Free Reply to Response to Motion - District Court of Colorado - Colorado

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 01-CV-1456-WYD-CBS KLESCH & COMPANY, LTD., Plaintiff, v. LIBERTY MEDIA CORP., et al., Defendants. * * * * *

LIBERTY MEDIA CORP., Counterclaim-Plaintiff, v. KLESCH & COMPANY LTD., AND A. GARY KLESCH, Counterclaim-Defendants. ___________________________________________________________________ LIBERTY'S REPLY IN SUPPORT OF ITS MOTION TO REVIEW CLERK'S TAXATION OF COSTS ___________________________________________________________________ On May 17, 2005, Defendants Liberty Media Corporation, Robert R. Bennett, and John C. Malone (collectively "Liberty") filed a motion to review the Clerk's taxation of costs (the "Motion"). On June 6, Plaintiff Klesch & Company, Ltd. ("Klesch") filed its Opposition. Liberty files this reply.

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ARGUMENT I. There Is Substantial Basis To Increase The Award Of Costs. Klesch's Opposition is long on unfounded accusations, but short on discussion of the actual governing law and standards. As set forth below, each of Klesch's complaints is refuted by solid precedent and should be rejected. Because Liberty's request for costs is fully supported both factually and legally, the full amount Liberty requests should be awarded. A. Fees of the Court Reporter Klesch argues that Liberty cannot recover costs for the daily transcript because the parties agreed to "share the costs." Opp. at 5. That arrangement, however, does not limit Liberty's right to recover Liberty's portion of the costs. Rather, the fact that both parties ordered the daily transcript simply corroborates that the transcript was necessarily obtained, and that both parties believed this to be so. U.S. Indus., Inc. v. Touche Ross & Co., 854 F.2d 1223, 1247 (10th Cir. 1988) (holding that pretrial arrangement to share cost of daily transcripts, while not conclusive, "is some evidence of the necessity of the daily transcript"); see also United Int'l Holdings, Inc. v. The Wharf (Holdings) Ltd., 174 F.R.D. 479, 484 (D. Colo. 1997) (noting that "both sides ordered and used" daily transcripts in the presentation of their case). Further, both parties also ordered and used the RealTime transcript. Thus, despite what Klesch argues now, at the time of the trial, Klesch clearly thought that the RealTime transcript was necessary and that Klesch could not avoid such costs by "merely taking notes." See Goss Int'l Corp. v. Tokyo Kikai Seisakusho, Ltd., 2004 WL 1234130, *9 (N.D. Iowa June 2, 2004) (holding that cost of "Real Time trial transcript" was "properly taxed as a cost given the length of the [eleven-day] trial and the

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improbability that [the prevailing party's] attorneys could have taken notes adequate to obviate the need for such transcript during trial."). Klesch also asserts that the daily transcripts were "obtained purely for [Liberty's] counsel's convenience." Opp. at 3. However, as detailed in Liberty's Motion, the transcripts were necessary to Liberty's direct and cross-examination of witnesses and to the preparation of the post-trial briefs requested by the Court. Mot. at 2-3. Liberty also needed the daily transcripts to prepare legal briefs during trial. For example, in Liberty's Rule 50 motion, Liberty cited to the daily transcripts to show that Klesch had failed to introduce any evidence of damages arising from the June 7 agreement. See Defendants' Motion for Judgment as a Matter of Law on Certain of Plaintiff's Claims at 3. It is doubtful that Klesch (or the Court) would have viewed citations to Liberty's attorney's notes as an acceptable alternative to citations to the daily transcripts. B. Fees for Exemplification Klesch argues that Liberty cannot recover the requested exemplification costs because Liberty did not obtain prior court approval. Opp. at 6-7. Klesch cites the 1961 Tenth Circuit case Euler v. Waller for this proposition. 295 F.2d 765, 767. However, the rule in Euler is no longer controlling law. In Tilton v. Capital Cities/ABC, Inc. -- a case cited by Klesch in other sections of its Opposition -- the Tenth Circuit held that an intervening Supreme Court case, Farmer v. Arabian Am. Oil Co., 379 U.S. 227 (1964), was "inconsistent" with Euler "to the extent that Euler prohibits a district court from taxing costs for trial exhibits absent pre-trial approval." 115 F.3d 1471, 1476 (10th Cir. 1997). The Tenth Circuit held that "[i]n accordance with Farmer, we reject a bright-line rule and instead examine whether the circumstances in a particular case justify an award of costs for trial exhibits." Id. (emphasis added); see also

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Albertson v. IBP Inc., 1997 WL 613301, * 3 (D. Kan. Oct. 1, 1997) (recognizing that Tilton, not Euler, is now the "controlling case" in the Tenth Circuit).1 Similarly, the issue here is not whether Liberty sought pre-trial approval for its exemplification expenses, but rather whether such expenses were justified. As detailed in Liberty's Motion, the expenses were justified because the circumstances of the case -- which included the presentation of lengthy transaction documents, videotaped deposition testimony, and complex demonstrative exhibits in a nearpaperless, high-tech courtroom -- necessitated the use of a multi-media consultant. See Mot. at 3-5. This point is underscored by the fact that Klesch, too, utilized the services of a multi-media consultant at trial, and on most trial days had two consultants sitting at the counsels' table, while Liberty relied on one consultant. With respect to the total amount of multi-media consultant fees and expenses sought by Liberty, Klesch overlooks the fact that, as noted in Liberty's Motion, Exhibit H to the Motion contains two invoices from Trial Graphix, one dated August 31, 2004, and another dated September 30, 2004.2 On the August 31 invoice, the itemized consultant fees and expenses (labeled "On-Site MM Consulting Svc" and "Travel Expenses" and marked with asterisks in the

Both Euler and Tilton dealt specifically with recovering costs for the preparation of certain trial exhibits, but, as is clear from Tilton, such costs are considered part of the larger category of "exemplification" costs under 28 U.S.C. §1920(4). 115 F.3d at 1475. Klesch's professed confusion regarding the language "THIS IS NOT A FINAL BILL SUBSEQUENT INVOICES TO FOLLOW" on the August 31, 2004 invoice is easily remedied: it simply means that a subsequent invoice would follow, as is evidenced by the invoice dated September 30, 2004, which was included as part of Exhibit H to Liberty's Motion.
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margin) total $80,863.29. On the similarly itemized September 30 invoice, the consultant fees and expenses total $47,046.53. The combined total for both invoices is $127,909.82.3 C. Costs Incident To Taking of Depositions Klesch's assertion that "the figures submitted by Liberty Media [for deposition costs] are undeniably excessive" is puzzling, given that Liberty is seeking reimbursement for the actual costs charged by the court reporters and videographers who recorded those depositions. Opp. at 9. Indeed, many of the most expensive depositions were conducted in New York City at the behest of Klesch, and court reporter and videographer fees in New York City are higher than those in Denver. Klesch's myriad other complaints regarding Liberty's request for certain deposition costs are similarly puzzling. It appears that Klesch is arguing that Liberty should not be able to recover any costs associated with the depositions of Castritius, Mobley, Schliemann, and Schmuck. Opp. at 9-11. However, the Clerk already awarded costs for the depositions of Castritius, Mobley, and Schliemann because portions of their deposition testimony were introduced at trial,4 and, as discussed in Part II below, Klesch has waived its right to challenge those costs. Second, as discussed in Liberty's Motion, Liberty is clearly entitled to recover costs for all four depositions under the test this Court set forth in Karsian -- a test Klesch ignores. See Mot. at 6 (quoting Karsian v. Inter-Reg'l Fin. Group, Inc., 13 F. Supp. 2d 1085, 1088 (D. Colo.

Klesch's allegation that Liberty is attempting "double recovery" for equipment rental costs is baseless, as such costs are separately itemized on the two invoices. See Ex. H, attached to Liberty's Motion. Moreover, as discussed in Part II below, Klesch has waived its right to challenge the Clerk's award of equipment rental costs.
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See Exhibit 1 to Klesch's Opposition.

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1998) (Daniel, J.)). For example, with respect to the costs associated with Mr. Schmuck's deposition (the one deposition of the four listed above for which the Clerk did not award costs), Klesch designated portions of Mr. Schmuck's deposition to be played at trial. See Defendants' Objections and Counter-Designations to Klesch's Deposition Designations, attached to Liberty's Motion as Ex. J, at 42. Pursuant to this Court's trial procedures, Liberty submitted objections and counter-designations to Klesch's deposition designations. Id. Clearly, Liberty would not have been able to do so if Liberty did not have a copy of Mr. Schmuck's stenographic transcript, and therefore the associated costs were necessarily incurred by Liberty. With respect to the remaining nine depositions for which the Clerk did not tax costs,5 Klesch argues that certain expedited transcripts, rough ASCII, and ASCII costs totaling $4,816.70 are not recoverable.6 Taxation of these costs, however, is clearly within the Court's discretion. In Cleveland Area Bd. of Realtors v. City of Euclid, for example, the prevailing party sought recovery of expedited transcripts that had been "requested just prior to a scheduled preliminary injunction hearing and/or trial." 965 F.Supp. 1017, 1025 (N.D. Ohio 1997). The court held that the "added cost of expedited transcripts was reasonably necessary for the litigation," and therefore the court awarded the cost. Id. Similarly, the expedited transcript of Craig Elson's June 24, 2004 deposition was reasonably necessary for the litigation because the deposition was taken just prior to the Court's deadline to submit motions in limine relating to

These include the depositions of Elson, Foulkes, Landen, Schroeder, Stillman, Voelcker, Nosler, Summers, and Baums. Klesch also objects to the "overtime reporting" charge listed on the invoice for the 10/13/2003 deposition of Robert Stillman. That charge is a court reporter fee, and should therefore be recoverable under 28 U.S.C. §1920(2).
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damages. See Minute Order dated 6/15/2004 (extending deadline for motions in limine relating to expert witnesses Stillman and Elson to July 30, 2004, with responses due August 16, 2004). The rough ASCII/RealTime transcripts and ASCII diskettes were also necessarily obtained given the relatively condensed deposition schedule and the complexity of the issues presented. For example, the depositions of eight expert witnesses all occurred within a 30-day period,7 and the deposition of Hilary Foulkes occurred just six days before the deposition of Gary Klesch (both of whom were key witnesses to Klesch's case). Immediate access to the rough ASCII/RealTime transcripts was necessary to adequately prepare for upcoming depositions. See Watson Indus., Inc. v. Murata Elecs. N. Am., Inc., 2004 WL 1354353, *1 (W.D. Wisc. June 15, 2004) (upholding clerk's award of costs for condensed copies and ASCII diskettes, noting that "condensed copies and ASCII diskettes are routine in cases of this complexity"). Accordingly, Liberty requests that the Court exercise its discretion to award these costs. D. Witness Fees Klesch asserts that witness fees and costs for Olaf Castritius and Henrik Schliemann cannot be recovered because they "never testified at trial." Opp. at 12. Under the applicable law, however, witnesses do not need to testify in person at trial in order for their deposition witness fees and expenses to be recovered. As noted in Liberty's initial Motion, 28 U.S.C. §1821 permits recovery for fees and expenses for trial and deposition witnesses. Mot. at 8-9; see also 10 Moore's Federal Practice, §54.103[3][c] (Matthew Bender 3d ed.) ("The deposition witness is entitled to a daily attendance fee as well as a mileage allowance under 28 U.S.C. The dates of these depositions are as follows: Stillman - 10/13/2003; Schroeder - 10/14/2003; Castritius - 10/14/2003; Baums - 10/21/2003; Bezzenberger - 10/22/2003; Voelcker 10/23/2003; Elson - 11/7/2003; Schliemann - 11/12/2003.
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§1821. Each of these expenses is properly taxed as costs under §1920(3)."). Even the one case cited by Klesch clearly states that "[w]itness fees are payable for attendance at depositions as well as for attendance at trial." Green Constr. Co. v. Kansas Power & Light Co., 153 F.R.D. 670, 681 (D. Kan. 1994) (citing 28 U.S.C. 1821(a)(1)). Moreover, at trial, Klesch introduced portions of the deposition testimony of Castritius and Schliemann. See Exhibit 1 to Klesch's Opposition. Thus, after deposing these two witnesses and entering portions of their deposition testimony at trial, Klesch has no basis to object to Liberty recovering witness fees and costs for those depositions. Klesch further asserts that Liberty should be denied recovery for what Klesch describes as the "first class airfare" of at least five, and possibly all six, of the witnesses for which Liberty is seeking cost recovery. Opp. at 12. In fact, at least two of Liberty's witnesses (Olaf Castritius and Henrik Schliemann) purchased business-class tickets, and one witness (Craig Elson) paid coach fare but received complimentary upgrades on two flights. Ex. L, N, P. As noted by Klesch, 28 U.S.C. §1821(c)(1) states that witnesses "shall utilize a common carrier at the most economical rate reasonably available." (emphasis added). In this case, all five of the witnesses who paid for first- or business-class tickets were on transatlantic flights from Europe to the United States, and they each were expected to be ready to testify under oath at depositions or at trial shortly after arriving in the United States. As such, the flights they chose and the rates they paid were reasonable. Even if the Court determines that the requested costs are unreasonable, however, the Court should not disallow the costs in their entirety, but rather make appropriate reductions. See, e.g., Green Constr. Co., 153 F.R.D. at 680-81 (reducing recoverable airfare costs from $1,890.38 to $1,300.00).

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Klesch also protests the seven days of attendance fees for Dirk Schroeder because he testified at trial on only one day (at $40/day, the total amount Liberty is seeking for Mr. Schroeder's attendance fees is $280). It is well-settled, however, that "attendance and

subsistence allowances for witnesses are not restricted to the days the witness actually testifies, but may also be awarded for each day the witness necessarily attends trial, time spent during delays and temporary adjournments, and the time necessary for travel to and from the place of attendance." Green Const. Co., 153 F.R.D. at 679. Mr. Schroeder's seven days of attendance fees are clearly justified: he spent several days traveling to and from the trial in Denver and his home in Germany, and, given the distances Mr. Schroeder had to travel in order to testify at trial and the uncertainty associated with the trial schedule, there was a necessary lag time between his arrival in Denver and the day of his testimony. Accordingly, Liberty should be awarded seven days of attendance fees for Mr. Schroeder. II. There Is No Basis To Decrease The Amount Awarded By The Clerk And Klesch Has

Waived That Argument. In its Opposition, Klesch seeks to reduce the Clerk's award of costs to Liberty. Opp. at 13-14. That argument is plainly improper. First, Klesch has waived its right to challenge the Clerk's award.8 Under Fed. R. Civ. P. 54(d)(1), any party that wants the district court to review the clerk's taxation of costs must file a motion within five days of the clerk's taxation. The Tenth Circuit has clearly stated that "a party's failure to file a motion for review of costs with the Curiously, Klesch also takes great pains in its Opposition to identify several costs that were not awarded by the Clerk and that Liberty chose not to ask the Court to review. To be clear, while Liberty believes every cost listed on Liberty's First Amended Bill of Costs was necessarily incurred and recoverable under the relevant law, Liberty sought in its Motion to simplify and expedite the Court's review process by requesting review of only a select group of costs.
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district court within the five-day period constitutes a waiver of the right to challenge the award." Bloomer v. United Parcel Serv., Inc., 337 F.3d 1220, 1221 (10th Cir. 2003). In Fleet Inv. Co., Inc. v. Rogers, 87 F.R.D. 537 (W.D. Okla. 1978), aff'd, 620 F.2d 792 (10th Cir. 1980), which was cited with approval by the Tenth Circuit in Bloomer, the court rejected precisely the type of argument Klesch makes here. In Fleet, the clerk taxed costs against the non-prevailing defendant. The prevailing plaintiff timely filed a motion to review the clerk's taxation of costs. The defendant did not file a motion, but "[i]n its response to Plaintiff's motion, Defendant apparently also request[ed] review by the Court of the action of the Clerk in taxing costs." Id. at 540. The Fleet court rejected that argument, stating: Rule 54(d) . . . provides that the action of the Clerk may be reviewed by the Court upon motion served within five days of taxing of costs. In the instant case, unlike Plaintiff the Defendant did not file a motion to review within the prescribed time period. Accordingly, Defendant's failure to timely serve a motion for review by the Court of the Clerk's taxation of costs requires that Defendant's request for such a review be denied. Id. Thus, the court considered issues raised in the prevailing party's motion only. Id. at 538-40. Here, irrespective of the Court's decision on Liberty's request that the award be increased, Klesch has waived its right to challenge any part of the Clerk's award. Klesch also asserts that Liberty is "not a typical `prevailing' party because all of its counterclaims were dismissed." Opp. at 13. Given Klesch's failure to timely object to the Clerk's taxation of costs, this argument need not be considered by the Court. It should be noted, however, that the Court acted entirely within its discretion when it previously held that "Defendants shall have their costs, incurred in connection with Plaintiff's claims." Judgment at 8. In Roberts v. Madigan, 921 F.2d 1047, 1058 (10th Cir. 1990), the plaintiffs argued that "the

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defendants were not `prevailing parties' on all issues within the meaning of Rule 54(d) of the Federal Rules of Civil Procedure." The Tenth Circuit held that it was not an abuse of discretion for the district court to award costs to the party that prevailed "on the vast majority of issues and on the issues truly contested at trial." Id. The court noted that its holding was "based on the broad discretion of the district court." Id. Here, Liberty prevailed on all of Klesch's claims -for which Klesch sought hundreds of millions of dollars plus punitive damages -- and it is undisputed that the vast majority of the trial was consumed by issues associated with Klesch's claims. Liberty also prevailed on its declaratory judgment claim. In contrast, Liberty sought only a few hundred thousand dollars on its counterclaims, and a negligible amount of time at trial was devoted to these counterclaims. See Scientific Holding Co., Ltd. v. Plessey Inc., 510 F.2d 15, 28 (2d Cir. 1974) (upholding award of costs to defendant who prevailed on all claims except defendant's counterclaim; the counterclaim was limited to two issues and "[l]ittle trial time was spent on the counterclaim, whereas consideration of plaintiff's claim for $1,260,000 compensatory damages plus punitive damages required three weeks of trial, 16 witnesses, over 1,800 pages of testimony and more than 100 exhibits."). Moreover, as it did with Liberty with respect to Klesch's claims, the Court also ordered that Klesch could recover costs associated with Liberty's counterclaims, but Klesch chose not to submit a bill of costs associated with those claims. See Judgment at 8. Klesch cannot now be heard to complain that Liberty followed through on the Court's award of costs to Liberty.

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CONCLUSION For the foregoing reasons and for the reasons stated in its initial Motion, Liberty respectfully requests that the Court exercise its discretion to award Liberty an additional $247,518.36 in costs, for a total award of $301,329.43. Dated: June 21, 2005 Respectfully submitted, /s/ Lawrence W. Treece Lawrence W. Treece SHERMAN & HOWARD L.L.C. 633 17th Street, #3000 Denver, Colorado 80202 (303) 297-2900 R. Stan Mortenson David A. Super BAKER BOTTS L.L.P. 1299 Pennsylvania Ave. Washington D.C. 20004 (202) 639-7700 Attorneys for Defendants

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CERTIFICATE OF SERVICE I hereby certify that on this 21st day of June, 2005, a true and correct copy of LIBERTY'S REPLY IN SUPPORT OF ITS MOTION TO REVIEW CLERK'S TAXATION OF COSTS was served Electronic Service and/or by U.S. Mail, first-class postage prepaid, to: Timothy R. Beyer Brownstein Hyatt & Farber, P.C. 410 17th Street, 22nd Floor Denver, Co 80202-4437 Michael J. Bowe Frank E. Morreale Kasowitz, Benson, Torres & Friedman, LLP 1633 Broadway New York, NY 10019 Attorneys for Klesch & Company Limited

/s/ Lawrence W. Treece