Opinion
Case No. 01-317-KI.
December 8, 2003
Michael E. Farnell, Parsons Farnell Grein, LLP, Portland, Oregon, Attorney for Plaintiffs.
Richard A. Lee, Bodyfelt Mount Stroup Chamberlain LLP, Portland, Oregon, Attorney for Defendant.
OPINION AND ORDER
Before the court is defendant Legion Insurance Company's Bill of Costs (#83).
PROCEDURAL BACKGROUND
Plaintiffs are trustees of the Western States Local Union Trust Fund of the Office and Professional Employees International Union. Plaintiffs were sued in Schultz v. Kirkland by beneficiaries of the trust in a class action alleging that plaintiffs mismanaged the investment of the trust funds when they invested with Capital Consultants, LLC. A potential settlement ofSchultz depended on a payment by plaintiffs' trustees' insurance provider, defendant Legion Insurance Company. In the action before me, plaintiffs sought a declaratory judgment against Legion concerning the effective limit of the policy and the obligation to pay their attorney fees.
Plaintiffs and Legion then agreed to settle this insurance coverage dispute with Legion agreeing to pay $578,000 by April 1, 2002. On March 28, 2002, the Commonwealth of Pennsylvania's State Insurance Commissioner was appointed to be Legion's Rehabilitator, effective April 1, 2002, due to Legion's financial insolvency. On March 29, 2002, plaintiffs asked me to enforce the settlement agreement because Legion could not confirm that it would pay the agreed amount on time.
Trustees sued in two other similar class actions, Eidem v. Plumbers Local 290 and McPherson v. Eighth District Electrical, reached settlement agreements with Legion, which had also insured them. The Eidem and McPherson trustees were similarly concerned that their settlement agreements with their trust beneficiaries were in danger of being unfunded due to Legion's financial difficulties. I ordered Legion to pay $9.5 M immediately, the total owed under all three settlement agreements. When this did not occur, I found Legion in contempt of my order. I allowed Legion to purge the contempt by posting a $10 M supersedeas bond on behalf of Legion and the Rehabilitator.
Legion appealed my actions. The Ninth Circuit reversed my order requiring Legion to pay all money due under its settlement agreements with plaintiffs and the Eidem and McPherson trustees and required me to vacate the order of contempt against Legion. The Circuit concluded that I abused my discretion in requiring Legion to pay the funds needed in plaintiffs' settlement because an anticipatory repudiation had not occurred under state contract law. The Circuit also held that I did not have subject matter jurisdiction over the Eidem and McPherson settlement agreements and their alleged breach by Legion because the Eidem and McPherson trustees did not sue Legion for a declaratory judgment concerning insurance coverage.
DISCUSSION
Legion seeks the cost of the supersedeas bond, $40,000. It notes that the Ninth Circuit ordered costs taxed in its judgment. Legion sought costs of $291.60 before the Ninth Circuit, which were allowed in full, without objection by plaintiffs. The appellate rules provide that the cost of the premium for a supersedeas bond is taxable in the district court. Fed.R.App.P. 39(e)(3). Legion argues that the appellate court's decision to tax costs is the mandate of the case and that I have no choice but to award the cost of the bond.
Plaintiffs cite McGill v. Faulkner, 18 F.3d 456 (7th Cir.),cert. denied, 518 U.S. 889 (1994). A prisoner's civil rights jury award was reversed on appeal and the prison officials were awarded costs by the appellate court after the prisoner did not object. When the prison officials sought to recover their trial costs in the district court, the prisoner objected. The Seventh Circuit held that it would not now review the costs awarded on appeal, because the prisoner did not file a timely objection, but it did review his objection to the costs awarded later by the district court.
Id. at 458-59.
Plaintiffs also argue that it does not make sense for the appellate court irrevocably to award costs which have not even been sought yet, thus precluding any objections from the other party. I agree and believe that I have the discretion to review the request and objections.
Although plaintiffs make objections on several grounds, I am most persuaded by their argument that their settlement amount of $578,000 is only a small portion of the $10M bond that I ordered Legion to obtain. It would be unjust to require these plaintiffs to pay the cost of the full amount of the bond.
CONCLUSION
Defendant Legion Insurance Company's Bill of Costs (#83) is denied. I decline to award costs.IT IS SO ORDERED.