From Ronald Mann
on April 20, 2021
at 10:19 am
Wednesday’s argument against Hotels.com in the city of San Antonio brings the judges to a fundamental civil litigation question: How should the courts rule on the “costs” that the prevailing party on appeal can get back from the losing party?
In general, the “American” rule in the United States requires the dominant party in the United States to pay its own attorney’s fees. However, there is a relatively narrow category of litigation-related administrative costs that the prevailing party can get back from the losing party. In this case, it is about the costs that arise after a successful appeal to a federal court. The relevant rule is Rule 39 of the Federal Appointments Code. Subsection (a) describes who should bear the costs and states in a relevant part: “Unless the law provides otherwise or the court does not order otherwise … If a judgment is reversed, the costs will be taxed against the tax [losing party]. “Sub-section (e) again provides that”[t]The following costs in the appeal proceedings are taxable at the district court in favor of the party liable to pay under this rule. “It then lists four types of costs that are available: minutes ‘costs, minutes’ costs, the fee for filing the notice of appeal, and the rewards associated with a pending complaint. By filing a complaint, a defendant who loses in the district court can prevent the plaintiff from carrying out the sentence while the complaint is pending.
The specific question in this case is whether the district court must award all four of the listed costs to the dominant party or instead, at its sole discretion, may decline or reduce some of the costs. In this case – a dispute between Texas communities and online tour operators over hotel occupancy taxes – the cost of documentation and filing fee was approximately $ 350,000, and the unsuccessful party (the City of San Antonio) had no objection to paying those. But Hotels.com (which lost in district court but ultimately prevailed on appeal) also spent more than $ 2 million in awards on an appeal, and the city asked the district court to cut those costs for a variety of reasons or reject, which I don’t need to summarize here. The district court denied the motion, not because it found the San Antonio arguments inappropriateness – it characterized them as “convincing.” Rather, the court stated that following the long-standing precedent of the U.S. Court of Appeals for the 5th Circuit, the district courts have no discretion whatsoever to reject or reduce the listed costs, but rather to grant the full amount of the listed costs in each case. It just so happens that there is an opposite rule in each of the other appellate courts to have the question considered (say nine other courts, depending on how you count them). If this case had occurred anywhere outside the 5th circuit, the district court would likely have, at its own discretion, reduced the cost San Antonio would have to pay.
As you would expect, the main arguments in this case are simple text arguments. Central to San Antonio is that the rule only states that the costs are “taxable” in the district court. This is viewed as an “allowable” term that defines the costs that are reimbursable, rather than an absolute mandate that those costs should always be recognized. San Antonio notes that an earlier version of Rule 39 provided that the listed costs “be taxed in the district court” and claims that the change from the mandatory phrase “be taxed” to the less absolute description of those costs as ” taxable ”reflects the validation of the district court’s discretion to determine the appropriate level of costs.
Hotels.com predictably argues that the district court is required to tax the costs listed. For Hotels.com, the point of the statement in 39 (e) that the costs are “Taxable in the District Court” is simply to indicate that the District Court is the place where the costs listed in 39 (e) are claimed can. Based on the Hotels.com reading, 39 (a) gives the appeals court a ruling on who will pay these costs and 39 (e) describes what those costs are. Hotels.com emphasizes the lack of a text reference in Rule 39 that the district court has the right to “object” to the appellate court’s determination of the dominant party’s claim for costs.
In my opinion, the textual arguments in this case are almost balanced. Two considerations lead me to expect that the judges might nevertheless lean towards San Antonio’s “discretionary” position. First, the acting attorney general filed an amicus letter in support of San Antonio, in which he strongly argued that San Antonio is making the debate better. Since the United States participates in federal appeals more than any other party, it may have the greatest interest in finding a sensible solution. The unqualified and relatively disinterested view that San Antonio has the superior argument will impress some of the judges. Since the United States undoubtedly wins most of the callings it attends, its demeanor in assisting the loser in the calling in this instance strongly suggests that this is a better way of determining the appropriate level of expense.
The second consideration is the interference with the acceptance of the lower court’s view. As San Antonio and the federal government show, courts across the country have for decades – everywhere except in the 5th circuit – assumed that the district courts will rule on the appropriate amount of the costs to be awarded. Local rules, forms and procedures in all of these courts would change if the judges accepted the outlier rule of the 5th circuit. While judges often don’t mind pissing the apple cart off when they see a one-sided split in the lower courts that flies in the face of a strong textual argument, the textual arguments here are so tightly balanced that disrupting the adoption of the minority rule can Strain balance. We’ll know more on Wednesday.