Acosta v. Saakvitne et al
Filing
690
ORDER ORDER ADOPTING IN PART AND MODIFYING IN PART FINDINGS AND RECOMMENDATION TO GRANT IN PART DEFENDANTS' BILL OF COSTS (ECF NO. 682 ); ORDER ADOPTING FINDINGS AND RECOMMENDATION TO DENY DEFENDANTS' MOTION FOR ATTORNEYS FEES AND NONTAXAB LE COSTS (ECF NO. 684 ) - Signed by JUDGE SUSAN OKI MOLLWAY on 2/7/2022.The court adopts in part and modifies in part the F&R re Taxable Costs, awarding $41,810.46 in taxable costs to Bowers, Kubota, and the Company.The court adopts the F&R re Attorneys' Fees and Costs and denies the request for such fees and costs by Bowers, Kubota, and the Company. (cib)
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PageID #:
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
MARTIN J. WALSH, Secretary of )
Labor, United States
)
Department of Labor,
)
)
Plaintiff,
)
)
vs.
)
)
BRIAN BOWERS, an individual; )
DEXTER C. KUBOTA, an
)
individual; BOWERS + KUBOTA
)
CONSULTING, INC., a
)
corporation; BOWERS + KUBOTA )
CONSULTING, INC. EMPLOYEE
)
STOCK OWNERSHIP PLAN,
)
)
Defendants.
)
_____________________________ )
CIVIL NO. 18-00155 SOM-WRP
ORDER ADOPTING IN PART AND
MODIFYING IN PART FINDINGS
AND RECOMMENDATION TO GRANT
IN PART DEFENDANTS’ BILL OF
COSTS (ECF NO. 682);
ORDER ADOPTING FINDINGS AND
RECOMMENDATION TO DENY
DEFENDANTS’ MOTION FOR
ATTORNEYS’ FEES AND
NONTAXABLE COSTS (ECF NO.
684)
ORDER ADOPTING IN PART AND MODIFYING IN PART FINDINGS
AND RECOMMENDATION TO GRANT IN PART DEFENDANTS’ BILL OF COSTS
(ECF NO. 682); ORDER ADOPTING FINDINGS AND RECOMMENDATION
TO DENY DEFENDANTS’ MOTION FOR ATTORNEYS’ FEES
AND NONTAXABLE COSTS (ECF NO. 684)
I.
INTRODUCTION.
Defendants Brian Bowers and Dexter Kubota created an
Employee Stock Ownership Plan (“the ESOP”) to which they sold,
for $40 million, all the shares in Bowers + Kubota Consulting,
Inc. (the “Company”).
The Government filed suit, alleging that Bowers and
Kubota had violated the Employee Retirement Income Security Act
of 1974 (“ERISA”) by causing the ESOP to pay more for the Company
than the Company’s fair market value.
The Company and the ESOP
were joined under Rule 19(a) of the Federal Rules of Civil
Procedure.
During the bench trial before this judge and
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throughout the course of this litigation, the Company, the ESOP,
Bowers, and Kubota (the “Remaining Defendants”) acted in concert,
presenting a joint defense even though they were separate
Defendants.1
On September 17, 2021, this court issued its posttrial
findings of fact and conclusions of law, determining that no
ERISA violation had been established and ordering that judgment
be entered in favor of the Remaining Defendants.
See ECF No.
657.
On October 1, 2021, Bowers, Kubota, and the Company
filed a Bill of Costs, seeking $78,341.39 in taxable costs.
See ECF No. 660.
It is the court’s understanding that the
Company paid all of the costs incurred in this case, even the
costs billed to Bowers and Kubota’s attorneys.
Apparently, there
is an agreement that the Company will pay such costs on behalf of
Bowers and Kubota.
See, e.g., Joint Exhibits 44 and 53 (not
received into evidence).
Accordingly, even though most of the
bills submitted along with the Bill of Costs were sent to the
1
The Government had earlier settled its claims against the
estate of an attorney who was the ESOP trustee and his law firm.
See ECF No. 507.
2
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attorneys for Bowers and Kubota,2 there is no dispute that the
Company paid those bills.
On November 18, 2021, Magistrate Judge Wes Reber Porter
issued his Findings and Recommendation to Grant in Part and Deny
in Part Defendants’ Bill of Costs (“F&R re Taxable Costs”),
recommending that this court award the Company $72,962.95 in
taxable costs.
See ECF No. 682.
On December 2, 2021, the
Government filed objections to the F&R re Taxable Costs.
No. 683.
See ECF
On de novo review, this court adopts the F&R re Taxable
Costs in part and modifies it in part by reducing the award to
$41,810.46 and awarding that amount of taxable costs to Bowers,
Kubota, and the Company.
Bowers, Kubota, and the Company also sought an award of
attorneys’ fees and nontaxable costs.
See ECF No. 669.
On
December 12, 2021, Magistrate Judge Porter issued his Findings
and a Recommendation that that request be denied.
See ECF No.
684 (“F&R re Attorneys’ Fees and Nontaxable Costs”).
Kubota, and the Company objected.
See ECF No. 688.
Bowers,
On de novo
review, this court agrees with and adopts the F&R re Attorneys’
2
Nearly all of the receipts submitted to the court show
that bills were invoiced to counsel for Bowers and Kubota, with
the exceptions being six bills that were sent to counsel for the
Company. These six were from HON Discovery Group in the amounts
of $1,884.82, $1,884.82, $5,026.18, $2,513.09, and $1,570.68 and
from Capital Reporting Company in the amount of $200.94. See ECF
No. 661-3, PageID #s 23766 and 23781; ECF No. 661-4, PageID
#s 23788 and 23796; and ECF No. 661-5, PageID #s 23801 and 23807.
3
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Fees and Nontaxable Costs, determining that the Government was
substantially justified in bringing this action and that it did
not proceed in bad faith.
The court also determines that Bowers,
Kubota, and the Company are not entitled to fees and costs under
29 U.S.C. § 1132(g)(1).
II.
STANDARD OF REVIEW.
A district judge reviews de novo those portions of a
magistrate judge’s findings and recommendation to which an
objection is made and may accept, reject, or modify, in whole or
in part, the findings and recommendation made by the magistrate
judge.
28 U.S.C. § 636(b); Fed. R. Civ. P. 72(b); Local Rule
74.1; Kealoha v. Totto, 2017 WL 1839280, *2 (D. Haw. May 8,
2017); Paco v. Meyers, 2013 WL 6843057, *1 (D. Haw. Dec. 26,
2013).
In other words, a district judge “review[s] the matter
anew, the same as if it had not been heard before, and as if no
decision previously had been rendered.”
Freeman v. DirectTV,
Inc., 457 F.3d 1001, 1005 (9th Cir. 2006).
The district judge
may accept those portions of the findings and recommendation that
are not objected to if the district judge is satisfied that there
is no clear error on the face of the record.
United States v.
Bright, 2009 WL 5064355, *3 (D. Haw. Dec. 23, 2009); Stow v.
Murashige, 288 F. Supp. 2d 1122, 1127 (D. Haw. 2003).
4
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III.
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ANALYSIS.
A.
This Court Adopts the F&R re Taxable Costs in Part
and Modifies it in Part by Reducing the Award to
$41,810.46, and by Awarding Those Costs to Bowers,
Kubota, and the Company.
The F&R re Taxable Costs recommended an award of
taxable costs to the Company.
The Government objects to this
recommendation, arguing that the Company was not the prevailing
party because no claim was asserted against it and that the
amount of any award should have been reduced.
According to the
Government, only Bowers and Kubota would qualify as prevailing
parties for purposes of 28 U.S.C. § 2412(a)(1).
However, the
Government argues that, even as prevailing parties, Bowers and
Kubota are not entitled to the taxable costs that the Company,
rather than Bowers and Kubota as individuals, paid under an
indemnification agreement.
The court disagrees with the
Government’s arguments with respect to entitlement to taxable
costs, but agrees that the recommended taxable costs should be
reduced.
Under Rule 54(d) of the Federal Rules of Civil
Procedure, there is ordinarily a presumption that a prevailing
party will be awarded taxable costs.
Fed. R. Civ. P. 54(d)
(“Unless a federal statute, these rules, or a court order
provides otherwise, costs--other than attorney’s fees--should be
allowed to the prevailing party.
But costs against the United
States, its officers, and its agencies may be imposed only to the
5
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extent allowed by law.”).
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While there is no such presumption
under Rule 54(d) in cases involving the United States, the Equal
Access to Justice Act (“EAJA”), 28 U.S.C. § 2412(a)(1), provides
for a discretionary award of taxable costs.
See Neal & Co. v.
United States, 121 F.3d 683, 687 (Fed. Cir. 1997) (“EAJA vests
the trial court with considerable discretion to award costs.
This discretion authorizes the trial court to consider a wide
variety of factors, including the conduct of the parties during
trial, in reaching its costs decision.”).
The “EAJA partially
waives the sovereign immunity of the United States” for such
taxable costs.
W. Watersheds Project v. Interior Bd. of Land
Appeals, 624 F.3d 983, 985 (9th Cir. 2010).
Under § 2412(a)(1),
a judgment for costs, as enumerated in
section 1920 of this title, but not including
the fees and expenses of attorneys, may be
awarded to the prevailing party in any civil
action brought by or against the United
States or any agency or any official of the
United States acting in his or her official
capacity in any court having jurisdiction of
such action. A judgment for costs when taxed
against the United States shall, in an amount
established by statute, court rule, or order,
be limited to reimbursing in whole or in part
the prevailing party for the costs incurred
by such party in the litigation.
Under the plain language of the statute, this court may
award costs to a prevailing party in a civil action brought by
the Government if the costs are limited to “reimbursing . . . the
6
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prevailing party for the costs incurred by such party in the
litigation.”
1.
Bowers, Kubota, and the Company are
“Prevailing Parties.”
The Supreme Court has noted that the term “prevailing
party” is a “legal term of art” that means “a ‘party in whose
favor a judgment is rendered, regardless of the amount of damages
awarded.’”
Buckhannon Bd. & Care Home, Inc. v. W. Virginia Dep't
of Health & Hum. Res., 532 U.S. 598, 603 (2001) (quoting Black’s
Law Dictionary 1145 (7th ed. 1999)); see also United States v.
Milner, 583 F.3d 1174, 1196 (9th Cir. 2009) (“To be a prevailing
party, the party must have received an enforceable judgment on
the merits or a court-ordered consent decree.”); Cadkin v. Loose,
569 F.3d 1142, 1144–45 (9th Cir. 2009) (“prevailing party status
turns on whether there has been a material alteration of the
legal relationship of the parties” (quotation marks and citation
omitted)).
The Government argues that the Company is not a
“prevailing party” because the Government’s Complaint asserted no
claim against the Company in the Complaint.
This court disagrees
with the Government’s contention that an express claim must have
been asserted against a party for that party to be considered a
“prevailing party.”
On September 5, 2018, the Company sought dismissal of
the Complaint with respect to it because it was “not a party to
7
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any of the direct claims alleged in the Complaint.”
1, PageID # 307.
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ECF No. 26-
It further argued that “the Complaint does not
allege any acts or omissions giving rise to any liability against
[it] and seeks no damages from [it].”
Id.
The Company contended
that it was named as a Defendant only to assure that complete
relief could be granted.
See id., PageID # 309.
The Government opposed dismissal, arguing that “any
remedy that the Secretary seeks in this action will implicate the
Company.
For example, and as stated in the Complaint, the
Secretary may seek to modify ESOP agreements and related
documents to correct harm to the ESOP caused by other named
Defendants.”
ECF No. 30, PageID # 325.
The Government said it
might seek to restructure the Company and was seeking restoration
of ESOP losses, to the extent the Company was responsible for the
losses.
Id.
On January 18, 2019, this court denied the Company’s
motion to dismiss, agreeing that this court might be unable to
accord complete relief in the Company’s absence.
PageID # 459.
See ECF No. 47,
The court noted that the Complaint sought to have
agreements through which the Company agreed to indemnify Bowers
and Kubota declared void and to enjoin the agreements from
causing or allowing the Company to indemnify Bowers and Kubota.
The court noted that the Company’s presence was necessary if the
ESOP’s governing documents had to be modified and the Company had
8
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to be restructured if the Government prevailed on its claims.
Id., PageID # 461.
Ultimately, this court ruled that Bowers and Kubota did
not violate ERISA.
See ECF No. 657, PageID # 23701.
This, of
course, meant that this court did not need to take any further
action with respect to the Company, the ESOP, or its
administration and plan documents.
Under these circumstances,
even though the Company did not prevail on an express claim
asserted against it, this court considers the Company to be a
“prevailing party,” as a judgment was entered in its favor that
preserved the very status quo the Government was seeking to
change.
See Buckhannon Bd. & Care Home, 532 U.S. at 603 (2001);
Milner, 583 F.3d at 1196; Cadkin, 569 F.3d at 1144–45.
This court also considers the Company to be a
“prevailing party” because the Remaining Defendants jointly and
in concert defended this action.
Throughout this litigation,
this court observed the Remaining Defendants coordinating their
defense.
It comes as no surprise that the Company paid for all
costs incurred by itself, Bowers, and Kubota.
Even if the Company is not a prevailing party, there
can be no doubt that Bowers and Kubota are prevailing parties, as
they prevailed on the Government’s ERISA claims.
As discussed in
more detail below, this court would award the same taxable costs
to Bowers and Kubota, who presumably would repay the Company for
9
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the costs fronted by it.
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Of course, only a single award of
taxable costs is awarded to Bowers, Kubota, and the Company.
2.
Bowers, Kubota, and the Company Are Entitled
to Be “Reimbursed” for the Taxable Costs They
“Incurred” With Respect to This Action.
The Government argues that Bowers and Kubota may not be
awarded taxable costs because they did not actually pay any of
the costs.
In other words, the Government contends that Bowers
and Kubota did not “incur” any expenses for which they need to be
“reimbursed.”
This argument ignores what actually happened in
this case.
The EAJA does not define the terms “reimburse” or
“incur.”
Accordingly, this court interprets those words using
their ordinary meanings.
See FCC v. AT&T Inc., 562 U.S. 397, 403
(2011) (“When a statute does not define a term, we typically give
the phrase its ordinary meaning” (internal quotation marks and
citation omitted)); Animal Legal Def. Fund v. United States Dep't
of Agric., 933 F.3d 1088, 1093 (9th Cir. 2019) (same); accord
Mohamad v. Palestinian Auth., 566 U.S. 449, 454 (2012) (“Because
the TVPA does not define the term ‘individual,’ we look first to
the word’s ordinary meaning.”).
The Ninth Circuit has explained
that, in determining the ordinary meaning of a word, courts
usually consult dictionary definitions.
When the word has a
plain meaning or is unambiguous, the statutory interpretation
inquiry ends.
Animal Legal Def. Fund, 933 F.3d at 1093.
10
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The American Heritage Dictionary of the English
Language defines “incur” as “[t]o become liable or subject to as
a result of one’s actions.”
https://www.ahdictionary.com/word/search.html?q=incur (last
visited January 24, 2022).
The Merriam-Webster dictionary
similarly defines “incur” as “to become liable or subject to.”
https://www.merriam-webster.com/dictionary/incur (last visited
January 24, 2022).
All but six of the charges included in the Bill of
Costs had been sent by the billing entities to counsel for Bowers
and Kubota.
See ECF No. 661.
It would therefore be difficult to
say that Bowers and Kubota did not “incur” these bills, even if
the Company ultimately paid them.
David R. Johanson, counsel for
Bowers and Kubota, states, “The Company paid all costs incurred
by the Remaining Defendants, whether incurred directly by the
Company or through Messrs. Bowers and Kubota.”
Johanson ¶ 4, ECF No. 661, PageID # 23748.
Decl. of David R.
While this court does
not have before it the agreements between Bowers and Kubota and
their attorneys, it appears that Bowers and Kubota would have
been liable for these bills had the Company not paid them.
Similarly, because the Remaining Defendants presented what
amounted to a joint defense, and because the Company paid the
bills sent to counsel for Bowers and Kubota, this court also
11
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rules that, along with Bowers and Kubota, the Company also
“incurred” those expenses.
Even with respect to the six bills sent to counsel for
the Company rather than to counsel for Bowers and Kubota, this
court rules that Bowers and Kubota “incurred” those expenses
along with the Company to whose counsel the bills were sent.
Bowers and Kubota would have “incurred” those expenses had the
Company not been billed for them.
The Remaining Defendants
coordinated their defense, acting jointly, making it clear that
the six bills sent directly to the Company were also “incurred”
by Bowers and Kubota.
Sending the bills to the Company’s counsel
was an act of convenience, rather than a restriction on who
“incurred” those bills.
The more interesting issue is whether Bowers and Kubota
should be “reimbursed” for taxable costs that they incurred but
that the Company paid under an indemnification agreement.
The
American Heritage Dictionary of the English Language defines
“reimburse” as “[t]o repay (money spent); refund” or “[t]o pay
back or compensate (another party) for money spent or losses
incurred.”
https://www.ahdictionary.com/word/search.html?q=reimburse (last
visited February 7, 2022).
The Merriam-Webster dictionary
similarly defines “reimburse” as “to pay back to someone” or “to
make restoration or payment of an equivalent to.”
12
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https://www.merriam-webster.com/dictionary/reimburse (last
visited February 7, 2022).
Bowers and Kubota are entitled to “reimbursement” by
the Government of the taxable expenses they “incurred,” even if
those expenses were paid for by the Company under an
indemnification agreement.
Such a “reimbursement” effectively
compensates Bowers, Kubota, and the Company, assuming that Bowers
and Kubota would turn around and repay the Company for any
taxable expenses it fronted.
In other words, a “reimbursement”
would “pay back” Bowers and Kubota for the expenses caused by the
Government’s Complaint–-expenses that they would have had to pay
themselves had the Company not fronted the expenses on their
behalf.
This court rejects the Government’s argument that this
court’s analysis would result in a windfall to its opponents.
To
the contrary, construing the Government’s waiver of sovereign
immunity as barring the taxation of costs to the Remaining
Defendants as a group would result in a windfall to the
Government.
Imagine a case in which the Government sues a minor who
ultimately wins the case.
Assuming that the minor’s parents paid
the taxable costs of the case, the Government’s position would
bar the minor’s parents from ultimately recovering the taxable
costs through an award of costs to the minor.
13
If the Government
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lost the very same case to an adult, the adult would be entitled
to a discretionary award of taxable costs.
It makes no sense to
treat the minor differently simply because the minor did not
write the check for the expenses.
The Ninth Circuit faced a similar issue in the context
of a party whose costs were paid for by an insurer.
In that
case, the Ninth Circuit held that a company whose costs were paid
for by an insurer was nevertheless entitled to seek the costs
under Rule 54(d) of the Federal Rules of Civil Procedure.
Taniguchi v. Kan Pac. Saipan, Ltd., 633 F.3d 1218, 1219–1220 (9th
Cir. 2011), rev'd on other grounds, 566 U.S. 560 (2012); see also
Manor Healthcare Corp. v. Lomelo, 929 F.2d 633 (11th Cir. 1991)
(holding that a city may recover costs even though the costs were
paid for by an insurance company); 10 Moore’s Fed. Practice –
Civil § 54.101[a] (Lexis 2022) (stating that, under Rule 54(d), a
prevailing party is entitled to costs “even if the costs were
actually paid by some third party, such as an insurer, and not by
the prevailing litigant”).
14
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3.
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This Court Declines to Award Taxable Costs
Associated With the Statute of Limitations
Defense To the Extent Those Costs Were
Incurred After This Court’s Order Denying
Defendants’ Motion for Summary Judgment on
Limitation Grounds ($28,932.77).
On January 15, 2021, Bowers and Kubota filed a motion
seeking summary judgment on the Government’s ERISA claims on
statute of limitations as well as other grounds, arguing in
relevant part that the claims were time-barred, either because
IRS Form 5500 had given the Government actual knowledge of the
facts underlying the sale of stock to the ESOP, or because the
Government had been willfully blind to those facts.
359 and 360.
The Company joined in the motion.
See ECF Nos.
See ECF No. 362.
On March 12, 2021, this court denied that motion,
ruling in relevant part that questions of fact precluded summary
judgment on the limitations issues.
#s 9158-63.
See ECF No. 412, PageID
With respect to the actual knowledge argument, this
court ruled:
Bowers and Kubota argue that the
Government gained actual knowledge of the
alleged violations from Form 5500 (the Annual
Return/Report of Employee Benefit Plan) filed
with the Internal Revenue Service and
submitted to the Department of Labor via
EFAST2 on October 15, 2013. However, Sulyma
states that Ҥ 1113(2) requires more than
evidence of disclosure alone.” 140 S. Ct. at
777. Jerome Raguero of the Department of
Labor explains that EFAST2 is an automated
system in which officials do not
automatically read submissions upon receipt.
30(b)(6) Depo. of Jerome Raguero, ECF No.
15
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363-1, PageID # 6783. This raises a question
of fact as to whether the Government had
actual knowledge of the contents of Form 5500
or whether the EFAST2 submission amounted to
only a disclosure.
Additionally, the court notes that Form
5500 shows only a possible decrease in the
value of the Company stock, rather than
establishing on its own an actual ERISA
violation in the form of a sale of stock for
more than fair market value. At the hearing,
Bowers and Kubota explained that what appears
to be a decrease in the value of the Company
stock was actually an accounting of the debt
related to the loan taken out to purchase the
stock. Whatever the explanation, this court
cannot conclude that Form 5500, without more,
provides actual notice of a possible ERISA
violation. Bowers and Kubota fail to show on
the present record that the Government had
actual knowledge of the alleged ERISA
violations in this case from the Form 5500
submitted via the EFAST2 system.
ECF No. 412, PageID #s 9160-61.
The Remaining Defendants fail to show that, given this
court’s summary judgment ruling, depositions of Government
officials were necessary to allow the Remaining Defendants to
explore whether the Government could be said to have had actual
knowledge.
None of the Government officials deposed after this
court’s order testified differently with respect to actual
knowledge.
While this court understands that the Remaining
Defendants may have been uncertain what the deponents would say,
the depositions appear to have been a fishing expedition with
respect to establishing actual knowledge.
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In addressing the willful blindness argument, this
court ruled:
A question of fact similarly precludes
summary judgment with respect to Bowers and
Kubota’s argument that the Government’s
alleged willful blindness counts as actual
knowledge of the alleged ERISA violations.
Bowers and Kubota argue that the Government
willfully ignored Saakvitne’s conduct, having
received a tip in July 2014 that Saakvitne
may have done something improper with respect
to the Hot Dog on a Stick ESOP. See Depo. of
Robert Prunty, ECF No. 363-5, PageID #s 68986900, 6906; Depo. of Crisanta Johnson, ECF
No. 363-3, PageID # 6850. Bowers and Kubota
also argue willful blindness based on the
Kennedy Fabricating investigation, which
began in November 2013, and led to a November
2015 investigation into Saakvitne. See Depo.
of Harold W. LeBrocq, III, ECF No. 363-6,
PageID # 6937; ECF No. 364-3, PageID # 7230.
Citing Miguel Paredes, a former Department of
Labor supervisory investigator, Bowers and
Kubota argue that the Government should have
investigated Saakvitne’s conduct in other
cases, including this one. Paredes
testified, “I would expect that if an
investigator has uncovered what they think is
a fiduciary breach by a fiduciary, they would
want to know whether or not that fiduciary is
a fiduciary of other plans because they would
be concerned that this provider is breaching
a fiduciary duty in other--in other--in the
provision of services to other plans.” Depo.
of Miguel Paredes, ECF No. 363-4, PageID #
6889. What an investigator might want to
know about other ESOPs is not actual
knowledge for purposes of § 1113(2).
There are questions of fact as to
whether the Hot Dog on a Stick and Kennedy
Fabricating investigations show willful
blindness on the Government’s part. Raguero
of the Department of Labor testified that,
although an investigator may inquire about
other ESOPs that a particular service
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provider may be involved with, Department of
Labor investigators do not generally make
such inquiries. See Depo. of Jerome Raguero,
ECF No. 363-1, PageID # 6800; see also
Johnson Depo., ECF No. 363-3, PageID #s 684041; Prunty Depo., ECF No. 363-5, PageID #s
6895, 6908. For example, with respect to the
Kennedy Fabricating investigation, LeBrocq
testified that, when he was investigating the
Kennedy Fabricating ESOP, he did not ask
Saakvitne about other ESOPs Saakvitne was
involved with. See LeBrocq Depo., ECF No.
363-6, PageID # 6933. Similarly, Wen
testified that, when he was investigating the
ESOP at issue in this case, he did not ask
Saakvitne about other ESOPs Saakvitne was
involved with. Wen explained that he focused
only on the ESOP transaction he was working
on. See Wen Depo., ECF No. 363-2, PageID #s
6824-25.
On this motion, Bowers and Kubota fail
to establish that other investigations were
red flags to which the Government was
willfully blind. It might be that it would
have been a good practice for individuals to
have considered Saakvitne’s involvement with
other ESOPs, but willful blindness requires
more than a failure to do what is best. At a
minimum, there is a question of fact as to
whether the Government investigators were
deliberately ignoring those alleged red flags
or were instead reasonably focusing on the
potential ERISA violations they were
investigating.
Id., PageID #s 9161-63.
Nor do the Remaining Defendants show that depositions
of Government officials were necessary after this court’s order
with respect to willful blindness.
The Remaining Defendants
should have known that the Government’s investigation of
Saakvitne with respect to other companies would not necessarily
18
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24298
PageID #:
cause the Government to examine all of the ESOPs Saakvitne was
involved with.
In short, the Remaining Defendants submitted no
testimony from those depositions that tended to show willful
blindness.
Nothing established that Government officials were
deliberately ignoring red flags that should have caused them to
earlier examine the sale of the Company to the ESOP.
At best,
the evidence established that it might have been good practice to
examine ESOPs Saakvitne had been involved with, but examinations
of those ESOPs were certainly not required.
Absent such a
requirement, the depositions of Government officials were
unnecessary, as they could not reasonably have been expected to
establish facts demonstrating willful blindness.
“[T]here is no rule requiring courts to apportion costs
according to the relative success of the parties.”
Kemin Foods,
L.C. v. Pigmentos Vegetales Del Centro S.A. de C.V., 464 F.3d
1339, 1348 (Fed. Cir. 2006).
However, 10 Moore’s Federal
Practice - Civil § 54.101 (Lexis 2022) notes that costs may be
limited if they “were unreasonably incurred or unnecessary to the
case.”
This court exercises its discretion, declining to award
taxable costs with respect to the depositions taken solely to
establish the Remaining Defendants’ statute of limitation
defense.
These depositions were unnecessary and unreasonably
increased the cost of this litigation.
See Pierce v. Cty. of
Orange, 905 F. Supp. 2d 1017, 1049 (C.D. Cal. 2012) (“the Court
19
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24299
PageID #:
may reduce an award of taxable costs [under Rule 54(d)(1)] to
reflect only partial success”); Federal Practice & Procedure,
§ 2667 (West 2022) (noting that courts have discretion to reduce
awards of cost under Rule 54(d) to reflect partial success).
The Government represents that the depositions of nine
Government officials were limited to the statute of limitations
defense.
See ECF No. 683, PageID # 24133.
These include the
following:
Last Name of
Deponent and
Citation
Invoice
Date
Bill From
$ Amount
Fukumoto, ECF No.
661-3, PageID
# 23768
9/28/20
Ralph Rosenberg
1,729.26
Hanzich, ECF No.
661-4, PageID #
23791
12/2/20
Ralph Rosenberg
1,991.31
Johnson, ECF No.
661-3, PageID
# 23783
11/7/20
Ralph Rosenberg
2,651.52
LeBroq, ECF No.
661-3, PageID
# 23784
11/7/20
Ralph Rosenberg
1,652.46
Palacios, ECF No.
661-3, PageID
# 23782
11/7/20
Ralph Rosenberg
1,899.42
Palacios (Vol. 2)
and Johnson (Vol.
2), ECF No. 661-4,
PageID # 23790
12/1/20
Ralph Rosenberg
1,832.88
Paredes, ECF No.
661-3, PageID
# 23767
9/26/20
Ralph Rosenberg
1,856.39
20
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24300
PageID #:
Paredes (Vol. 2),
ECF No. 23795
12/23/20
Ralph Rosenberg
834.55
Prunty (Vol. 2),
ECF No. 661-4,
PageID # 23793
12/11/20
Ralph Rosenberg
550.05
Prunty, ECF No.
661-3, PageID
# 23769
9/29/20
Ralph Rosenberg
2,086.99
Raguero, ECF No.
661-4, PageID
# 23794
12/14/20
Ralph Rosenberg
2,271.94
Zielinski, ECF No.
661-4, PageID
# 23789
11/21/20
Ralph Rosenberg
2,036.75
Johnson, Palacios,
LeBroq (Video),
ECF No. 661-3,
PageID # 23781
11/1/2020
HON Discovery Group
1,884.82
Paredes, Fukumoto,
and Prunty
(Video), ECF No.
661-3, PageID
# 23766
9/22/2020
HON Discovery Group
1,884.80
Zielinski,
Hanzich, Johnson,
Palacios, Prunty,
Ragero, Paredes
(Video), ECF No.
661-4, PageID
# 23796; Court not
deducting for Wen
or Hansen
($5,026.18 $1,256.55 =
$3,769.63)
12/23/2020
HON Discovery Group
3,769.63
28,932.77
Total
21
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24301
PageID #:
The court declines to award $28,932.77 in costs for the
depositions of these Government officials that went solely to the
Remaining Defendants’ statute of limitations defense.3
4.
The Court Adopts the F&R re Costs’
Recommendation to Decline to Award Costs for
Michael Wen’s Deposition Due to Misconduct.
The F&R re Costs recommended that this court decline to
award taxable costs with respect to the Deposition of Michael Wen
because of counsel’s alleged misconduct at that deposition.
ECF No. 682, PageID # 24110.
recommendation.
See
No objection has been made to that
Accordingly, this court adopts it, no clear
error being apparent from the record.
This court declines to
award the $2,789.95 requested for Wen’s deposition.
See ECF No.
661-3, PageID # 2,789.95.
5.
The Court Awards as Taxable Costs Expenses
Incurred for Both Video and Stenographic
Depositions, But Declines to Award Expenses
With Respect to Synchronizing Those
Depositions.
This court’s local rules allow taxable costs with
respect to “a stenographic and/or video original and one copy of
any deposition transcript necessarily obtained for use in the
case.”
Local Rule 54.1(f)(2) (emphasis added).
Given the
express allowance in this court’s local rules for an award of
3
The Government says the cost of the depositions pertaining
to the statute of limitations was $29,403.91. See ECF No. 683,
PageID # 24132. This court’s calculation of those deposition
costs differs from that amount by $471.14.
22
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24302
PageID #:
taxable costs for both stenographic and video deposition
expenses, this court rejects the Government’s argument that costs
for only one format should be allowed, not both.
The court also allows taxable expenses associated with
real-time and daily transcripts during trial, as those were
reasonably necessary for trial counsel to effectively litigate
this case given travel restrictions and other difficulties caused
by the pandemic.
The court remembers such transcripts being
provided to expert witnesses prior to their testimony via Zoom.
These experts were then able to comment about fact witnesses’
statements and other expert testimony, as well as assist trial
counsel with the presentation of evidence.
Given the difficulty
of trying this case during the height of the COVID-19 pandemic,
this court finds the cases cited by the Government
distinguishable.
The court declines to award as taxable costs expenses
associated with synchronizing the stenographic and video
depositions.
Synchronizing stenographic and video depositions
was not necessary for litigating matters before this court.
Accordingly, this court does not award $2,513.09 for the invoice
from HON Discovery Group dated February 1, 2021, which states
that it is for synchronizing 16 deposition transcripts.
No. 661-3, PageID # 23801.
See ECF
Nor does this court award $314.14
($300 plus GET of $14.14) for the synchronizing of the Mark
23
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24303
Johnson and Steven Sherman depositions.
PageID # 23807.
PageID #:
See ECF No. 661-5,
The total not awarded for deposition
synchronization is $2,827.23 ($2,513.09 + $314.14).4
6.
The Court Awards $3,347.65 for Taxable
Copying Costs.
Local Rule 54.1(f)(4) provides that the court may award
taxable costs of copies necessarily obtained for use in the case
at $0.15 per page or the actual cost charged by commercial
copiers, provided the charges are reasonable.
Counsel submitted
a declaration indicating copying charges at $0.15 per page for
three print jobs in June 2021.
The court awards these costs,
which total $3,347.65 ($752.40 + $2,972.10 + $1,623.15).
7.
Other Taxable Costs.
The court awards $151.89 for costs relating to the
service of summonses and subpoenas.
The court also awards $80
for witness fees.
The Bill of Costs also seeks reimbursement of four
receipts from Staples for commercial copying costs.
The court
awards those costs minus the express pick-up fees charged because
Bowers, Kubota, and the Company fail to demonstrate that the
express fees were necessary.
The court declines to award costs
4
The Government says the cost of deposition synchronization
was $3,113.09. See ECF No. 683, PageID # 24138 n.5. This
differs from this court’s calculation by $285.86.
24
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24304
PageID #:
for duplicate receipts that appear to have been submitted by
mistake.
To be specific, the court refers to the request by
Bowers, Kubota, and the Company for an award of taxable costs for
a Staples receipt dated October 21, 2020, in the amount of
$115.94.
See ECF No. 661-6, PageID #s 23815-16.
With respect to
that receipt, the court disallows the express pick-up charge of
$24.27, plus pro-rated tax of $2.49.5
The court allows copying
costs of $80.89, plus pro-rated tax of $8.29, for a total of
$89.18.
With respect to duplicate receipts, Bowers, Kubota, and
the Company have submitted identical Staples receipts dated
October 21, 2020, in the amount of $115.94.
PageID #s 23815-16 and 23817-18.
See ECF No. 661-6,
Duplicate costs are disallowed.
It may well be that Bowers, Kubota, and the Company intended to
attach a receipt for $44.92, as listed in ECF No. 661, PageID
# 23755.
However, the court will not tax costs for commercial
copying when the wrong receipt is submitted to the court.
Bowers, Kubota, and the Company seek an award of
taxable costs for a Staples receipt dated October 22, 2020, for
$80.56.
See ECF No. 661-6, PageID #s 23819-20.
With respect to
this receipt, the court disallows the express pick-up charge of
5
All of the
with the Bill of
location. These
incurred had the
receipts from Staples submitted in connection
Costs reflect taxes paid at a California
taxes are higher than what would have been
underlying services been performed in Hawaii.
25
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24305
$16.86, plus pro-rated tax of $1.73.
PageID #:
The court allows copying
costs of $56.21, plus pro-rated tax of $5.76, for a total of
$61.97.
Bowers, Kubota, and the Company seek an award of
taxable costs for a Staples receipt dated November 4, 2020, in
the amount of $176.83.
See ECF No. 661-6, PageID #s 23821.
The
court disallows the express pick-up charge of $36.85, plus prorated tax of $3.78.
The court allows copying costs of $122.83,
plus pro-rated tax of $12.59, for a total of $135.42.
Bowers, Kubota, and the Company seek an award of
taxable costs for a Staples receipt dated June 6, 2021, in the
amount of $22.04.
See ECF No. 661-6, PageID # 23822.
does not award copying costs for this receipt.
The court
The receipt
states that it is for “HAMMERMILL COPYPLU,” which may be a
reference to printer paper, rather than copying costs.
Bowers,
Kubota, and the Company have not provided sufficient detail with
respect to this receipt for this court to include it in copying
costs.
8.
The Court Awards the Following Taxable Costs.
Description
Citation
Date
$ Amount
ACE Attorney
Service, Inc.
for Subpoena
Duces Tecum on
Steven
Rosebaugh
ECF No. 661
¶ 6, PageID
# 23749; ECF
No. 661-2,
PageID # 23764
July 7, 2020
151.89
26
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24306
Paul Vallone
Deposition
ECF No. 661-3,
PageID # 23770
October 7,
2020
876.05
Gary Kuba
Deposition
ECF No. 661-3,
PageID # 23771
October 12,
2020
1,172.88
Dexter Kubota
Deposition
ECF No. 661-3,
PageID # 23772
October 14,
2020
1,375.81
Dawn Muragame
Deposition
ECF No. 661-3,
PageID # 23773
October 14,
2020
815.81
Thomas
Nishihara
Deposition
ECF No. 661-3,
PageID # 23774
October 15,
2020
694.24
Motion to
Dismiss
Transcript
ECF No. 661-3,
PageID #s
23775-76
January 22,
2019
220.26
Brian Bowers
Deposition
(R. 30(b)(6))
ECF No. 661-3,
PageID # 23778
October 22,
2020
1,042.09
Brian Bowers
Deposition
ECF No. 661-3,
PageID # 23779
October 22,
2020
1,093.30
Marcus Piquet
Deposition
ECF No. 661-3,
PageID # 23780
October 22,
2020
1,716.10
Gregory
Kniesel
Deposition
ECF No. 661-3,
PageID # 23786
November 13,
2020
2,444.70
Gregory
Kniesel
Deposition
ECF No. 661-4,
PageID # 23788
November 13,
2020
200.94
Greg Hansen
Deposition
ECF No. 661-4,
PageID # 23792
December 7,
2020
1,239.84
Michael Wen
and Gregory
Hansen Video
Deposition
ECF No. 661-4,
PageID # 23796
December 23,
2020
1,256.55
Ian Rusk
Deposition
ECF No. 661-4,
PageID # 23797
January 12,
2021
1,626.62
2d Greg Hansen
Deposition
ECF No. 661-4,
PageID # 23798
January 14,
2021
622.41
27
PageID #:
Case 1:18-cv-00155-SOM-WRP Document 690 Filed 02/07/22 Page 28 of 33
24307
2d Marcus
Piquet
Deposition
ECF No. 661-4,
PageID # 23799
January 22,
2021
464.45
Gregory Brown
Deposition
ECF No. 661-5,
PageID #s
23802-03
January 26,
2021
2,686.30
Summary
Judgment
Hearing
Transcript
ECF No. 661-5,
PageID # 23804
March 4, 2021
294.55
Steven Sherman
Deposition
ECF No. 661-5,
PageID # 23805
March 5, 2021
2,098.27
Mark Johnson
Deposition
ECF No. 661-5,
PageID # 23806
March 8, 2021
2,243.56
Steven Sherman
and Mark
Johnson Video
Deposition
ECF No. 661-5,
PageID # 23807
March 15, 2021
1,256.54
Kenneth Pia
Deposition
ECF No. 661-5,
PageID # 23808
March 26, 2021
1,465.85
Pretrial
Conference and
Motion in
Limine
Transcript
ECF No. 661-5,
PageID # 23809
May 25, 2021
485.08
Daily Trial
Transcripts
ECF No. 661-5,
PageID # 23811
June 14, 2021
17,172.77
Partial
Reimbursement
for Daily
Trial
Transcripts
ECF No. 661-5,
PageID # 23812
June 28, 2021
-6,772.51
Taxable
Copying Costs
See above
discussion
3,347.65
Subpoena
See above
discussion
151.89
Witness Fees
See above
discussion
80.00
28
PageID #:
Case 1:18-cv-00155-SOM-WRP Document 690 Filed 02/07/22 Page 29 of 33
24308
Staples
ECF No. 661-6,
PageID #s
23815-16
October 21,
2020
89.18
Staples
ECF No. 661-6,
PageID #s
23819-20
October 22,
2020
61.97
Staples
ECF No. 661-6,
PageID # 23821
November 4,
2020
PageID #:
135.42
41,810.46
Total
These taxable costs represent only a fraction of the
monetary value at issue at trial.
The court expressly finds
these costs to have been reasonable, necessary, and sufficiently
supported by documentation.
The court exercises its discretion
under the circumstances presented here and awards taxable costs
of $41,810.46 to Bowers, Kubota, and the Company.
B.
The Court Adopts the F&R re Attorneys’ Fees and
Nontaxable Costs.
Bowers, Kubota, and the Company sought an award of
attorneys’ fees and nontaxable costs under two sections of the
EAJA, 28 U.S.C. §§ 2412(b) and (d).
See ECF No. 669.
On
December 8, 2021, Magistrate Judge Porter issued his F&R re
Attorneys’ Fees and Nontaxable Costs, recommending that this
court deny the request for attorneys’ fees and nontaxable costs.
See ECF No. 684.
On December 29, 2021, Bowers, Kubota, and the Company
objected.
See ECF No. 688.
29
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24309
PageID #:
On de novo review, this court agrees with and adopts
the thorough and well-reasoned F&R re Attorneys’ Fees and
Nontaxable Costs.
1.
Bowers, Kubota, and the Company Are Not
Entitled to Fees and Costs Under 28 U.S.C.
§ 2412(d).
Because the Government was substantially justified in
bringing this action, Bowers, Kubota, and the Company are not
entitled to fees and nontaxable costs under 28 U.S.C. § 2412(d),
which provides:
Except as otherwise specifically provided by
statute, a court shall award to a prevailing
party other than the United States fees and
other expenses, in addition to any costs
awarded pursuant to subsection (a), incurred
by that party in any civil action (other than
cases sounding in tort), including
proceedings for judicial review of agency
action, brought by or against the United
States in any court having jurisdiction of
that action, unless the court finds that the
position of the United States was
substantially justified or that special
circumstances make an award unjust.
28 U.S.C. § 2412(d)(1)(A).
This court determines based on the evidence submitted
at trial that the Government was substantially justified in
bringing this action.
As discussed in detail in this court’s
Posttrial Findings of Fact and Conclusions of Law, ECF No. 657,
which the court does not rehash here, the Government had every
right to be suspicious of the circumstances surrounding the sale
of the Company to the ESOP.
While the Government ultimately
30
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24310
PageID #:
failed to meet its burden of proving any of its claims by a
preponderance of the evidence, it was nevertheless substantially
justified in bringing those claims.
Accordingly, as discussed in
the F&R re Attorneys’ Fees and Costs, Bowers, Kubota, and the
Company are not entitled to fees or nontaxable expenses
§ 2412(d)(1)(A).
2.
Bowers, Kubota, and the Company Are Not
Entitled to Fees and Costs Under 28 U.S.C.
§ 2412(b).
Bowers, Kubota, and the Company also seek fees and
costs under 28 U.S.C. § 2412(b), which states:
Unless expressly prohibited by statute, a
court may award reasonable fees and expenses
of attorneys, in addition to the costs which
may be awarded pursuant to subsection (a), to
the prevailing party in any civil action
brought by or against the United States or
any agency or any official of the United
States acting in his or her official capacity
in any court having jurisdiction of such
action. The United States shall be liable
for such fees and expenses to the same extent
that any other party would be liable under
the common law or under the terms of any
statute which specifically provides for such
an award.
Bowers, Kubota, and the Company rely on common law and
29 U.S.C. § 1132(g)(1) (section 502(g)(1) of ERISA), in arguing
entitlement to fees and costs.
Neither justifies an award of
fees and costs in this case.
31
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24311
3.
PageID #:
The Government Did Not Proceed in Bad Faith.
Under the EAJA, “[t]he common law allows a court to
assess attorney’s fees against a losing party that has acted in
bad faith, vexatiously, wantonly, or for oppressive reasons.”
Rodriguez v. United States, 542 F.3d 704, 709 (9th Cir. 2008)
(quotation marks and citation omitted).
As noted above, the
Government was substantially justified in bringing this action.
Additionally, Bowers, Kubota, and the Company have not shown that
the Government proceeded in bad faith after filing the Complaint.
Accordingly, Bowers, Kubota, and the Company are not entitled to
fees or costs based on bad faith conduct.
4.
Bowers, Kubota, and the Company Are Not
Entitled to Fees and Costs Under 29 U.S.C.
§ 1132(g)(1).
Bowers, Kubota, and the Company contend that they are
entitled to fees and nontaxable costs under 29 U.S.C.
§ 1132(g)(1), which states, “[i]n any action under this
subchapter (other than an action described in paragraph
(2) [pertaining to actions by a fiduciary on behalf of a plan])
by a participant, beneficiary, or fiduciary, the court in its
discretion may allow a reasonable attorney’s fee and costs of
action to either party.”
However, as Magistrate Judge Porter
determined, this action was not brought by Bowers, Kubota, or the
Company.
Accordingly, 29 U.S.C. § 1132(g)(1) does not support a
discretionary award of fees and costs in this case, which was
32
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24312
brought by the Government.
PageID #:
See Corder v. Howard Johnson & Co.,
53 F.3d 225, 229 (9th Cir. 1994) (“we have refused to award
attorney’s fees in ERISA actions not brought by one of the
enumerated parties” in § 1132(g)(1)--“participant, beneficiary,
or fiduciary”).
Bowers, Kubota, and the Company did not object
to this portion of the F&R re Attorneys’ Fees and Costs, and the
court adopts this part of it, in which no clear error is apparent
from the record.
IV.
CONCLUSION.
The court adopts in part and modifies in part the F&R
re Taxable Costs, awarding $41,810.46 in taxable costs to
Bowers, Kubota, and the Company.
The court adopts the F&R re Attorneys’ Fees and Costs
and denies the request for such fees and costs by Bowers, Kubota,
and the Company.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, February 7, 2022.
/s/ Susan Oki Mollway
Susan Oki Mollway
United States District Judge
Walsh v. Heritage, et al.,
MODIFYING IN PART FINDINGS
COSTS (ECF NO. 682); ORDER
MOTION FOR ATTORNEYS' FEES
Civ. No. 18-00155 SOM-WRP; ORDER ADOPTING IN PART AND
AND RECOMMENDATION TO GRANT IN PART DEFENDANTS' BILL OF
ADOPTING FINDINGS AND RECOMMENDATION TO DENY DEFENDANTS'
AND NONTAXABLE COSTS (ECF NO. 684)
33
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