Klapmeier v. Cirrus Indus., Inc.

900 N.W.2d 386

Alan KLAPMEIER, Appellant,

v.CIRRUS INDUSTRIES, INC., Respondent,Cirrus Holding Company, Ltd., Defendant.

A14-1725

A14-2217

Supreme Court of Minnesota.

Filed: August 16, 2017

Edward P. Sheu, Ashleigh M. Leitch, Best & Flanagan LLP, Minneapolis, Minnesota, for appellant.

Bruce Jones, Aaron D. Van Oort, Erin L. Hoffman, Jeffrey P. Justman, Faegre Baker Daniels, LLP, Minneapolis, Minnesota, for respondent.

OPINION

ANDERSON, Justice.

A jury awarded appellant Alan Klapmeier $10 million on his claim against respondent Cirrus Industries, Inc. The court of appeals reversed the jury's verdict and granted in part Cirrus's request to tax costs and disbursements for the appeal. Specifically, the court of appeals awarded $671,863.88 to Cirrus, most of which was for the interest that Cirrus incurred on a loan that it obtained to enable it to post a supersedeas bond, which was used to secure the judgment on the jury's verdict during the appeal. Asserting that the interest is not taxable on appeal, Klapmeier sought review of the court of appeals' taxation decision under either Minn. R. Civ. App. P. 117 or by granting a petition for a writ of prohibition under Minn. R. Civ. App. P. 120. We granted Klapmeier's petition for review and agreed to hear the petition for a writ of prohibition, directing the parties to also address our authority to review a decision of the court of appeals that taxes costs and disbursements. We now hold that, although review of the court of appeals taxation decisions is not permitted under Rule 117, we retain the discretionary authority to grant a petition under Rule 120 for a writ of mandamus or prohibition to address such a decision. Further, we conclude that Minn. R. Civ. App. P. 139 does not permit the taxation of borrowing costs in the circumstances presented here. Thus, we grant the writ of prohibition, reverse the court of appeals' decision to allow taxation of those costs, and direct the Clerk of the Appellate Courts to tax costs and disbursements as set forth below.

FACTS

Alan Klapmeier was one of the founders of Cirrus Industries, Inc., a Duluth-based aircraft manufacturer. Klapmeier was removed from his position as Chief Executive Officer at Cirrus in 2008. In 2011, Klapmeier and Cirrus settled certain claims between them with an agreement that included a non-disparagement clause. In 2012, Klapmeier claimed that Cirrus breached the non-disparagement clause and in 2014 a jury agreed, awarding Klapmeier $10 million. Cirrus then moved for judgment as a matter of law, a new trial, and remittitur. Cirrus also moved to stay entry of judgment on the jury's verdict while its posttrial motions were pending before the district court. In response, Klapmeier asked the district court to require Cirrus to post a bond for the full amount of the jury's verdict, plus ten percent prejudgment interest, to ensure that Cirrus could pay the judgment if its appeal was unsuccessful. In March 2014, the district court ordered Cirrus to post a bond to secure the $10 million award.¹

Cirrus considered various options for posting the security, ultimately deciding to secure a supersedeas bond through a loan and a letter of credit. Specifically, Aon Risk Insurance Services West, Inc. (Aon) agreed to provide Cirrus with a $12 million bond if Cirrus obtained a $12 million letter of credit as collateral and paid $96,000 in premiums per year. To obtain the letter of credit, Cirrus borrowed $12 million from Superior Aerospace Insurance Company (SAIC), Cirrus's affiliated captive insurance company, under terms set out in a promissory note, including that Cirrus owed SAIC 4.25 percent interest. Cirrus deposited the $12 million with a Los Angeles bank. In return, the bank gave Cirrus a $12 million certificate of deposit and issued an irrevocable letter of credit to Aon. Having obtained the letter of credit that it requested, Aon issued the $12 million supersedeas bond to Cirrus, and Cirrus posted the bond.

The district court denied Cirrus's posttrial motions and Cirrus appealed. In 2015, the court of appeals reversed, holding that the evidence was insufficient to support the jury's finding as to the amount of damages awarded to Klapmeier. Klapmeier v. Cirrus Indus., Inc. , Nos. A14-1725, A14-2217, 2015 WL 5194755, at *1 (Minn. App. Sept. 8, 2015). We denied review. Klapmeier , Nos. A14-1725, 14-2217, Order (Minn. filed Nov. 25, 2015).

After the court of appeals filed its decision, Cirrus filed a timely request to tax costs and disbursements for the appeal. As relevant here, Cirrus sought $192,000 in "bond costs," representing the premiums paid for the supersedeas bond, and $743,750 in "borrowing costs," representing the interest owed to SAIC on the loan that Cirrus used to obtain the letter of credit to secure the supersedeas bond.

Klapmeier objected to the requested taxation on several grounds, arguing specifically with respect to the claimed borrowing costs that the taxation of interest payments is not authorized by Minnesota law. Klapmeier also argued that because Cirrus's claim to borrowing costs was based on a loan that it obtained from an affiliated entity, Cirrus was essentially borrowing money from itself and did not actually incur any expenses. Finally, Klapmeier requested discovery and an evidentiary hearing on Cirrus's proposed taxation.

The court of appeals denied Klapmeier's request for discovery and an evidentiary hearing because those procedures are not authorized by the appellate rules. Klapmeier , Nos. A14-1725, A14-2217, Order at 2 (Minn. App. filed Jan. 22, 2016). Then, the court of appeals allowed taxation of some disbursements, including some of the bond premium payments, and reduced the amounts taxed for other disbursements. Id. at 3-5. Regarding the borrowing costs, the court of appeals found that some of Cirrus's borrowing costs were incurred during proceedings in the district court, rather than the appeal, and therefore could not be taxed by the court of appeals. Id. at 5-6. But the court allowed taxation of $542,583.33 in borrowing costs, concluding that Klapmeier did not establish that those costs were clearly excessive. Id.

Klapmeier petitioned for review of the court of appeals' order and, in the alternative, for a writ of prohibition. We granted review and agreed to hear the petition for a writ of prohibition. We also directed the parties to address our authority to review a court of appeals award of costs and disbursements.

ANALYSIS

I.

We begin with our authority to review an award of costs and disbursements made by the court of appeals. We have the authority to review "any decision of the Court of Appeals." Minn. R. Civ. App. P. 117, subd. 2. But our rules also state that "no appeal from the taxation of costs and disbursements" is allowed. Minn. R. Civ. App. P. 139.04.

Klapmeier argues that the court of appeals' taxation decision "deviates from Minnesota law," making it the type of case in which we should exercise our supervisory and discretionary authority over the lower courts under Minn. R. Civ. App. P. 117, particularly when a decision on taxation "deviates from Minnesota law, creates new law, or denies due process of law."² In the alternative, Klapmeier asserts that a writ of prohibition under Minn. R. Civ. App. P. 120 is appropriate because the only other remedy available to the party facing taxation—to assert objections to the requested taxation, Minn. R. Civ. App. P. 139.04 —has been exhausted by the time relief is sought by way of a writ.

Cirrus acknowledges that we have the authority to review any judicial action, but argues that we should decline to review the court of appeals taxation decisions based on the plain and unambiguous language of Rule 139.04. Further, as Cirrus notes, we have declared that "decisions regarding costs and disbursements are final" and not reviewable under Minn. R. Civ. App. P. 117. Kelly v. Ellefson , No. A04-0615, Order at 2 (Minn. Sept. 18, 2006); see also Dargi v. City of Golden Valley , No. A12-2293, Order at 4 (Minn. Jan. 31, 2013) (quoting Kelly and recognizing that Rule 139.04 prohibits an appeal from an award of costs and disbursements).

Cirrus next argues that a writ of prohibition is not an appropriate remedy because an extraordinary writ is available only when a lower court has "clearly exceeded any arguable authority." Arguing that the exercise of discretionary authority to tax certain allowable costs and disbursements does not exceed any arguable authority, Cirrus contends that reviewing these decisions through an extraordinary writ proceeding would render meaningless the plain language of Minn. R. Civ. App. P. 139.04 (stating that "[t]here shall be no appeal from the taxation of costs and disbursements").

Interpretation of the Rules of Civil Appellate Procedure is a question of law, which we review de novo. Madson v. Minn. Min. & Mfg. Co. , 612 N.W.2d 168, 170 (Minn. 2000). We will follow the plain and unambiguous language of a procedural rule. Walsh v. U.S. Bank, N.A. , 851 N.W.2d 598, 601 (Minn. 2014). We read a procedural rule "as a whole," interpreting each rule in light of surrounding sections in order to avoid rendering superfluous any other word, phrase, or sentence. State v. Dahlin , 753 N.W.2d 300, 305-06 (Minn. 2008).

The scope of our discretionary authority to review decisions of the court of appeals is broad; we have the authority to review "any decision" of that court. Minn. R. Civ. App. P. 117, subd. 2 ; see Hyatt v. Anoka Police Dept ., 691 N.W.2d 824, 826 (Minn. 2005) (stating that "[t]he word ‘any’ is given broad application in statutes"). But this broad review authority is constrained by the more specific provision in Rule 139.04, which prohibits an appeal from a specific decision, namely, "the taxation of costs and disbursements." Typically, a specific provision prevails over a more general provision. See, e.g. , Minn. Stat. § 645.26, subd. 1 (2016) (explaining that the "special provision shall prevail and shall be construed as an...