the
court expressly stated its ruling was made in reliance on the
holding of Science Applications, which suggests the trial court
may have felt its “discretion” was constrained in a particular
way. The court’s ruling taxing the entire amount of electronic
discovery costs does not provide further insight into whether the
trial court believed its discretion was constrained: taxing all costs
is consistent with a belief that such costs are never recoverable.
While taxing all costs could also be consistent with an exercise of
the court’s discretion, the record before us does not suggest the
parties expressly argued or the trial court discussed whether
specific components of the electronic discovery costs were
reasonably necessary to the litigation. Although it is a close
question in this case, given the City’s primary argument that the
costs associated with electronic discovery are never recoverable
under Science Applications and the lack of clarity in the
transcript of the hearing, we cannot presume the trial court
understood the extent of its discretion to award costs related to
electronic discovery. We remand the matter to allow the trial
court to either exercise its discretion to award electronic
discovery costs or confirm the prior exercise of its discretion to
deny electronic discovery costs.
Travel Costs
Pricewaterhouse contends the trial court abused its
discretion by taxing the travel costs to depositions and hearings
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for counsel based in New York. No abuse of discretion has been
shown.
Section 1033.5, subdivision (a)(3)(C), expressly allows a
prevailing party to recover “[t]ravel expenses to attend
depositions” as costs. (§ 1033.5, subd. (a)(3)(C).) Recoverable
travel expenses are not limited to deposition travel by attorneys
who practice in the court’s jurisdiction. (Thon v. Thompson
(1994) 29 Cal.App.4th 1546, 1548.)
Whether a cost is reasonably necessary to the litigation,
however, and whether a cost is reasonable in amount, is a
determination within the trial court’s discretion. In this case, the
trial court found that Pricewaterhouse’s New York-based counsel
had qualified, experienced attorneys available in the firm’s Los
Angeles office to conduct depositions and attend hearings, and
who in fact took several of the depositions in this case. Under the
circumstances, the trial court found the travel costs for out-of-
town attorneys were not reasonably necessary to the litigation
and the court exercised its discretion to tax the travel costs of
out-of-town attorneys. We cannot say that the court’s assessment
was clearly wrong; no abuse of discretion has been shown.
DISPOSITION
The portion of the order taxing costs associated with
electronic discovery is reversed and remanded for further
proceedings in accordance with this opinion, while the remaining
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portion of the order taxing costs is affirmed. In the interests of
justice, the parties are ordered to bear their own costs on appeal.
MOOR, J.
We concur:
RUBIN, P. J.
GRIMES, J.*
* Justice of the Court of Appeal, Second Appellate District,
Division Eight, assigned by the Chief Justice pursuant to article
VI, section 6 of the California Constitution.
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