Kelley V Bmo Harris Bank Na As Successor To Mi Marshall And Iisley
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Douglas A. Kelley, in his capacity as the File No. 19-cv-1756 (ECT)
Trustee of the BMO litigation trust,
Plaintiff,
v. OPINION AND ORDER
BMO Harris Bank N.A., as successor to
M&I Marshall and Ilsley Bank,
Defendant.
________________________________________________________________________
J. David Jackson, Dorsey & Whitney LLP, Minneapolis, MN; Joseph W. Anthony, Joseph
Robert Richie, and Ryan Matthew Lawrence, Anthony Ostlund Baer & Louwagie PA,
Minneapolis, MN; Michael A. Collyard, Stephen P. Safranski, Thomas L. Hamlin,
William E. Manske, Michael D. Reif, and Peter Ihrig, Robins Kaplan LLP, Minneapolis,
MN; and David Marder and Morgia Holmes, Robins Kaplan LLP, Boston, MA, for
Plaintiff Douglas A. Kelley in his capacity as the Trustee of the BMO Litigation Trust.
Keith S. Moheban, Stinson Leonard Street LLP, Minneapolis, MN; Debra L. Bogo-Ernst,
Joshua D. Yount, Lucia Nale, Thomas Vangel Panoff, and Gina Parlovecchio, Mayer
Brown LLP, Chicago, IL; Donald B. Verrilli, Jr. and Elaine Goldenberg, Munger, Tolles
& Olson LLP, Washington, D.C.; Christopher Steven Comstock, Sheppard Mullin Richter
& Hampton LLP, Chicago, IL; Andrew J. Calica, Gina Parlovecchio, and Richard A.
Spehr, Mayer Brown LLP, New York, NY; John Gleeson, Morgan A. Davis, Noelle E.
Lyle, Susan Reagan Gittes, and Michael Schaper, Debevoise & Plimpton LLP, New York,
NY; and Sean O’Donnell Bosack, Godfrey & Kahn, S.C., Milwaukee, WI, for Defendant
BMO Harris Bank N.A., as successor to M&I Marshall and Ilsley Bank.
________________________________________________________________________
Plaintiff Trustee Douglas A. Kelley alleged that Defendant BMO Harris Bank N.A.,
as successor-in-interest to M&I Marshall and Ilsley Bank, aided and abetted a breach of
fiduciary duty committed by the management of Petters Company, Inc. (or “PCI”). A jury
returned a verdict in the Trustee’s favor and awarded more than $500 million in damages.
The Eighth Circuit reversed and “remanded with directions to enter judgment in favor of
BMO.” Kelley v. BMO Harris Bank Nat’l Ass’n, 115 F.4th 901, 907–08 (8th Cir. 2024).
The court held that the equitable defense of in pari delicto, as understood and applied by
the Minnesota Supreme Court, barred the Trustee’s action against BMO because, even if
BMO aided the scheme to the degree proven at trial, it “cannot be more culpable than the
entity that orchestrated the scheme.” Id. at 907.
After the Eighth Circuit reversed and remanded, BMO filed two bills of costs.
ECF Nos. 502, 505. The first bill of costs, filed under Federal Rule of Appellate Procedure
39(e), sought $3,092,267.21 in appellate bond premiums, $19,087.50 in fees for transcripts
obtained for the appeal, and $1,010.00 in fees of the Eighth Circuit Clerk of Court, or a
total of $3,112,364.71. ECF No. 502 at 1. With respect to BMO’s first bill of costs, the
Clerk taxed $3,109,808.26 against the Trustee—nearly the full request, with a reduction in
just the requested transcript fees. ECF Nos. 511, 511-1. The second bill of costs, filed
under Federal Rule of Civil Procedure 54(d) and District of Minnesota Local Rule 54.3(c),
sought $23,287.82 in district-court costs, ECF No. 505 at 1, and the Clerk allowed
$16,563.09, ECF No. 512 at 1.
The Trustee seeks review of the Clerk’s cost judgments. ECF No. 513; see D. Minn.
LR 54.3(c)(3). The Trustee raises two issues. (1) He argues that appellate bond premiums
are not taxable costs as a matter of law. (2) He argues that awarding district court costs
would be inequitable in view of BMO’s litigation conduct. These issues will be considered
in that order.
(1) The appellate-bond-premium issue arises from a lack of correlation between a
statute and a Federal Rule of Appellate Procedure. The statute, 28 U.S.C. § 1920, identifies
“[t]he costs that may be awarded to prevailing parties in lawsuits brought in federal court.”
Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S. 560, 562 (2012). Appellate bond premiums
are not among the costs set forth in § 1920. The Federal Rule of Appellate Procedure, on
the other hand, says that “premiums paid for a bond or other security to preserve rights
pending appeal” “are taxable in the district court for the benefit of the party entitled to costs
under this rule.” Fed. R. App. P. 39(e). And the Rule makes clear that, “if a judgment is
reversed, costs are taxed against the appellee.” Fed. R. App. P. 39(a)(3). The question is
whether the omission of appellate bond premiums from § 1920 means these costs cannot
be taxed notwithstanding Rule 39.
Courts addressing this question directly have held that appellate bond premiums are
costs a district court may tax. See, e.g., Campbell v. Rainbow City, 209 F. App’x 873, 876
(11th Cir. 2006); Republic Tobacco Co. v N. Atl. Trading Co., 481 F.3d 442, 448 (7th Cir.
2007); Berkley Reg’l Ins. Co. v. Phila. Indem. Ins. Co., 600 F. App’x 230, 237 (5th Cir.
2015); In re RealNetworks, Inc., Nos. 09 Civ. 7760 (DLC), 41 Civ. 1395 (DLC), 2011 WL
1642767, at *2 (S.D.N.Y. Apr. 29, 2011); Ericsson Inc. v. TCL Commc’n Tech. Holdings,
Ltd., No. 2:15-cv-00011-RSP, 2020 WL 3469220, at *5–6 (E.D. Tex. June 23, 2020);
Eshelman v. Puma Biotechnology, Inc., No 7:16-CV-18-D, 2022 WL 989743, at *4
(E.D.N.C. Mar. 11, 2022). A concise explanation for this holding appears in Republic
Tobacco Co. There, the Seventh Circuit, responding to an argument by the losing party
(NATC), explained why the absence of appellate bond premiums from § 1920 did not
prevent their recovery under Rule 39:
NATC is correct, as one of the Advisory Committee Notes to
Rule 39 mentions, that § 1920 provides courts with the
authority to award costs under Rule 39. NATC is also correct
that § 1920’s categories do not include one that allows costs for
bond premiums. Nevertheless, Congress approved Rule 39
after it passed § 1920, and Rule 39 specifically provides that a
district court may award “premiums paid for a supersedeas
bond or other bond to preserve rights pending appeal.” Where
the Federal Rules conflict with a “procedure provided in an
earlier act of Congress,” the Federal Rules control. Am. Fed’n
of Musicians v. Stein, 213 F.2d 679, 686 (6th Cir. 1954); see
also 28 U.S.C. § 2072 (allowing the United States Supreme
Court to promulgate rules of procedure and declaring invalid
any laws that conflict with those rules at the time the rules take
effect). In short, because Rule 39(e) expressly authorizes the
taxation of supersedeas bond costs, it is binding on district
courts regardless of whether § 1920 authorizes an award of
those costs.
Republic Tobacco Co., 481 F.3d at 448.
Though the Eighth Circuit has not discussed this question, it has affirmed a district
court order taxing appellate bond premiums. See Emmenegger v. Bull Moose Tube Co.,
324 F.3d 616, 626–27 (8th Cir. 2003); cf. Reeder-Simco GMC, Inc. v. Volvo GM Heavy
Truck Corp., 497 F.3d 805, 808 (8th Cir. 2007) (affirming district court decision not to tax
appellate bond premiums because prevailing party failed to file a bill of costs in the court
of appeals). And courts in this district and other districts within the Eighth Circuit have
taxed appellate bond premiums. See, e.g., Great Lakes Gas Transmission Ltd. P’ship v.
Essar Steel Minn., LLC, No. 09-cv-3037 (SRN/LIB), 2017 WL 3025848, at *2 (D. Minn.
July 17, 2017); St. John’s Mercy Med. Ctr. v. Delfino, No. 4:02CV01527 ERW, 2006 WL
5363180, at *5 (E.D. Mo. Mar. 29, 2006).
The Trustee cites two cases to support his position that their omission from § 1920
makes appellate bond premiums non-taxable, but these cases don’t carry weight on the
issue. The first is City of San Antonio v. Hotels.com, L.P., 593 U.S. 330 (2021). There, in
a footnote, the Supreme Court acknowledged that appellate “bond premiums, despite being
referenced in Appellate Rule 39(e)(3), are not listed as taxable costs in § 1920.” Id. at 341
n.4. The Court, however, declined to consider the question because it had not been raised
by the losing party. Id. It would be a mistake to cite, as authority for holding that appellate
bond premiums are not taxable costs, a case that expressly declined to consider the
question. The second case the Trustee cites is Winniczek v. Nagelberg, 400 F.3d 503 (7th
Cir. 2005) (per curiam). There, the court wrote that Rule 39(e) did not “attempt to broaden
the list of taxable items that appears in section 1920.” Id. at 504. Winniczek did not address
appellate bond premiums; it addressed whether an appellate court’s docketing fee is
taxable. See id. Regardless, the Seventh Circuit subsequently characterized the quoted
sentence as dicta, and explained, “any suggestion in Winniczek’s dicta that Rule 39(e) does
not expand the costs taxable under § 1920 is an over-reading” of the case. Republic
Tobacco Co., 481 F.3d at 448. Against the seemingly unanimous weight of persuasive
authority and the Eighth Circuit’s affirmance of a district court order taxing appellate bond
premiums, it would be a mistake to adopt the Trustee’s position.
(2) “When an expense is taxable as a cost . . . there is a strong presumption that a
prevailing party shall recover it ‘in full measure.’” Concord Boat Corp. v. Brunswick
Corp., 309 F.3d 494, 498 (8th Cir. 2002) (quoting In re Paoli R.R. Yard PCB Litig., 221
F.3d 449, 468 (3d Cir. 2000)). That presumption is codified in Rule 54(d). The rule
provides that “[u]nless a federal statute, these rules, or a court order provides otherwise,
costs—other than attorney’s fees—should be allowed to the prevailing party.” Fed. R. Civ.
P. 54(d)(1); see Greaser v. Mo. Dep’t of Corr., 145 F.3d 979, 985 (8th Cir. 1998). Despite
the presumption, “[a] district court has ‘substantial discretion’ when determining an award
of costs to a prevailing party under § 1920 and Rule 54(d).” Dunne v. Res. Converting,
LLC, 991 F.3d 931, 941 (8th Cir. 2021) (quoting Richmond v. Southwire Co., 980 F.2d
518, 520 (8th Cir. 1992)). The Eighth Circuit has affirmed cost reductions when “the case
was over-litigated,” id. at 942, and when a party obtained only a nominal victory, see
Richmond, 980 F.2d at 520; Grisso v. Massanari, 22 F. App’x 656, 658 (8th Cir. 2001),
and other courts have determined that a party’s spoliation of evidence or other misconduct
justified the denial of costs, see Nelson v. Thurston County, No. 3:18-cv-05184-DGE, 2023
WL 8370156, at *3 (W.D. Wash. Dec. 4, 2023) (spoliation); Congregation of the Passion,
Holy Cross Province v. Touche, Ross & Co., 854 F.2d 219, 222 (7th Cir. 1988) (“Generally,
only misconduct by the prevailing party worthy of a penalty . . . or the losing party’s
inability to pay will suffice to justify denying costs.”). “The ‘losing party bears the burden
of making the showing that an award is inequitable under the circumstances.’” Concord
Boat Corp., 309 F.3d at 498 (quoting In re Paoli, 221 F.3d at 462–63).
The Trustee argues that it would be inequitable to tax BMO’s district court costs
against the Trustee because of BMO’s district court litigation conduct, but this contention
is unconvincing on this case’s extensive record. It is true that the Bankruptcy Court
imposed spoliation sanctions against BMO, see ECF No. 15-19 at 44 (granting an
adverse-inference instruction), and the district court affirmed this ruling, see ECF No. 125
at 28. But there is a weightier counterbalance against inequity the Trustee suffered because
of the spoliation issue. BMO moved to dismiss the adversary proceeding in the Bankruptcy
Court in October 2016, relying on the in pari delicto doctrine. See ECF No. 3-12 at 30–
48. The argument was rejected and the motion denied (in relevant part). See ECF No. 4-13
at 11–13. Under the Eighth Circuit’s ruling, the proceeding should have been dismissed
on that ground at that time, meaning BMO should not have incurred taxable costs (or other,
non-taxable costs and attorneys’ fees) in the district court. In these circumstances, the
district court cost judgment is not inequitable.
The Trustee has a fallback position, but it doesn’t change things. He claims that
BMO inequitably “sought transcript costs for discovery hearings necessitated by its
spoliation of evidence.” ECF No. 515 at 14. The Trustee does not identify how much of
the $7,059.40 in transcript fees awarded to BMO were attributable to those hearings. See
ECF No. 512-1 at 1. The absence of this information makes it impracticable to consider
reducing these fees. Accepting as true the Trustee’s claim that BMO sought “fees for
witnesses—like John Vanderheyden, Paul Stroble, and David Grant—whom BMO
proffered solely in an effort to excuse and minimize its intentional spoliation,” ECF No.
515 at 14–15, the Clerk did not award transcript fees for any of these witnesses. The Clerk
taxed no costs for Stroble or Grant. See ECF No. 512-1 at 2 (citing “[i]nsufficient
documentation” for Stroble and explaining that Grant did not testify). The Clerk taxed
costs for Vanderheyden’s hotel stay in the amount of $375.66. ECF No. 512-1 at 3; see
ECF No. 505-4 at 12–13. The Trustee did not target this amount in his motion. If he had,
the same considerations discussed in the preceding paragraph would have warranted
rejecting the challenge.
ORDER
Based on the foregoing, and on all the files, records, and proceedings herein, IT IS
ORDERED THAT:
1. Plaintiff Douglas A. Kelley’s Motion to Review Clerk’s Taxation of Costs
[ECF No. 513] is DENIED.
2. The Clerk’s Cost Judgments in the amount of $3,109,808.26 [ECF No. 511]
and $16,563.09 [ECF No. 512] for Defendant BMO Harris Bank N.A. are AFFIRMED.
Dated: July 22, 2025 s/ Eric C. Tostrud
Eric C. Tostrud
United States District Court