Cali, et al v. Williams Companies, et al
U n i t e d States Court of Appeals T e n t h Circuit
M a r c h 3, 2009
PUBLISH U N I T E D STATES COURT OF APPEALS T E N T H CIRCUIT
E l i s a b e t h A. Shumaker C l e r k of Court
In re: WILLIAMS SECURITIES L I T I G A T I O N WCG SUBCLASS.
N o . 08-5100
APPEAL FROM THE UNITED STATES DISTRICT COURT F O R THE NORTHERN DISTRICT OF OKLAHOMA ( D . C . No. 4:02-CV-0072-SPF) Submitted on the briefs: * W i l l i a m Christopher Carmody, Jonathan E. Bridges, and Jeremy J. Brandon, Susman G o d f r e y LLP, Dallas, Texas, Joshua H. Vinik, Matthew A. Kupillas, and Kent A. B r o n s o n , Milberg LLP, New York, New York, and Behram V. Parekh, Yourman A l e x a n d e r & Parekh, Los Angeles, California, for Plaintiffs-Appellants. M i c h a e l J. Gibbens, Victor E. Morgan, and Gerald L. Jackson, Crowe & Dunlevy, T u l s a , Oklahoma, for Defendants-Appellees Howard E. Janzen, Scott E. Schubert, K e n n e t h Kinnear II, Matthew W. Bross, Bob F. McCoy, Howard S. Kalika, John C. B u mg a r n e r Jr., and Frank M. Semple. G r a y d o n Dean Luthey, Jr., and Sarah Jane Gillett, Hall, Estill, Hardwick, Gable, G o l d e n & Nelson, P.C., Tulsa, Oklahoma, Timothy K. Roake, Gibson, Dunn & C r u t c h e r , L.L.P., Palo Alto, California, and Ethan D. Dettmer, Gibson, Dunn & C r u t c h e r , L.L.P., San Francisco, California, for Defendants-Appellees The Williams C o mp a n i e s , Inc. and Keith E. Bailey. P a t r i c k M. Ryan, and Philip G. Whaley, Ryan, Whaley & Coldiron, Oklahoma City, O k l a h o ma , Peter A. Wald, Latham & Watkins LLP, San Francisco, California, and
After examining the briefs and appellate record, this panel has determined u n a n i mo u s l y that oral argument would not materially assist in the determination of t h i s appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is t h e r e f o r e ordered submitted without oral argument.
C h r i s t o p h e r Harris, Latham & Watkins LLP, New York, New York, for Defendant - A p p e l l e e Ernst & Young LLP. Before McCONNELL, ANDERSON, and BALDOCK, Circuit Judges. BALDOCK, Circuit Judge. Following the breakup of AT&T in the 1980s, the Williams Companies ( W M B ) , an energy group, devised a plan to run fiber-optic cables through some of i t s decommissioned pipelines. Subsequently, WMB used a subsidiary known as the W i l l i a ms Communications Group (WCG) to develop a large fiber-optic network. W M B sold most of this network to a competitor in 1995. Rapid growth in the T e l e c o mmu n i c a t i o n s Index in the late 1990s, however, spurred WMB to reenter the n e t w o r k communications market through its WCG subsidiary. Indeed, WMB stated i t s intention to invest vast sums in creating a national fiber-optic network. But the T e l e c o mmu n i c a t i o n s Index experienced a major downturn in the spring of 2000. W M B subsequently spun off its WCG subsidiary. Less than two years later, WCG's s t o c k was practically worthless and the company filed for Chapter 11 bankruptcy. A s a result, some thirty securities fraud class action suits were filed seeking $ 2 . 9 billion against three defendant groups: (1) the WMB Defendants; (2) the WCG D e f e n d a n t s ; and (3) Ernst & Young, the outside auditor to both WMB and WCG. T h e district court consolidated these actions under the caption In re Williams S e c u r i t i e s , bifurcated the litigation into two subclasses of plaintiffs -- the WMB 2
S u b c l a s s and the WCG Subclass -- and ordered coordinated discovery. While the W M B Subclass Action settled, Defendants in the WCG Subclass Action filed a mo t i o n for summary judgment, which the district court granted. Plaintiffs appealed t h e district court's ruling, which we affirmed in In re Williams Securities Litigation WCG Subclass, No. 07-5119, __ F.3d __, 2009 WL 388048 (10th Cir. Feb. 1 8 , 2009). Pursuant to 28 U.S.C. § 1920 and Fed. R. Civ. P. 54(d)(1), the district court a w a r d e d the WCG Subclass Defendants costs. Plaintiffs now challenge the district c o u r t ' s costs awards on three separate grounds. First, Plaintiffs allege Defendants f a i l e d to prove that the transcripts and copies for which the district court awarded c o s t s were "necessarily obtained for use in the case." 28 U.S.C. § 1920(2) & (4). S e c o n d , Plaintiffs maintain that many of the costs for which Defendants seek r e i mb u r s e me n t are equally attributable to the WMB Subclass Action. Hence,
P l a i n t i f f s argue the district court abused its discretion in taxing them for the full a mo u n t of these costs. Third, Plaintiffs suggest that the district court's awards of c o s t s are substantively unreasonable, even assuming these costs are taxable under 28 U . S . C . § 1920. We have jurisdiction under 28 U.S.C. § 1291. Satisfied that the d i s t r i c t court acted within the broad confines of its discretion, we affirm. I. A f t e r the district court granted summary judgment in favor of Defendants, e a c h defendant group filed a timely bill of costs with the district court. The district 3
c o u r t clerk held a joint hearing on Defendants' bills of costs. See Furr v. AT&T T e c h s . , Inc., 824 F.2d 1537, 1550 n.11 (10th Cir. 1987) (recognizing that "a bill of c o s t s is initially filed with the clerk rather than with the court"). Shortly thereafter, t h e clerk issued three orders taxing Plaintiffs $231,549.08 in favor of the WCG D e f e n d a n t s , $180,411.70 in favor of the WMB Defendants, and $229,371.72 in favor o f Ernst & Young. Ultimately, the clerk reduced Defendants' requested costs awards b y $31,220.00 (WCG Defendants), $3,287.45 (WMB Defendants), and $97,339.05 ( E r n s t & Young) respectively. Defendants voluntarily withdrew their request for t r a n s c r i p t costs related to one deposition witness and the WMB Defendants agreed t o drop their request for approximately $2,900.00 in copying costs. Plaintiffs moved the district court to review the clerk's awards under Fed. R. C i v . P. 54(d)(1), raising substantially the same arguments they now press on appeal. S e e id. ("Should the party seeking costs be dissatisfied with the clerk's actions, or s h o u l d the party against whom they are to be taxed object, on motion served within 5 days thereafter, the action of the clerk may be reviewed by the court. Such review b y the court is a de novo determination."). The district court referred this motion to a United States Magistrate Judge, who held another hearing on the matter. S u b s e q u e n t l y , the magistrate judge issued a twenty-two page report and r e c o mme n d a t i o n , substantially affirming the clerk's awards of costs. The magistrate j u d g e did exclude, however, costs related to four depositions for which the clerk a w a r d e d costs to the WMB Defendants and Ernst & Young. 4 This reduced
D e f e n d a n t s ' costs awards by $6,135.45 (the WMB Defendants) and $5,650.45 (Ernst & Young) respectively. In total, the magistrate judge recommended the district court t a x Plaintiffs $231,549.08 in favor of the WCG Defendants, $174,276.25 in favor of t h e WMB Defendants, and $223,721.27 in favor of Ernst & Young. Plaintiffs also objected to the magistrate judge's report and recommendation o n essentially the same grounds they now raise on appeal. In a twenty-two page o r d e r , the district court adopted the magistrate judge's recommended awards of costs, w i t h several notable exceptions. The district court independently reviewed the r e c o r d and excluded transcription costs related to seven deposition witnesses because i t was not satisfied that these depositions were "necessarily obtained" for use in the c a s e . Further, the district court reduced the WCG Defendants' award for copy costs b y over $4,000.00. All together, the district court reduced the costs awards
r e c o mme n d e d by the magistrate judge by $8,795.30 (the WCG Defendants), $ 5 , 7 8 5 . 3 0 (the WMB Defendants), and $3,001.80 (Ernst & Young) respectively. A c c o r d i n g l y , the district court taxed Plaintiffs $222,753.78 in favor of the WCG D e f e n d a n t s , $168,490.95 in favor of the WMB Defendants, and $220,719.47 in favor o f Ernst & Young. II. R u l e 54(d)(1) provides that costs, other than attorney's fees, should generally " b e allowed to the prevailing party." We have recognized that the district court's d i s c r e t i o n in taxing costs is limited in two ways. See Cantrell v. Int'l Bhd. of Elec. 5
W o r k e r s , 69 F.3d 456, 458-59 (10th Cir. 1995) (en banc). First, "Rule 54 creates a p r e s u m p t i o n that the district court will award costs to the prevailing party." Id. at 4 5 9 . Second, the district court "must provide a valid reason" for denying such costs. I d . ; see also Klein v. Grynberg, 44 F.3d 1497, 1507 (10th Cir. 1995) (stating that d e n y i n g costs to a prevailing party is a "severe penalty" and explaining that "there mu s t be some apparent reason to penalize the prevailing party if costs are to b e denied"). Items proposed by prevailing parties "as costs should always be given careful s c r u t i n y . " U.S. Indus., Inc. v. Touche Ross & Co., 854 F.2d 1223, 1245 (10th Cir. 1 9 8 8 ) , overruled on other grounds as recognized by Anixter v. Home-Stake Prod. C o . , 77 F.3d 1215, 1231 (10th Cir. 1996). The costs statute allows a judge or clerk o f any court of the United States to tax costs for transcripts and copies "necessarily o b t a i n e d for use in the case." 28 U.S.C. § 1920(2) & (4). Both parties agree that t h i s standard governs the costs at issue in this appeal. The "necessarily obtained for use in the case" standard does not allow a p r e v a i l i n g party to recover costs for materials that merely "added to the convenience o f counsel" or the district court. Touche Ross, 854 F.2d at 1245. To be recoverable, a prevailing party's transcription and copy costs must be "reasonably necessary to t h e litigation of the case." Mitchell v. City of Moore, 218 F.3d 1190, 1204 (10th Cir. 2 0 0 0 ) . Materials produced "solely for discovery" do not meet this threshold. Furr, 8 2 4 F.2d at 1550. At the same time, we have acknowledged that materials may be 6
t a x a b l e even if they are not "strictly essential" to the district court's "resolution of t h e case." Id. The "realities of litigation occasionally dispense with the need of mu c h of the discovery already taken by the parties when, for instance, a dispositive mo t i o n is granted by the trial court." Callicrate v. Farmland Indus., Inc., 139 F.3d 1 3 3 6 , 1340 (10th Cir. 1998). Our cases establish that if deposition transcripts or c o p i e s were "offered into evidence," were "not frivolous," and were "within the b o u n d s of vigorous advocacy," costs may be taxed. Id. (citing Furr, 824 F.2d at 1 5 5 0 ) . This standard recognizes that "caution and proper advocacy may make it i n c u mb e n t on counsel to prepare for all contingencies which may arise during the c o u r s e of litigation," including the "possibility of trial." Id. Thus, we do not "employ the benefit of hindsight" in determining whether ma t e r i a l s for which a prevailing party requests costs are reasonably necessary to the l i t i g a t i o n of the case. Id. We base this determination, instead, solely "on the p a r t i c u l a r facts and circumstances at the time the expense was incurred." Id.; see a l s o Allison v. Bank One-Denver, 289 F.3d 1223, 1249 (10th Cir. 2002) (recognizing t h a t as long as the expense "appeared to be reasonably necessary at the time it was" i n c u r r e d , "the taxing of such costs should be approved"). The standard is one of r e a s o n a b l e n e s s . See Mitchell, 218 F.3d at 1204. If "materials or services are r e a s o n a b l y necessary for use in the case," even if they are ultimately not used to d i s p o s e of the matter, the district court "can find necessity and award the recovery o f costs." Callicrate, 139 F.3d at 1339. Thus, we will not "penalize a party who 7
h a p p e n s to prevail on a dispositive motion by not awarding costs associated with that p o r t i o n of discovery which had no bearing on the dispositive motion, but which a p p e a r e d otherwise necessary at the time it was taken for proper preparation of the c a s e . " Id. at 1340. A prevailing party bears the burden of establishing the amount of costs to w h i c h it is entitled. See Allison, 289 F.3d at 1248. Our precedents establish that the a m o u n t a prevailing party requests "must be reasonable." Callicrate, 139 F.3d at 1 3 3 9 . Once a prevailing party establishes its right to recover allowable costs, h o w e v e r , the burden shifts to the "non-prevailing party to overcome" the p r e s u mp t i o n that these costs will be taxed. Rodriguez v. Whiting Farms, Inc., 360 F . 3 d 1180, 1190 (10th Cir. 2004). III. The district court possesses "broad discretion" in awarding costs. Touche Ross, 8 5 4 F.2d at 1247; see also Callicrate, 139 F.3d at 1339 ("The taxing of costs rests i n the sound judicial discretion of the district court."). Accordingly, we review costs a w a r d s only for an abuse of that discretion. See Touche Ross, 854 F.2d at 1245. A d i s t r i c t court abuses its discretion where it (1) commits legal error, (2) relies on c l e a r l y erroneous factual findings, or (3) where no rational basis exists in the e v i d e n c e to support its ruling. See Elephant Butte Irrigation Dist. v. U.S. Dep't of t h e Interior, 538 F.3d 1299, 1301 (10th Cir. 2008).
A. W e first address Plaintiffs' assertion that Defendants failed to provide s u f f i c i e n t evidence to show that the taxed materials were "necessarily obtained for u s e in the case." 28 U.S.C. § 1920(2) & (4). Whether materials are necessarily o b t a i n e d for use in the case is "a question of fact" that we review "only for clear e r r o r . " Sorbo v. United Parcel Serv., 432 F.3d 1169, 1181 (10th Cir. 2005). Clear e r r o r is established if, "after reviewing all the evidence, we are left with a definite a n d firm conviction that a mistake has been made." Aquila, Inc. v. C.W. Mining, 5 4 5 F.3d 1258, 1263 (10th Cir. 2008). Plaintiffs have not met this threshold here. P l a i n t i f f s espouse an exceedingly narrow view of the deposition expenses a u t h o r i z e d under 28 U.S.C. § 1920. Indeed, they argue that a district court may only a w a r d costs for depositions the district court actually used in deciding summary j u d g me n t , or for depositions that were, at the very least, designated for trial. But all § 1920 requires is that the generation of taxable materials be "reasonably necessary f o r use in" the case "at the time the expenses were incurred." Callicrate, 139 F.3d a t 1340. As we explained in Merrick v. Northern Natural Gas Company, 911 F.2d 4 2 6 , 434 (10th Cir. 1990), any "rule that permits costs only for depositions received i n evidence or used by the court in ruling upon a motion for summary judgment is n a r r o w e r than [S]ection 1920." Plaintiffs' understanding of the costs statute is thus
s u r e l y flawed. 1 The same is true of Plaintiffs' view of the burden placed on prevailing parties t o justify the taxation of copy costs. We have specifically noted that the burden of j u s t i f y i n g copy costs is not "a high one." Case v. Unified Sch. Dist. No. 233, 157 F . 3 d 1243, 1259 (10th Cir. 1998). A prevailing party need not "justify each copy" i t makes. Id. All a prevailing party must do to recoup copy costs is to demonstrate t o the district court that, under the particular circumstances, the copies were " r e a s o n a b l y necessary for use in the case." Touche Ross, 854 F.2d at 1246.
C o n t r a r y to Plaintiffs' assertions, a description of each copy, replete with an e x p l i c a t i o n of its use, is not necessarily required to satisfy this burden. Nor do we t h i n k the fact that documents are available in a central depository, as Plaintiffs a l l e g e here, inexorably leads to the conclusion that copies made for an attorney's u s e were not "reasonably necessary to the litigation of the case." Ramos v. Lamm, 7 1 3 F.2d 546, 560 (10th Cir. 1983), abrogated on other grounds by Pennsylvania v. D e l . Valley Citizens' Council for Clean Air, 483 U.S. 711 (1987).
We reject Plaintiffs' assertion that the district court's costs awards were i mp e r mi s s i b l e because they contravened the local Clerk's Guidelines for Taxation o f Costs. As the district court correctly noted, the clerk's guidelines do not purport t o be an authoritative exposition of the costs allowable under applicable law and t h e y are not binding on the district court. The district court, therefore, correctly a n a l y z e d Defendants' requested costs under § 1920, Rule 54, and our controlling precedents. 10
O n appeal, we remain aware that we cannot hope to match the district c o u r t ' s "first-hand sensitivity to the proceedings" in this case. Sorbo, 432 F.3d at 1 1 8 1 . The district court ultimately approved the awards of costs related to some s e v e n t y - f o u r depositions. Based on its familiarity with the "nature and course" of t h e litigation, it concluded that these depositions were "not taken merely for i n v e s t i g a t i v e purposes or for the convenience of counsel." The district court found, i n s t e a d , that these depositions -- based on the information available to the parties a t the time -- were necessarily obtained for use in this case. Considering that the p a r t i e s presented a combined total of sixty-nine fact witnesses, the district court's c o n c l u s i o n hardly seems suspect. Similarly, the district court examined Defendants' requested copy costs and o p i n e d , in light of the fact that over fifteen million pages were produced, that D e f e n d a n t s selectively copied the documents at issue. The number of copies made b y each defendant group necessarily varied, in the district court's view, because D e f e n d a n t s adopted differing approaches to fashioning a defense. After excluding s o me of the WCG Defendants' requested copy costs, the district court ruled that D e f e n d a n t s had shown the remaining copies were necessarily obtained for use in the c a s e . Our examination of the record, gives us no reason to doubt that conclusion. W e , therefore, reject Plaintiffs' first claim of error. B. We now turn to Plaintiffs' contention that the district court failed to properly 11
a p p o r t i o n and tax the costs attributable to them. In short, Plaintiffs allege the district c o u r t abused its discretion in taxing them for costs that are equally attributable to the W M B Subclass of Plaintiffs. Due to the factual overlap between the WCG and W M B Subclasses, the district court determined that Defendants would have incurred t h e costs at issue even in the absence of the WMB Subclass action. The district court c o n s e q u e n t l y regarded the awarded costs as directly related to the WCG Subclass a c t i o n , in which Defendants undisputably prevailed. A "rational basis in the
e v i d e n c e " clearly supports this conclusion. Elephant Butte Irrigation Dist., 538 F.3d a t 1301. As such, we cannot say that the district court abused its discretion in r e f u s i n g to reduce Defendants' costs awards on this ground. C. Finally, we address Plaintiffs' argument that the district court's costs awards a r e unreasonably high. Aggregating the costs awarded to the three defendant groups, P l a i n t i f f s contend that the district court rendered the highest costs award in the h i s t o r y of American jurisprudence. We disagree with Plaintiffs' characterization of t h e facts of this case. The costs awarded in this case are undoubtedly higher than the norm. But g i v e n the massiveness and complexity of the litigation at issue, we do not regard the ma g n i t u d e of Defendants' costs awards as particularly surprising. Plaintiffs sought $ 2 . 9 billion in damages from three defendant groups, all of whom are prevailing p a r t i e s . Thus, we are now faced with three separate costs awards. 12
D e f e n d a n t s ' costs were, quite plainly, driven upward by the cold, hard facts o f this case. Plaintiffs' litigation choices; including the number of defendants, the h i g h amount of damages sought, the broad allegations asserted, the complexity of the c l a i ms at issue, and Plaintiffs' aggressive course of discovery; necessarily resulted i n heightened defense costs. See Klein, 44 F.3d at 1507 ("[Plaintiffs'] own actions b r o u g h t about the litigation."). We agree with the district court that consideration o f such factors does not constitute disapproval or condemnation of Plaintiffs' c o n d u c t ; rather, these considerations go directly towards the reasonable necessity of D e f e n d a n t s ' costs. See Mitchell, 218 F.3d at 1204 (noting that our role is to measure " w h e t h e r an incurred cost was reasonably necessary under § 1920"). In this case, the s t a k e s were indisputably high and "it was incumbent on [D]efendants to fully prepare t h e i r case on the merits." Callicrate, 139 F.3d at 1341. Of course, we have recognized that certain circumstances justify a district c o u r t in exercising its discretion to deny otherwise recoverable costs, "including w h e n the prevailing party was only partially successful, when damages were only n o mi n a l , when costs were unreasonably high or unnecessary, when recovery was i n s i g n i f i c a n t , or when the issues were close or difficult." Zeran v. Diamond Broad., 2 0 3 F.3d 714, 722 (10th Cir. 2000). But the district court concluded that none of t h e s e grounds apply here. We cannot say that, in so ruling, the district court abused i t s discretion.
R u l e 54's presumption that a prevailing party will recoup certain costs fully a p p l i e s to class actions. See White v. Sundstrand Corp., 256 F.3d 580, 585-86 (7th C i r . 2001). Even if litigation is complex or lengthy, instituted in good faith, and r e s o l v e d early, we have rejected attempts to deny prevailing parties their otherwise t a x a b l e costs. See AeroTech, Inc. v. Estes, 110 F.3d 1523, 1527 (10th Cir. 1997). P l a i n t i f f s "caused this litigation to be brought" and Defendants' "costs to be i n c u r r e d . " White, 256 F.3d at 586. Thus, absent Plaintiffs carrying their burden of s h o w i n g that Defendants' otherwise recoverable costs should not be taxed, they must " ma k e the prevailing [parties] whole." Id. Plaintiffs have simply failed to meet this b u r d e n in that they have failed to establish a valid basis for penalizing Defendants w i t h the denial or reduction of their otherwise recompensable costs. We, therefore, AFFIRM Defendants' costs awards for substantially the r e a s o n s stated by the district court.
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