From Ronald Mann
on April 24, 2021
at 4:53 p.m.
Daniel Geyser advocates the communities of San Antonio and Texas (Art Lien)
Wednesday’s argument against Hotels.com in the city of San Antonio dealt with what appeared to be a fundamental procedural question: How should the courts rule on the “costs” that the prevailing party on appeal can get back from the losing party? At least as far as the argument suggests, it turns out that nothing about this question is simple or obvious.
The case concerns two subsections of Rule 39 of the Federal Appointments Code. The first question is which party should bear the costs. All agree that subsection (a) assigns this issue to the appellate court that ruled the appeal. The rule generally provides for the losing party to pay the dominant party’s costs, but does consider the possibility of the court ordering otherwise, which happens with some regularity. In a narrow case, the court could deviate from the basic “winner-all-rounder” agreement and ask the parties to share the costs equally or in a certain ratio.
The second question – the question before the Supreme Court – is who (if any) decides whether the loser has to pay all the costs requested by the dominant party. Everyone agrees that the District Court has an important role to play in determining these costs, as subsection (e) of Rule 39 lists the five categories of eligible costs and states that they are “taxable” in the District Court. Typically, after the appeal has been completed, the appeals court will send the case back to the district court to finalize the cost decision.
The appeal winner in this case (Hotels.com) argues that decisions about reducing costs are to be made by the appellate court and, second, that there should rarely or never be a reason not to award all costs, which will be the winner originated. The loser on appeal (the city of San Antonio), however, argues that the district court has a wide discretion to determine whether the loser should pay the full amount of the costs demanded by the party that prevailed on the appeal would have. In this case, for example, San Antonio is reluctant to pay the $ 2 million cost of the bond that Hotels.com received to uphold the district court’s judgment pending its (successful) appeal.
Several inconsistent topics confused the discussion. First, several judges appeared to be convinced that San Antonio could easily have challenged the size of the bond in the appeals court or the district court at the time the bond was issued. With that in mind, Justice Clarence Thomas asked Daniel Geyser (San Antonio representative), “Why not proactively object to circuit cost taxation?” Judges Sonia Sotomayor, Neil Gorsuch and Brett Kavanaugh raised similar concerns. Gorsuch was particularly alerted, saying, “Perhaps you haven’t received a coined invitation, but the rule is there, and I think you had four ways to raise it.” For his part, Judge Samuel Alito asked for confirmation that Geyser’s client “had the opportunity … when … the district court approved the loan to raise objections.”
Another group of judges seemed to find it obvious that someone must have authority to review the reasonableness of the costs, but they seemed relatively agnostic as to which court it might be. For example, Sotomayor said, “You raised your objections and the 5th Circle said the district court could not consider it, but it did not consider your objections either.” As Justice Amy Coney Barrett put it, “The 5th circuit approach is that basically there is no one [to consider those objections]because it falls through the cracks, no one decides. “She seemed to think that perhaps” the court of appeal that just ruled the appeal is better placed to rule on the strength of the arguments. “
As the argument continued, there were concerns about the practicality of leaving these determinations to the appellate court, as the amount of the disputed costs is unlikely to become known until the case is sent back to the district court. Chief Justice John Roberts and Thomas and Justice Stephen Breyer were concerned about this point, and Thomas suggested that the situation would appear “sandbag-ripe” if the court waited to leave the decision in the hands of the appellate court and the ruling party to disclose the cost until the case is returned to the district court.
When the argument ended, several judges appeared to find an answer to the problem in Section 1924 of the Judicial Code, a provision the parties had not even addressed in their pleadings. Sotomayor, for example, may recall her days as a trial judge and urged David Salmons (Hotels.com representative) to admit that his position would not prevent a district court from declaring costs well above market value as “unnecessary” – a Reference to the requirement in Section 1924 that taxable costs “necessarily arise”. Barrett and Justice Elena Kagan both agreed, suggesting that it was obvious to them that the district court, in its sole discretion, would reject a point that did not necessarily appear to have arisen. As Kagan put it, “1924 suggests that the district court actually has two functions and that those functions are in its own discretion. One is to decide whether the costs are correct and the other is to decide whether they were necessarily incurred. … Wouldn’t you say that the district court is free to do something about it? “
One final point on this argument: Sotomayor and Barrett, if not others, appeared to take seriously the Salmon’s assertion that even under section 1924 the district court would not have authority to reduce the borrowing costs in this case. because the approval of the loan by the district court in the first instance (before the appeal) shows that the cost of the loan “necessarily accrued”.
So at the end of the argument, you could see three things. First, a large majority of judges appear to believe that someone must have authority to oversee the level of the costs. Some of the judges (though perhaps not all) find it impractical for the appeals court to do this because the relevant information would not be there if the case were before the appeals court. Finally, some of the judges believe that Section 1924 appears to offer this authority, but the parties did not address this argument in their pleadings. It is not at all obvious what the judges are going to do here, and they might even ask for additional information on the meaning of Section 1924.