holding that "'difficulty' alone does not justify penalizing the prevailing parties"Summary of this case from Steffens v. Regus Grp., PLC
Nos. 92-36886, 92-36915.
Argued and Submitted December 13, 1994.
Decided April 11, 1995.
Robert Hayden Burns, Butler Binion, Houston, TX, for defendant-appellant Credit Bureau Reports, Inc.
Thomas Demitrack and Robert H. Rawson, Jr., Jones, Day, Reavis Pogue, Cleveland, OH, for defendant-appellant TRW, Inc.
Stephen F. Crew, O'Donnell, Ramis, Crew Corrigan, Portland, OR, Eugene Crew, Townsend and Townsend Khourie and Crew, San Francisco, CA, for plaintiffs-appellees.
Appeals from the United States District Court for the District of Oregon.
Before: SKOPIL, NORRIS and HALL, Circuit Judges.
This case raises the question of when a district court may deny costs to a prevailing party. See Fed.R.Civ.P. 54(d)(1). The district court denied costs to the prevailing defendants on the ground that the plaintiffs brought their case in good faith and without vexatious purpose. We conclude that the district court abused its discretion.
This case began when plaintiffs National Information Services, Inc., Credit Data of Illinois, Inc., Informative Research, Inc., and CDB Infotek (collectively, "Plaintiffs") filed a federal antitrust action against defendants TRW, Inc. and Credit Bureau Reports, Inc. (collectively, "Defendants"). The complaint alleged a series of federal and state antitrust violations. It also included a number of business tort claims under California and Oregon law.
After extensive discovery, briefing, and oral argument, the district court granted Defendants' motion for summary judgment in its entirety. Plaintiffs then further supplemented the record and filed a motion for reconsideration. After full briefing and another round of oral argument, the district court denied the motion to reconsider and entered summary judgment for Defendants.
Plaintiffs took an appeal to this Court. See National Info Servs., Inc. v. TRW, Inc., No. 92-36780, 52 F.3d 334 (9th Cir. 1995). In an unpublished order filed today, we affirmed the district court.
As prevailing parties, both defendants timely submitted separate bills of costs to the district court. Plaintiffs objected but did not challenge any specific item claimed in the cost memoranda. Instead, Plaintiffs relied on the district court's equitable discretion under Rule 54(d)(1) and asked that each side be ordered to bear its own costs. In support of their request, Plaintiffs argued that their case raised "important and intricate" legal questions and included claims that were "not meritless." Plaintiffs' Memorandum of Points and Authorities in Opposition to Defendants' Bill of Costs at 2.
The district court agreed. It denied Defendants' bills of costs, reasoning that:
Plaintiffs' antitrust action has merit. Although I granted Defendants' motion for summary judgment, I did not do so lightly. I took Plaintiffs' motion to reconsider seriously. Under these facts, I deny Defendants' bills of costs.
Order of October 15, 1992 (denying costs). Defendants appealed. We have jurisdiction under 28 U.S.C. § 1291 and now reverse.
Rule 54(d)(1) provides, in pertinent part, that "costs other than attorneys' fees shall be allowed as of course to the prevailing party unless the court otherwise directs." Fed.R.Civ.P. 54(d)(1). We long have held that the decision to award costs ordinarily resides in the district court. We will not disturb that decision unless the court has abused its discretion. See, e.g., Trans Container Servs. v. Security Forwarders, Inc., 752, F.2d 483, 488 (9th Cir. 1985).
The district court based its decision to deny costs on its conclusion that Plaintiffs' case had "merit." Order of October 15, 1992 (denying costs). We understand this finding of "merit" as a statement that even though Plaintiffs were not entitled to prevail on their substantive claims, they brought their case in good faith and without vexatious purpose. As we explain below, this is not a sufficient reason to justify the denial of costs to a prevailing party.
We agree with our sister circuits that Rule 54(d)(1) creates a strong presumption in favor of awarding costs to the prevailing party. See Klein v. Grynberg, 44 F.3d 1497, 1506 (10th Cir. 1995); Congregation of the Passion v. Touche, Ross Co., 854 F.2d 219, 222 (7th Cir. 1988). This presumption is supported by the explicit language of Rule 54(d)(1), which makes the award of costs to a prevailing party automatic in the absence of an express direction to the contrary by the district court. See Fed.R.Civ.P. 54(d)(1) (providing that costs "shall be allowed as of course . . . unless the court otherwise directs"); see also Chicago College of Osteopathic Medicine v. George A. Fuller Co., 801 F.2d 908, 910 (7th Cir. 1986); Subscription Television, Inc. v. Southern Cal. Theater Owners Ass'n, 576 F.2d 230, 234 (9th Cir. 1978).
The unsuccessful litigant can overcome this presumption only by pointing to some impropriety on the part of the prevailing party that would justify a denial of costs. See Delta Air Lines, Inc. v. Colbert, 692 F.2d 489, 490 (7th Cir. 1982); Popeil Bros., Inc. v. Schick Electric, Inc., 516 F.2d 772, 775-776 (7th Cir. 1975). The loser bears this burden because the denial of costs is by nature a penalty. See Smith v. Southeastern Penn. Transp. Auth., 47 F.3d 97, 99-100 (3d Cir. 1995) (per curiam); Serna v. Manzano, 616 F.2d 1165, 1167 (10th Cir. 1980). A district court therefore must award costs unless the prevailing party is guilty of some fault, misconduct, or default worthy of punishment. See Delta Air Lines, 692 F.2d at 490.
We find no impropriety on the part of Defendants that would justify denying them their due costs under Rule 54(d)(1). We specifically reject Plaintiffs' argument that their good faith in prosecuting the underlying antitrust action should defeat the presumption in favor of awarding costs. All parties to a federal action have an obligation to act in good faith and with proper purpose. See, e.g., Fed.R.Civ.P. 11; Model Rules of Professional Conduct Rule 3.1 (1994). It follows that noble intentions alone do not relieve an unsuccessful litigant of the obligation under Rule 54(d) to compensate his opponent for reasonable costs. "If the awarding of costs could be thwarted every time the unsuccessful party is a normal, average party and not a knave, Rule 54(d)(1) would have little substance remaining." Popeil Bros., 516 F.2d at 776. We therefore hold that the district court abused its discretion when it refused to award costs on the ground that Plaintiffs brought their case in good faith and with meritorious intentions.
Plaintiffs offer an alternative basis on which to let the district court order stand. They ask us to affirm the denial of costs on the ground that their antitrust action raised "close and difficult" legal issues. We decline the invitation. As an initial matter, we hardly think that the underlying antitrust action qualifies as a particularly close or difficult case. More importantly, even if it did, we hold that "difficulty" alone does not justify penalizing the prevailing parties. Cf. Klein v. Grynberg, 44 F.3d at 1507 ("We find no justification to penalize [the prevailing party] because this litigation was complex or lengthy."). But see White White, Inc. v. American Hosp. Supply Corp., 786 F.2d 728, 733 (6th Cir. 1986) (holding that length and difficulty of a case may be a factor in the decision to deny costs). As we explained, the district court must award costs unless equity demands otherwise due to some impropriety on the part of the prevailing party during the course of the litigation. See Smith, 47 F.3d at 99-100, (citing ADM Corp. v. Speedmaster Packaging Corp., 525 F.2d 662, 665 (3d Cir. 1975), and Chicago Sugar Co. v. American Sugar Refining Co., 176 F.2d 1, 11 (7th Cir. 1949), cert. denied, 338 U.S. 948, 70 S.Ct. 486, 94 L.Ed. 584 (1950)). Generally speaking, neither side bears responsibility for the length or complexity of a particular case. Moreover, the difficulty of a case hardly constitutes an impropriety that calls out for punishment. This case is REVERSED and REMANDED with instructions to tax costs in favor of defendants TRW, Inc. and Credit Bureau Reports, Inc.