SCOTUS Rules District Courts Can’t Second Guess Appellate Courts’ Ruling on Costs

Back in San Antonio v. Hotels.com, L.P., 593 U.S. ____ (2021), the U.S. Supreme Court held that a district court does not have the discretion to deny or reduce the costs given by an appellate court under Federal Rule of Appellate Procedure 39.

Facts of the Case

The City of San Antonio–acting on behalf of a class of 173 Texas municipalities–has been granted a multi-million-dollar judgment in Federal District Court from many of favorite online travel companies (OTCs) within the calculation of hotel occupancy taxes. To prevent execution on such judgment pending appeal, the OTCs acquired supersedeas bonds securing the judgment.

On appeal, the Court of Appeals decided that the OTCs hadn’t underpaid on their taxation. In keeping with Federal Rule of Appellate Procedure 39(d), the OTCs registered with the circuit clerk a invoice of costs searching for unmanned docketing fees and printing costs, that were taxed without objection. The OTCs then filed a statement of costs in the District Court seeking over $2.3 million in costs–mostly for premiums paid on the supersedeas bonds which are listed in Rule 39(e) as”taxable in the district court for the benefit of the party entitled to costs.”

San Antonio objected and urged the District Court to exercise its discretion to decline to tax all or most of these costs. The District Court held that it had no discretion to deny or decrease those costs under Circuit precedent.

Supreme Court’s Conclusion

Even the Supreme Court unanimously affirmed, holding that Rule 39 does not allow a district court to change a court of appeals’ feasibility of the costs listed in subdivision (e) of the Rule. Justice Samuel Alito wrote on behalf of the Court.

In reaching its conclusion, the Court refused San Antonio’s argument that”the appellate court may say’who will receive costs (party A, party B, or neither)’ but lacks’ability to split up costs. ”’ Rather, the justices sided with the OTCs, agreeing that the court has the discretion to split up the costs as it deems suitable and a district court cannot change that job.

“There is a longstanding custom of awarding certain costs besides attorney’s fees to prevailing parties from the national courts,” Justice Alito clarified. He added that Principle 39″certainly does not imply that the court of appeals may not split up costs,” but”[o]n the contrary, the jurisdiction of a court of appeals to do exactly that is firmly supported by the association between the default rules and the court of appeals’ ability to’order otherwise. ”’

Justice Alito went on to emphasize the court of appeals’ conclusion that a party is”entitled” to a specific proportion of costs will mean little if the district court would take another look in the equities. He also wrote:

Suppose that a court of appeals, in a situation where the district court judgment is affirmed, awards the prevailing appellee 70 percent of its costs. In the event the district court, in an exercise of its discretion, later reduced the costs by half an hour , the appellee would receive just 35 percent of its prices –in direct violation of the court of appeals’ instructions. Or assume the court of appeals, presuming the decision below was plainly wrong, awards the prevailing appellant 100 percent of its prices. It would subvert that allocation if the district court declined to tax costs or substantially reduced them because it thought there was at least a very powerful argument in favor of the conclusion the court of appeals had reversed–which, clearly, was the district court’s decision. In short, the court of appeals’ conclusion that a party is”entitled” to costs could mean small if, since San Antonio considers the district court can take another look in the equities.

Even the Supreme Court was also not persuaded that applying the plain text of Rule 39 will make the problems that San Antonio raised. “we don’t see why our interpretation will cause confusion,” Justice Alito wrote. “This translation quite sensibly gives national courts at each level primary discretion over costs relating to their proceedings.”
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