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In re Philadelphia Mortg. Trust

filed: April 11, 1991.

IN RE: PHILADELPHIA MORTGAGE TRUST, MAURICE BAEHR, SR., TRUSTEE,
v.
TOUCHE ROSS & CO., APPELLANT



On Appeal from the United States District Court for the Eastern District of Pennsylvania; D.C. Civil No. 85-0709.

Sloviter, Chief Judge,*fn* Scirica and Seitz, Circuit Judges.

Author: Sloviter

SLOVITER, Chief Judge

I.

Introduction

The sole issue in this case is whether a bankruptcy court's orders that approve a trustee's employment of expert witnesses are tantamount to appointment by the court of those witnesses for purposes of 28 U.S.C. § 1920(6) (1988) which permits taxation as costs against the losing party of fees for "court appointed experts." Surprisingly, this appears to be a question of first impression for an appellate court.

II.

Factual and Procedural History

Maurice Baehr, Sr. ("Baehr" or "trustee"), the trustee in bankruptcy for Philadelphia Mortgage Trust ("PMT"), commenced an adversary proceeding against Touche Ross & Co. ("Touche") in the United States Bankruptcy Court for the Eastern District of Pennsylvania on September 13, 1985, for breach of Touche's contract to audit PMT. At the time this action was commenced, PMT had been in reorganization proceedings under Chapter 11 of the Bankruptcy Code for over two years.

On three separate occasions, Baehr applied for and received authorization from the Bankruptcy Court to employ three accountants. The first of these applications, filed over a year before the trustee commenced suit against Touche, requested an accountant's assistance to render typical accounting services. The latter two, both entitled "Application to Employ Expert Witness", App. at 30, 37, sought authorization to employ two other accountants to "prepare a report for use at trial, appear at trial and assist counsel in this litigation." App. at 31, 38. Neither the applications nor the court's orders approving them mention any specific rules or statutory authority for the employment of the accountants.

The parties stipulated to withdrawal of reference to the bankruptcy court of the adversary proceeding, and the case was tried before the district court. The jury entered a verdict against Touche in the amount of $207,910.

Baehr then submitted a bill of costs for $109,084.68, of which expert witness fees for the employment of the three accountants comprised $101,071.50. Touche objected to the inclusion of the expert witness fees as beyond the statutory bounds of 28 U.S.C. § 1821(b) (1988). The clerk denied recovery for those fees and taxed costs of only $8,013.18. Baehr moved for reconsideration. The district court then entered an order which stated, inter alia, "Plaintiff Trustee's expert witnesses shall be deemed court appointed experts entitled to compensation pursuant to 28 U.S.C. § 1920," App. at 54 (emphasis in original), and granted Baehr's motion to tax costs against Touche for the full amount of the expert witnesses' fees.

Touche now appeals the district court's order. We have appellate jurisdiction pursuant to ...


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