Opinion ID: 771005
Heading Depth: 2
Heading Rank: 4

Heading: The District Court's Refusal to Award Costs14

Text: 93 Defendants appeal from the district court's order denying their cost bill in the amount of $216,443.67. Federal Rule of Civil Procedure 54(d)(1) provides that costs other than attorneys' fees shall be allowed as of course to the prevailing party unless the court otherwise directs. By its terms, the rule creates a presumption in favor of awarding costs to a prevailing party, but vests in the district court discretion to refuse to award costs. See National Info. Servs., Inc. v. TRW, Inc., 51 F.3d 1470, 1471 (9th Cir. 1995). 94 That discretion is not unlimited. A district court must specify reasons for its refusal to award costs. Subscription Television, Inc. v. Southern Cal. Theatre Owners Ass'n, 576 F.2d 230, 234 (9th Cir. 1978). On appeal, we determine whether the reasons that the district court has specified are appropriate and whether, considering those reasons, the court abused its discretion in denying costs. See National Info. Servs., 51 F.3d at 1471-72. 95 In past cases, this court has approved the following reasons for refusing to award costs to a prevailing party: the losing party's limited financial resources, see National Org. for Women v. Bank of Cal., 680 F.2d 1291, 1294 (9th Cir. 1982); see also Wrighten v. Metropolitan Hosps., Inc., 726 F.2d 1346, 1358 (9th Cir. 1984); Moore v. Hughes Helicopters, Inc., 708 F.2d 475, 486 (9th Cir. 1983); and misconduct on the part of the prevailing party, see National Info. Servs., 51 F.3d at 1472. Further, in Stanley v. University of Southern California, 178 F.3d 1069, 1079-80 (9th Cir.), cert. denied, 120 S. Ct. 533 (1999), we held that the district court abused its discretion in denying a losing civil rights plaintiff's motion to re-tax costs without considering (1) the plaintiff's limited financial resources; and (2) the chilling effect of imposing such high costs on future civil rights litigants. 96 Here, the district court gave four reasons for denying costs to Defendants: (1) the case involve[s] issues of substantial public importance, specifically educational quality, interracial disparities in economic opportunity, and access to positions of social influence; (2) there is great economic disparity between Plaintiffs, who are individuals and small nonprofit educational organizations, and the State of California; (3) the issues in the case are close and difficult; 15 and (4) Plaintiffs' case, although unsuccessful, had some merit, as evidenced by the 1995 modification of the CBEST to eliminate higher order mathematics questions. 97 Defendants argue that the district court's reasons for denying costs were improper. According to Defendants, this court's opinion in National Information Services establishes that the only proper reason for denying costs to a prevailing party is to punish misconduct by that party. We disagree. 98 As noted, this court previously has held that district courts may consider other, nonpunitive reasons for denying costs to a prevailing party. National Information Services does appear to suggest that such a denial is proper only as a means of punishing a prevailing but undeserving litigant. See also Zenith Ins. Co. v. Breslaw, 108 F.3d 205, 207-08 (9th Cir. 1997) (following National Information Services). But that suggestion is inconsistent with earlier opinions of this court, see, e.g., National Org. for Women, 680 F.2d at 1294, opinions that National Information Services, as a panel's opinion, could not (and did not purport to) overrule. 99 More importantly, we see no basis for limiting district courts' discretion in the manner that Defendants suggest. The rule itself contains no such limitation; it provides simply that costs shall be allowed to the prevailing party unless the district court otherwise directs. The requirement that district courts give reasons for denying costs flows logically from the presumption in favor of costs that is embodied in the text of the rule; if a district court wishes to depart from that presumption, it must explain why so that the appellate court will be able to determine whether or not the trial court abused its discretion. Subscription Television, 576 F.2d at 234. But the limitation on district courts' discretion that Defendants advocate curtails that discretion in a manner and to a degree that are inappropriate in view of the broad wording of the rule. We now overrule National Information Services to the extent that it held that only misconduct may support the denial of costs to a prevailing party. 100 Federal Rule of Civil Procedure 54(d)(1) establishes that costs are to be awarded as a matter of course in the ordinary case. Our requirement that a district court give reasons for denying costs is, in essence, a requirement that the court explain why a case is not ordinary and why, in the circumstances, it would be inappropriate or inequitable to award costs. Misconduct on the part of the prevailing party is one factor that might render a case extraordinary.  But it is not the only such factor. Here, the reasons that the district court gave for denying costs reflect what is clear at a glance: This is an extraordinary, and extraordinarily important, case. Plaintiffs are a group of individuals and nonprofit organizations. The record demonstrates that their resources are limited. They have brought an action that presents issues of the gravest public importance, and the action affects tens of thousands of Californians and the state's public school system as a whole. The issues in the case are close and complex. Although Plaintiffs have not prevailed in this action, their claims are not without merit. Indeed, as the district court pointed out, Defendants substantially altered the CBEST during the pendency of this litigation. Finally, costs in this case are extraordinarily high. In keeping with our decision in Stanley , we note that divesting district courts of discretion to limit or to refuse such overwhelming costs in important, close, but ultimately unsuccessful civil rights cases like this one might have the regrettable effect of discouraging potential plaintiffs from bringing such cases at all. 101 We do not mean to suggest that the presumption in favor of awarding costs to prevailing parties does not apply to defendants in civil rights actions. Nor are we attempting to create an exhaustive list of good reasons for declining to award costs. We simply hold that the reasons that the district court gave for refusing to award costs in this case were appropriate under Rule 54(d)(1) and that, considering those reasons, the court did not abuse its discretion in refusing to award costs to Defendants.