Commercial Litigation and Arbitration

Class Actions – Settlement Administrator as Court-Appointed Expert / Taxation of Costs

The plaintiff and its counsel in In re Cardizem CD Antitrust Litig., 2007 U.S. App. LEXIS (6th Cir. Feb. 22, 2007), had filed an unsuccessful objection to a class action settlement, and resolution of that objection caused expense as well as delay. After the objection was overruled by the Sixth Circuit (in a prior decision), the District Court ordered plaintiffs’ counsel personally to pay $255,683 in administrative costs attributable to the delay – representing sums paid to the settlement administrator – but denied sanctions under 28 U.S.C. § 1927. The lawyer objected on two principal grounds: (i) costs under Rule 54(d) and 28 U.S.C. § 1920 may be imposed only on parties, not on counsel, and (ii) costs cannot properly include amounts paid to a settlement administrator in a class action.

The Sixth Circuit agreed with the appealing lawyer but the question whether Rule 54(d) or § 1920 authorizes an award of costs against counsel as opposed to the litigant is not easily resolved by reference to the text of the rule or statute. Both authorize taxation of costs but neither identifies against whom. It is noteworthy that the style-amended Federal Rules of Civil Procedure, which will go into effect on December 1 of this year (barring unforeseen events), similarly do not address this issue. In concluding that costs may not be taxed on counsel, the Sixth Circuit examined a variety of textual clues, and it noted that other statutes, such as § 1927, clearly refer to counsel when they contemplate counsel liability for litigation-imposed costs.

The defendants argued that settlement administration costs are properly awardable under § 1920 on the theory that the settlement administrator is a ‛court-appointed expert“ with § 1920(6). In dicta, the Sixth Circuit made a strong case that a settlement administrator is not a ‛court-appointed expert,“ which must be defined by reference to Federal Rule of Evidence 706.

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