Opinion
Argued and Submitted Jan. 16, 2003.
NOT FOR PUBLICATION. (See Federal Rule of Appellate Procedure Rule 36-3)
Current and former sales employees brought action alleging that employer's implementation of unlawful compensation plans violated Racketeer Influenced and Corrupt Organizations Act (RICO). The United States District Court for the Northern District of California, Susan Yvonne Illston, J., 2001 WL 764953, entered summary judgment in favor of employer, and employees appealed. Employer cross-appealed denial of costs. The Court of Appeals held that: (1) employees failed to establish RICO violation, and (2) employer was prevailing party.
Appeal affirmed; cross-appeal reversed and remanded. Appeals from the United States District Court for the Northern District of California, Susan Yvonne Illston, District Judge, Presiding.
Before HUG, ALARCON, and GRABER, Circuit Judges.
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3.
Plaintiffs, who are current and former employees of West Coast Beauty Supply, allege that Defendants defrauded them through three unlawful compensation plans. Plaintiffs argue that Defendants' implementation of these plans violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1962(c)-(d), 1964. The district court granted summary judgment in Defendants' favor. We affirm.
A. "Charge back" and "instant credit" plans
We assume for the sake of this disposition, but need not and do not decide, that only some of Plaintiffs' claims as to these two plans are time-barred. Even if some claims are not barred by the statute of limitations, Defendants are entitled to summary judgment.
Page 309.
There is no evidence that Defendants intentionally misrepresented anything about either the "charge back" or the "instant credit" plan. The details of each plan have been disclosed. For example, Kauders stated that he mailed a copy of the commission charge-back report to each Plaintiff with Plaintiffs' paychecks.
Plaintiffs' claim hinges on their allegation that Defendants represented the plans as being legal, while knowing that the plans were illegal. However, there is no admissible evidence that raises a genuine issue of material fact as to Defendants' knowledge concerning the legality of the plans. Plaintiffs rely on a 1981 advice letter from their employer's lawyer to their employer, which (they contend) implies that Defendants knew that the plans adopted several years later were illegal. However, the district court correctly ruled that this document is privileged and that the privilege never has been waived. No other evidence in the record raises an inference of the knowledge alleged.
None of the district court's other evidentiary rulings was an abuse of discretion.
B. "Bonus Bucks" plan
Two plaintiffs allege that they received inflated 1099s as a result of their participation in the "Bonus Bucks" plan. However, there is no evidence that either of them actually incurred any additional tax liability or whether, instead, they filed offsetting forms, declined to report the amount recited as income, or otherwise avoided paying taxes on these amounts. Without showing some concrete financial loss, Plaintiffs cannot state a RICO claim. Forsyth v. Humana, Inc., 114 F.3d 1467, 1481 (9th Cir.1997).
C. Costs
On cross-appeal, Defendants argue that the district court abused its discretion in denying them costs. We agree.
Defendants are the prevailing party in this action. Under Rule 54(d)(1) of the Federal Rules of Civil Procedure, costs are "allowed as of course to the prevailing party unless the court otherwise directs." We have held that this rule "creates a presumption in favor of awarding costs to a prevailing party." Ass'n of Mexican-Am. Educators v. California, 231 F.3d 572, 591 (9th Cir.2000) (en banc). If a district court denies costs to a prevailing party, it must give reasons explaining why the case is not ordinary and why it would be "inappropriate or inequitable to award costs." Id. at 593.
The district court denied costs simply because it concluded that the RICO claims are "intertwined" with pendant state-law claims, which it dismissed without prejudice. However, the district court's decision to decline to exercise supplemental jurisdiction over Plaintiffs' state-law claims does not change the fact that Defendants are fully the prevailing party in this federal case.
On remand, the district court should reconsider whether to award costs: if not, it must explain its reasons; if so, it should consider the appropriate amount.
AFFIRMED on appeal (No. 01-16561); REVERSED and REMANDED on cross-appeal (No. 01-17167). Costs on appeal No. 01-16561 are taxed against Plaintiffs-Appellants, and costs on cross-appeal No. 01-17167 are taxed against Plaintiffs-Appellees.