United States District Court, C.D. Illinois, Peoria Division
October 8, 2004.
DEBRA KEACH and PATRICIA SAGE, Plaintiff,
U.S. TRUST COMPANY, N.A., f/k/a/ U.S. TRUST COMPANY OF CALIFORNIA, N.A., ELLEN D. FOSTER, as Executrix of the Estate of Thomas S. Foster and as Co-Trustee of the Thomas S. Foster Trust executed on April 14, 1994, THE NORTHERN TRUST COMPANY, an Illinois Corporation, as Co-Trustee of the Thomas S. Foster Trust executed on April 14, 1994, MELVIN R. REGAL, individually, as trustee or agent of the Steven Jay Regal Trust, as trustee or agent of the Judi Lynn Regal Trust, and as trustee or agent of the John E. Regal Trust, A. ROBERT PELLEGRINO, VALUEMETRICS, INC., HOULIHAN, LOKEY, HOWARD & ZUKIN, INC., ROBERT A. OSTERTAG, JR., TERRY P. COLE, ALAN R. DIX, JON D. ELLETSON, STEPHEN P. BARTLEY, LYLE T. DICKES, JAMES N. FREID, DALE FUJIMOTO, WILLIAM J. GEHRING, HENRY R. GREGORY II, JOHN F. HALPIN, RICHARD S. HODGSON, JAMES H. KYLE, JOHN LAPPEGAARD, GREGORY K. McALLISTER, GEORGE McKITTRICK, MICHAEL F. NORBUTAS, CLAYTON PATINO, JERRY L. RATHMANN, FREDERICK J. STUBER, W. THOMAS STUMB, MARK SWEDLUND, LEO A. VANDERVLUGT, ROBERT J. WILSON, BRUCE B. WRIGHT, and ASHLEY ANNE FOSTER, as trustee or agent of the Ashley Anne Foster Irrevocable Trust, Defendant.
The opinion of the court was delivered by: MICHAEL MIHM, District Judge
Following a bench trial that resulted in judgment being entered
in favor of Defendants and against Plaintiffs, Defendant U.S.
Trust Company, N.A. ("U.S. Trust") subsequently submitted a Bill
of Costs pursuant to Federal Rule of Civil Procedure 54(d),
seeking to recover a total of $157,781.61. Plaintiffs object to
the award of any costs, or alternatively to several items in the
Bill of Costs. For the reasons stated herein, Plaintiffs'
objections are allowed, and the Court declines to award any of
the costs sought by U.S. Trust.
Generally in civil cases, "costs . . . shall be allowed as of
course to the prevailing party unless the court otherwise
directs. . . ." Fed.R. Civ. P. 54(d)(1). The costs that may be
recovered pursuant to Rule 54(d)(1) are specified in
28 U.S.C. § 1920. See Crawford v. Fitting Co. v. J.T. Gibbons, Inc.,
482 U.S. 437, 441 (1987). They include: (1) fees of the clerk and
marshal; (2) fees of the court reporter; (3) fees and
disbursements for printing and witnesses; (4) fees for
exemplification and copies of "papers necessarily obtained for use in the case"; (5) docket
fees; and (6) compensation of court appointed experts and
interpreters. 28 U.S.C. § 1920.
Rule 54(d) creates a strong presumption favoring the award of
costs to the prevailing party. See Weeks v. Samsung Heavy
Indus. Co., Ltd., 126 F.3d 926, 945 (7th Cir. 1997). "The
presumption is difficult to overcome, and the district court's
discretion is narrowly confined the court must award costs
unless it states good reasons for denying them." Id. (citation
omitted). The losing party must affirmatively demonstrate the
prevailing party is not entitled to costs. See M.T. Bonk Co.
v. Milton Bradley Co., 945 F.2d 1404, 1409 (7th Cir. 1991).
Here, U.S. Trust has submitted separate Bills of Cost from the
two firms that represented it during this litigation. O'Melveny
and Myers has submitted a Bill of Costs seeking a total of
$108,483.33, and Heyl, Royster, Voelker & Allen requests costs in
the amount of $49,298.28.
Plaintiffs first argue that in ERISA cases, awards of costs are
governed by the discretionary language of 29 U.S.C. § 1132(g)(1),
rather than the presumptive standard of Rule 54(d). Section §
1132(g)(1) provides that "[i]n any action under this title . . .
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." In support of this argument, Plaintiffs
cite Marquardt v. North American Car Corp., 652 F.2d 715,
719-20 (7th Cir. 1981), and Nichol v. Pullman Standard,
Inc., 889 F.2d 115, 121 (7th Cir. 1989).
U.S. Trust correctly notes that in Marquardt, fees were
sought exclusively pursuant to § 1132(g)(1) with no reference to
or discussion of the applicability of Rule 54(d). On the other
hand, in McIlveen v. Stone Container Corp., 910 F.2d 1581
(7th Cir. 1990), which U.S. Trust relies on, costs were sought solely
pursuant to Rule 54(d) with no reference to or discussion of the
applicability of § 1132(g)(1). Needless to say, the Court has
been unable to find any clear precedent in this circuit resolving
this question. That being said, the Court finds that the more
in-depth and persuasive analysis stems from the cases applying
standards for assessing costs pursuant to § 1132(g) and will
therefore adopt this approach for purposes of resolving the
District courts entertain a "modest presumption" that
prevailing parties are entitled to reasonable costs pursuant to §
1132(g)(1). Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574,
592 (7th Cir. 2000), citing Little v. Cox's Supermarkets,
71 F.3d 637, 644 (7th Cir. 1995); see also, Bittner v.
Sadoff & Rudoy Indust., 728 F.2d 820, 830 (7th Cir. 1984).
However, this presumption is rebuttable. Bowerman,
226 F.3d at 592, citing Harris Trust & Savings Bank v. Provident Life &
Accident Insurance Co., 57 F.3d 608, 617 (7th Cir. 1995).
The Seventh Circuit has used two tests to determine whether a
prevailing party is entitled to an award of costs. The first test
considers the following five factors:
(1) the degree of the offending parties' culpability
or bad faith; (2) the degree of the ability of the
offending parties to satisfy personally an award of
attorney's fees; (3) whether or not an award of
attorney's fees against the offending parties would
deter other persons acting under similar
circumstances; (4) the amount of benefit conferred on
members of the plan as a whole; and (5) the relative
merits of the parties' positions.
Bowerman, 226 F.3d at 592-93, citing Quinn v. Blue Cross and
Blue Shield Association, 161 F.3d 472
, 478 (7th Cir. 1998).
As this test was found to be "oriented toward the case where the
plaintiff rather than the defendant prevails and seeks an award,"
the Court of Appeals proposed an alternative test, under which a
prevailing party is awarded attorney's fees "unless the loser's position, while
rejected by the court, had a solid basis more than merely not
frivolous, but less than meritorious." Rivera v. Benefit Trust
Life Insurance Co., 921 F.2d 692
, 698 (7th Cir. 1991),
citing Bittner, 728 F.2d at 829-30. However, the real
question under either test "is essentially the same: was the
losing party's position substantially justified and taken in good
faith, or was that party simply out to harass its opponent?"
Anderson v. Flexel, Inc., 47 F.3d 243
, 251 (7th Cir. 1995),
citing Meredith v. Navistar International Trans. Corp.,
935 F.2d 124
, 128 (7th Cir. 1991); Bowerman, 226 F.3d at 593;
Trustmark Life Insurance Co. v. University of Chicago
Hospitals, 207 F.3d 876
, 884 (7th Cir. 2000).
Here, the Plaintiffs were beneficiaries of the Foster &
Gallagher ("F&G") ESOP who brought this litigation with the hope
of restoring lost retirement funds to all of the participants in
the plan based on their belief that the loss was the result of
mismanagement and breach of fiduciary duty by F&G's management.
After presiding over this case for more than three years,
including the extensive motions practice and lengthy bench trial,
the Court cannot find that Plaintiffs acted with any harassing or
improper motives or pursued this litigation in anything other
than good faith. While the Plaintiffs were ultimately
unsuccessful, their position was not frivolous and had a solid
basis. In fact, the record was such that the Court denied several
Motions for Summary Judgment and requests for directed verdict at
trial. Given these circumstances, it is not difficult to see that
an award of the substantial costs sought in this case would
likely have a chilling effect on participants in other ERISA
plans who reasonably believe that they have meritorious claims
and deter them from bringing challenges where the defendants'
liability is not a foregone conclusion because they would be
reluctant to risk the imposition of attorney's fees and costs; such an effect would
not be in the public interest.
Based on these findings and a review of the parties' arguments
in light of the Court's extensive knowledge of the record in this
case, the Court must conclude that Plaintiffs' position, though
not meritorious, was more than merely not frivolous and was
"substantially justified" within the meaning of Bittner,
Anderson, Bowerman, and Trustmark. Accordingly, the Court
must conclude that Plaintiffs' good faith, in conjunction with
the fact that their position was "substantially justified," is
sufficient to overcome the modest presumption in favor of costs
under § 1332(g) and declines to award any of the costs sought.
For the reasons set forth above, the Court finds that the
modest presumption in favor of awarding reasonable costs to the
prevailing party that is recognized in the Seventh Circuit has
been overcome, and U.S. Trust's Bill of Costs [#642] is therefore
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