Court Opinion

ID: 2999784
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:57:47.190451+00
Date Added: 2024-06-11T11:45:39.283033
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 06-1318
EMILY RIVERA,
                                                 Plaintiff-Appellee,
                                 v.

CITY OF CHICAGO,
                                            Defendant-Appellant.
                          ____________
            Appeal from the United States District Court
       for the Northern District of Illinois, Eastern Division.
          No. 03 C 1863—Matthew F. Kennelly, Judge.
                          ____________
 ARGUED OCTOBER 17, 2006—DECIDED NOVEMBER 21, 2006
                    ____________

 Before FLAUM, Chief Judge,                    and     BAUER      and
EASTERBROOK, Circuit Judges.
  FLAUM, Chief Judge. Former Chicago police officer Mario
Morales entered Emily Rivera’s home, handcuffed her, and
ransacked her apartment. Rivera obtained a default
judgment against Morales, who is currently in prison after
being convicted of numerous felonies. In an attempt to
collect the judgment, Rivera sued the City of Chicago (“the
City”). The district court granted the City summary judg-
ment, and the City submitted a bill of costs to the court
pursuant to Federal Rule of Civil Procedure 54(d)(1). The
court denied the City’s costs based on its finding that Rivera
is indigent. The City now appeals. For the following rea-
2                                               No. 06-1318

sons, we vacate the district court’s denial of costs and
remand for further proceedings.

                     I. BACKGROUND
  On June 21, 2001, at 11:30 p.m., former Chicago police
officer Mario Morales went to Emily Rivera’s apartment,
identified himself as a police officer and demanded that
Rivera let him in. Rivera was home with her six year old
daughter and one month old son. At the time of the inci-
dent, Morales was wearing a bulletproof vest and a badge
pouch. Rivera opened the back door and Morales forcibly
entered the apartment. Once inside, Morales informed her
that he had a search warrant but never showed it to her.
Morales led Rivera upstairs, handcuffed her hands behind
her back and placed her on a bed. While Rivera was
handcuffed upstairs, Morales ransacked the apartment and
then left. Rivera did not report the incident to law enforce-
ment. Following the incident, Morales pled guilty to
numerous federal felony offenses for which he is currently
incarcerated. In his plea agreement, Morales admitted
entering Rivera’s apartment.
  Rivera brought a two-count complaint against Morales
alleging a violation of her Fourth Amendment rights under
42 U.S.C. § 1983, and a state law battery claim. The district
court stayed Rivera’s claim pending the resolution of related
criminal matters against Morales. Approximately a year
later, Rivera filed a motion to vacate the stay, which the
district court granted. Morales failed to respond to the
complaint, and Rivera sought a default judgment against
him, which the district court granted in the amount of
$175,000.
  Rivera then attempted to collect this judgment from the
City through a supplemental collection proceeding under
Federal Rule of Civil Procedure 69. Rivera argued that
the City was liable for Morales’s conduct because he was a
No. 06-1318                                                  3

city employee and acted under color of state law when he
entered her apartment. The City moved for summary
judgment arguing that it should not be liable for Morales’s
conduct because he was not acting within the scope of his
employment. The district court granted the motion and
entered judgment for the City.
  Following the judgment in its favor, the City submitted a
bill of costs to the district court. In response, Rivera argued
that she should not pay costs associated with the litigation
because she is indigent. To support her claim of indigence,
Rivera submitted an affidavit of her assets, stating that she
is a single mother of four children, earns a salary of $1800
per month, has only a nominal amount of money in her
checking account, receives food stamps, and has no other
assets. The affidavit did not list her expenses or include the
$175,000 judgment against Morales among her assets. The
district court found that Rivera made a showing sufficient
to demonstrate her “indigency and inability to pay costs.”

                       II. ANALYSIS
  The City makes two arguments on appeal. First, the City
requests this Court to reexamine whether district courts
may consider a losing party’s indigence when ruling on a
bill of costs submitted by the prevailing party under Federal
Rule of Civil Procedure 54(d)(1). Second, the City argues
that the district court abused its discretion by denying the
City’s motion for costs.

                              A.
  The City argues that we should abolish the exception that
allows indigent losing parties to avoid paying costs under
Rule 54(d)(1). The proper interpretation of Rule 54(d)(1) is
a legal conclusion that we review de novo. Gavoni v. Dobbs
House, Inc., 164 F.3d 1071, 1075 (7th Cir. 1999).
4                                                No. 06-1318

  Rule 54(d)(1) provides in pertinent part, “[e]xcept when
express provision therefore is made either in a statute
of the United States or in these rules, costs shall be allowed
as of course to the prevailing party unless the court other-
wise directs.” Fed. R. Civ. P. 54(d)(1). The rule provides a
presumption that the losing party will pay costs but grants
the court discretion to direct otherwise. Although Rule 54
does not specifically mention indigence, the rule speaks of
the district court’s discretion in general terms, and certainly
does not prohibit a district court from considering indigence
when assigning costs to a losing party.
  Since 1983, this Court has held that it is “within the
discretion of the district court to consider a plaintiff’s
indigency in denying costs under Rule 54(d).” Badillo v.
Cent. Steel & Wire Co., 717 F.2d 1160, 1165 (7th Cir. 1983);
see also Mother & Father v. Cassidy, 338 F.3d 704, 708 (7th
Cir. 2003); Reed v. Int’l Union, 945 F.2d 198, 204 (7th Cir.
1991); Congregation of Passion v. Touche, Ross & Co., 854
F.2d 219, 222 (7th Cir. 1988). Though the City asserts that
we adopted the exception without analysis and without
relying on any prior precedent, Badillo was a case of first
impression for this Court, and that is why no precedent was
cited in the opinion. In that case we relied on the unambig-
uous language of Rule 54(d), and held that the power to
award costs is a matter within the sound discretion of the
district court. Badillo, 717 F.2d at 1165.
  In support of its argument that we should reconsider the
Badillo line of cases, the City states that the Supreme
Court has never adopted the indigence exception to Rule
54(d). While it is true that the Supreme Court has never
adopted such an exception, it has not foreclosed its avail-
ability either. Furthermore, seven other circuits permit
district courts to consider the losing party’s indigence when
determining whether to award costs. See Rodriguez v.
Whiting Farms, 360 F.3d 1180, 1190 (10th Cir. 2004);
Lampkins v. Thompson, 337 F.3d 1009, 1017 (8th Cir.
No. 06-1318                                                      5

2003); Whitfield v. Scully, 241 F.3d 264, 273 (2d Cir. 2001);
Chapman v. AI Transp., 229 F.3d 1012, 1039 (11th Cir.
2000); In re Paoli R.R. Yard PCB Litig., 221 F.3d 449, 462-
68 (3d Cir. 2000); Cherry v. Champion Int’l Corp., 186 F.3d
442, 446 (4th Cir. 1999); Stanley v. Univ. of S. Cal., 178
F.3d 1069, 1079 (9th Cir. 1999). Only one circuit has
expressly prohibited district courts from considering a
losing party’s indigence when awarding costs under Rule
54(d). See McDonald v. Petree, 409 F.3d 724, 732 (6th Cir.
2005). Because the acceptance of the indigence exception is
well established, we decline to abandon it.
   The City expresses concern that the indigence excep-
tion eliminates the disincentive for indigent litigants to
pursue meritless claims. However, indigence does not
automatically excuse the losing party from paying the
prevailing party’s costs. See Luckey v. Baxter Healthcare
Corp., 183 F.3d 730, 733-34 (7th Cir. 1999). The fact that
indigence is not a blanket excuse for paying costs tempers
the City’s policy argument because allowing the district
court discretion to impose costs on indigent litigants “serves
the valuable purposes of discouraging unmeritorious claims
. . . .” McGill v. Faulkner, 18 F.3d 456, 460 (7th Cir. 1994).1
  Finally, the City takes issue with the indigence excep-
tion because it gives district courts unbounded discretion
and encourages litigants of modest means to portray
themselves as indigent whether they truly are or not,
leading to fraud on the district courts. These policy concerns
are legitimate; however, the answer is not to eliminate the

1
  In fact, district courts have used their discretion to police
blatantly frivolous lawsuits brought by the losing party. In Farrar
v. Gorchowiak, the district court held that although the losing
plaintiff was indigent, her “regular and active use of the court
system militate[d] in favor of her paying costs that her unsuccess-
ful lawsuits impose[d] on [d]efendants.” August 1, 2005 Minute
Order at 2.
6                                                No. 06-1318

indigence exception. Rather, the better course is to pro-
vide the district courts with guidance in considering wheth-
er to hold an indigent party liable for costs.
   First, the district court must make a threshold factual
finding that the losing party is “incapable of paying the
court-imposed costs at this time or in the future.” McGill, 18
F.3d at 459. The burden is on the losing party to provide the
district court with “sufficient documentation to support such
a finding.” Chapman, 229 F.3d at 1039. This documentation
should include evidence in the form of an affidavit or other
documentary evidence of both income and assets, as well as
a schedule of expenses. Requiring a non-prevailing party to
provide information about both income/assets and expenses
will ensure that district courts have clear proof of the non-
prevailing party’s dire financial circumstances. Moreover,
it will limit any incentive for litigants of modest means to
portray themselves as indigent.
  Second, the district court should consider the amount
of costs, the good faith of the losing party, and the closeness
and difficulty of the issues raised by a case when using its
discretion to deny costs. No one factor is determinative, but
the district court should provide an explanation for its
decision to award or deny costs. See Chapman, 229 F.3d at
1039 (holding that a district court must have and state a
sound basis for doing so); Cantrell v. Int’l Bhd. of Elec.
Workers, 69 F.3d 456, 459 (10th Cir. 1995) (holding that
when a district court exercises its discretion and denies
costs to a prevailing party, it must provide a valid reason
for the denial).
  Though we decline to abolish the indigence exception, we
note that the exception is a narrow one. Rule 54(d)(1)
provides a presumption that costs are awarded to the
prevailing party, and the burden is on the non-prevailing
party to overcome this presumption.
No. 06-1318                                                 7

                             B.
  The City claims that the district court abused its discre-
tion by denying its motion for costs. This Court reviews a
denial of a motion for costs under Rule 54(d)(1) for an abuse
of discretion. United States v. Santiago, 826 F.2d 499, 505
(7th Cir. 1987). An abuse of discretion occurs “only when no
reasonable person could take the view adopted by the trial
court.” Id.
  At the outset, we note that the district court did not state
the basis for its decision to deny costs. Rather, it summarily
concluded that, “defendant’s [motion] for costs is denied, as
plaintiff has made a sufficient showing of indigency and
inability to pay costs.”
  The City claims that Rivera did not provide the district
court with sufficient information for the court to determine
that she is indigent. To prove her indigence, Rivera was
required to show not only that she was incapable of pay-
ing court-ordered costs at the time they were imposed
but also that she will be incapable of paying them in the
future. McGill, 18 F.3d at 459. Rivera did not include
any information regarding her future ability to pay the
City’s costs. Two district court cases from this Circuit are
instructive. In Denson v. Northeast Illinois Regional
Commuter Railroad Corporation, the plaintiff filed an
affidavit attesting that she had not worked for over eight
months, she supported herself, her two children and a
grandchild, she had no savings, and she received supple-
mental security income benefits. No. 00 C 2984, 2003
WL 21506946, *2 (N.D. Ill. June 27, 2003). The court held
that “this affidavit shows that plaintiff [wa]s presently
indigent. However, it does not show whether plaintiff is
unlikely to be able to pay costs in the future.” Id. The court
explained that the plaintiff had been employed in the
past and had indicated a desire to continue to work, thus,
the court held, it was possible that the plaintiff would again
8                                                  No. 06-1318

be gainfully employed in the future. The court awarded
costs but stayed the execution of the judgment until the
plaintiff’s circumstances changed. Id.
  By contrast, in Cross v. Roadway Express, the plaintiff
was an unemployed single parent to three children, who
suffered from severe mental health problems, and received
$840 a month in Social Security payments. No. 93 C 2584,
1994 WL 592168, *1 (N.D. Ill. Oct. 26, 1994). The court,
finding that the plaintiff was indigent, focused on the
fact that his illness “rendered it impossible for [the plaintiff]
to pursue his former occupation as a truck driver.” Id. Thus,
the plaintiff had proven an inability to pay costs in the
future.
  Here, Rivera submitted an affidavit averring that she is a
single mother of four children and works full time at
American Women’s Medical Center as a medical recep-
tionist, earning a salary of $1800 per month. She owns no
real estate, stocks or bonds, vehicles, or savings accounts,
and she receives no child support. She has a checking
account with a nominal balance, and she receives food
stamps. However, Rivera did not include any information
regarding her monthly expenses. She testified that she lives
in a building owned by her mother, which would certainly
bear on her ability to pay the City’s costs if she has little or
no rent to pay. Rivera also testified that her son Royce has
not lived with her for two years and that Royce’s father
supports him.
  Rivera is employed full-time and has no medical problems
to speak of. Moreover, she has a $175,000 judgment against
Mario Morales. Although Morales is currently in prison,
Rivera has up to seven years to collect this judgment
against him. She has not yet filed a citation to discover
Morales’ assets so she cannot claim that Morales has no
assets with which to satisfy the judgment in her favor.
Given that Rivera did not provide the district court with a
No. 06-1318                                                   9

schedule of expenses and did not identify any basis for a
finding that she will be incapable of paying the City’s costs
at some point in the future, the district court abused its
discretion in denying the City’s costs.

                     III. CONCLUSION
  For the above stated reasons, we VACATE and REMAND for
further proceedings consistent with this opinion.

  EASTERBROOK, Circuit Judge, concurring. The court
sensibly rejects Chicago’s proposal to overrule Badillo v.
Central Steel & Wire Co., 717 F.2d 1160 (7th Cir. 1983), and
its successors, which allow district judges to excuse unsuc-
cessful but indigent litigants from paying costs under Fed.
R. Civ. P. 54(d). Whether indigent litigants must be ordered
to pay statutory costs is a subject that has divided the
circuits. Only the Supreme Court or an amendment under
the Rules Enabling Act can produce national uniformity;
there is little point in our moving restlessly from one side of
the conflict to the other.
  If we are to express an opinion on the subject, however, I
would not endorse our current practice, as my colleagues do
in Part II.A of the court’s opinion. (I do join Part II.B, which
explains why a remand is appropriate under this circuit’s
current approach.) It would be better to award costs “as of
course” (which is what the Rule says) and leave to bank-
ruptcy the question whether collection is possible. Discre-
tion may be exercised against an award when the victor has
run up costs or otherwise abused the judicial process, but
the parties’ relative wealth is not a good reason to deny
10                                               No. 06-1318

costs to the winner, any more than a losing litigant’s
indigence would be a good reason to withhold an award of
damages for battery, theft, or breach of contract.
  If an indigent person hits someone with a car and causes
a $1,000 loss, the court will award $1,000 without regard to
the driver’s income. If an indigent person hits someone with
a lawsuit and causes a $1,000 loss (in costs of defense), the
same consequence should ensue: an award of $1,000. For
either award, whether collection occurs is a question for
bankruptcy (including the state law of exemptions).
  When a debtor cannot pay all creditors in full, but can pay
something, there is no reason why prevailing litigants who
are out of pocket should receive nothing while other credi-
tors retain valid claims. And when a debtor is so destitute
that he cannot pay anything, there is no harm in the award
of costs. It is only when a person can pay (but tries to
persuade a court otherwise) that the award matters.
  Instead of trying to administer debt relief one claim at a
time, creating an odd (and extra-statutory) set of priorities,
district judges should award costs and let the collective
bankruptcy proceeding handle all debts and all creditors at
one go, according to the Bankruptcy Code—which governs
not only which claims are paid first but also how much a
debtor with a given level of income must pay to creditors in
the aggregate, and over how much time. All a district court
can do by excusing the payment of costs is interfere with
the Bankruptcy Code’s system. A judge should not use his
office to favor “the deserving poor” or other litigants he
likes, at the expense of victorious litigants (and to the
potential benefit of creditors not before the court); justice
must be administered without regard to persons.
   Rule 54(d) must be read together with 28 U.S.C. §1915,
which says in subsection (a)(1) that an impoverished
litigant may proceed without prepaying the filing fees. Only
No. 06-1318                                                 11

pre-payment is excused, as subsection (f)(1) shows: “Judg-
ment may be rendered for costs at the conclusion of the suit
or action as in other proceedings”. All costs— which include
the filing fees, see 28 U.S.C. §1920(1)—thus remain as
debts of the losing side, to be paid if and when resources are
available. See McGill v. Faulkner, 18 F.3d 456 (7th Cir.
1994); Abdul-Wadood v. Nathan, 91 F.3d 1023 (7th Cir.
1996).
   Making the award of costs routine has three additional
benefits: (a) It avoids the expense of suit-by-suit inquiries
into indigence, which as this case shows may be complex.
Why replicate a bankruptcy proceeding just to decide on
an award of costs? (b) It avoids false positives. Some people
who claim to be indigent aren’t. Indeed, the very assertion
“I’m indigent, so please excuse me” implies solvency. Why
seek to avoid an award that, if you are destitute, cannot
harm you? (A pauper who fears that the award could be
collected from future income may have it discharged in
bankruptcy.) (c) It avoids disparate treatment of identically
situated litigants. District judges differ substantially in how
they use the discretion this court’s decisions give them.
Some regularly excuse costs for indigents; some never do;
some draw hard-to-articulate lines. Rights measured by the
chancellor’s foot are not “rights” of any kind, and such a
stochastic process is not the administration of justice. We
need rules that apply in an even-handed fashion.
12                                         No. 06-1318

A true Copy:
      Teste:

                    ________________________________
                     Clerk of the United States Court of
                       Appeals for the Seventh Circuit

               USCA-02-C-0072—11-21-06