Show me the Money! The Recoverability of Computerized Legal Research Expenses by the Prevailing party in the Federal Circuits
| Author | Sarah Wise |
| Position | J.D., Capital University Law School, 2008 |
| Pages | 455-491 |
Page 455
SHOW ME THE MONEY! THE RECOVERABILITY OF COMPUTERIZED LEGAL RESEARCH EXPENSES BY THE PREVAILING PARTY IN THE FEDERAL CIRCUITS
SARAH WISE*
INTRODUCTION
Computerized legal research1expenses may be a foreign concept to a first year law student who is given unlimited “free” access to Westlaw and LexisNexis,2but these expenses are a major concern for competitive law firms.3Computerized legal research is expensive and law firms incur these expenses in most lawsuits.4Thousands of dollars are often spent researching on-line and the expenses add up after time.5For purposes of this Comment, computerized legal research expenses include fees charged
Copyright © 2007, Sarah Wise.
* J.D., Capital University Law School, 2008. I would like to thank Professor Susan Gilles for her insight and willingness to help in drafting this Comment.
1See Cary Griffith, An Overview of Computer-Assisted Legal Research Services, 8 No.
7 LAW. PC 2, 2–3 (Jan. 1, 1991) (observing that “[i]n its simplest form, computer-assisted legal research is . . . research facilitated by the use of a computer. . . . The most obvious
examples of CALR services are LEXIS and WESTLAW . . . [which] consist of central computers with large databanks of information that can be searched by many people [simultaneously]”).
2See Ian Gallacher, Forty-Two: The Hitchhiker’s Guide to Teaching Legal Research to the Google Generation, 39 AKRON L. REV. 151, 175 (2006) (noting that law students are often taught by representatives of Westlaw and LexisNexis, the two leading competitors in providing legal information via an electronic database).
3See Brad Malamud, How Times Have Changed: A Systematic Approach to Billing, 62 DEF. COUNS. J. 583, 587 (1995) (stating that “[b]ecause of the expense of on-line computer-assisted research, it is important that attorneys use these services only when necessary and not as primary research tools. At around $200 per hour, on-line searches must be limited and focused”); Ola Najar, Note, Computerized Research in the Legal Arena: Developing a Standard of Research Sufficiency in Legal Malpractice and Rule 11 Actions, 39 WAYNE L.
REV. 1683, 1694 (1993).
4See Najar, supra note 3, at 1694.
5See Litton Systems, Inc. v. Am. Tel. & Tel. Co., 613 F. Supp. 824, 836 (S.D.N.Y. 1985) (holding computerized legal research expenses unrecoverable as costs where the party was seeking to recover Lexis expenses totaling over $20,000). Also worth noting is the party in Litton incurred Lexis fees totaling over $20,000 over 20 years ago. Id.
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to attorneys for time spent online using a commercial legal research service such as Westlaw or LexisNexis.6
Providing legal information online is big business. In “[t]he United States [alone, the] legal information market is worth in excess of $5 billion per year, and has been growing at an annual rate of 5% in recent years.”7
According to one author, “the yearly cost of a complete Westlaw PRO package (including all state and federal primary and secondary libraries and KeyCite) . . . for 2005, . . . ranged from $13,512 for a one or two person firm, to $52,236 for a sixteen to twenty person firm.”8Such costs increase the expense of modern litigation.9The traditional system of legal research, once conducted solely in the library with the use of digests and reporters, has evolved into an efficient system of computerized research that can now be called a new standard of legal research.10As a result, courts have been faced with the problem of determining whether the expenses associated with computerized legal research should be recoverable by a prevailing party in litigation.11As stated by one author, “it has become difficult to fit the new system into the mold of the old law.”12
The Supreme Court has remained silent on the issue, which has led to a split among the circuits as to whether computerized legal research expenses should be recoverable, and if so, how the expenses should be recovered.13There are three positions that have been taken by the circuit courts: (1) categorize the expense as a cost under 28 U.S.C. § 1920 and award the expenses to the prevailing party in every case; (2) categorize the expense as an overhead expense and award it, if at all, subsumed in the
6See Westlaw Information, http://west.thomson.com/westlaw/default.aspx (last visited June. 20, 2008); Total Practice Solutions, http://law.lexisnexis.com/ (last visited June. 20, 2008).
7Gallacher, supra note 2, at 175.
8Id. at 196.
9See Najar, supra note 3, at 1697 n.89.
10Id. at 1684 (noting that “computers and electronic databases are vital elements of the legal arsenal available to today’s practitioner [and s]ome courts have implied the existence of a new technological standard for legal research”).
11Kathryn E. Cassady, Recent Development, Invessys, Inc. v. McGraw-Hill Cos.: Should Electronic Research Costs Be Recoverable Under Fee Shifting Statutes?, 29 AM. J.
TRIAL ADVOC. 487, 487 (2005).
12Id.
13See Trustees of Constr. Indus. & Laborers Health & Welfare Trust v. Redland Ins. Co., 460 F.3d 1253, 1258 (9th Cir. 2006) (discussing the Circuit split).
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attorney’s hourly rate if there is a fee shifting statute; and (3) categorize the expense as one related to attorneys’ fees and award it as a separate expense from the attorney’s hourly rate if there is a fee shifting statute.14The label given to the computerized legal research expenses proves important because it determines whether or not a party will be reimbursed.15If labeled as costs, the expense is awarded to every prevailing party in every case.16If labeled as a component of attorneys’ fees, the expense can only be awarded under a fee shifting statute.17Further, if labeled as overhead, the expense would be unrecoverable to the extent that it was not already included in the attorney’s hourly rate,18and if labeled as a related expense, it would be recoverable as a reasonable expense separate from the attorney’s hourly rate.19
This Comment will first explain what computerized legal research expenses are and how they are charged. Next, a brief history of the American and English Rules will be discussed along with the evolution of Rule 54(d) of the Federal Rules of Civil Procedure. Then, the current distinction between costs and attorneys’ fees will be explained. The next section will explain the calculation of attorneys’ fee awards and the ways in which expenses can be included in those awards. Following this background introduction, the different approaches endorsed by the federal circuit courts will be introduced. Finally, this Comment will argue that the best rule for the federal courts to adopt is one in which computerized legal research expenses are recoverable under Rule 54(d)(2) (when appropriately authorized by a fee shifting statute) as a related expense separately calculated from an attorney’s hourly rate.
I. BACKGROUND
A. Computerized Legal Research
Since the early 1980s, computerized legal research has been recognized as an efficient way to do legal research and decrease the hours
14See id. (“We note that there is a circuit split concerning whether expenses for computer-based legal research are compensable as ‘reasonable attorney’s fees.’”).
15See infra Part I.C. (discussing the law regarding recoverability).
16See infra notes 78–80 and accompanying text.
17See infra note 78 and accompanying text.
18For cases adopting this rule, see infra note 138.
19For cases adopting this rule, see infra note 113.
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attorneys spent in a traditional library.20Now, law students across the country are completely immersed in training sessions for Westlaw and LexisNexis before the end of their first semester of law school.21Book research is being replaced by online research and some courts have even implied that failing to research online could warrant sanctions.22
In order to stay competitive, law firms have to “subscribe to either LexisNexis or Westlaw and probably both.”23“LexisNexis and Westlaw offer four types of pricing structure: hourly pricing; transactional pricing; individualized packages (designed for small firms, with coverage tailored to the firm’s geographical and practice areas); and fixed rate plans . . . .”24
Fees charged for access to “these services are difficult to determine
20See, e.g., Wehr v. Burroughs Corp., 619 F.2d 276, 285 (3d Cir. 1980). See also Int’l Wood Processors v. Power Dry, Inc., 598 F. Supp. 299, 305 (D.S.C. 1984) (computer research, although not essential, is reasonable, because it replaces many hours of human research); Timberland Design Inc. v. Fed. Deposit Ins. Corp., 745 F. Supp. 784, 790
(D.Mass. 1990) (same); Arbor Hill Concerned Citizens Neighborhood Ass’n v. County of Albany, 369 F.3d 91, 98 (2d Cir. 2004) (same); Apple Corps. v. Int’l Collectors Soc., 25 F. Supp. 2d 480, 497–98 (D.N.J. 1998) (same).
21See Michael Whiteman, The Impact of the Internet and Other Electronic Sources on an Attorney’s Duty of Competence Under the Rules of Professional Conduct, 11 ALB. L.J.
SCI. & TECH. 89, 95 (2000) (noting that “[a]ll of the 181 ABA-approved law schools report having student and faculty access to both Westlaw and Lexis”).
22See Najar, supra note 3, at 1694–95 observing that,
[w]hile research in LEXIS, WESTLAW and general digests has found no court which explicitly stated that failure to perform computerized research is an instant indicator of possible legal malpractice, or a Rule 11 violation, a number of courts have hinted that a breach of duty may occur if an attorney fails to properly advise or protect a client’s interest due to a lack of relevant information which could have easily been found through means available to today’s...
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