Best & Flanagan attorneys prevail at the Minnesota Supreme Court in high-stakes case involving the taxation of costs and disbursements

August 16, 2017

On Wednesday, August 16, 2017, Ted Sheu and Ashleigh Leitch secured a win on behalf of their client before the Minnesota Supreme Court. The decision saved Best & Flanagan’s client $743,750 and established important precedent for future litigants.

In Klapmeier v. Cirrus Indus., the Minnesota Supreme Court addressed both a rarely invoked rule of appellate procedure and an unusual request for taxable costs.

First, the Court addressed whether an award of costs and disbursements issued by the court of appeals was reviewable, either via the Court’s discretionary authority to review any lower court decisions, under Minn. R. Civ. App. P. 117, or by applying for a writ of prohibition under Minn. R. Civ. App. P. 120. Few court of appeals’ cost awards have been reviewed, and confusion remained whether a court of appeals’ cost award was subject to any review given the last sentence of Rule 139.04, which prohibits appeals from a court of appeals’ decision on costs. In Klapmeier, the Court concluded the appropriate avenue to challenge a court of appeals’ taxation award was by way of a writ of prohibition and that such a writ was warranted. This is the first time the Supreme Court has issued a writ of prohibition to restrain a court of appeals’ decision.

Second, the Court addressed the allowance of a novel category of taxable disbursements, namely, “borrowing costs” allegedly incurred in purchasing a supersedeas bond. No authority in Minnesota, and scant authority elsewhere, has permitted the taxation of money borrowed to pay otherwise taxable expenses, such as a supersedeas bond’s premium. The Court concluded that allowing taxation of “borrowing costs”—essentially interest incurred on money borrowed to pay otherwise taxable items—was too uncertain, variable, and ripe for abuse. The Court’s concerns were highlighted by the circumstances of this case, where the interest owed on the “borrowed” money was allegedly due to the bond purchaser’s wholly-owned captive insurer.