Verdict tossed, plaintiff tagged with bond premiums

Talk about your reversals of fortune.

Following a bruising eight years’ worth of litigation in U.S. District Court of Minnesota and the 8th U.S. Circuit Court of Appeals, plaintiff Great Lakes Gas Transmission Partnership first watched its $32 million verdict go up in smoke.

Now, it’s been tagged with $1.2 million in costs for the premiums on the defendants’ appeal bond.

The convoluted saga dates back to 2007, when Essar Steel, a Mumbai, India-based conglomerate, acquired a Minnesota Steel Industries property outside of Nashwauk.

With the purchase, Essar also inherited a 15-year contract with Great Lakes Gas Transmission, which was hired to supply natural gas for a planned open pit mine, taconite production facility and steel mill.

Described at the time as the state’s largest-ever private construction project (and the Iron Range’s first all-new iron ore operation in some four decades), the sprawling operation was supposed to employ 350 people by 2014.

That didn’t happen.

While Essar broke ground in 2008, it was caught flat-footed by the advent of the Great Recession and, as the project stalled amid financing woes, it tried to renegotiate the terms of the deal with Great Lakes.

Great Lakes said no and, in 2009, sued Essar Steel Minnesota and three related entities for breach of contract, saying Essar hadn’t made a single payment since the first monthly $190,000 bill came due.

After years of intense motion practice, the case finally went to trial in federal court in Duluth in 2015. The jury agreed with Great Lakes’ claim that it had been stiffed and, that September, U.S. District Court Judge Susan Nelson awarded Great Lakes $32.9 million in damages.

Great Lakes, which accused Essar of engaging in bad faith conduct, then asked Nelson to make Essar cough up $2.1 million of the $5.1 million in attorney fees it racked up in the course of the fight.

Undeterred, Essar posted a $37.9 million supersedeas bond to stay the judgment and took its case to the 8th Circuit.

The move paid off last December when a three-judge panel vacated the verdict on jurisdictional grounds and ruled that the dispute properly belonged in state, not federal, court.

Following the ruling, Essar (which has been in bankruptcy last summer and has since rebranded as Mesabi Metallics Company) asked Nelson to make Great Lakes pay for the $1.2 million in premiums it was shelled out for the supersedeas bonds.

In response, Great Lakes objected on the grounds that the 8th Circuit, in vacating the verdict, had awarded Essar $500 for its appellate filing fees but had said nothing on the question of the bond premiums.

Under the 8th Circuit’s 2008 precedent in Reeder-Simco GMC, Inc. v. Volvo GM Heavy Truck Corp., Great Lakes argued that “costs are taxed only as the court orders” when a judgment is vacated. And even if the premium on the bond were deemed recoverable, Great Lakes continued, Nelson had broad discretion under Rule 39(e) to deny costs.

Nelson should exercise that discretion, Great Lakes argued, because Essar “unnecessarily drug out this case for six years by asserting baseless defenses and engaging in otherwise dilatory litigation conduct.”

In response, Essar said Reeder-Simco didn’t apply because, unlike the successful appellee in that case, it had notified the 8th Circuit of its intent to seek costs.

In the end, Nelson sided with Essar.

“While this is a close question, the Court finds that it has the authority to tax as costs the supersedeas bond premium payments, as the 8th Circuit awarded the appellant filing fee costs, directed Defendant to seek their statutory filing fee costs with this court, and Defendants’ Bill of Costs gave notice of the reservation of rights to seek costs for the premium payments,” Nelson wrote in her May 26 order.

The fate of Essar’s half-built taconite project, meanwhile, remains up in the air as creditors await an imminent ruling from a federal bankruptcy judge in Delaware on the proposed reorganization plan.

Lawyers for both sides in the bond dispute did not return calls seeking comment on the ruling, or plans going forward.

Essar was represented by Nicole Moen of the Fredrikson & Byron firm, as well Douglas Flaum, Shahzeb Lari and Amanda Pober of the New York firm of Paul Hastings. Great Lakes Gas was represented by David Elrod of the Dallas, Texas firm of Gruber Elrod Johansen Hail Shank and local counsel Julian Zebot of Maslon.