Court Opinion

ID: 6472061
Source: CourtListenerOpinion
Date Created: 2022-06-26 14:21:28.046501+00
Date Added: 2024-06-11T15:53:50.724915
License: Public Domain

HARTZ, C.J., concurring in part and dissenting in part. {22} I concur in Judge Alarid’s opinion except for affirmance of the district court’s decision to reduce the cost award by 80%. {23} Hard cases can make bad law. Chrysler’s claim of $210,514.93 in expert witness fees is extraordinarily high. But our aversion to that claim should not lead us to overlook Key’s failure to mount a proper challenge in district court. {24} The district court found that the fee was reasonable. I have my doubts about that finding. Chrysler argued that it needed to make an all-out effort to defend its measures for evaluating franchises, because an adverse ruling would have ramifications throughout the country. I wonder, however, whether it is appropriate to burden Key with costs that cannot be justified by the potential liability in Key’s case alone. Perhaps it was reasonable for Chrysler, given its interests nationwide, to spend what it did on an expert. Yet, requiring Key to pay all those costs may well be unreasonable, given the limited financial impact of a judgment in Key’s ease alone. That was not, however, an argument raised by Key in district court, and I agree with the majority opinion that we must defer to the district court’s discretion in rejecting Key’s district court challenges to the reasonableness of the fee. {25} Where I part company with the majority is in their affirmance of the district court’s reduction by 80% of the total cost award. The factual predicate for that reduction is Key’s inability to pay the full award. To be sure, most litigants could not afford to pay $200,000 in costs. The problem here is that Key offered no evidence of his financial condition. The majority opinion refers to “somewhat ambiguous” evidence presented at the cost hearing that showed “Key’s business value to be less than $200,000.” But the $200,000 figure referred to an estimate of the value of thé franchise that was the subject of this litigation — the franchise that Key had hoped to acquire but that Chrysler had denied him. There was no evidence of Key’s personal wealth or the net worth of his corporation. Chrysler has not conceded the issue; rather it has contended on appeal that the record is “absolutely devoid of any evidence of the financial condition of Key which would otherwise demonstrate his ability or inability to pay Chrysler’s costs in full .” {26} The failure of Key to establish his inability to pay the cost award is critical, because otherwise the disparity in wealth between Chrysler and him is immaterial. Disparity in wealth alone is insufficient to justify a reduction in the cost award. In Cafeteria Operators, L.P. v. Coronado-Santa Fe Assoc. L.P., 1998-NMCA-005, ¶ 37, 124 N.M. 440, 952 P.2d 435, we wrote: “We agree that a party should not be denied an award of costs simply because it can ‘afford to swallow1 the expense.” The leading federal authorities state that disparity of wealth is not in itself a ground to deny or limit costs to the prevailing party. See Smith v. Southeastern Pennsylvania Transp. Auth., 47 F.3d 97, 99-100 (3rd Cir.1995); Reed v. International Union of Auto., Aerospace, & Agric. Implement Workers, 945 F.2d 198, 204 (7th Cir.1991); 10 James Wm. Moore, Moore’s Federal Practice, § 54—101[1][b] at 54-153 (3d ed.1998). If we were to recognize a relative-wealth exception to the general rule that the prevailing party is entitled to recover its costs, the exception would consume the rule. For example, if an insurance company bore the expense for one side in the litigation, the insurance company would not be able to recover its costs. So often is one party much stronger financially than the other, that one would expect the relative-wealth exception to have been incorporated into the rules and statutes governing costs if their authors had intended courts to recognize the exception. {27} Relative wealth of the parties is a proper consideration only if other compelling considerations are present, such as when the losing party is unable to pay costs. See Smith, 47 F.3d at 100. (If the prevailing party is as poor as the loser, why should the loser be relieved of the duty to pay costs?) Costs might also be reduced or denied if the wealthier party improperly exploited its superior financial resources in a bad faith effort to wear out the opposition by driving up the costs of discovery, etc. But that was not the situation here. {28} Finally, I disagree with the majority’s view that the district court could properly consider whether an award of costs would discourage litigation. Does litigation* serve such a useful function in society that we should refrain from discouraging meritless claims? After all, Key lost his lawsuit. If there is* any trend in the law, particularly tort law, in recent decades, it is that one should bear the costs that one imposes on others. Why should we move in the opposite direction with respect to the costs of litigation? Key imposed substantial expenses on Chrysler by filing his unsuccessful claim. What is the social benefit in exempting him from reimbursing Chrysler for the customary items in those expenses? {29} The only authority cited by the majority consists of three statutory provisions on costs. But as I understand those statutes, they are designed to enable a defendant to recover attorney fees when the plaintiffs claim is groundless. See NMSA 1978 §§ 47-9-7 (1991), 57-12-10(C) (1987), 57-13-6(B) (1987). None would preclude a prevailing defendant from recovering the usual costs. {30} I am aware that on occasion courts have expressed concern about discouraging litigation by failing to award sufficiently high attorney fees or costs. The issue in those eases, however, is whether the prevailing party is adequately reimbursed. It is one thing to remove an impediment to meritorious litigation by trying to protect against an empty victory — when the cost of prevailing exceeds the benefits. It is quite another to subsidize losing efforts. {31} As far as I can tell, for quite some time it has been considered desirable that a litigant take into account that if it loses it will have to absorb the opposing party’s costs. Taking cost shifting into account encourages sensible behavior, including settlement. Indeed, the prospect of cost shifting is the foundation of Rule 1-068 NMRA 1998, which provides for offers of judgment. Defendants are encouraged to make reasonable offers by the incentive of escaping the obligation to pay costs incurred after the offer if the ultimate judgment is less than the offer. The rule likewise encourages plaintiffs to accept reasonable offers of judgment. If costs are not shifted in certain types of “desirable” litigation, the incentives of Rule 1-068 disappear. {32} Perhaps the Legislature will one day decide that some types of litigation are so desirable that a losing plaintiff should not have to pay ordinary costs. I doubt, however, that litigation under the Motor Vehicle Dealers Franchising Act will head the list.