WASHINGTON, D.C. | March 31, 2020 — On Friday, March 27, the United States Court of Appeals for the D.C. Circuit reversed an order requiring whistleblower Harry Barko to pay over $58,000 in e-discovery costs in a False Claims Act case he brought against multinational defense contractor KBR. This decision, won by a legal team supported by the National Whistleblower Center, sets an important precedent by limiting the amount of taxable e-discovery costs defendants can bill whistleblowers and other plaintiffs under 28 U.S.C. § 1920(4) when they do not prevail in their legal actions.
The potential for exorbitant e-discovery costs created by the district court’s order had sent a chilling message to whistleblowers considering bringing legal actions alleging corruption by corporate officials; if they prevailed against the whistleblowers, corporations could have punished the whistleblowers with overwhelming court costs. Under 28 U.S.C. § 1920(4), the prevailing party can charge the losing party for “the costs of making copies of any materials where the copies are necessarily obtained for use in the case.” By siding with the plaintiff in this case, the D.C. Circuit ensures that prevailing parties cannot abuse this statute by shifting all e-discovery costs to the other party, no matter how tangentially related to the case.
The D.C. Circuit held that the taxable e-discovery costs in question related only to the actual costs in creating the copies provided for the case, and not the non-copying related e-discovery costs that KBR insisted Mr. Barko was liable to pay. Such non-copying costs included server hosting for its documents, labor in searching through the documents, and other preparatory work that took place before the actual copying of the document. By charging all of these costs, KBR sought $109,446.74 of which $58,894.01, or 54%, were the e-discovery process costs rejected by the D.C. Circuit.
John Kostyack, Executive Director of the National Whistleblower Center, stated: “We commend the D.C. Circuit Court of Appeals for siding with the whistleblower in this case. Corporations cannot be given free rein to deter whistleblowers and victims of civil rights abuses by threatening to impose inflated court costs if they do not prevail.”
In the case, U.S. ex rel. Harry Barko v. KBR et al., initially filed in 2005, qui tam whistleblower, Harry Barko, alleged that the then Halliburton subsidiary, KBR, purposefully inflated the costs of construction services on military bases in Iraq in violation of the federal False Claims Act statute. In 2013, the U.S. District Court of D.C. allowed the qui tam lawsuit to proceed, ruling that Barko had provided a detailed description of the falsehoods that created the basis of his suit. On April 2015, the U.S. Securities and Exchange Commission took action against KBR for attempting to silence the whistleblower and ordered KBR to pay a $130,000 penalty and cease this practice. Ultimately, the U.S. District Court of D.C. ruled in 2017 that Barko hadn’t offered admissible evidence of a False Claims Act violation.
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