*

 After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist in the determination of

this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is

therefore ordered submitted without oral argument.

FILED

United States Court of Appeals

Tenth Circuit

March 3, 2009

Elisabeth A. Shumaker

Clerk of Court

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

 

In re: WILLIAMS SECURITIES

LITIGATION – WCG SUBCLASS. No. 08-5100

 

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF OKLAHOMA

(D.C. No. 4:02-CV-0072-SPF)

 

Submitted on the briefs:*

William Christopher Carmody, Jonathan E. Bridges, and Jeremy J. Brandon, Susman

Godfrey LLP, Dallas, Texas, Joshua H. Vinik, Matthew A. Kupillas, and Kent A.

Bronson, Milberg LLP, New York, New York, and Behram V. Parekh, Yourman

Alexander & Parekh, Los Angeles, California, for Plaintiffs-Appellants.

Michael J. Gibbens, Victor E. Morgan, and Gerald L. Jackson, Crowe & Dunlevy,

Tulsa, Oklahoma, for Defendants-Appellees Howard E. Janzen, Scott E. Schubert,

Kenneth Kinnear II, Matthew W. Bross, Bob F. McCoy, Howard S. Kalika, John C.

Bumgarner Jr., and Frank M. Semple.

Graydon Dean Luthey, Jr., and Sarah Jane Gillett, Hall, Estill, Hardwick, Gable,

Golden & Nelson, P.C., Tulsa, Oklahoma, Timothy K. Roake, Gibson, Dunn &

Crutcher, L.L.P., Palo Alto, California, and Ethan D. Dettmer, Gibson, Dunn &

Crutcher, L.L.P., San Francisco, California, for Defendants-Appellees The Williams

Companies, Inc. and Keith E. Bailey.

Patrick M. Ryan, and Philip G. Whaley, Ryan, Whaley & Coldiron, Oklahoma City,

Oklahoma, Peter A. Wald, Latham & Watkins LLP, San Francisco, California, and
2

Christopher Harris, Latham & Watkins LLP, New York, New York, for Defendant

-Appellee 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

(WMB), an energy group, devised a plan to run fiber-optic cables through some of

its decommissioned pipelines. Subsequently, WMB used a subsidiary known as the

Williams Communications Group (WCG) to develop a large fiber-optic network.

WMB sold most of this network to a competitor in 1995. Rapid growth in the

Telecommunications Index in the late 1990s, however, spurred WMB to reenter the

network communications market through its WCG subsidiary. Indeed, WMB stated

its intention to invest vast sums in creating a national fiber-optic network. But the

Telecommunications Index experienced a major downturn in the spring of 2000.

WMB subsequently spun off its WCG subsidiary. Less than two years later, WCG’s

stock was practically worthless and the company filed for Chapter 11 bankruptcy.

As 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

Defendants; and (3) Ernst & Young, the outside auditor to both WMB and WCG.

The district court consolidated these actions under the caption In re Williams

Securities, bifurcated the litigation into two subclasses of plaintiffs — the WMB
3

Subclass and the WCG Subclass — and ordered coordinated discovery. While the

WMB Subclass Action settled, Defendants in the WCG Subclass Action filed a

motion for summary judgment, which the district court granted. Plaintiffs appealed

the 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.

18, 2009). 

Pursuant to 28 U.S.C. § 1920 and Fed. R. Civ. P. 54(d)(1), the district court

awarded the WCG Subclass Defendants costs. Plaintiffs now challenge the district

court’s costs awards on three separate grounds. First, Plaintiffs allege Defendants

failed to prove that the transcripts and copies for which the district court awarded

costs were “necessarily obtained for use in the case.” 28 U.S.C. § 1920(2) & (4).

Second, Plaintiffs maintain that many of the costs for which Defendants seek

reimbursement are equally attributable to the WMB Subclass Action. Hence,

Plaintiffs argue the district court abused its discretion in taxing them for the full

amount of these costs. Third, Plaintiffs suggest that the district court’s awards of

costs 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

district court acted within the broad confines of its discretion, we affirm. 

I.

After the district court granted summary judgment in favor of Defendants,

each defendant group filed a timely bill of costs with the district court. The district
4

court clerk held a joint hearing on Defendants’ bills of costs. See Furr v. AT&T

Techs., Inc., 824 F.2d 1537, 1550 n.11 (10th Cir. 1987) (recognizing that “a bill of

costs is initially filed with the clerk rather than with the court”). Shortly thereafter,

the clerk issued three orders taxing Plaintiffs $231,549.08 in favor of the WCG

Defendants, $180,411.70 in favor of the WMB Defendants, and $229,371.72 in favor

of Ernst & Young. Ultimately, the clerk reduced Defendants’ requested costs awards

by $31,220.00 (WCG Defendants), $3,287.45 (WMB Defendants), and $97,339.05

(Ernst & Young) respectively. Defendants voluntarily withdrew their request for

transcript costs related to one deposition witness and the WMB Defendants agreed

to 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.

Civ. P. 54(d)(1), raising substantially the same arguments they now press on appeal.

See id. (“Should the party seeking costs be dissatisfied with the clerk’s actions, or

should 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

by 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.

Subsequently, the magistrate judge issued a twenty-two page report and

recommendation, substantially affirming the clerk’s awards of costs. The magistrate

judge did exclude, however, costs related to four depositions for which the clerk

awarded costs to the WMB Defendants and Ernst & Young. This reduced
5

Defendants’ 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

tax Plaintiffs $231,549.08 in favor of the WCG Defendants, $174,276.25 in favor of

the WMB Defendants, and $223,721.27 in favor of Ernst & Young. 

Plaintiffs also objected to the magistrate judge’s report and recommendation

on essentially the same grounds they now raise on appeal. In a twenty-two page

order, the district court adopted the magistrate judge’s recommended awards of costs,

with several notable exceptions. The district court independently reviewed the

record and excluded transcription costs related to seven deposition witnesses because

it was not satisfied that these depositions were “necessarily obtained” for use in the

case. Further, the district court reduced the WCG Defendants’ award for copy costs

by over $4,000.00. All together, the district court reduced the costs awards

recommended by the magistrate judge by $8,795.30 (the WCG Defendants),

$5,785.30 (the WMB Defendants), and $3,001.80 (Ernst & Young) respectively.

Accordingly, the district court taxed Plaintiffs $222,753.78 in favor of the WCG

Defendants, $168,490.95 in favor of the WMB Defendants, and $220,719.47 in favor

of Ernst & Young. 

II.

Rule 54(d)(1) provides that costs, other than attorney’s fees, should generally

“be allowed to the prevailing party.” We have recognized that the district court’s

discretion in taxing costs is limited in two ways. See Cantrell v. Int’l Bhd. of Elec.
6

Workers, 69 F.3d 456, 458-59 (10th Cir. 1995) (en banc). First, “Rule 54 creates a

presumption that the district court will award costs to the prevailing party.” Id. at

459. Second, the district court “must provide a valid reason” for denying such costs.

Id.; see also Klein v. Grynberg, 44 F.3d 1497, 1507 (10th Cir. 1995) (stating that

denying costs to a prevailing party is a “severe penalty” and explaining that “there

must be some apparent reason to penalize the prevailing party if costs are to

be denied”). 

 Items proposed by prevailing parties “as costs should always be given careful

scrutiny.” U.S. Indus., Inc. v. Touche Ross & Co., 854 F.2d 1223, 1245 (10th Cir.

1988), overruled on other grounds as recognized by Anixter v. Home-Stake Prod.

Co., 77 F.3d 1215, 1231 (10th Cir. 1996). The costs statute allows a judge or clerk

of any court of the United States to tax costs for transcripts and copies “necessarily

obtained for use in the case.” 28 U.S.C. § 1920(2) & (4). Both parties agree that

this standard governs the costs at issue in this appeal. 

The “necessarily obtained for use in the case” standard does not allow a

prevailing party to recover costs for materials that merely “added to the convenience

of 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

the litigation of the case.” Mitchell v. City of Moore, 218 F.3d 1190, 1204 (10th Cir.

2000). Materials produced “solely for discovery” do not meet this threshold. Furr,

824 F.2d at 1550. At the same time, we have acknowledged that materials may be
7

taxable even if they are not “strictly essential” to the district court’s “resolution of

the case.” Id. The “realities of litigation occasionally dispense with the need of

much of the discovery already taken by the parties when, for instance, a dispositive

motion is granted by the trial court.” Callicrate v. Farmland Indus., Inc., 139 F.3d

1336, 1340 (10th Cir. 1998). Our cases establish that if deposition transcripts or

copies were “offered into evidence,” were “not frivolous,” and were “within the

bounds of vigorous advocacy,” costs may be taxed. Id. (citing Furr, 824 F.2d at

1550). This standard recognizes that “caution and proper advocacy may make it

incumbent on counsel to prepare for all contingencies which may arise during the

course of litigation,” including the “possibility of trial.” Id. 

Thus, we do not “employ the benefit of hindsight” in determining whether

materials for which a prevailing party requests costs are reasonably necessary to the

litigation of the case. Id. We base this determination, instead, solely “on the

particular facts and circumstances at the time the expense was incurred.” Id.; see

also Allison v. Bank One-Denver, 289 F.3d 1223, 1249 (10th Cir. 2002) (recognizing

that as long as the expense “appeared to be reasonably necessary at the time it was”

incurred, “the taxing of such costs should be approved”). The standard is one of

reasonableness. See Mitchell, 218 F.3d at 1204. If “materials or services are

reasonably necessary for use in the case,” even if they are ultimately not used to

dispose of the matter, the district court “can find necessity and award the recovery

of costs.” Callicrate, 139 F.3d at 1339. Thus, we will not “penalize a party who
8

happens to prevail on a dispositive motion by not awarding costs associated with that

portion of discovery which had no bearing on the dispositive motion, but which

appeared otherwise necessary at the time it was taken for proper preparation of the

case.” Id. at 1340. 

A prevailing party bears the burden of establishing the amount of costs to

which it is entitled. See Allison, 289 F.3d at 1248. Our precedents establish that the

amount a prevailing party requests “must be reasonable.” Callicrate, 139 F.3d at

1339. Once a prevailing party establishes its right to recover allowable costs,

however, the burden shifts to the “non-prevailing party to overcome” the

presumption that these costs will be taxed. Rodriguez v. Whiting Farms, Inc., 360

F.3d 1180, 1190 (10th Cir. 2004). 

III. 

 The district court possesses “broad discretion” in awarding costs. Touche Ross,

854 F.2d at 1247; see also Callicrate, 139 F.3d at 1339 (“The taxing of costs rests

in the sound judicial discretion of the district court.”). Accordingly, we review costs

awards only for an abuse of that discretion. See Touche Ross, 854 F.2d at 1245. A

district court abuses its discretion where it (1) commits legal error, (2) relies on

clearly erroneous factual findings, or (3) where no rational basis exists in the

evidence to support its ruling. See Elephant Butte Irrigation Dist. v. U.S. Dep’t of

the Interior, 538 F.3d 1299, 1301 (10th Cir. 2008). 
9

A.

We first address Plaintiffs’ assertion that Defendants failed to provide

sufficient evidence to show that the taxed materials were “necessarily obtained for

use in the case.” 28 U.S.C. § 1920(2) & (4). Whether materials are necessarily

obtained for use in the case is “a question of fact” that we review “only for clear

error.” Sorbo v. United Parcel Serv., 432 F.3d 1169, 1181 (10th Cir. 2005). Clear

error is established if, “after reviewing all the evidence, we are left with a definite

and firm conviction that a mistake has been made.” Aquila, Inc. v. C.W. Mining,

545 F.3d 1258, 1263 (10th Cir. 2008). Plaintiffs have not met this threshold here.

Plaintiffs espouse an exceedingly narrow view of the deposition expenses

authorized under 28 U.S.C. § 1920. Indeed, they argue that a district court may only

award costs for depositions the district court actually used in deciding summary

judgment, 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

for use in” the case “at the time the expenses were incurred.” Callicrate, 139 F.3d

at 1340. As we explained in Merrick v. Northern Natural Gas Company, 911 F.2d

426, 434 (10th Cir. 1990), any “rule that permits costs only for depositions received

in evidence or used by the court in ruling upon a motion for summary judgment is

narrower than [S]ection 1920.” Plaintiffs’ understanding of the costs statute is thus
1

 We reject Plaintiffs’ assertion that the district court’s costs awards were

impermissible because they contravened the local Clerk’s Guidelines for Taxation

of Costs. As the district court correctly noted, the clerk’s guidelines do not purport

to be an authoritative exposition of the costs allowable under applicable law and

they are not binding on the district court. The district court, therefore, correctly

analyzed Defendants’ requested costs under § 1920, Rule 54, and our controlling

precedents.

10

surely flawed.1

The same is true of Plaintiffs’ view of the burden placed on prevailing parties

to justify the taxation of copy costs. We have specifically noted that the burden of

justifying copy costs is not “a high one.” Case v. Unified Sch. Dist. No. 233, 157

F.3d 1243, 1259 (10th Cir. 1998). A prevailing party need not “justify each copy”

it makes. Id. All a prevailing party must do to recoup copy costs is to demonstrate

to the district court that, under the particular circumstances, the copies were

“reasonably necessary for use in the case.” Touche Ross, 854 F.2d at 1246.

Contrary to Plaintiffs’ assertions, a description of each copy, replete with an

explication of its use, is not necessarily required to satisfy this burden. Nor do we

think the fact that documents are available in a central depository, as Plaintiffs

allege here, inexorably leads to the conclusion that copies made for an attorney’s

use were not “reasonably necessary to the litigation of the case.” Ramos v. Lamm,

713 F.2d 546, 560 (10th Cir. 1983), abrogated on other grounds by Pennsylvania v.

Del. Valley Citizens’ Council for Clean Air, 483 U.S. 711 (1987). 
11

On appeal, we remain aware that we cannot hope to match the district

court’s “first-hand sensitivity to the proceedings” in this case. Sorbo, 432 F.3d at

1181. The district court ultimately approved the awards of costs related to some

seventy-four depositions. Based on its familiarity with the “nature and course” of

the litigation, it concluded that these depositions were “not taken merely for

investigative purposes or for the convenience of counsel.” The district court found,

instead, that these depositions — based on the information available to the parties

at the time — were necessarily obtained for use in this case. Considering that the

parties presented a combined total of sixty-nine fact witnesses, the district court’s

conclusion hardly seems suspect. 

Similarly, the district court examined Defendants’ requested copy costs and

opined, in light of the fact that over fifteen million pages were produced, that

Defendants selectively copied the documents at issue. The number of copies made

by each defendant group necessarily varied, in the district court’s view, because

Defendants adopted differing approaches to fashioning a defense. After excluding

some of the WCG Defendants’ requested copy costs, the district court ruled that

Defendants had shown the remaining copies were necessarily obtained for use in the

case. Our examination of the record, gives us no reason to doubt that conclusion.

We, therefore, reject Plaintiffs’ first claim of error.

B. 

We now turn to Plaintiffs’ contention that the district court failed to properly
12

apportion and tax the costs attributable to them. In short, Plaintiffs allege the district

court abused its discretion in taxing them for costs that are equally attributable to the

WMB Subclass of Plaintiffs. Due to the factual overlap between the WCG and

WMB Subclasses, the district court determined that Defendants would have incurred

the costs at issue even in the absence of the WMB Subclass action. The district court

consequently regarded the awarded costs as directly related to the WCG Subclass

action, in which Defendants undisputably prevailed. A “rational basis in the

evidence” clearly supports this conclusion. Elephant Butte Irrigation Dist., 538 F.3d

at 1301. As such, we cannot say that the district court abused its discretion in

refusing to reduce Defendants’ costs awards on this ground.

C. 

Finally, we address Plaintiffs’ argument that the district court’s costs awards

are unreasonably high. Aggregating the costs awarded to the three defendant groups,

Plaintiffs contend that the district court rendered the highest costs award in the

history of American jurisprudence. We disagree with Plaintiffs’ characterization of

the facts of this case. 

The costs awarded in this case are undoubtedly higher than the norm. But

given the massiveness and complexity of the litigation at issue, we do not regard the

magnitude of Defendants’ costs awards as particularly surprising. Plaintiffs sought

$2.9 billion in damages from three defendant groups, all of whom are prevailing

parties. Thus, we are now faced with three separate costs awards. 
13

Defendants’ costs were, quite plainly, driven upward by the cold, hard facts

of this case. Plaintiffs’ litigation choices; including the number of defendants, the

high amount of damages sought, the broad allegations asserted, the complexity of the

claims at issue, and Plaintiffs’ aggressive course of discovery; necessarily resulted

in heightened defense costs. See Klein, 44 F.3d at 1507 (“[Plaintiffs’] own actions

brought about the litigation.”). We agree with the district court that consideration

of such factors does not constitute disapproval or condemnation of Plaintiffs’

conduct; rather, these considerations go directly towards the reasonable necessity of

Defendants’ costs. See Mitchell, 218 F.3d at 1204 (noting that our role is to measure

“whether an incurred cost was reasonably necessary under § 1920”). In this case, the

stakes were indisputably high and “it was incumbent on [D]efendants to fully prepare

their case on the merits.” Callicrate, 139 F.3d at 1341. 

Of course, we have recognized that certain circumstances justify a district

court in exercising its discretion to deny otherwise recoverable costs, “including

when the prevailing party was only partially successful, when damages were only

nominal, when costs were unreasonably high or unnecessary, when recovery was

insignificant, or when the issues were close or difficult.” Zeran v. Diamond Broad.,

203 F.3d 714, 722 (10th Cir. 2000). But the district court concluded that none of

these grounds apply here. We cannot say that, in so ruling, the district court abused

its discretion.
14

Rule 54’s presumption that a prevailing party will recoup certain costs fully

applies to class actions. See White v. Sundstrand Corp., 256 F.3d 580, 585-86 (7th

Cir. 2001). Even if litigation is complex or lengthy, instituted in good faith, and

resolved early, we have rejected attempts to deny prevailing parties their otherwise

taxable costs. See AeroTech, Inc. v. Estes, 110 F.3d 1523, 1527 (10th Cir. 1997).

Plaintiffs “caused this litigation to be brought” and Defendants’ “costs to be

incurred.” White, 256 F.3d at 586. Thus, absent Plaintiffs carrying their burden of

showing that Defendants’ otherwise recoverable costs should not be taxed, they must

“make the prevailing [parties] whole.” Id. Plaintiffs have simply failed to meet this

burden in that they have failed to establish a valid basis for penalizing Defendants

with the denial or reduction of their otherwise recompensable costs. 

We, therefore, AFFIRM Defendants’ costs awards for substantially the

reasons stated by the district court.