Court Opinion

ID: 8248142
Source: CourtListenerOpinion
Date Created: 2022-10-16 09:54:44.156768+00
Date Added: 2024-06-11T16:42:50.292076
License: Public Domain

DISSENT
HUDSON, Justice
(dissenting).
I agree with the majority that an application for an extraordinary writ under Minn. R. Civ. App. P. 120 is the proper mechanism to seek review of a court of appeals order that allows taxation of costs and disbursements. But I disagree with *397the majority’s conclusion that Minn. R. Civ. App. P. 139.02 does not allow taxation of “borrowing costs.” The majority’s holding finds no support in the plain language of Rule 139.02 or case law, calls into question long-standing Minnesota practice regarding taxation of costs, and disregards the reality faced by parties involved in multi-million-dollar commercial litigation. I respectfully dissent.
The court of appeals taxed appellant Alan Klapmeier. a total of $671,863.88 in costs and disbursements after Klapmeier lost on appeal in his case against respondent Cirrus Industries, Inc. The order included $192,000 in premiums paid by Cirrus for obtaining a supersedeas bond- of $12 million, as well as $542,583.33 in borrowing costs, which was the interest accrued on the money Cirrus borrowed to finance the letter of credit required to obtain the supersedeas bond. The majority concludes that Rule 139.02 does not authorize the court of appeals to award Cirrus its borrowing costs because they are not expenses that are “necessary—unavoidable—if the appeal is to advance.” According to the majority, a filing fee or trans'cript fee is necessary for an appeal to advance, and “[e]ven bond premiums may be necessary to an appeal.” In contrast, “borrowing costs do not have the same direct relationship to an appeal because they are not necessarily paid or incurred to allow an appeal to proceed.”
The majority’s holding draws arbitrary distinctions, and has no support in the plain language of Rule 139.02 or our case law. In attempting to distinguish borrowing costs from filing fees and transcript fees, the majority explains that “borrowing costs ... are paid or incurred based on circumstances unique to, and decisions made by,,the borrower that are unrelated to the appeal, such as interest rates, loan terms, other financing options, ongoing business activities, and assei/liability calculations.” They are necessary, says the majority, “only because the party has determined that a loan, and its required expenses, is the best financial option for reasons that may have nothing to do with the appeal.” In other words, under the majority’s holding, expenses that are incurred in connection with certain taxable costs are non-taxable under Rule 139.02 if they are incurred simply due to the party’s finan-' cial considerations.
This holding is contrary to.the .plain language of Rule 139.02, which contains no such restrictions. Rule 139.02 provides that “[u]nless otherwise ordered by the appellate court, the prevailing party shall be allowed that party’s disbursements necessarily paid or incurred.”: Minn. R. Civ. App. P. 139.02. In addition, the rule specifically prohibits the prevailing party from “tax[ing] as a disbursement the cost of preparing informal briefs or submissions designated in Rule 128.01, subd. 2.” Id. By explicitly identifying informal briefs and submissions as nontaxable items, Rule 139.02 clearly contemplates all other costs and disbursements “necessarily paid or incurred” as taxable. See, e.g., Staab v. Diocese of St. Cloud, 853 N.W.2d 713, 718-19 (Minn. 2014) (applying the canon of construction, expressio unius est exclusio al-terius, to conclude that the “expression of a general rule ... subject to four exceptions ... precludes an interpretation ... that would effectively create a fifth exception”). Thus, the majority’s interpretation reads the phrase “necessarily paid or incurred” too narrowly and cannot be squared with the plain language of the rule.
Nor can the majority’s holding be reconciled with our precedent allowing the taxation of bond premiums. See Henderson v. Nw. Airlines, Inc., 231 Minn. 503, 43 N.W.2d 786, 792 (1950) (allowing taxation *398of bond premiums in the absence of a showing that the costs were excessive). To the extent that the majority interprets Rule 139.02 as allowing taxation of expenses that are only necessary .because they are “unavoidable” on appeal, bond premiums would be nontaxable under Rule 139.02 because they are, in fact, avoidable under the majority’s definition! First, to proceed on appeal, parties do not have to post a supersedeas bond. They can simply allow the judgment to be entered, or use a different form of security. See Minn. R. Civ. App; P. 108.02, subd. 3 (“The form of the security may be a supersedéas bond, a letter of credit, a deposit of cash- or property with the trial court administrator, or' any other form of security that the trial court approves as adequate under the circumstances.”).1 Bond premiums are, hehee, avoidable if the party seeking to. stay .the judgment to proceed on appeal provides security in a different form. Second, although a party seeking a supersedeas bond generally has to pay premiums to the bond provider, there is no rule or practical evidence suggesting that .premiums are always required. Thus, to adopt.the majority’s framing, bond premiums are also expenses incurred “only because the party has determined that a [supersedeas bond] ... is the best financial option for reasons that may have .nothing to do with the appeal.” But under today’s holding, these premiums are apparently nontaxable. The majority’s ruling is irreconcilable with our case law on the taxability of bond premiums.
' In ’ sum, ’ although neither bond premiums nor borrowing costs are required by law for an ’ appeal to proceed, both expenses are typically incurred—as they were here—in connection with a party’s efforts to secure a supersedeas bond for purposes of staying the entry of judgment on appeal. Similar to bond premiums, borrowing costs also “may -be necessary to an appeal when a district court requires a party to post a supersedeas bond.” Yet, we award prevailing parties the former (bond premiums), but not—under the ruling today—the latter (borrowing costs). The majority fails to justify its differential treatment of the two.2
Likewise, fees for obtaining letters of credit are. also costs incurred due to a party’s financial considerations because they are not always required when one obtains a supersedeas bond. In fact, nothing in the record suggests that Cirrus paid letter-of-credit fees here. But even though letter-of-credit fees have been routinely taxed in Minnesqta, they arguably become nontaxable as a result of the majority’s holding today. See e.g., Kelly v. Ellefson, No. A04-0615, Amended Order at 3 (Minn. App. filed July 10, 2006) (allowing taxation of letter-qf-credit costs related to superse-deas bonds, stating that “[t]he cost of col-lateralizing supersedeas bonds, including *399obtaining- letters of credit, are routinely taxed in Minnesota” (citing 3 Eric J. Magnuson & David F. Herr, Minnesota Practice—Appellate Rules Ann. § 108.43 (2003 ed.))), rev. denied (Sept. 18, 2006).
Moreover, today’s holding is inconsistent with most federal courts’ interpretations of Fed. R. App. P. 39(e), the comparable federal rule regulating taxation of costs. Notably, the language of Rule 139.02 is broader than that of the federal rule. Compare Minn. R. Civ. App. P. 139.02 (allowing taxation of “disbursements necessarily paid or incurred” except for “the cost of preparing informal briefs or submissions designated in Rule 128.01, subd. 2”), with Fed. R. App. P. 39(e) (specifically designating only four kinds- of costs as taxable, including “premiums paid for a supersede-as bond or other bond to preserve rights pending appeal”). Despite the broader language of Rule 139.02, the majority—by limiting the meaning of the phrase “disbursements necessarily paid or incurred” to only those expenses that cannot be characterized as incurred due to a party’s special circumstances—unduly narrows the scope of Rule 139.02.
By contrast, although Fed. R. App. P. 39(e) identifies bond premiums as taxable and is otherwise silent on the taxability of other kinds of bond-related costs, most federal circuit courts interpreting the rule have concluded that letter-of-credit fees and borrowing costs are taxable as long as they meet certain criteria. See Republic Tobacco Co. v. N. Atl. Trading Co., 481 F.3d 442, 448-51 (7th Cir. 2007) (allowing taxation of “borrowing costs” in lieu of bond premiums under Fed. R. App. P. 39(e)); Bose Corp. v. Consumers Union of U.S., Inc., 806 F.2d 304, 305 (1st Cir. 1986) (allowing taxation of letter-of-credit costs that were “[neither] unreasonable [nor] resulted in any greater total cost than a supersedeas bond without supporting collateral” under Fed. R. App. P. 39(e)); Trans World Airlines, Inc. v. Hughes, 515 F.2d 173, 178-79 (2d Cir. 1975) (allowing taxation of fees paid for a letter of credit that was obtained instead of a supersedeas bond under Fed. R. App. P. 39(e)). Cf. Lerman v. Flynt Distrib. Co., 789 F.2d 164, 166 (2d Cir. 1986) (holding that “costs of appeal that are agreed to and less expensive substitutes for costs explicitly authorized in Rule 39(e) are allowable” without limiting the kinds of costs that parties may recover). The majority’s narrow interpretation of the broad language of Rule 139.02 is at odds with federal courts’ broader-interpretation of thé narrower language in Fed. R. App. P, 39(e).
The majority’s holding is also untethered from reality because it ignores the financial costs incurred in multi-million-dollar commercial litigation.'It is increasingly common for parties engaged in complex business litigation to incur significant expenses in obtaining supersedeas bonds, as evidenced by the size of the financing costs incurred and awarded in this case and many others. By restricting the types of expenses a prevailing party may recover, the majority’s holding may discourage high-stakes commercial litigants from pursuing an appeal, regardless of the merits of the claim, to avoid incurring large appellate costs that are not taxable.4 See 3- Eric *400J. Magnuson, et al., Minnesota Practice— Appellate Rules Ann. § 108.1, Authors’ Comments (2016 ed.) (“The need for and availability of a supersedeas bond is a significant factor to be considered when making the decision to appeal'.”).
Therefore, I would hold that the court of appeals had authority under Minn. R. Civ. App. P. 139.02 to tax all necessary and reasonable costs related to obtaining a su-persedeas bond on appeal, including borrowing costs. The next step in the analysis is to evaluate the court of appeals’ costs order based on the proper standard of review.
We review an award of costs and disbursements for an abuse of discretion, Kellar v. Von Holtum, 605 N.W.2d 696, 703 (Minn. 2000), superseded, on other grounds by Minn. R. Civ. P. 11.03. Here, nothing in the record shows that the court of appeals’ decision to tax Klapmeier $542,583.33 in borrowing costs incurred in obtaining a supersedeas bond of $12 million was clearly erroneous. As the court of appeals stated, Cirrus submitted adequate documentation (affidavits, a promissory note, etc.) demonstrating that it incurred these costs, and that no less expensive alternatives existed for obtaining the required supersede-as bond within the time constraints imposed by the district court and Klapmeier. Nor does Klapmeier argue that Cirrus could have secured the loan on better terms from an alternative source, Klapmeier claims that the borrowing costs Cirrus claimed were for an “alleged loan” that was simply a “book entry,” but Klapmeier provides no evidence supporting this claim. I recognize that, absent discovery or an evidentiary healing, Klapmeier had limited opportunities to obtain evidence to refute the authenticity of the borrowing costs. That said, Klapmeier was in a unique position to evaluate the' authenticity of Cirrus’s documentation given his previous position as Chief Executive Officer of Cirrus and the parties’ protracted litigation surrounding his dismissal. In any event, Henderson requires that Klapmeier, as the non-prevailing party, bear the burden to show the claimed borrowing costs were excessive. See 43 N.W.2d at 792. Klapmeier made no such showing.
The court of appeals did exactly what we ask and expect it to do: it carefully reviewed the documentation • submitted by Cirrus and determined that the borrowing costs were “necessarily paid or incurred.” Absent a showing to the contrary by Klap-meier, the court of appeals acted well within its discretion in awarding Cirrus $542,583.33 in borrowing costs.
Additionally, upon independent review of the record, the costs claimed here for obtaining a supersedeas bond appear reasonable compared with similar costs sought and awarded in other cases. First, the court of appeals has awarded costs of similar sizes paid to a surety as collateral for a supersedeas bond. See e.g., St. Paul Fire & Marine Ins. Co. v. A.P.I., Inc., No. A06-1229, Order at 2 (Minn. App. filed Jan. 3, 2008) (awarding the appellant $618,587.19, including the costs of obtaining a superse-deas bond, because the appellant “established that the claimed amounts were paid to the surety,” and the respondent did not identify “any valid basis for denying or reducing the requested taxation”), rev. denied (Minn. Dec. 11, 2007). Second, the amount of the costs Cirrus seeks in proportion to the bond value is not excessive. The borrowing costs here, $542,583,33, *401were about 4.5 percent of the $12 million supersedeas bond. Courts have awarded financing costs of similar or larger sizes in relation to the supersedeas bonds filed, in addition to bond premiums. See, e.g., Creed v. Apog, 377 Mass. 522, 386 N.E.2d 1273 (1979) (awarding letter-of-credit costs equal to about 9.8 percent of the bond value awarded for obtaining the bond, in addition to bond premiums); N. Pointe Ins. Co. v. Steward, 265 Mich.App. 603, 697 N.W.2d 173, 180 (2005) (awarding letter-of-credit costs equal to about 3.5 percent of the bond value awarded for obtaining the bond, in addition to bond premiums). Thus, the court of appeals did not abuse its discretion in determining that the borrowing costs here were reasonable.
In sum, I would affirm the court of appeals, and hold that the court of appeals had authority under Minn. R. Civ. App. P. 139.02 to permit taxation of the borrowing costs at issue and did not abuse its discretion in awarding Cirrus its borrowing costs. Unquestionably, the borrowing costs here are large and warrant close scrutiny, and the court of appeals did scrutinize these costs. Moreover, at the risk of stating the obvious, the borrowing costs here are simply a function of the size of the judgment Cirrus was required to secure.5 But regardless of the amount, our analysis must be based on the relevant law and principles. To that end, Rule 139.02 provides that the court of appeals has discretion to award a prevailing party “disbursements necessarily paid or incurred.” Minn. R. Civ. App. P. 139.02. While the rule does not explicitly allow borrowing costs or otherwise mention interest, it does not expressly allow any of the costs this court typically awards, such as bond premiums, Henderson, 43 N.W.2d at 792. We have also held that whether or not a court should allow taxation of costs related to a supersedeas bond depends on the reasonableness of the costs. Id. Again, here, Cirrus submitted adequate documentation to demonstrate that the borrowing costs were “necessarily incurred” and reasonable. Thus, the court of appeals did not abuse its discretion in awarding Cirrus its borrowing costs. I respectfully dissent.

, The majority' argues that "whether bond' premiums are necessary does not depend' solely on the party’s financial situation,” and that "it is not the party’s financial situation, but rather the court’s order, that makes bond premiums necessary.” This unsupported contention implies that a district court may force a party to post a supersedeas bond even though the party chooses an alternative form of security. But it is not uncommon for the district courts to prefer other security.arrangements over supersedeas bonds. See Minn. R. Civ. App. P. 108.02 advisory comm. chit.—2009 amends. ("Subdivision 3 recognizes that security may be provided in any of several forms.... In many cases, a deposit into court or posting of a letter of credit may be preferable and less expensive.”).

. As the majority correctly notes, the taxability of bond premiums is not at issue, and I do not dispute the taxability of bond premiums. I simply disagree with the majority’s inconsistent treatment of two expenses that are both ’ necessary on appeal.

. Although Minnesota Practice is not binding on us, we have relied on it for information concerning real-world Minnesota practice. See, e.g., Mingen v. Mingen, 679 N.W.2d 724, 726 (Minn. 2004) (citing 3 Eric J. Magnuson & David F. Herr, Minnesota Practice—Appellate Rules Ann. § 104.11 (2003 ed.)); Maxwell Comm’cns v. Webb Publ’g Co., 518 N.W.2d 830, 834 n.6 (1994) (citing 3 Eric J. Magnuson, David F. Herr & Roger Haydock, Minnesota Practice—Appellate Rules Ann., 502 (1985)).

. I agree wiA the majority that where the language of Ae rule is plain,and.unambigu*400ous, we must follow the plain language. Supra at 396 n. 13; see Walsh v. U.S. Bank, N.A., 851 N.W.2d 598, 601 (Minn. 2014). That- is precisely why I dissent from today’s holding. As explained above, the majority imposes on Rule 139.02 restrictions not found in the plain language of the rule.

. To the extent the majority’s decision is animated by concerns regarding the court of appeals’ authority to assess and tax interest and other costs related to supersedeas bonds in commercial litigation, the proper method to allay such concerns is to refer Minn. R. Civ. App. P. 139.02 to the appropriate rule-making committee for consideration and potential amendment.