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Brown v. Tax Ease Lien Servicing, LLC

United States District Court, W.D. Kentucky, Louisville

December 17, 2019

JAMES BROWN, et al. PLAINTIFFS
v.
TAX EASE LIEN SERVICING, LLC, et al. DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          CHARLES R. SIMPSON III, SENIOR JUDGE UNITED STATES DISTRICT COURT.

         This matter is before the Court on motion to compel payment of expert witness fees, DN 197, filed by Plaintiffs James Brown, et al. (“Brown” or “Plaintiffs”) and motion for amended bill of costs, DN 208, filed by Defendants Tax Ease Lien Servicing, LLC, et al. (“Tax Ease” or “Defendants”). For the following reasons, Brown's motion to compel Tax Ease to pay expert witness fees is GRANTED in part and DENIED in part, and Defendant's bill of costs is GRANTED in part and DENIED in part.

         I. Background

         Plaintiffs are Kentucky property owners who sued Defendants, corporations and attorneys who profited from the debts of Kentucky citizens under the state-created system for the third-party purchase of certificates of tax delinquency. DN 204 at 1. Plaintiffs alleged Defendants improperly inflated Plaintiffs' tax bills with attorneys' fees that were not “actual” or “reasonable” under Kentucky Revised Statutes Section 134.452. Id. at 2. Plaintiffs hired four expert witnesses, all of whom were deposed by Defendants between October 13 and October 17, 2017. DN 197 at 1. On February 15, 2018, Plaintiffs filed a “MOTION TO COMPEL TAX EASE DEFENDANTS TO PAY EXPERT WITNESSES' FEES AS REQUIRED BY FRCP 26(b)(4)(E).” DN 197. Section II of this opinion will address how much of the requested expert fees Tax Ease is obligated to pay.

         Parties also dispute what amount, if any, Plaintiffs must pay of Defendants' bill of costs. On April 30, 2018, Defendants filed an amended bill of costs with this Court. DN 208. Plaintiffs filed an objection to Defendants' amended bill of costs on May 14, 2018. DN 209. Section III of this opinion will address how much of Defendants' amended bill of costs Plaintiffs are obligated to pay.

         II. Expert Fees

         Plaintiffs seek payment from Defendants for the fees of expert witnesses who were hired by Plaintiffs and deposed by Defendants. DN 197 at 1. Plaintiffs' experts include attorney Alan O. Bryant, attorney Sheldon G. Gilman, and employees from the public accounting firm of Jones, Nale & Mattingly. DN 197-1 at 1-3. Plaintiffs assert that they hired these experts to provide opinions that may have been presented at trial. DN 197 at 6. Plaintiffs' experts prepared reports and provided copies to Tax Ease. DN 199-8; DN 199-10; DN 199-11. Defendants deposed each of Brown's experts. DN 199 at 4. Plaintiffs seek payment of $8, 309.25 for time their experts spent “in preparation for and participation in depositions noticed by the Tax Ease Defendants.” DN 197 at 1, 3. Plaintiffs provide invoices from each expert for fees related to Defendants' discovery requests. DN 197-1, p. 1-3. Plaintiffs assert Defendants must pay for all of the requested fees pursuant to Federal Rule of Civil Procedure 26(b)(4)(E).

         Defendants respond that they should not be compelled to pay Plaintiffs' requested expert fees because to do so would be “unreasonable” and a “manifest injustice” in contravention of Rule 26(b)(4)(E). DN 199 at 1. First, Defendants argue they should not be required to pay any fees because (A) had a trial taken place, the expert opinions would have been excluded and (B) expert reports were so de minimis that Defendants had to depose the experts to determine the basis for their conclusions. Id. In the alternative, Defendants argue that (C) even if they are obligated to pay for time Plaintiffs' experts spent in depositions, they should not be required to pay for time those experts spent preparing for depositions. Id. Defendants' first two arguments are without merit. Regarding Defendants' third argument, this Court finds that Rule 26(b)(4)(E) does not require Defendants to pay for time Plaintiffs' experts spent preparing for depositions.

         A. Exclusion of Expert Testimony

         Defendants ask the Court to deny Plaintiffs' motion to compel the payment of expert witness fees because, if the case had gone to trial, the Court should have excluded every expert from testifying. DN 199 at 6. This argument is without merit.

         Rule 26(b)(4)(E) of the Federal Rules of Civil Procedure provides:

Payment. Unless manifest injustice would result, the court must require that the party seeking discovery:
(i) pay the expert a reasonable fee for time spent in responding to discovery under Rule 26(b)(4)(A) or (D); and
(ii) for discovery under (D), also pay the other party a fair portion of the fees and expenses it reasonably incurred in obtaining the expert's facts and opinions.

         Rule 26(b)(4)(A) provides, in relevant part, that a party “may depose any person who has been identified as an expert whose opinions may be presented at trial.”

         At the time Defendants deposed Plaintiffs' experts, Plaintiffs had identified them as “expert[s] whose opinions may be presented at trial.” Fed R. Civ. P. 26(b)(4)A). Although Defendants filed a motion to exclude Plaintiffs' experts' testimonies at trial on March 23, 2018 (more than five months after deposing them), DN 201-203, Defendants' motions were mooted by this Court's summary judgment order on March 30, 2018, DN 204 at 6. Now, Defendants ask this Court to engage in a hypothetical evaluation of whether these experts' testimonies would have been excluded at trial if a trial had taken place. Rule 26 does not require that this Court engage in such an inquiry, and this Court declines to conduct one. Therefore, costs for expert depositions will not be disallowed on these grounds.

         B. “De minimis” Expert Reports

         Defendants also ask this Court to deny Plaintiffs' motion to compel the payment of expert witness fees because “the Discovery was necessitated by the Experts' deficient reports.” DN 199 at 6. Defendants argue “[e]xpert fees that were incurred because of the actions of Plaintiffs and their experts are not reasonably shifted to the opposing party” and that “[i]t also would be manifestly unjust to require a defendant to pay the fees of a plaintiff's expert when the fees were necessitated by the Plaintiffs' failure to comply with their disclosure obligations.” Id. at 10. Defendants make a blanket claim that “Plaintiffs' expert reports contain little more than a series of conclusory statements by each expert” but only argue with particularity about the alleged deficiency of reports by Bryant and Gilman. Id. at 9. Defendants allege these reports “lack the basis and reasons for the opinions being offered.” Id. We find Plaintiffs' expert reports are sufficient to meet the requirements of the Federal Rules of Civil Procedure, and Defendants' arguments are without merit.

         An expert witness must provide a written report that includes, among other things, “a complete statement of all opinions the witness will express and the basis and reasons for them” as well as “the facts or data considered by the witness in forming them.” Fed.R.Civ.P. 26(a)(2)(B). Plaintiffs' expert reports meet those requirements. For example, attorney Gilman identifies in numerical paragraph 6 of his report the basis for his opinion, citing specific sources, including Black's Law Dictionary, SCR 3.130(1.5), and certain Kentucky Supreme Court commentary. DN 199-8 at 2. In paragraph 7, Gilman explains the factors he would consider in determining whether a lawyer's fee is “reasonable, ” including a “lawyer's exposure to liability…the results obtained; responsibility incurred; amount of money involved; extent and character of work performed; intricacies of facts involved; the lawyer's diligence and skill; the likelihood that client itself could have easily performed the same service without the assistance of counsel.” Id. (emphasis in original). Bryant similarly met the requirements of Rule 26, going so far as to headline a portion of his report “Data and other information considered in accordance with FRCP 26(a)(2)(b)(ii), ” followed by an itemized list of the sources upon which his opinion was based. DN 199 at 10. Bryant also headlined another portion of his report “Statement of opinions with basis and reasons, pursuant to FRCP 26(a)(2)(b)(i), ” followed by a list of his opinions and his bases for them. Id. at 2-7. Accordingly, Defendants fail to demonstrate how Plaintiffs' expert reports were deficient under Rule 26.

         Furthermore, even if some form of “discovery was necessitated by Plaintiffs' failure to provide proper expert reports, ” Defendants chose to depose the experts instead of seeking additional detail to cure alleged deficiencies. See DN 199 at 9 (“[R]ather than engaging in debate and inevitable motion practice over the reports, Defendants deposed Plaintiffs' experts to try to learn their ‘complete' opinions and…the basis and reasons for each opinion and the facts relied on to form each opinion.”). Having chosen to depose Plaintiffs' experts and not raise the issue of deficiency until almost five months later, this Court finds Defendants have waived their right to complain about the sufficiency of the reports or costs incurred in taking depositions. This Court agrees with the court in Durkin v. Paccar, Inc., a case cited by Defendants in their response brief, which found “assertions as to…[a] deficient report do not alter the general rule that the deposing party must reimburse the producing party for reasonable expert fees incurred during the actual taking of the expert's deposition.” Durkin v. Paccar, Inc., 2012 U.S. Dist. LEXIS 197951, at *13 (D.N.J. Dec. 28, 2012). Therefore, costs for expert depositions will not be disallowed on these grounds.

         C. Deposition Preparation Costs

         Finally, Defendants argue “Plaintiffs' experts should not be compensated for preparation time.” This Court agrees. “Our circuit has little caselaw on Rule 26(b)(4)(E), ” and no binding precedent on whether parties are required to pay for experts' deposition preparation costs. DN 221 at 20. Courts generally are split on whether Rule 26 allows for such compensation, with a “slim majority” allowing recovery if the fees are reasonable. Borel v. Chevron U.S.A., Inc., 265 F.R.D. 275, 277 (E.D. La. 2010) (collecting cases). This Court finds that the plain meaning of Rule 26 excludes “deposition preparation” costs entirely.

         Rule 26(b)(4)(E) states “[u]nless manifest injustice would result, the court must require that the party seeking discovery…pay the expert a reasonable fee for time spent in responding to discovery under Rule 26(b)(4)(A).” The plain meaning of the rule requires that the deposing party pay a reasonable fee for time an expert spends “responding to discovery, ” not the time he or she spends preparing to respond to discovery. Despite the rule's plain meaning, many courts have concluded “responding to discovery” includes preparation time. See, e.g., Rote v. Zel Custom Mfg. LLC, No. 2:13-cv-1189, 2018 U.S. Dist. LEXIS 76346, at *13 (S.D. Ohio May 7, 2018) (“time spent preparing for a deposition is, literally speaking, time spent in responding to discovery”) (quoting Collins v. Village of Woodridge, 197 F.R.D. 354, 357 (N.D. Ill. 1999)). Another district court within the Sixth Circuit has observed, “the rule itself does not specify that the parameters for ‘responding' to this form of discovery are limited to the actual time spent under oath in a deposition.” Cohen v. Jaffe, Raitt, Heuer, & Weiss, P.C., 322 F.R.D. 298, 301 (E.D. Mich. 2017). However, these courts focus an inordinate amount of attention on the phrase “responding to discovery” to the detriment of the rest of the sentence, which states that parties seeking discovery shall pay for time spent in “responding to discovery under Rule 26(b)(4)(A). Fed.R.Civ.P. 26(b)(4)(A) (emphasis added).

         Rule 26(b)(4)(A), therefore, illuminates the extent of what time should be encompassed in “responding to discovery”:

Deposition of an Expert Who May Testify. A party may depose any person who has been identified as an expert whose opinions may be presented at trial. If Rule 26(a)(2)(B) requires a report from the expert, the deposition may be conducted only after the report is provided.

         Rule 26(b)(4)(A) explains the type of “responding” for which parties are obliged to pay-the “Deposition of an Expert Who May Testify.” Further, because Rule 26(b)(4)(A) limits the conduct of depositions of opposing experts to “only after the report is provided, ” any further “preparation” should not be compensable. Moreover, “such exclusion of ‘preparation' time is supported by the lack of a provision for compensation for time spent by experts in responding to interrogatories under Rule 26(b)(4)(A)(i).” Rhee v. Witco Chem. Corp., 126 F.R.D. 45, 47 (N.D. Ill. 1989) (citing Keith v. Van Dorn Plastic Mach. Co., 86 F.R.D. 458, 460 (E.D. Pa. 1980)). Accordingly, this court concludes that Rule 26 generally requires the deposing party to pay for time experts spend traveling to and participating in depositions, but not for time spent “preparing” to be deposed.

         Public policy also favors a plain meaning interpretation of Rule 26 that excludes deposition preparation from the costs deposing parties are expected to bear. “Although it is true that most lawyers are likely to insist that their experts spend some time preparing for a deposition, and that a well-prepared expert's deposition may proceed more efficiently, there are countervailing concerns.” Rock River Communs., Inc. v. Universal Music Group, 276 F.R.D. 633 *, 2011 U.S. Dist. LEXIS 152812, 2011 WL 5452970 (internal citations omitted). Here, three countervailing concerns weigh in favor of Plaintiffs paying for their own experts' preparation time.

         First, the deposing party should not generally be expected to pay for deposition preparation because the deposing party cannot control how much time an expert (or the counsel who hired them) decides is necessary. “Shifting expert fees for deposition preparation creates what economists call an externality: the retaining party determines how much deposition preparation it deems desirable, but the deposing party pays for it. When benefit and cost are separated like this, the risk of unfairness is great.” Id. at *6. In coming to this conclusion, the Court does not assume the “parties will violate Rule 1, which requires parties to employ the Federal Rules of Civil Procedure to secure the just, speedy, and inexpensive determination of every action and proceeding, ” as Plaintiffs argue. DN 200 at 8 (citation omitted). The Court simply recognizes that if the retaining party is not paying for deposition preparation, the expert will be more likely to prepare more than may be necessary. Accordingly, the retaining party may have its expert prepare as thoroughly as he or she wishes, but must do so at his or her own expense.

         Second, if the Court broadens the meaning of “responding to discovery” to include deposition preparation, this begs the question of just how much is encompassed by “preparation.” This introduces the risk that “an expert's deposition preparation may encompass a variety of tasks that contribute little or nothing to the efficiency of the deposition, are largely unrelated to the deposition, or are undertaken for an entirely partisan purpose.” Rock River Communs, 276 F.R.D. at *7. Tasks for which the opposing party should not be obliged to pay, but that may be considered “preparation” include educating an expert about the retaining party's strategy, instructing the expert about how to behave during the deposition, preparing the expert to testify persuasively during the deposition or preparing the expert for testimony at trial. Id. Many courts have reasoned that the deposing party should pay for the time an expert spends “reviewing documents” in preparation for a deposition. Benson v. Wells Fargo Bank, N.A., 2017 U.S. Dist. LEXIS 98282, at *52 (D.S.D. June 26, 2017). But the review performed by experts to prepare for a deposition often overlaps with the same review required to benefit the hiring party at trial. See Patterson Farm, Inc., 22 F.Supp.2d at 1094-1095 (“[T]ime spent 'preparing' for a deposition entails not only the expert's review of his conclusions and their basis, but also communication between the responding party's counsel and the expert in order to prepare the expert to best support the responding party's case and to anticipate questions from seeking party's counsel. An expert's deposition is in part a dress rehearsal for his testimony at trial and his preparation is part of trial preparation. One party need not pay for the other's trial preparation.”). To attempt to carve out how much preparation time is for the benefit of the retaining party and how much is for the benefit of the deposing party would be both unnecessary and arbitrary.

         Third, broadening the meaning of “responding to” beyond those factors under the direct control of the deposing party (time spent in a deposition and its associated travel costs) would require this Court to exercise its own judgment as to what amount of preparation is “reasonable.” This judgment is more rightly exercised by the retaining party. In substituting its own judgment, the Court would need to engage in an endless game of multi-factor balancing. Courts that have done so have created a range of “reasonable” preparation-to-deposition ratios. See Script Sec. Sols., LLC v. Amazon.com, Inc., No. 2:15-CV-1030-WCB, 2016 U.S. Dist. LEXIS 156034, at *21-22 (E.D. Tex. Nov. 10, 2016) (citing numerous cases approving preparation-time-to-deposition-time ratios between less than 1:1 up to 3:1). Courts that assume this role as arbiter of “reasonable” ratios, must also determine if the appropriate ratio is the same in every circumstance, see, e.g., Ushijima v. Samsung Elecs. Co., No. A-12-cv-318, 2015 U.S. Dist. LEXIS 109031, 2015 WL 11251558, at *6 (limiting ratio of preparation time to deposition time to one-to-one regardless of the details of the case), or if the ratio should be adjusted along a sliding scale according to the case's perceived “complexity, ” see, e.g., Nordock Inc. v. Sys. Inc., 927 F.Supp.2d 577, 583 (E.D. Wis. 2013) (allowing a 3:1 ratio of preparation time to deposition time for a complex case). These courts may also consider how recently experts have written their original reports. See, e.g., Mannarino v. United States, 218 F.R.D. 372, 376 (E.D.N.Y. 2003) (reducing expert's request for eight hours of preparation time to four hours, where expert reviewed the same materials that he did in preparing his expert report a few months prior). This type of balancing requires courts to exercise their own judgment in place of that of the expert or the expert's retaining party. See, e.g., Nnodimele v. City of N.Y., No. 13-CV-3461 (ARR), 2015 U.S. Dist. LEXIS 94889, at *14 (E.D.N.Y. July 21, 2015) (“While Pollini need not merely review his report and contemporaneous notes as defendants suggest, the latter, duplicative record review appears to be excessive, especially in light of Pollini's decades of experience with police practices, his prior experience testifying as an expert, and the fact that the issues in the case are not especially technical or complex.”). While this Court is capable of such an inquiry, it will not wade into such a morass when the law does not so require. Ultimately, the party deciding on how much time is reasonable to spend in preparation for a deposition should also be the party who is paying for such preparation.

         Some Courts have taken an intermediate approach by requiring the deposing party to pay for expert deposition preparation if a case is particularly complex or a long period of time has elapsed between the writing of an expert report and the deposition itself. 3M Co. v. Kambar, 2007 WL 2972921, *3 (N.D.Cal.2007) (noting “persuasive authority which states that ordinarily the deposing party need only pay for time spent in deposition, unless it is a complex case or there are extenuating circumstances which require additional preparation time;” the court found no extenuating circumstances in that case). Even if the Court were to follow this approach, charging Defendants for deposition preparation costs would not be reasonable in this case. Here, Plaintiffs' experts wrote their reports within weeks of being deposed, making the “preparation time” requested manifestly unreasonable. See Fisher v. Accor Hotels, Inc., No. 02-CV-8576, 2004 U.S. Dist. LEXIS 516, at *3 (E.D. Pa. Jan. 12, 2004) (denying reimbursement for deposition preparation where the expert's report and supplement totaled five pages, the issues were not complex, and the deposition occurred approximately two months after the expert report was disclosed). Furthermore, the expert opinions rendered were not particularly complex and did not require significant review beyond that which had already been accomplished to complete the report. See Fait v. Hummel, No. 01 C 2771, 2002 U.S. Dist. LEXIS 21012, at *4 (N.D. Ill. Oct. 28, 2002) (“Costs for deposition preparation are generally not awarded except in complex cases where experts must review voluminous documents”). Bryant and Gilman's brief expert reports revolved around the definition of the word “reasonable” and if the fees charged by Defendants were justified by the value their services added. See DN 199-8 at 2-4; 199-10 at 2-10. The expert report by Jones, Nale & Mattingly was similarly simple-concluding that several ...


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