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D.C. Circuit Addresses E-Discovery Costs in False Claims Act Litigation

April 3, 2020

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On March 27, 2020, the U.S. Court of Appeals for the District of Columbia addressed the question of discovery costs in a long-running False Claims Act case, U.S. ex rel. Barko v. Halliburton (No. 19-7064, March 2020) (“Barko”). In Barko, a former employee claimed that an affiliate of Halliburton, Kellogg Brown & Root Services (KBR), inflated costs and received kickbacks from subcontractors during the Iraq war during the early to mid-2000s. After a contentious, lengthy litigation, including 64 document requests and more than 2.4 million pages of potentially responsive documents, the District Court granted summary judgment which was upheld by the Court of Appeals in 2017 (U.S. ex rel Barko v. Halliburton Co., 17-7057 (Dec. 17, 2017)).

But that decision did not completely end the matter. The District Court awarded discovery costs exceeding $100,000 to Halliburton, including “fees for printed or electronically recorded transcripts.” In response to discovery requests, KBR scanned documents into electronic format for hosting on an electronic platform—a frequently used approach for discovery. KBR sought more than $100,000 for e-discovery costs, which were allowed by the District Court, relying on 28 U.S.C. § 1920 (Barko at 3-4). KBR argued that section 1920(a), which allows costs for “making copies,” included e-discovery review for identifying responsive documents as well as hosting and processing costs. Id. at 4.

The Court of Appeals disagreed. It concluded that KBR’s view was too expansive and did not take into account the intent and language of Section 1920(4). It also ruled that the e-discovery tasks, for which KBR sought reimbursement, were “comparable” to the traditional document review to identify documents for production. These tasks, it held, are not reimbursable whether performed by an attorney or an “algorithm.” Id. at 9. The result was a significant reduction. The Court of Appeals did not disturb District Court’s award of costs for expediting deposition transcripts and video production.

Federal appellate decisions about discovery costs are rare—the assessment of costs is usually a clerical matter. This decision, however, eliminates for relators, and non-prevailing parties, an expensive deterrent to discovery—absorbing the costs of a potentially prevailing adversary’s document review. We can expect that this decision will tilt the playing field and encourage False Claims Act suits.

For more information about this alert, please contact Jonathan Feld (jfeld@dykema.com), Dante Stella (dstella@dykema.com), Jason Ross (jross@dykema.com) or your Dykema relationship attorney.

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