Hayley Elizabeth Kytta, Appellant,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2018).

STATE OF MINNESOTA
IN COURT OF APPEALS
A19-0703

Hayley Elizabeth Kytta,
Appellant,

vs.

Corey Strecker,
Respondent.

Filed December 9, 2019
Affirmed in part and reversed in part
Hooten, Judge

Hennepin County District Court
File No. 27-CV-17-12116

James R. Schwebel, James S. Ballentine, Matthew J. Barber, Schwebel, Goetz & Sieben,
P.A., Minneapolis, Minnesota (for appellant)

Angela C. Shackleford, Kimberly A. Scriver, LaBore, Guiliani & Viltoft, Ltd., Hopkins,
Minnesota (for respondent)

Considered and decided by Hooten, Presiding Judge; Cleary, Chief Judge; and
Worke, Judge.
U N P U B L I S H E D O P I N I O N
HOOTEN, Judge
Appellant challenges the district court’s affirmance of the district court
administrator’s award to respondent for disbursements incurred on his behalf by his
automobile liability insurer as part of respondent’s defense and the district court’s

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additional award for costs and attorney fees incurred by the insurer during the appeal of
the district court administrator’s award. Appellant argues that the district court erred when
it affirmed the award of disbursements paid by the insurer as the statute authoriz ing
disbursements paid or incurred by the prevailing party, Minn. Stat. § 549.04, subd. 1
(2018), must be narrowly construed to limit the recovery of disbursements to those
personally paid or incurred by the prevailing party. We affirm in part and reverse in part.
FACTS
In March of 2013, appellant Hayley Elizabeth Kytta and respondent Corey Strecker
were involved in a car accident. Shortly after, Kytta sued Strecker, alleging that the car
accident left her with a permanent injury. In July 2018, a jury re turned a verdict finding
that Strecker was not responsible for Kytta’s injury. One week later, Strecker, as the
prevailing party, filed a notice and application for taxation of costs and disbursements as
permitted under Minn. Stat. §§ 549.02, subd. 1, .04 , subd. 1 (2018), with the district court
administrator. Strecker requested the amount of the disbursements paid and incurred by
his automobile liability insurer, State Farm, on his behalf. The district court filed an order
for judgment on the merits from the jury trial on October 1, 2018, and found Strecker was
entitled to reasonable costs and disbursements without indicating the amount of the award.
One week later, Kytta filed an objection to the award of costs and disbursements
requested by Strecker, claiming that only prevailing parties are entitled to reasonable
disbursements under Minn. Stat. § 549.04, subd. 1, and that there was no evidence to
suggest that Strecker personally incurred any disbursements during the proceeding as State
Farm funded his entire defense. Nevertheless, on October 16, 2018, the district court

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administrator awarded the requested amount of $5,440.37 to Strecker. Kytta timely
appealed the court administrator’s award of fees and costs to the district court.
On January 24, 2019, the district court affirmed the court administrator’s award of
$5,440.371 to Strecker and awarded Strecker an additional $80 in costs, as well as $900 in
attorney fees associated with the appeal of the administrator’s award to the district court.
On March 21, 2019, the district court entered judgment on the January 24, 2019 order that
ordered Kytta to pay Strecker a total of $6,420.37. This appeal followed.
D E C I S I O N
I. Kytta’s appeal of the district court’s judgment on the award of disbursement s
is timely.

Strecker argues that this appeal is untimely and therefore Kytta has waived her right
to contest Strecker’s disbursements. This court reviews matters of jurisdiction and
statutory interpretation de novo. In re Comm’r of Pub. Safety, 735 N.W.2d 706, 710 (Minn.
2007) (providing jurisdiction is a question of law that appellate courts review de novo).
An appeal may be taken by this court from a final judgment. Minn. R. Civ. App. P.
103.03(a). Unless a different statutory deadline applies, an appeal must be “from a
judgment within 60 days after its entry.” Minn. R. Civ. App. P. 104.01, subd. 1.

1 The award of $5,440.37 is based on the award of $5,234.87 in disbursements authorized
under Minn. Stat. § 549.04, subd. 1, and $205.50 in statutory costs authorized under Minn.
Stat. § 549.02, subd. 1. Kytta’s appeal is limited to the language of Minn . Stat. § 549.04,
subd. 1, and therefore only relates to the disbursements authorized thereunder. As Kytta
fails to raise any arguments regarding Strecker’s entitlement to the $205.50 in statutory
costs, we decline to consider it. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating
that appellate courts generally will not consider matters not argued to and considered by
the district court).

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On January 24, 2019, the district court issued an order awarding the disbursements
paid or incurred on behalf of Strecker by State Farm. On March 21, 2019, the district court
entered a final judgment on this order. Kytta filed her appeal of the district court’s
judgment on May 7, 2019—47 days after the judgment was entered.
As the district court’s cost and disbursement judgment is independently app ealable
as a final judgment under Minn. R. Civ. App. P. 103.03(a), and Kytta’s appeal to this court
was filed within the 60-day window allowed by Minn. R. Civ. App. P. 104.01, subd. 1, her
appeal is timely.
II. The district court did not err when it construe d Minn. Stat. § 549.04, subd. 1,
to allow the prevailing party to collect reasonable disbursements paid or
incurred, even when the disbursements were paid or incurred by the prevailing
party’s insurer.

Kytta argues that the district court erred when it a ffirmed the court administrator’s
award of disbursements to Strecker because Minn. Stat. § 549.04, subd. 1, authorizes only
a prevailing party to collect reasonable disbursements personally paid or incurred during
litigation. Although State Farm paid and incurred reasonable disbursements associated
with Strecker’s defense —disbursements for which Strecker would be otherwise liable —
Kytta contends that Strecker is not statutorily authorized to recover any disbursements as
he did not personally incur them over the course of the litigation.
A. Minn. Stat. § 549.04, subd. 1, should be narrowly construed.
“[L]egislation abrogating the common law must be narrowly construed.” Renswick
v. Wenzel, 819 N.W.2d 198, 210 (Minn. App. 2012), review denied (Minn. Oct. 16, 2012).
We do not presume that the “Legislature intends to abrogate or modify a common law rule

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except to the extent expressly declared or clearly indicated in the statute.” Staab v. Diocese
of St. Cloud, 813 N.W.2d 68, 73 (Minn. 2012). I nstead, a court “must carefully examine
the express wording of the statute to determine the nature and extent to which the statute
modifies the common law.” Id.
The ability of a prevailing party to recover reasonable disbursements paid or
incurred by th e prevailing party is a right not recognized at common law. State ex rel.
Wrabek v. Tifft, 240 N.W. 354, 354 (Minn. 1931). This form of recovery is authorized by
Minn. Stat. § 549.04, subd. 1 , which reads in relevant part, “In every action in a district
court, the prevailing party . . . shall be allowed reasonable disbursements paid or incurred
. . . .”
“The first step in interpreting a statute is to examine the language to determine
whether it is clear and unambiguous.” A.A.A. v. Minn. Dep’t of Human Servs., 832 N.W.2d
816, 819 (Minn. 2013). Statutory words and phrases are ambiguous if they are susceptible
to more than one reasonable interpretation. State v. Peck , 773 N.W.2d 768, 772 (Minn.
2009). If more than one reasonable interpretation exists, a court must apply the canons of
construction to ascertain the legislative intent. State v. Thonesavanh, 904 N.W.2d 432, 435
(Minn. 2017). When a statute is unambiguous, appellate courts give the words and phrases
their plain and ordinary meaning. A.A.A., 832 N.W.2d at 819 . Where ambiguity exists
between the plain meaning of a word and words that have acquired a special meaning, those
terms “are construed according to such special meaning.” Minn. Stat.
§ 645.08(1) (2018). Therefore, narrowly construing a statute does not prohibit a court from

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interpreting words and phrases that have acquired special meanings in accordance with
those meanings. Staab, 813 N.W.2d at 73–74.
Kytta argues that a narrow construction of Minn. Stat. § 549.04, subd. 1, requires us
to recognize an unspoken restriction that allows for the recovery of reasonable
disbursements paid or incurred only by those who: (1) were a party in the litigation, and
(2) personally paid or incurred an expense associated with their role as a party. And yet, a
narrow construction of a statute is not always synonymous with simply determining the
plain meaning of the words.
In Staab, the Minnesota Supreme Court noted that where words or phrases are not
defined in a statute that abrogates the common law, a court must determine if the words
have acquired a special meaning under the common law and then interpret the words in
light of those determinations. 813 N.W.2d at 74. Absent clearly expressed legislative
intent, definitions crafted by the common law should be preserved. Id. at 73.
As Minn. Stat. § 549.04, subd. 1 , is in abrogation of the common law, Kytta is
correct that we must narrowly construe it. However, we are not free to end our analysis
with the plain meanings of the words in the statute . Instead, we must determine whether
any words or phrases have acquired a special meaning or definition under the common law
and then interpret the statute in light of those meanings. See Staab, 813 N.W.2d at 74;
Minn. Stat. § 645.08(1).

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B. The insurer of a prevailing party is not a prevailing party under Minn. Stat.
§ 549.04, subd. 1.

Kytta argues that State Farm cannot recover reasonable disbursements paid or
incurred in defense of Strecker because a third-party insurer is not a prevailing party under
Minn. Stat. § 549.04, subd. 1.
Minn. Stat. § 549.04, subd. 1 , reads, “[i]n every ac tion in a district court, the
prevailing party . . . shall be allowed reasonable disbursements paid or incurred . . . .”
(Emphasis added.) The Minnesota Supreme Court recognizes that the phrase “prevailing
party” has acquired a special meaning as one “wh o has, in the view of the law, succeeded
in the action,” in that he or she is the party ‘‘in whose favor the decision or verdict is
rendered and judgment entered.” Borchert v. Maloney, 581 N.W.2d 838, 840 (Minn. 1998)
(quotation omitted). Additionally, M innesota does not recognize a direct cause of action
whereby a plaintiff can sue an insurer. Miller v. Market Men’s Mut. Ins. Co., 115 N.W.2d
266, 268 (Minn. 1962).
By narrowly construing Minn. Stat. § 549.04, subd. 1, in accordance with the
supreme court’s definition of “prevailing party” as a party in whose favor the decision or
verdict is rendered and judgment entered, a third -party insurer of a prevailing party is not
a prevailing party. Here, Strecker, and not State Farm, was the prevailing party aw arded
reasonable disbursements by the district court.
C. Reasonable disbursements paid or incurred include those paid or incurred by a
third-party contractually obligated to fund a party’s defense.

Where a prevailing party becomes liable for, or subject to, litigation expenses, they
incur those disbursements. Staffing Specifix, Inc. v. TempWorks Mgmt. Servs., Inc. , 896

8
N.W.2d 115, 128 (Minn. App. 2017), aff’d on other grounds , 913 N.W.2d 687 (Minn.
2018). This is true even though an insurer commonly pays all sums for which the insured
becomes legally obliged in accordance with the terms of the insurance contract. See, e.g.,
Minn. Mining & Mfg. Co. v. Travelers Indem. Co. , 457 N.W.2d 175, 181 (Minn. 1990)
(providing that insurers agree to pay, on behalf of the insured, any damages to another party
arising from the policy’s coverage).
Kytta contends that by allowing a prevailing party to recover disbursements paid or
incurred by a third -party insurer in the defense of the prevailing party, a court
impermissibly reads the words “paid or incurred on behalf of the prevailing party” into the
statute where they do not exist.
The Minnesota Supreme Court has expressly concluded “[t]he definition of incur is
‘to become liable for.’” Collins v. Farmers Ins. Exch., 135 N.W.2d 503, 507 (Minn. 1965)
(emphasis added); see also Staffing Specifix , 896 N.W.2d at 128 (interpreting “incurred”
as an unambiguous term meaning to become liable or subject to expenses). We therefore
apply the special meaning of “incur” to the statute. Under this definition of “incurred,”
Minn. Stat. § 549.04, subd. 1, authorizes a prevailing party to recover disbursements paid
or incurred by a contractually -obligated third party in the defense of a prevailing party —
including through an insurance policy.
An insurer’s “duty to defend an insured on a claim arises when any part of the claim
is arguably within the scope of the policy’ s coverage.” Jostens, Inc. v. Mission Ins. Co. ,
387 N.W.2d 161, 165 (Minn. 1986) (quotation omitted). This is a duty based on a

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contractual relationship between the insured and the insurer. Meadowbrook, Inc. v. Tower
Ins. Co., Inc., 559 N.W.2d 411, 415 (Minn. 1997).
Strecker and State Farm entered into a contract for automobile insurance that was
in effect on the date of the accident with Kytta. In exchange for a monthly premium, the
terms of the policy gave State Farm the right and obligation to “defend an insured in any
claim or lawsuit, with attorneys chosen by [State Farm]; and appeal any award or legal
decision for damages payable under this policy.” The policy also provided that State Farm
“will pay . . . [a]ttorney fees for attorneys chosen by [State Farm] to defend an insured . . .
and [c]ourt costs awarded by the court against an insured.”
As the car accident fell within the scope of coverage under Strecker’s policy, State
Farm was contractually obligated to provide for Strecker’s defense—paying and incurring
reasonable disbursements for which Strecker would be otherwise personally obligated. But
for this contractual relationship between Strecker and State Farm, Strecker would be
personally and solely liable for his defense. Applying the Minnesota Supreme Court’s
definition of incur as “to become liable for,” State Farm became liable to Str ecker to pay
for Strecker’s defense by the very nature of the insurance contract into which they both
entered.
Nevertheless, Kytta argues that the Minnesota Supreme Court’s decision in
Dukowitz v. Hannon Security Services , 841 N.W.2d 147 (Minn. 2014), re quires us to
interpret Minn. Stat. § 549.04, subd. 1 , to only authorize disbursements paid or incurred
personally by the prevailing party. In Dukowitz, the supreme court held that the district
court was not allowed to consider a non-prevailing party’s financial status when it assessed

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what disbursements were reasonable under Minn. Stat. § 549.04, subd. 1 . Dukowitz v.
Hannon Sec. Servs., 841 N.W.2d 147 (Minn. 2014). In its discussion, the supreme court
construed the statute to make it clearer that the “re asonableness” provision applies to the
disbursements “‘paid or incurred’ by the prevailing party.” Id. at 155 (emphasis added).
Kytta claims that the supreme court’s use of the word “by” in Dukowitz, a word not in the
statute itself, supports the proposi tion that only disbursements paid or incurred by the
prevailing party are authorized. Yet, this interpretation would also require us to read the
word “by” into the statute. Furthermore, Dukowitz simply does not address the supreme
court’s broad definition of “incurred.”
Agreements between parties and non -parties that implicate the funding of legal
proceedings are exceptionally common. Indeed, contingency fee agreements in personal
injury cases may create a contractual relationship between an attorney and a client whereby
an attorney agrees to pay or incur disbursements that would otherwise be the responsibility
of the client. See Minn. R. Prof. Conduct 1.5(c) (providing for contingency fee
agreements). Under Kytta’s interpretation, a client would be pro hibited from taxing
disbursements paid or incurred by an attorney working under a contingency fee agreement.
The consequence of this prohibition could render a prevailing client whose attorney paid
the disbursements associated with the litigation unable to recover those disbursements and,
at the same time, spare the non-prevailing party from any such debt. This burden shifting
is contrary to the intent of the statute, which allows a prevailing party to tax reasonable
disbursements from the non-prevailing party. As limiting the statute in such a way would
lead to an absurd result in light of the exceptionally common practice of contingency fee

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agreements, we must determine that the legislature did not intend to reshape taxation of
costs absent explicit instructions to the contrary. See Minn. Stat. § 645.17(1) (2018) (stating
that when construing a statute, we must presume that “the legislature does not intend a
result that is absurd, impossible of execution, or unreasonable”).
Because “incurred” has been interpreted by the Minnesota Supreme Court to mean
“become liable for,” a narrow construction of Minn. Stat. § 549.04, subd. 1, authorizes a
prevailing party to tax reasonable disbursements paid or incurred by a third party who
agrees to pay for the e xpenses of a prevailing party. Therefore, the district court did not
err when it affirmed the disbursements award to Strecker.
As the prevailing party is allowed to recover reasonable costs and disbursements
paid or incurred under Minn. Stat. § 549.04, subd. 1, even if such costs and disbursements
were paid or incurred by an automobile liability insurer, the district court did not abuse its
discretion when it affirmed the district court administrator’s October 16, 2018
disbursements award.
III. The district court abused its discretion by awarding attorney fees in
conjunction with Kytta’s appeal of the administrator’s award to the district
court.

Kytta argues that the district court abused its discretion when it awarded attorney
fees to Strecker associated w ith Kytta’s appeal of the district court administrator’s
disbursements award to the district court.
“Costs and disbursements shall be allowed as provided by law .” Minn. R. Civ. P.
54.04(a). An award of costs and disbursements is a matter within the district court’s sound
discretion and will not be disturbed absent an abuse of that discretion. Lake Superior Ctr.

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Auth. v. Hammel, Green & Abrahamson, Inc. , 715 N.W.2d 458, 482 (Minn. App. 2006),
review denied (Minn. Aug. 23, 2006). “A court abuses its disc retion when its decision is
based on an erroneous view of the law . . . .” Riley v. State, 792 N.W.2d 831, 833 (Minn.
2011).
“An award of attorney fees must be authorized by statute or contract.” Swenson v.
Bender, 764 N.W.2d 596, 604 (Minn. App. 2009), review denied (Minn. July 22, 2009).
Although a district court may award attorney fees sua sponte as a sanction, the district court
must describe the party’s conduct so as to merit the sanction. Id. at 605; see also Minn.
Stat. § 549.211, subd. 3 (2018) (authorizing sanctions in civil actions); Minn. R. Civ. P.
11.03(a)(2) (requiring a court to describe the specific conduct that warrants the sua sponte
award of sanctions).
At the January 24, 2019 hearing, the district court awarded Strecker an additional
$900 in attorney fees 2 incurred by Strecker for Kytta’s appeal of the district court
administrator’s award. This request was made in a responsive memorandum submitted by
Strecker to the district court. The district court did not indicate the authority u pon which
it relied for its award of $900 in attorney fees to Strecker. There is also no evidence in the
record describing any conduct by Kytta that would merit the sua sponte award of sanction-
based attorney fees under Minn. R. Civ. P. 11.03(a)(2). As attorney fees are not specifically

2 Kytta did not address whether or not Strecker was entitled to the award of $80 in costs
associated with the appeal of the district court administrator’s award. Accordingly, Kytta
waived this argument. See McKenzie v. State , 583 N.W.2d 744, 746 n.1 (Minn. 1998)
(applying the rule that arguments not briefed are waived in an appeal in which the appellant
“allude[d] to” an issue but “fail[ed] to address [it] in the argument portion of his brief”).

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authorized under Minn. Stat. § 549.04, subd. 1, and the district court did not describe the
requisite conduct for a sanction-based award, the district court erred when it awarded $900
in unauthorized attorney fees to Strecker. This error constitutes an abuse of discretion.
Because we conclude that Minn. Stat. § 549.04, subd. 1 , authorizes a prevailing
party to tax reasonable disbursements paid or incurred in his or her proceeding, even if the
disbursements are paid or inc urred on behalf of the prevailing party by a third -party
automobile liability insurer, we affirm the district court’s affirmance of the district court
administrator’s disbursements award to Strecker. However, because the district court’s
award of attorney fees was not authorized by statute, we reverse the district court’s award
of $900 in attorney fees to Strecker.
Affirmed in part and reversed in part.