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American Safety Casualty Insurance Company v. City of Waukegan

December 20, 2011

AMERICAN SAFETY CASUALTY INSURANCE COMPANY PLAINTIFF,
v.
CITY OF WAUKEGAN,
DEFENDANT. CITY OF WAUKEGAN, COUNTER-PLAINTIFF,
v.
AMERICAN SAFETY CASUALTY INSURANCE COMPANY, INTERSTATE INDEMNITY COMPANY, CERTAIN UNDERWRITERS AT LLOYDS OF LONDON, NORTHFIELD INSURANCE COMPANIES, WESTPORT INSURANCE CORPORATION, EVANSTON INSURANCE COMPANY, S. ALEJANDRO DOMINGUEZ, AND PAUL HENDLEY, COUNTER-DEFENDANTS



The opinion of the court was delivered by: Magistrate Judge Finnegan

MEMORANDUM OPINION AND ORDER

This insurance coverage dispute between the City of Waukegan, Illinois ("Waukegan" or "the City") and its insurers arose from a $9,063,000 verdict entered against the City in a civil rights suit brought by S. Alejandro Dominguez, who was convicted of rape but later exonerated. At issue in this case was which, if any, of the City's various insurers were required to cover the City's loss from the Dominguez judgment. On March 3, 2011, the district judge entered judgment in favor of the City and against two of its insurers, primary carrier American Safety Casualty Insurance Company ("American Safety") and excess carrier Interstate Indemnity Company ("Interstate"), finding that those two carriers insured the City when Mr. Dominguez's due process claim against it accrued and are obligated to indemnify the City for the judgment against it, and that the City's loss was the $11,397,195.39 it paid to satisfy the judgment, including interest, attorneys' fees, and costs. (Docs. 811, 884). Pursuant to Section 155 of the Illinois Insurance Code, the district judge also awarded the City its attorneys' fees for litigating its declaratory judgment action against American Safety. As to the other carriers in the case, the district judge granted summary judgment in their favor. Because the record was underdeveloped, the district judge ordered briefing concerning who is responsible for the $2,334,195.39 difference between the verdict and judgment. On July 6, 2011, the district court issued a Memorandum Opinion and Order allocating the City's $11,397,195.39 loss by amount and responsible party. (Doc. 884). After denying the parties' motions to alter or amend the judgment, the district judge entered an order and final judgment disposing of this matter on July 29, 2011. (Doc. 910).

The City now seeks to recover its costs from American Safety and Interstate pursuant to Federal Rule of Civil Procedure 54(d)(1) and 28 U.S.C. § 1920, as well as its attorneys' fees from American Safety pursuant to the district judge's order of March 3, 2011. The district judge referred the City's bills of costs and fee petition to this Court for decision. For the reasons set forth below, the City of Waukegan is awarded $4,265.23 in costs and $255,376.84 in attorneys' fees and costs from American Safety, and $2,954.76 in costs from Interstate.

DISCUSSION

A. The Bills of Costs

Federal Rule of Civil Procedure 54(d)(1) provides that "costs -- other than attorney's fees -- should be allowed to the prevailing party" unless "a court order provides otherwise." Rule 54(d) creates a "strong presumption that costs will be awarded to the prevailing party," and that presumption is "difficult to overcome." U.S. Neurosurgical, Inc. v. City of Chicago, 572 F.3d 325, 333 (7th Cir. 2009); Weeks v. Samsung Heavy Indus. Co., 126 F.3d 926, 945 (7th Cir. 1997). Under 28 U.S.C. § 1920, recoverable costs include (1) fees of the clerk and marshal, (2) fees for transcripts necessarily obtained for use in the case, (3) fees and disbursements for printing and witnesses, (4) fees for copies necessarily obtained for use in the case, (5) docket fees, and (6) compensation of court appointed experts and interpreters. Republic Tobacco Co. v. North Atlantic Trading Co., 481 F.3d 442, 447 (7th Cir. 2007). Costs are not recoverable if they were incurred solely for the convenience of the prevailing party. Trading Tech. Int'l, Inc. v. eSpeed, Inc., 750 F.Supp.2d 962, 969 (N.D. Ill. 2010).

There is no dispute here that the district judge entered judgment in favor of the City on the claims concerning American Safety and Interstate, and that the City is the prevailing party in this lawsuit. (Docs. 811, 884). See also Republic Tobacco Co., 481 F.3d at 446 (quoting Moore's Federal Practice § 54.101[3] (3d ed. 2006)) ("Courts and commentators have interpreted 'prevailing party' to mean 'the party in whose favor judgment has been entered.'")). The prevailing party has the "'burden of demonstrating the amount of its recoverable costs.'" Trading Tech. Int'l, 750 F.Supp.2d at 969 (citation omitted). But the losing party "bears the burden of an affirmative showing that taxed costs are not appropriate." Davis v. Budz, No. 99 C 3009, 2011 WL 1303435, at *1 (N.D. Ill. Mar. 31, 2011) (quoting Beamon v. Marshall & Ilsley Trust Co., 411 F.3d 854, 864 (7th Cir. 2005)).

The City petitions that American Safety pay the following costs totaling $16,295.69: (1) $1,108.76 for witness appearance and mileage fees; (2) $1,981.33 for deposition and hearing transcript costs; (3) $306.20 for attorney travel costs; (4) $247.79 for commercial copying costs; and (5) $12,651.61 for internal copying costs, which includes a "cost allowance" in the amount of $8,611.27. (Docs. 840, 872, 971). The City petitions that Interstate pay the following costs totaling $6,747.07: (1) $48.25 for witness/mileage fees; (2) $2,218.33 for court reporter/transcript costs; (3) $615.20 for attorney travel costs; (4) $247.79 for commercial copying costs; and (5) $3,617.50 for internal copying and binding costs. (Docs. 839, 873). In addition, the City seeks a total of $3,130,168.42 from both American Safety and Interstate in financing costs associated with the expense of securing funds to satisfy the Dominguez judgment. The court considers each request in turn.

1. Witness Appearance and Mileage Fees

The City seeks to recover appearance and mileage fees for certain witnesses to attend depositions in this case. Under 28 U.S.C. § 1920(3), recovery of fees and disbursements for witnesses is allowed, however the recoverable witness fee is limited to $40 per day plus travel expenses or mileage for attendance at court or a deposition. See 28 U.S.C. § 1821; see also Portman v. Andrews, 249 F.R.D. 279, 282 (N.D. Ill. 2007) (citing 28 U.S.C. § 1821).

From American Safety, the City seeks to recover $1,108.76 in witness appearance and mileage fees it paid to two former American Safety employees, Harold Berezin and Peter Hildebrand, to appear for their depositions. (Doc. 840 at 5). This amount consists of $54.38 in mileage costs for each of the two witnesses, plus a $500 "appearance fee" the City paid to each of the witnesses. (Doc. 840 at Exh. 3). The City asserts that it should be awarded the $500 fees since the witnesses demanded fees in this amount and at least one of them refused to be deposed unless he received it. (Doc. 971 at 12). But the City cites no legal authority to support its position, and the statute is clear on this point. The City is not entitled to recover appearance fees it paid to Mr. Berezin and Mr. Hildebrand beyond the $40 per witness authorized by the statute. See 28 U.S.C. § 1821. Accordingly, the Court reduces the requested award by $920 and taxes costs for witness appearance and mileage fees in favor of the City and against American Safety in the amount of $188.76.

From Interstate, the City seeks to recover $48.25 in witness appearance and mileage fees for the deposition of former Interstate employee Terry Donahoe. (Doc. 839 at 5, Exh. B at ¶ 12). Although the documentation provided by the City does not specify the breakdown of costs, Interstate does not object and presumably the expense consists of the $40 appearance fee authorized by statute plus $8.25 for mileage. See 28 U.S.C. § 1821. Accordingly, the Court taxes costs for witness appearance and mileage fees in favor of the City and against Interstate in the amount of $48.25.

2. Deposition and Hearing Transcript Costs

The City also seeks to recover its expenses for obtaining transcripts of certain depositions and court hearings. Section 1920(2) allows recovery of fees for "transcripts necessarily obtained for use in the case." 28 U.S.C. § 1920(2). Local Rule 54.1 further elaborates that the costs of such transcripts "shall not exceed the regular copy rate as established by the Judicial Conference of the United States and in effect at the time the transcript or deposition was filed unless some other rate was previously provided for by order of court." L.R. 54.1(b). For ordinary transcripts, the rate is $3.65 per page for an original transcript and $0.90 for the first copy to each party. See Maximum Transcript Rates, http://www.ilnd.uscourts.gov/clerks_office/CrtReporter/trnscrpt.htm (last viewed Dec. 15, 2011). The local rule also specifies that only the cost of the original and one copy where needed shall be allowed. (Id.)

a. American Safety

From American Safety, the City seeks to recover transcript costs for the depositions of certain City and American Safety witnesses and for two court hearings. The City initially sought $3,658.26 in court reporter and transcript costs from American Safety (Doc. 840 at 5); however, in response to American Safety's objections it subsequently reduced its request to $1,981.33 for depositions and $24.19 for hearings. (Doc. 971 at 12-15). The City revised the amounts it sought for transcripts such that they no longer exceed the maximum rates per page allowed by the Judicial Conference. In addition, the City withdrew certain additional costs to which American Safety objected, including court reporter attendance fees and archiving, diskette, and delivery charges, although it kept a partial court reporter attendance fee for the Fisher deposition and it included $15 fees for condensed transcripts for the Berezin and Hildebrand depositions. The revised breakdown of the amounts sought for each transcript is as follows: Bob D'Olympio ($609.55), Linda Ford ($51.66), Marianne Veltri ($44.28), Jean Fisher ($748.25), Harold Berezin ($105.90), Peter Hildebrand ($158.10), Michael Noonan ($65.52), William Anderson ($79.47), Steve Pearson ($34.65), and Paul Hendley ($83.95). (Doc. 971 at Exh. H). In its cost calculations, the City attributed to American Safety the full amount of the D'Olympio, Fisher, Berezin, and Hildebrand depositions, but only 20% of the six other depositions.

As a threshold issue, American Safety objects to recovery of any portion of the transcript costs for the Pearson, Anderson, and Hendley depositions on the ground that those transcripts were not utilized in the summary judgment briefs and therefore were not necessarily "obtained for use in the case" as the statute requires. The fact that a particular deposition is not used as evidence is not determinative of whether the deposition transcript costs may be recovered. Instead courts have focused on whether the deposition was reasonably necessary to the case. State of Illinois v. Sangamo Const. Co., 657 F.2d 855, 867 (7th Cir. 1981); Fagbemi v. Spatz, No. 08 C 3736, 2010 WL 3522946, *4 (N.D. Ill. Sep. 2, 2010) ("Expenses related to depositions, including transcript costs, are recoverable even if the depositions are not used as evidence at trial or in support of a motion for summary judgment as long as the prevailing party shows that the depositions were 'reasonably necessary' to the case."). "The determination of necessity must be made in light of facts known at the time of the deposition." Gallagher v. Gallagher, No. 07 CV 4196, 2010 WL 2610192, *3 (N.D. Ill. June 24, 2010) (quoting M.T. Bonk Co. v. Milton Bradley Co., 945 F.2d 1404, 1410 (7th Cir. 1991)). In its objections, American Safety does not argue that the depositions of these three witnesses were not reasonably necessary to the case, but rather relies solely on the fact that the depositions were not used in the summary judgment briefs. The City, in reply, emphasizes that former American Safety claims adjustors Berezin and Hildebrand were integrally involved in the handling of the City's insurance claim, including the coverage determination which is at the heart of this declaratory action. (Doc. 971 at 15). Regarding the deposition of police officer Paul Hendley, a co-defendant in the underlying Dominguez case, the City asserts that his deposition was necessary since American Safety and other insurers "claimed certain policy defenses relating to Hendley's alleged conduct in the Dominguez investigation and arrest." (Id.) These facts are sufficient to establish that at the time the depositions were taken, the City appropriately determined that Berezin, Hildebrand, and Hendley's testimony was reasonably necessary to the litigation.

Having concluded that transcript costs associated with each of the ten depositions are recoverable at least in part, the Court now addresses whether certain other costs associated with the City's transcript requests are recoverable. First, the City seeks to recover $41.75 of the $250 court reporter appearance fee for the Fisher deposition, although its cost calculations do not appear to include the $41.75 in the total amount of $748.25 it seeks from American Safety based on a 205-page transcript at the maximum rate of $3.65 per page. (Doc. 971 at Exh. H). The City cites Held v. Held, 137 F.3d 998, 1002 (7th Cir. 1998), for the proposition that this Court may tax costs for fixed court reporter appearance fees. But this Court is persuaded by the reasoning of subsequent cases declining to exercise such discretion where a court reporter fee pushes the overall cost of the transcript beyond the maximum ordinary transcript rates established by the Judicial Conference. See Higbee v. Sentry Ins. Co., No. 97 C 1349, 2004 WL 1323633, *2 (N.D. Ill. June 11, 2004); Rogers v. City of Chicago, No. 00 C 2227, 2002 WL 423723, *4 (N.D. Ill. Mar. 15, 2002). Here, the City calculated that the Fisher transcript was charged at a rate of $4.26 per page, but reduced it to the Judicial Conference rate of $3.65 per page in its revised request. (Doc. 971 at Exh. H). Since the amount the City seeks to recover for the Fisher transcript is already at the maximum allowable amount, no additional costs for the court reporter appearance fee will be allowed; however, there is no need to reduce the amount requested because the City did not include the $41.75 fee in its calculations in any event.

Next, the Court considers whether to tax the court reporter exhibit reproduction costs the City seeks to recover for the Anderson and Pearson transcripts. Specifically, the City requests a 20% prorated portion of the $184.05 charge for the Anderson exhibits and the $85.95 charge for the Pearson exhibits. These costs are in addition to the maximum allowable amount the City seeks based on the cost per page of the transcripts. (Doc. 971 at Exh. H). Costs for exhibit reproduction are recoverable if the prevailing party establishes that "the exhibits were essential to understanding an issue in the case." Camp v. Centrue Bank, No. 08 C 4020, 2011 WL 2581751, *2 (N.D. Ill. June 28, 2011) (citing Harkins v. Riverboat Servs., Inc., 286 F.Supp.2d 976, 980 (N.D. Ill. 2003)). Here, the City asserts that an award is appropriate given that this case encompassed over 15 depositions, that there were at one time seven parties to the action, and that numerous motions were filed and extensive discovery exchanged while the case was litigated over a period of several years. (Doc. 971 at 14). While inclusion of the exhibits with the transcript may have been convenient given the number of depositions taken, the City has not shown that the exhibit copies were essential. See Boyle v. Torres, No. 09 C 1080, 2011 WL 899720, *2 (N.D. Ill. Mar. 15, 2011) (declining to award charges for exhibit costs where prevailing parties did not show that exhibits "were anything other than extra copies of documents already within their possession"); Menasha Corp. v. News America Marketing Instore, Inc., No. 00 C 1895, 2003 WL 21788989, * 2 (N.D. Ill. July 31, 2003). Accordingly, the Court reduces the award by $36.81 for the prorated cost of the Anderson exhibits and by $17.19 for the prorated cost of the Pearson exhibits.

Next, the Court considers whether to award the City costs for condensed transcripts where regular copies of those transcripts also were purchased. Specifically, the City seeks to recover a $15 per transcript fee for condensed transcripts of the Berezin and Hildebrand depositions, in addition to the maximum allowable fee it seeks to recover for obtaining copies of each transcript. (Doc. 971 at Exh. H). The City argues that the condensed transcript fees are recoverable costs incidental to the taking of a deposition. (Doc. 971 at 13, citing Alsaras v. Dominick's Finer Foods, Inc., No. 99 C 4226, 2001 WL 1117275, *2 (N.D. Ill. Sep. 19, 2001)). But condensed transcript costs are generally not taxable "because they are not necessary to litigation and are merely for the convenience of the attorney." Garcia v. City of Chicago, No. 08 C 5354, 2010 WL 4134996, *1 (N.D. Ill. Oct. 12, 2010); see also Ochana v. Flores, 206 F.Supp.2d 941, 945 (N.D. Ill 2002) ("Costs for condensed transcripts are not recoverable."). The City presents no reason to conclude that the condensed transcripts in this instance were purchased for any purpose other than counsel's convenience. Thus, the Court reduces the award by $30, the cost of the two condensed transcripts.

Finally, the Court considers whether to award the City costs for the transcripts of two court hearings, which took place on February 27, 2008 and December 13, 2010. American Safety argues that the request should be denied because the City failed to identify the need for the transcripts. In its reply, the City clarified that the first transcript, concerning its motion to amend its counterclaim to join additional parties, was necessarily obtained because the minute order granting the motion provided no detail; thus it needed the transcript to insure it complied fully with the district judge's ruling set forth in open court. As to the second transcript concerning the City's motion before this Court to compel American Safety to produce documents on its privilege log, the City clarified that it needed the transcript to attach to the objections it filed with the district judge to this Court's denial of the motion. These are reasonable justifications for the necessity of obtaining the transcripts. The Court taxes costs at the requested amount of 20% of the cost of $14.70 for the first transcript and $106.25 for the second transcript. Accordingly, the Court awards the City $24.19 for hearing transcripts, consisting of $2.94 for the first transcript and $21.25 for the second transcript.

For these reasons, the Court taxes costs for deposition and hearing transcripts in favor of the City of Waukegan and against American Safety in the amount of $1,921.52.

b. Interstate Indemnity

From Interstate, the City seeks to recover $2,218.33 in transcript costs for the depositions of certain City and Interstate witnesses and for two court hearings. (Doc. 839 at 5). The City provides no breakdown of the percentage it seeks to recover from Interstate for the cost of each transcript, but simply attaches invoices for the following transcripts: Linda Ford ($761.85), Marianne Veltri ($657.30), Scott Byrne ($891.10), Terry Donahoe ($618.75), Michael Noonan ($1,090), and Paul Hendley ($547.50). (Id. at Exh. 4). While Interstate makes no objections, clearly the City cannot recover the full amount of the Ford, Veltri, Noonan, and Hendley transcripts since it sought and will be granted 20% of appropriate costs for those transcripts from American Safety. The Court therefore taxes costs against Interstate for those four transcripts at the same 20% prorated amount taxed against American Safety, which equates to $51.66 for Ford, $44.28 for Veltri, $65.52 for Noonan, and $83.95 for Hendley. (Doc. 971 at Exh. H).

As for Scott Byrne and Terry Donahoe, they are current or former Interstate employees (Doc. 839 at Exh. B, ¶ 9), so any costs to be taxed for these transcripts are taxable against Interstate in the full amount. But, for the same reasons noted above as to American Safety, certain costs in the invoices are not recoverable, including court reporter attendance fees and exhibit reproduction costs, and the total transcript cost cannot exceed the maximum rate per page specified by the Judicial Conference. Thus, for the Byrne transcript, the City is entitled to the $683.10 charged for 198 pages, which equates to a permissible rate of $3.45 per page. (Id. at Exh. 4). However, the remaining fees of $200 for "E-transcript and Scrunch" and $8 for handling and delivery are allowed only in an amount to bring the total cost up to the maximum Judicial Conference rate of $3.65 per page, or $722.70. The invoice for the Donahoe transcript charges $551.25 for 147 pages, which equates to a rate of $3.75 per page. (Id. at Exh. 4). Therefore, the taxable amount is reduced to $3.65 per page, or $536.55. The additional charges for the reporter attendance fee, exhibits, and postage and handling are not taxed as costs for the reasons previously discussed. Accordingly, the Court taxes costs against Interstate in the amount of $1,504.66 for the six deposition transcripts identified above.

Finally, the City requests costs from Interstate for transcripts of the same two court hearings of February 27, 2008 and December 13, 2010 discussed above as to American Safety. For the same reasons set forth above, the Court concludes that the transcript was necessarily obtained for the status conference of February 27, 2008. However, the request for costs is denied as to the December 13, 2010 hearing because that hearing concerned a motion to compel documents from American Safety only and not from Interstate. Accordingly, the Court taxes costs against Interstate for hearing transcripts in the amount of $2.94, comprising 20% of the cost of $14.70 for the February 27, 2008 hearing transcript.

For these reasons, the Court taxes costs for deposition and hearing transcripts in favor of the City of Waukegan and against Interstate in the amount of $1,507.60.

3. Attorney Travel Costs

The City seeks to recover $306.20 in travel costs incurred by its attorney to take the depositions of two former American Safety employees in Atlanta, Georgia where American Safety maintains its corporate headquarters. (Doc. 840 at 5-6). From Interstate, the City seeks to recover $615.20 in costs for its attorney to travel to Denver, Colorado for the deposition of former Interstate employee Terry Donahoe. (Doc. 839 at 4). But 28 U.S.C. § 1920 does not provide for recovery of attorney travel expenses. Calderon v. Witvoet, 112 F.3d 275, 276 (7th Cir. 1997) (citing Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 107 S.Ct. 2494, 96 L.Ed.2d 385 (1987) and Collins v. Gorman, 96 F.3d 1057 (7th Cir. 1996)); see also Freedom Mortgage Corp. v. Burnham Mortgage, Inc., No. 03 C 6508, 2008 WL 4534162, *2 (N.D. Ill. Oct. 3, 2008) (attorney travel is an ordinary business expense not enumerated under § 1920 and should be excluded from bill of costs). The City's reliance on Cintas Corp. v. Perry, 494 F.Supp.2d 907 (N.D. Ill. 2007), is misplaced, as attorney travel costs were awarded in that case only because an employment agreement between the parties entitled the employee to such costs "regardless of the restrictions placed on costs by the federal rules." Id. at 909. Accordingly, the City's attorney travel expenses are not taxable as costs under Rule 54(d)(1).*fn1

4. Copying Costs

The City also seeks to recover costs it incurred for copying, binding and tabbing various court filings and other documents. Section 1920(4) allows recovery of fees "for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case." 28 U.S.C. ยง 1920(4); see also M.T. Bonk Co., 945 F.2d at 1410. The party seeking to recover costs "[i]s not required to submit a bill of costs containing a description so detailed as to make it impossible economically to recover photocopying costs," but rather "[i]s required to provide the best breakdown obtainable from retained records" in order to make the required showing of necessity. Northbrook Excess & Surplus Ins. Co. v. Procter & Gamble, 924 F.2d 633, 643 (7th Cir. 1991); see also Brown v. County of Cook, No. 06 C 617, 2011 WL 4007333, *4 (N.D. Ill. Sep. 8, 2011); Glenayre Electronics, Inc. v. Jackson, No. 02 C 0256, 2003 WL 21947112, *3 (N.D. Ill. Aug. 11, 2003).Namely, the party must show "the nature of the documents copied, including how they were used or intended to be used in the case." Glenayre Electronics, No. 02 C 0256, 2003 WL 21947112, *3; ...


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