Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-00654/USCOURTS-casd-3_13-cv-00654-8/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332ac Diversity-Account Receivable

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

COMPASS BANK, an Alabama 

banking corporation, d/b/a “BBVA 

COMPASS,”

Plaintiff,

Case No. 13-cv-654-BAS-WVG

ORDER:

(1) DENYING DEFENDANT’S

MOTION TO RETAX COSTS 

[ECF NO. 313]; AND

(2) GRANTING IN PART 

PLAINTIFF’S MOTION TO 

RETAX COSTS [ECF NO. 314]

v.

MORRIS CERULLO WORLD 

EVANGELISM, a California 

corporation,

Defendant.

AND RELATED CROSS-ACTIONS

I. INTRODUCTION

After trial, Plaintiff and Counter-Defendant Compass Bank filed a Bill of Costs 

seeking recovery of costs as the prevailing party in the amount of $32,161.41. (ECF 

No. 300). Morris Cerullo World Evangelical (“MCWE”) filed an objection to the Bill 

of Costs (ECF No. 309), and the Clerk taxed costs in the amount of $12,847.99. (ECF 

No. 311). Both parties now move to retax costs. MCWE argues that no costs should 

have been taxed as Compass Bank was not the prevailing party and had unclean hands 

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because of discovery abuses (ECF No. 313). Compass Bank seeks an additional 

amount of $3324.30 for witness fees and deposition transcripts. (ECF No. 314). As 

discussed below, the Court finds Compass Bank is entitled to costs as the prevailing 

party, and is entitled to an additional amount of $3166.01. Therefore, the Court 

GRANTS IN PART Compass Bank’s Motion to retax costs (ECF No. 314) and 

DENIES MCWE’s Motion to retax costs (ECF No. 313).

II. STATEMENT OF FACTS

Compass Bank brought this declaratory relief action under 28 U.S.C. § 2201(a) 

against MCWE to declare that a $5.2 million standby letter of credit purportedly 

issued by Compass Bank and held by MCWE was fraudulent and unenforceable. 

(ECF No. 1). MCWE answered and countersued Compass Bank along with thirdparty defendants Larry Sorenson, Christopher Hammatt, and Jack Wilkinson. (ECF 

No. 6). MCWE proceeded to trial against Compass Bank on causes of action for 

breach of contract and promissory estoppel. (ECF No. 31).

Following a Bench Trial, this Court found in favor of Compass Bank on its 

declaratory relief action, and in favor of Compass Bank and against MCWE on its 

counter-claims for breach of contract and promissory estoppel.

During the course of the litigation, the Court sanctioned Compass Bank for 

discovery violations. (ECF 166, 292). 

III. ANALYSIS

Out of the original $32,161.41 requested by Compass Bank, the Clerk of the 

Court taxed costs in the amount of $12,847.99. (ECF No. 300, 311). MCWE filed 

objections indicating it did not object to the amount of the costs taxed by the Clerk, 

but to the fact that costs were awarded at all. (ECF No. 313). Compass Bank’s Motion 

to retax only objected to $3,324.30 not awarded. (ECF No. 314). Following this 

Court’s local rules, the Court will only consider the rulings of the Clerk to which the 

parties have objected. See Civ. L.R. 54.1(h)(2) (“A motion to retax must particularly 

specify the ruling of the clerk excepted to and no others will be considered at the

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hearing.”).

A. MCWE’s Objections

First, MCWE objects to the characterization of Compass Bank as the 

prevailing party. Under Rule 54(d)(1) of the Federal Rules of Civil Procedure, “costs 

other than attorneys’ fees shall be allowed as of course to the prevailing party...” To 

be considered the prevailing party, a party must receive some affirmative relief. See 

Tunison v. Continental Airlines Corp., Inc., 162 F.3d 1187, 1190 (D.C. Cir. 1998). 

As articulated by the U.S. Supreme Court, a plaintiff “prevails” “when actual relief 

on the merits of his claim materially alters the legal relationship between the parties 

by modifying the defendant’s behavior in a way that directly benefits the plaintiff.” 

Farrar v. Hobby, 506, U.S. 103, 111–12 (1992). “[A] material alteration of the legal 

relationship occurs [when] the plaintiff becomes entitled to enforce a judgment, 

consent decree or settlement against the defendant. In these situations, the legal 

relationship is altered because the plaintiff can force the defendant to do something 

he otherwise would not have to do.” Fischer v. SJB-P.D. Inc., 214 F.3d 1115, 1118 

(9th Cir. 2000) (internal citation omitted). A party can be the “prevailing party” based 

solely on injunctive relief; monetary relief is not required. Id.

In this case, Compass Bank filed a complaint for declaratory relief seeking a 

court judgment that a $5.2 million standby letter of credit purportedly issued by 

Compass Bank and held by MCWE was fraudulent and unenforceable. (ECF No. 1). 

Compass Bank was successful in this declaratory relief action. MCWE countersued 

Compass Bank and proceeded to trial against Compass Bank on causes of action for 

breach of contract and promissory estoppel. (ECF No. 6, 31). Compass Bank was 

successful in these counter-claims as well. The Court granted Compass Bank’s 

request for declaratory relief and entered judgment for Compass Bank and against 

MCWE on its counter-claims for breach of contract and promissory estoppel. (ECF 

No. 295). The resulting judgment altered the legal relationship between Compass 

Bank and MCWE because Compass Bank became entitled to enforce its requested 

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declaratory judgment against MCWE and because MCWE’s attempts to force 

Compass Bank to pay $5.2 million on the letter of credit were unsuccessful. Under 

Rule 54(d)(1), Compass Bank is entitled to recover costs as the “prevailing party.”

The fact that MCWE may have prevailed against other defendants, even a defendant 

who was an ex-Compass Bank employee, is irrelevant to the issue of who prevailed

in the action between Compass Bank and MCWE. Between these two parties, 

Compass Bank was the prevailing party.

Next MCWE asks the Court, in its discretion, to decline to award costs in light 

of Compass Bank’s dilatory tactics during discovery. During the course of this 

litigation, Magistrate Judge Gallo, in an order affirmed by this Court, granted 

MCWE’s motion for evidentiary and monetary sanctions finding Compass Bank had 

“wilfully engaged in the spoilation of relevant evidence” and “demonstrated a pattern 

of recalcitrant behavior during discovery in this litigation.” (ECF No. 166). The court 

granted an evidentiary adverse inference against Compass Bank and awarded 

monetary damages to MCWE. (ECF No. 166). MCWE now argues that this conduct 

warrants additional sanctions in the nature of denying costs to Compass Bank. The 

Court disagrees. 

First, the Court finds the sanction originally ordered was sufficient. Second, to 

the extent MCWE is arguing that there were additional discovery violations in that: 

(1) Compass Bank suppressed evidence of an internal investigation into the Century 

letter of credit and (2) analyzed recordings in preparation for trial that it failed to turn 

over to MCWE, as discussed in the Order denying Sanctions filed simultaneously 

with this Order, this Court finds there is no evidence to support these additional 

allegations of discovery abuse. 

Finally, to the extent MCWE argues that attempting to subpoena and/or depose 

Morris Cerullo and Louis Galuppo was done in bad faith, the Court again disagrees. 

Both were key witnesses in the case. MCWE reserved the right to rely on an advice 

of counsel defense and Morris Cerullo was a witness to the key meetings in the case. 

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Therefore, deposing and/or subpoenaing each as a witness was not done in bad faith.

B. Compass Bank’s Objections

Compass Bank requests that the following additional amounts be taxed: (1) 

$2548.16 for the costs of deposition transcripts for Frank Hicks, Burton McCullough, 

Paul Honeycutt, Brenton Gee, Bonnie Karow and Andy Castro; (2) $413.70 for 

standard service of process fees for deposition subpoenas served on Andy Castro, 

Christopher Hammatt, Jack Wilkinson, Union Bank, Lisa Mora and Louis Galuppo; 

(3) $160.05 for mileage reflected in witness fees offered and taken pursuant to 

deposition subpoenas by Andy Castro, Christopher Hammatt, Jack Wilkinson, and 

Lisa Mora; and (4) $202.39 for mileage fees offered and taken by witnesses served 

with trial subpoenas including Louis Galuppo, Jack Wilkinson, Morris Cerullo and 

Roger Artz, for a total of $3,324.30. The Court will address each of these requests in 

turn.

1. Deposition Transcripts

The cost of an original and one copy of any deposition is recoverable as costs 

even if the deposition is not introduced in evidence or used at trial “so long as at the 

time it was taken it could reasonably be expected that the deposition would be used 

for trial preparation, rather than mere discovery.” Civ. L.R. 54.1(b)(3). Compass 

Bank seeks recovery for the deposition transcripts of Frank Hicks, Burton 

McCullough, Paul Honeycutt, Brenton Gee, Bonnie Karow and Andy Castro. The 

Clerk denied these costs pursuant to Local Rule 54.1(b)(3)(b) which provides “[i]f 

both video and stenographic depositions are taken, they both will be allowed as costs 

only if the video deposition is used at trial. The cost of electronic versions is 

recoverable.” However, Compass Bank’s Motion to Retax costs clarifies that these 

depositions were not videotaped and the amount sought is strictly for an electronic 

version of the transcripts. Therefore, to the extent the clerk denied the costs of the 

deposition transcripts for these witnesses believing they were the costs of video 

recordings, in light of Compass Bank’s clarification, the Court finds these costs 

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should now be included. 

In addition, at the time the original cost bill was submitted, Compass Bank 

failed to provide a breakdown of what was included in the costs submitted for the 

deposition of Andy Castro. Compass Bank now submits an invoice decreasing the 

original amount requested, and asking for reimbursement of only $859.71 for the 

deposition transcript of Castro. The invoice submitted supports this request. (ECF 

No. 314-3, Exh. B). 

MCWE argues that, with the exception of Brenton Gee, none of these 

witnesses testified at trial and thus these witnesses were purely investigatory. 

However, all of these witnesses were on the final pretrial order as potential witnesses. 

Frank Hicks and Burton McCullough were both potential expert witnesses retained 

specifically to testify at trial. (ECF No. 261). Paul Honeycutt was “expected to 

provide testimony consistent with his deposition concerning (1) Wilkinson’s 

employment history with Compass; (2) the termination of Wilkinson’s employment 

with Compass; (3) policies and procedures.” Id. Bonnie Karow was:

expected to provide testimony consistent with her deposition concerning: 

(1) Compass’ investigation of Wilkinson; (2) Compass’ investigation of 

Christopher Hammatt and the Purported LOC; (3) conversations between 

Ms. Karow and other witnesses to this litigation; and (4) the Secret 

Services’ investigation of Christopher Hammatt. 

Id. And Andy Castro was:

expected to provide testimony consistent with his deposition concerning: 

(1) his business dealing and transactions with Hammatt and MCWE; (2) 

his business relationship with Hammatt; (3) his retention of Hammatt to 

provide legal representation and the subsequent termination of said 

representation; (4) the knowledge of the Jade statute (“Jade”) and 

discussion with Hammatt concerning the Jade; (5) conversations with 

MCWE and its representatives concerning the Subject Loan transaction 

and the Jade; and (6) conversations with MCWE’s undersigned counsel 

concerning the Subject Loan Transaction and the Jade. 

Id. At the time these witnesses’ depositions were taken, it could reasonably be 

expected that their depositions would be used for trial preparation, rather than mere 

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discovery. Therefore, the costs of the deposition transcripts are recoverable. See Civ. 

L.R. 54.1(b)(3).

2. Standard Service of Process Fees 

In its original Motion to Tax Costs, Compass sought reimbursement for 

priority and same day service of process fees. The Clerk denied this request. 

Compass now submits a request for reimbursement of $68.95 for regular service of 

deposition subpoenas on Castro, Hammatt, Wilkinson, Union Bank, Mora and 

Galuppo, despite the fact that it expended higher amounts for priority and same day 

service. (ECF No. 314). Compass Bank provides invoices supporting this request. 

(ECF No. 314-3, Exh. D; 314-3 Exh. C, pgs. 9, 11, 13, 15; ECF No. 300-2, pgs. 49, 

54.)

Fees for service of process, including the costs for service of subpoenas are 

taxable. See Civ. L.R. 54.1(b)(1). Fees for expedited service are allowable only if the 

Court ordered service to be effected on an expedited basis. Id. Since the Court did 

not order that service be effected on an expedited basis in this case, the Clerk was 

correct to deny the original request. However, the Court finds the Motion to Retax

Costs, reducing the amount requested to the standard service of process fees, is 

appropriate, and the Court will grant Compass Bank’s motion on these grounds. 

MCWE argues that these service of process fees are not recoverable because 

these witnesses never testified at trial. However, the subpoenas were not for trial 

attendance but for attendance at depositions. With the exception of Galuppo and 

Union Bank, all of these witnesses attended a deposition. Therefore, the costs for 

service of subpoenas to compel their attendance at the deposition are recoverable. 

With respect to Galuppo, as discussed above, he was a necessary witness because 

MCWE had indicated it may be relying on the advice of counsel as a defense. 

Therefore, Compass Bank was entitled to depose MCWE’s counsel to determine 

what advice he gave to MCWE. The fact that MCWE then decided to withdraw the 

defense of counsel defense, rather than waive the attorney-client privilege, does not 

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undermine the fact that Compass Bank was within its rights to subpoena a necessary 

witness for a deposition, and is entitled to recover the costs of serving this witness 

with a subpoena. Likewise, Compass Bank served Union Bank with a subpoena for 

production of records. The costs of serving this subpoena are recoverable under Rule 

54.1.

3. Mileage Fees for Witnesses Attending Depositions or Trial

Compass Bank submitted witness fees tendered and accepted by witnesses 

attending either depositions (Castro, Hammatt, Wilkinson and Mora) or trial 

(Galuppo, Wilkinson, Cerullo and Artz). The Clerk disallowed any amounts over the 

standard $40.00 witness fees. Compass Bank now submits additional documentation 

reflecting the fact that each of these witnesses was tendered and accepted a witness 

fee that included mileage reimbursement from the place in which the subpoena was 

served to the place of either the deposition or the courthouse. 

Fees paid to a witness, including mileage, subsistence and attendance fees are 

recoverable as costs so long as the fees are provided to witnesses subpoenaed who 

actually attend the proceedings. See Civ. L.R. 54.1(b)(4)(a). Such fees are taxable 

even though the witness does not take the stand at the trial provided the witness 

necessarily attends court. See Civ. L.R. 54.1(b)(4)(b). In this case, witness fees, 

including mileage tendered to Castro, Hammatt, Wilkinson and Mora for their 

attendance at depositions, was reimburseable. Thus, Compass Bank’s motion to retax 

the additional mileage amounts of $160.05 is granted.

Compass is also entitled to the mileage tendered and accepted to Wilkinson 

and Artz for their attendance at trial. Although Wilkinson was not actually called, he 

did attend court and was ordered back. However, the parties eventually concluded 

that his testimony would not be needed. Nonetheless, Compass Bank may obtain 

costs for these two witnesses, who both attended court. On the other hand, neither 

Galuppo nor Cerullo was compelled to attend court as a witness. Although Galuppo 

was present at counsel table, it was resolved before the trial began that MCWE would 

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not be relying on a defense of counsel defense, and thus Galuppo was not required to 

attend as a witness. Cerullo never attended court as a witness, and thus his fee is not 

recoverable. Therefore, the Clerk’s award of $40.00 for each of these two witnesses 

was in error. The Court denies Compass Bank’s request to add mileage fees for these 

two witnesses, and deducts $80.00 awarded by the clerk in error.

IV. CONCLUSION & ORDER

For the foregoing reasons, the Court DENIES MCWE’s Motion to Retax 

Costs (ECF No. 313). The Court grants in part and denies in part Compass Bank’s 

Motion to Retax Costs (ECF No. 314). Additional costs are granted in the amounts 

of: (1) $2,548.16 for deposition transcripts; (2) $413.70 for standard service of 

process fees for service of deposition subpoenas; (3) $160.05 mileage fees tendered 

to witnesses for attendance at depositions; and (4) $124.10 for mileage fees tendered 

to Wilkinson and Artz for their attendance at trial. The Court declines to award 

mileage fees in the amount of $78.29 for Galuppo and Cerullo who were not required 

to testify at trial, and the Court further finds that the $80.00 in witness fees for these 

two witnesses was awarded by the Clerk in error. Therefore, the Court GRANTS

Compass Bank’s Motion to Retax costs in the additional amount of $3166.01 above 

the amount ordered by the Clerk of $12,847.99, for a total costs bill of $16,014.00.

IT IS SO ORDERED.

DATED: December 9, 2015

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