Opinion ID: 159131
Heading Depth: 2
Heading Rank: 2

Heading: Defendant's Application for Costs.

Text: 54 Defendant appeals an order of the district court denying it costs as a prevailing party under Rule 54(d)(1) of the Federal Rules of Civil Procedure. The district court denied Defendant's application on the grounds, as explained in the order, that, while the court felt compelled under the applicable law to find in the defendant's favor, it did not condone the behavior of the defendant's employees. 55 A district court's denial of costs to the prevailing party is reviewed under an abuse of discretion standard. Aerotech, Inc. v. Estes, 110 F.3d 1523, 1526 (1997). Defendant argues that the district court abused its discretion by denying costs as a penalty not for improper behavior as a litigant, but for non-actionable behavior giving rise to the litigation. 56 Rule 54(d)(1) provides in relevant part that costs shall be allowed as of course to the prevailing party unless the court otherwise directs. The allowance or disallowance of costs to a prevailing party is within the sound discretion of the district court. Homestake Mining Co. v. Mid-Continent Exploration Co., 282 F.2d 787, 804 (10th Cir. 1960). However, this discretion is limited in two ways. First, it is well established that Rule 54 creates a presumption that the district court will award costs to the prevailing party. Cantrell v. IBEW Local 2021, 69 F.3d 456, 458-59 (10th Cir. 1995). Second, the district court must provide a valid reason for not awarding costs. Id. at 459. The district court's stated reason for denying costs was, essentially, that although Defendant's behavior was not legally actionable, it was sufficiently distasteful to warrant the denial of litigation costs. 57 While this Court has discussed various circumstances in which a district court may properly exercise its discretion to deny costs, including when the prevailing party was only partially successful, when damages were only nominal, when costs were unreasonably high or unnecessary, when recovery was insignificant, or when the issues were close or difficult, see, e.g., Cantrell, 69 F.3d at 459, this Court has never attempted to create an exclusive list of valid reasons. Nor has this Court stated that misconduct outside the litigation process is not a justifiable reason for denying costs. 58 However, case law from other jurisdictions points to the conclusion that a district court may not deny costs on the ground that the district court personally disapproves of the conduct upon which the plaintiff's unsuccessful claim was based. See, e.g., Zenith Insur. Co. v. Breslaw, 108 F.3d 205, 207 (9th Cir. 1997) ([D]enial of Rule 54(d) costs operates to punish the prevailing party for some impropriety during the course of the litigation. (emphasis added)); White & White, Inc. v. American Hosp. Supply Corp., 786 F.2d 728, 730 (6th Cir. 1986) (stating that the district court may deny costs where the prevailing party should be penalized for unnecessarily prolonging trial or for injecting unmeritorious issues); Popeil Bros., Inc. v. Schick Elec., Inc., 516 F.2d 772, 775 (7th Cir. 1975) ([T]he denial of costs to the prevailing party or the assessment of partial costs against him is in the nature of a penalty for some defection on his part in the course of the litigation . . . . (emphasis added) (quoting Chicago Sugar Co. v. American Sugar Refining Co., 176 F.2d 1, 11 (7th Cir. 1949), cert. denied 338 U.S. 948 (1950))); Smith v. Southeastern Penn. Transp. Auth., 47 F.3d 97, 99 (3d Cir. 1995) (quoting Chicago Sugar). In Chicago Sugar, the Seventh Circuit went even further, strongly implying that extra-judicial misconduct cannot be the basis for a district court's denial of costs to the prevailing party: [T]he penalty of denial or apportionment of costs under Rule 54(d) should be imposed only for acts or omissions on the part of the prevailing party in the actual course of the litigation . . . . Chicago Sugar, 176 F.2d at 11 (emphasis added). 59 Accordingly, we now hold that the district court's own view of extra-judicial conduct, which the law does not recognize as legally actionable, should play no part in the district court's decision whether to override the presumption that the prevailing party receives costs. In denying Defendant costs on that basis, the district court abused its discretion.