900 N.W.2d 386
Minn.2017Background
- Alan Klapmeier won a $10 million jury verdict against Cirrus Industries for breach of a non-disparagement clause; the district court required Cirrus to post security to stay judgment pending appeal.
- Cirrus obtained a $12 million supersedeas bond by borrowing $12 million from its captive insurer (SAIC), paying bond premiums and interest at 4.25% to SAIC; the bond was collateralized by a bank letter of credit.
- The court of appeals reversed the jury verdict and Cirrus sought taxation of appellate costs, including $192,000 in bond premiums and $743,750 in borrowing costs (interest paid to SAIC); the court of appeals taxed $542,583.33 of those borrowing costs.
- Klapmeier objected, arguing Minnesota law does not permit taxation of interest/borrowing costs and sought review or an extraordinary writ; this Court granted a petition for a writ of prohibition to review the taxation decision.
- The Supreme Court held Rule 117 petitions for review cannot be used to challenge court of appeals taxation orders (Rule 139.04 bars appeals of taxation), but extraordinary writ relief (Rule 120) is available in proper cases and issued the writ here.
- On the merits, the Court concluded that borrowing costs (interest on a loan to secure a supersedeas bond) are not "disbursements necessarily paid or incurred" under Minn. R. Civ. App. P. 139.02 and reversed the taxation of those borrowing costs; bond premiums and customary appellate costs remain taxable as appropriate.
Issues
| Issue | Plaintiff's Argument (Klapmeier) | Defendant's Argument (Cirrus) | Held |
|---|---|---|---|
| Whether this Court may review a court of appeals order taxing costs and disbursements | Rule 117 review should be available where taxation deviates from law; alternatively, an extraordinary writ is proper | Rule 139.04 bars appeal of taxation decisions; extraordinary writs would swallow the rule | Rule 117 review is not permitted for taxation orders, but an extraordinary writ (Rule 120) is available in rare cases; writ granted here |
| Whether borrowing costs (interest on loan to obtain collateral for a supersedeas bond) are taxable under Minn. R. Civ. App. P. 139.02 | Borrowing costs are not taxable; they are not "necessarily paid or incurred" by virtue of the appeal because financing choices are independent of the appeal | Rule 139.02 broadly allows taxation of disbursements necessarily paid or incurred; borrowing costs are analogous to other bond-related costs and should be taxable | Borrowing costs are not "necessarily paid or incurred" for purposes of Rule 139.02 and are not taxable; taxation of Cirrus’s borrowing costs reversed |
| Whether bond premiums and other routine appellate costs are taxable | (implicit) Bond premiums and necessary appellate costs are taxable | Bond premiums and routine appellate costs are taxable | Bond premiums and routine appellate costs (filing fees, transcripts, briefs, and $128,000 in bond premiums) remain taxable |
| Standard and limits on extraordinary-writ relief to review taxation orders | Extraordinary relief appropriate because no other adequate remedy exists and rule-based bar prevents review | Extraordinary writs should be extremely limited so Rule 139.04 remains meaningful | Extraordinary writs may be used but only in rare/extreme cases; requirements for prohibition met here because taxation of borrowing costs was unauthorized by law |
Key Cases Cited
- Madson v. Minnesota Mining & Mfg. Co., 612 N.W.2d 168 (Minn. 2000) (procedural-rule interpretation reviewed de novo)
- Walsh v. U.S. Bank, N.A., 851 N.W.2d 598 (Minn. 2014) (follow plain language of court rules)
- Lund v. Commissioner of Public Safety, 783 N.W.2d 142 (Minn. 2010) (taxation-of-costs against the State; distinguishes scope of review)
- Servin v. Servin, 345 N.W.2d 754 (Minn. 1984) (supersedeas bonds are costs of appeal)
- Lerman v. Flynt Distrib. Co., 789 F.2d 164 (2d Cir. 1986) (borrowing expense to collateralize a bond not taxable in addition to premium)
- Republic Tobacco Co. v. North Atlantic Trading Co., 481 F.3d 442 (7th Cir. 2007) (borrowing costs taxable in lieu of bond premium in limited circumstances)
- Bose Corp. v. Consumers Union of U.S., Inc., 806 F.2d 304 (1st Cir. 1986) (letter-of-credit costs taxable where not greater than a bond premium)
- Johnson v. Pacific Lighting Land Co., 878 F.2d 297 (9th Cir. 1989) (treating letter-of-credit cost as equivalent to a bond premium)
- Rossa v. D.L. Falk Construction, Inc., 53 Cal.4th 387 (Cal. 2012) (California Supreme Court denied taxation of interest to borrow funds for letter-of-credit collateral)