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In Minnesota can I recover attorneys’ fees if my opponent pursues baseless claims? The answer is: yes.

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Jon Hanson,
Plaintiff and Counter-Defendant,
v.
Loparex, Inc., and Loparex, LLC,
Defendants, Counter-Plaintiffs,
and Third-Party Plaintiffs,
v.
Mondi Packaging Akrosil, LLC, and
Mondi Packaging Minneapolis, Inc.,
Third-Party Defendants.
Civil No. 09-1070 (SRN/FLN)
MEMORANDUM OPINION
AND ORDER

SUSAN RICHARD NELSON, United States District Judge
This Court previously denied as moot in part, denied in part, and granted in part
the motions for Rule 11 sanctions against Defendants Loparex Inc. and Loparex LLC
brought by Plaintiff Jon Hanson (Doc. No. 416), and by Third-Party Defendants Mondi
Packaging Akrosil, LLC, and Mondi Packaging Minneapolis, Inc. (Doc. No. 448). The
Court now awards fees and costs as a sanction, and also taxes costs against Loparex.
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I. FACTUAL AND PROCEDURAL SUMMARY
On August 15, 2011, after ruling on the parties’ summary judgment motions, the
Court addressed the last outstanding discovery motions by Hanson and by Loparex,
which sought sanctions for alleged discovery misconduct (Doc. Nos. 225, 276 & 290), as
well as their Rule 11 motions for sanctions (Doc. Nos. 416 & 448). The Court, among
other things, imposed Rule 11 sanctions against Loparex’s counsel. (Doc. No. 462.)
The Court concluded that Hanson and Mondi should recover their fees and costs
incurred in defending against Loparex’s damages claim based on the audit that Ernst &
Young conducted in early 2009, and which until the summary judgment hearing Loparex
had alleged was caused by Hanson’s disparaging remarks about Loparex to its bankers
who had financed Loparex’s acquisition of Douglas-Hanson. The Court explained that
Loparex’s counsel lacked–since it first asserted the claim in early November 2009–any
evidentiary support whatsoever for that damages claim. See Fed. R. Civ. P. 11(b)(3).
Loparex’s counsel repeatedly represented that it made the claim in good faith and with
evidentiary support, only for it to become clear in the end that Loparex never had any
evidence to support the claim. And because Loparex nonetheless pursued that claim until
finally withdrawing it on April 29, 2011, Loparex needlessly and significantly increased
the cost of this litigation. See Fed. R. Civ. P. 11(b)(1). Moreover, this was Loparex’s
only clearly-articulated claim for damages. (Doc. No. 418, at 15-26.)
The Court concluded that effective deterrence of similar conduct requires payment
to Hanson and Mondi all of the reasonable attorney’s fees and other expenses directly
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resulting from Loparex’s untenable pursuit of its damages claims for the Ernst & Young
audit. Loparex’s pursuit of this claim–right up until the hearing on summary
judgment–involved an ongoing violation of Rule 11 that caused a needless increase in the
cost of this litigation for Hanson and Mondi over a period of about one and one-half
years. Each attempt by Hanson and Mondi to ferret out the evidentiary support for
Loparex’s damages claim resulted, not in the production of evidence permitting them to
discern the basis for Loparex’s claim, but rather only in a seemingly endless cycle of
additional discovery, incrementally increasing the litigation costs to them at every step.
Hanson and Mondi then had to address the issue not only in their motions for summary
judgment, but also in their responses to Loparex’s motion for summary judgment.
The Court further explained that an award of the consequential fees and costs
incurred by Hanson and Mondi is proportional to the extent of the violation. Whereas a
brief violation of this sort, followed by a prompt concession of the lack of any basis to
pursue a baseless claim, would merit only a lesser monetary (or other) sanction, the
ongoing violation at issue here warranted the greater sanction of the consequential fees
and costs incurred because the violation continued until the claim was withdrawn on
April 29, 2011, only after completion of all of the summary judgment briefing and all of
the briefing on Hanson’s Rule 11 motion, and following the April 18, 2011 hearing on
that sanctions motion (but shortly before the May 2, 2011 hearing on summary judgment).
Hanson and Mondi have now submitted affidavits identifying those attorney fees
and costs and, as the prevailing parties, their respective bills of costs.
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II. DISCUSSION
A. Rule 11 Sanctions
1. Hanson’s Attorney Fees and Costs
Hanson seeks to recover a total of $50,706.75 of his attorney fees related to the
Ernst & Young audit as follows: (1) for time spent generally, with an estimate of the
portion attributable to the audit issue; (2) for time spent with respect to depositions, with a
best estimate of the portion addressing the audit; and (3) for time spent preparing
summary judgment materials, with an estimate of ten percent (10%) of that time being
attributable to the audit issue. (Doc. No. 464.)
Loparex objects, arguing that the amount that Hanson’s counsel seeks is “not
reasonable in light of the pleadings, discovery, and the previous declarations filed,”
because Loparex’s “pleadings minimally referenced the audit claim.” (Doc. No. 469, at
3.)1 But simply counting up the number of pleading paragraphs, discovery requests and
pages of summary judgment briefing devoted to the audit as a proportion of the whole is
not the proper yardstick. As the Court already has explained, Loparex’s lengthy but
unsubstantiated pursuit of its claim for audit damages required Hanson’s counsel to
expend considerable time defending against that claim. (Doc. No. 462, at 5-6, 11-12.)
1 Loparex first argues that the Court may not sanction it for a frivolous
argument, only for a frivolous pleading or other submission. (Doc. No. 469.) The Court
already has rejected this argument. (Doc. No. 483 (denying Loparex’s request for
reconsideration of sanctions order).) Loparex also argues that the sanction must be
confined to “‘the least severe sanction that will adequately deter the undesirable
conduct.’” (Doc. No. 469 (quoting Pope v. Federal Express Corp., 974, F.2d 982 (8th Cir.
1992)). The Court also addressed this issue in its earlier order. (Doc. No. 462, at 13.)
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Loparex also takes issue with the particular attorney fees Hanson seeks to recover,
concluding that they fall into four categories, only one of which properly reflects
recoverable fees here. (Doc. No. 469, at 5-6; Doc. No. 471, at 5.) Loparex contends that
Hanson improperly seeks to recover attorney fees for (1) time for which recovery should
have been sought in prior declarations; (2) for time incurred with respect to “the
deposition of witnesses covering a multitude of topics”; and (3) for time incurred with
respect to “primarily . . . non-defense work, such as . . . general discovery related matters,
settlement, motions initiated by Hanson by which Loparex did not force Hanson to incur
fees, and Loparex’s motion for punitive damages that was unrelated to the audit claim.”
(Doc. No. 471, at 5.) Loparex thus argues that only $6,914.20 of the $50,706.75 in fees
claimed by Hanson “were reasonably related to the audit claim.” (Id. at 7; Doc. No. 469,
at 6.) Loparex also claims that the declaration of Hanson’s counsel submitted in support
of the present request for fees should have required “only . . . $920 in additional fees at
declarant’s rate, for a total of $7,834.20.” (Doc. No. 469, at 6.)
Hanson clarifies that “none of the $50,706.75 in fees now being sought by Hanson
. . . include fees that were previously assessed against Loparex in connection with
discovery matters.” (Doc. No. 479, ¶ 3.) Thus, the Court rejects Loparex’s attempt to
exclude from recovery the $15,873 that Loparex contends “should have been claimed in a
prior declaration.”
With respect to the other two categories that Loparex contends should not be
recoverable by Hanson, the Court also rejects Loparex’s argument that they do not relate
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to the audit claim. As the declaration of Hanson’s counsel plainly indicates, counsel is
seeking only the portion of particular billing entries that is “attributable to [the] audit
claim.” (Doc. No. 464, Ex. A.) The Court thus rejects Loparex’s attempt to weed out
what it purports to be entire categories of time not spent in connection with the audit. The
very nature of the issue–a claim for damages resulting from an audit–is not conducive to
billing entries that separately identify attorney time expressly devoted to that issue. And,
of course, at the time the attorney fees were recorded, counsel could not have known, or
reasonably anticipated, that the Court would later permit recovery of those fees, and only
those fees, devoted to time spent addressing a particular counterclaim for damages.
Loparex also argues that the sole declarant improperly testifies as to the time spent
by others in addition to himself, and that Hanson provides no proof the fees sought “were
actually invoiced [to] or paid” by Hanson. But as counsel for Hanson clarifies, “Hanson
has in fact been billed for all of the time now being sought.” (Doc. No. 479, ¶ 5.) And
the Court discerns nothing improper about the fact that Hanson’s lead counsel submits a
declaration regarding the time spent by other attorneys at his firm. Such a partner plainly
has access to the billing records of those working for him.
Loparex also takes issue with Hanson’s counsel’s estimate that 10% of counsel’s
time was spent on the audit, claiming that that percentage “is not uniformly applied and
entries are adjusted by inconsistent amounts.” (Doc. No. 469, at 5.) Loparex notes that
“block-billing” is “a ‘universally disdained’ practice.” (Id.)
But as Hanson clarifies, the 10% estimate applies only to time spent in summary
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judgment briefing, not to time spent on other matters, which are governed by counsel’s
best estimate of the portion of time spent that is attributable to the audit issue. (Doc. No.
479, ¶ 4.) And as explained above, Loparex’s objection to “block-billing” is misplaced
because Hanson’s counsel could not have known, or even reasonably expected, when
billing time, that the Court would award sanctions with respect to the audit, such that time
incurred on that issue could be separately billed.
Nonetheless, the Court understands that much of Hanson’s request is, under the
circumstances, necessarily an estimate of the fees incurred with respect to the audit issue.
Exercising its discretion, the Court reduces the recoverable fees to $40,000.00.
Finally, the Court recognizes, as Hanson’s counsel observes, that the Court has yet
to order that Loparex pay for the attorney fees incurred in connection with Hanson’s
sanctions motion filed on October 4, 2010, and heard on October 18, 2010. (Doc. No.
464, at 3 n.1.) No objection having been filed to that declaration, Hanson’s counsel may
recover the $2,763.00 in attorney fees spent in connection with Hanson’s motion for
sanctions.
2. Mondi’s Attorney Fees and Costs
Mondi seeks to recover its attorney fees related to the Ernst & Young audit as
follows: (1) $2,652.00 for time spent “directly related to Loparex’s claim for damages
relating to the” audit; (2) $1,371.38 for time spent preparing for, attending and taking
depositions where the audit was a topic of questioning, with an estimated five percent
(5%) of that time relating to the audit; and (3) $1,653.00 for time spent “reviewing
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CASE 0:09-cv-01070-SRN-FLN Document 484 Filed 02/23/12 Page 7 of 12
invoices and transcripts and calculating fees relating to Loparex’s claim for damages
relating to the” audit. (Doc. No. 463, ¶¶ 2-7, 9.) Mondi also seeks to recover its costs
related to the audit, again with an estimated five percent (5%) of the total costs being
related to the audit, totaling $265.22. (Doc. No. 463, ¶ 8.) In sum, Mondi seeks a total of
$5,676.38 in attorneys fees and $265.22 in costs. (Doc. No. 463, ¶10.)2
Loparex objects, arguing that (1) Mondi’s affidavit “provides little objective
criteria by which to measure the estimated” five percent; (2) the affiant improperly
testifies as to the time spent by others in addition to himself; and (3) Mondi provides no
proof the fees sought “were actually invoiced to or paid by Mondi.” (Doc. No. 472, at 2-
3.) Loparex argues that based on the fact that no written discovery requests
(interrogatories, document requests) addressed the audit claim, and that the summary
judgment brief did not address the audit claim, the time spent by Mondi regarding
Loparex’s audit claim was only a “nominal sum,” largely because that claim was against
Hanson, not Mondi. (Id. at 3-4.)
With respect to the corporate depositions, Loparex argues that “Mondi incurred the
fees for services by court reporters regardless of any questions it asked related to the audit
claim,” and that the “amount of questioning Mondi dedicated to the audit claim was
nominal.” (Id. at 5.) It thus claims that “a nominal sum of $500 more than compensates
Mondi for [the] plainly de minimus amount of time” spent on that claim. (Id. at 6.)
The Court disagrees. Mondi’s counsel’s estimate that five percent of the total time
2 Mondi calculates a total of $5,686.38, but this is apparently a typographic
or computational error.
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spent concerned the audit is reasonable under the circumstances. As discussed above, the
affiant may properly include the time of other attorneys in his firm as well as his own
time. And the Court is satisfied that the fees were actually invoiced to Mondi. Mondi’s
counsel may thus recover $5,676.38 in fees and $265.22 in costs, for a total of $5,941.60.
B. Taxable Costs
Rule 54 provides, in relevant part, that “costs other than attorneys’ fees shall be
allowed as of course to the prevailing party unless the court otherwise directs.” Fed. R.
Civ. P. 54(d)(1). And pursuant to 28 U.S.C. § 1920, a court may tax as costs “‘fees of the
clerk and marshal, fees of the court reporter, fees and disbursements for printing and
witnesses, fees for copies of necessary papers, docket fees, and compensation of courtappointed
experts and interpreters.’” 168th & Dodge, LP v. Rave Reviews Cinemas, LLC,
501 F.3d 945, 957 (8th Cir. 2007) (internal citation omitted). See generally United States
District Court for the District of Minnesota, Bill of Costs Guide (Nov. 2011).
Because the prevailing party “‘is presumptively entitled to recover all of its
costs,’” the “losing party bears the burden of overcoming the presumption that the
prevailing party is entitled to costs.” 168th & Dodge, LP, 501 F.3d at 958. This Court has
“substantial discretion in awarding costs under Rule 54(d).” Smith v. Tenet
Healthsystem SL, Inc., 436 F.3d 879, 889 (8th Cir. 2006).
1. Hanson’s Bill of Costs
Hanson seeks to tax a total of $6,550.63 in costs as follows: (1) $350.00 for fees
paid to the Clerk of Court; (2) $174.60 for necessary hearing transcripts; and (3)
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$6,026.03 for six deposition transcripts. (Doc. No. 467.)
Loparex objects, arguing that the costs incurred with respect to the depositions of
Jon Hanson, Christian Hanson, Mark Rostagno and Paul Siebrasse should be disallowed
in their entirety because Hanson “did not use and rely on” those depositions, but rather
the declarations of those deponents. (Doc. No. 480, at 3, 5.) Loparex also contends that
the costs of the depositions of Jack Taylor, James Miksta, and Michael Apperson should
be reduced to the proportion actually used to prove a point of fact. (Id. at 4, 5.)3
The Court largely disagrees with Loparex. With respect to the depositions, the
Court is satisfied that Hanson’s counsel used the transcripts in more than an
“investigative” capacity. Smith v. Tenet Healthsystem SL, Inc., 436 F.3d 879, 889 (8th
Cir. 2006) (court may tax costs of deposition necessarily obtained for use in case and not
purely investigative).
The Court agrees that the $174.60 for the October 18, 2010 hearing transcript
appears to be a charge for an “expedited” transcript. The Court declines to tax that cost.
Bill of Costs Guide, at 5. With respect to the depositions, the Court notes that the
$450.46 sought for the deposition of Paul B. Siebrasse includes a finance charge of $6.66
for a balance more than 30 days past due. Thus, Hanson may recover only $443.80 for
that deposition.
Loparex also contends that the “costs of both an electronically recorded deposition
transcript and the printed deposition transcript” are generally not taxable. (Doc. No. 480,
3 Loparex also seeks leave to file its opposition one day late. (Doc. No. 480,
at 6.) The Court grants Loparex’s request.
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at 4-5.) But Loparex fails to identify which particular transcripts it claims were thus
provided in both forms or that Hanson seeks to tax the costs of both. The Court notes that
certain deposition transcripts may have been provided in both formats, but the invoice
does not delineate separate charges for the particular formats. With respect to the
depositions of Miksta and Rostagno, however, the court reporter’s invoice discloses a
separate charge for an “[e]xpedited [r]ough” draft of $156.40. Accordingly, the court will
deduct that amount from the $2,679.19 claimed by Hanson’s counsel. In sum, Hanson is
entitled to recover costs in the amount of $6,212.97.
2. Mondi’s Bill of Costs
Mondi seeks to tax costs as follows: (1) $6,693.98 related to deposition
transcripts; (2) $40.00 in witness fees; and (3) $43.56 for copies. (Doc. Nos. 477, 478.)
In sum, Mondi seeks a total of $6,777.54 in taxed costs.4
Loparex objects, arguing that Mondi should not be able to tax costs for the
transcripts of the depositions of Hanson, Mays, Schabinger, Rostagno, Monroe, Booher
and Siebrasse, because they were “investigative” in nature and not “necessarily obtained
for use in the case.” (Doc. No. 481.) It also argues that the costs of the depositions of
Taylor, Miksta and Apperson should not be taxed in full, but only in proportion to their
being used to actually prove a point of fact. (Id.) In addition, it contends that the Hanson
and Siebrasse deposition transcripts exist in both a printed and an electronic form, such
that both forms may not be taxed. (Id.) It also argues that costs for expedited transcripts
4 Mondi’s total of $6,784.74, is apparently a computational error.
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or costs for shipping or courier fees may not be taxed. (Id.) Finally, it argues that the law
does not permit taxation of costs for copies obtained for hearings, expedited items,
electronic versions or copies, and copies for use of counsel. (Id.)
In addition to the reasons provided with respect to Hanson’s bill of costs, the Court
agrees with Mondi that Loparex has failed to satisfy its burden, as the losing party, to
overcome the presumption that the prevailing party is presumptively entitled to recover
all of its costs. Loparex recites general principles of law with respect to the taxation of
costs but does not demonstrate how or why those principles warrant the disallowance of
specific costs incurred here. Mondi is thus entitled to recover $6,777.54 in costs.
III. ORDER
Based on the foregoing, and all the files, records and proceedings herein, IT IS
HEREBY ORDERED that:
1. Loparex’s counsel shall pay Hanson, as a Rule 11 sanction, $40,000.00;
2. Loparex’s counsel shall pay Hanson, as this Court previously ordered (Doc.
No. 249), for the fees and costs incurred in bringing an earlier motion for sanctions (Doc.
No. 225), $2,763.00;
3. Loparex’s counsel shall pay Mondi, as a Rule 11 sanction, $5,941.60;
4. Hanson shall recover from Loparex, as taxable costs, $6,212.97; and
5. Mondi shall recover from Loparex, as taxable costs, $6,777.54.
Dated: February 23, 2012 s/ Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge
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