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SUPREME COURT OF THE UNITED STATES
_________________
No. 20–334
_________________
CITY OF SAN ANTONIO, TEXAS, on behalf of
itself and all other similarly situated TEXAS MUNICIPALITIES,
PETITIONER
v. HOTELS.COM, L. P., et al.
on writ of certiorari to the united states
court of appeals for the fifth circuit
[May 27, 2021]
Justice Alito delivered the opinion of the
Court.
Civil litigation in the federal courts is often
an expensive affair, and each party, win or lose, generally bears
many of its own litigation expenses, including attorney’s fees that
are subject to the so-called American Rule.
Baker Botts L. L.
P. v.
ASARCO LLC, 576 U.S. 121, 126 (2015). But certain
“costs” are treated differently. Federal Rule of Appellate
Procedure 39 governs the taxation of appellate “costs,” and the
question in this case is whether a district court has the
discretion to deny or reduce those costs. We hold that it does not
and therefore affirm the judgment below.
I
A
There is a longstanding tradition of awarding
certain costs other than attorney’s fees to prevailing parties in
the federal courts.
Marx v.
General Revenue Corp.,
568 U.S.
371, 377, and n. 3 (2013); see,
e.g., Winchester
v.
Jackson, 3 Cranch 514 (1806). Today, Federal Rule of
Appellate Procedure 39 sets out the procedure for assessing and
taxing costs relating to appeals. Subdivision (a) provides a series
of default rules that govern “unless the law provides or the court
orders otherwise.” Under these default rules:
“(1) if an appeal is dismissed, costs are
taxed against the appellant, unless the parties agree
otherwise;
“(2) if a judgment is affirmed, costs are taxed
against the appellant;
“(3) if a judgment is reversed, costs are taxed
against the appellee;
“(4) if a judgment is affirmed in part, reversed
in part, modified, or vacated, costs are taxed only as the court
orders.”
The remaining subdivisions of the Rule deal with
related issues. Subdivision (b) limits costs for or against Federal
Government litigants to those “authorized by law.” Subdivision (c)
directs the courts of appeals to fix a maximum rate for taxing the
costs of briefs, appendices, and (where applicable) the original
record. Subdivision (d) provides the procedure for seeking certain
appellate costs, filing objections to those costs, and preparing an
itemized statement of costs for insertion in the mandate. And
subdivision (e) lists four categories of “costs on appeal” that
“are taxable in the district court for the benefit of the party
entitled to costs under this rule.”
This case concerns one of the categories of
costs that are taxable in the district court under subdivision (e):
“premiums paid for a bond or other security to preserve rights
pending appeal.” Fed. Rule App. Proc. 39(e)(3). These costs arise
because the Federal Rules of Civil Procedure generally stay the
execution or enforcement of a district court judgment for only 30
days after its entry. Fed. Rule Civ. Proc. 62(a). Unless a further
stay is granted, the prevailing party can attempt to execute on
that judgment while an appeal is pending. See 12 J. Moore, D.
Coquillette, G. Joseph, G. Vairo, & C. Varner, Moore’s Federal
Practice §62.02 (3d ed. 2020). To prevent complications arising
from pre-appeal enforcement of judgments, Federal Rule of Civil
Procedure 62(b) provides that a party “may obtain a stay by
providing a bond or other security.” These bonds are often called
supersedeas bonds, tracking the name of a traditional writ that was
used to stay the execution of a legal judgment. See,
e.g.,
Hardeman v.
Anderson, 4 How. 640, 642 (1846) (issuing
a “writ of supersedeas to stay execution on the judgment”). “A
supersedeas bond is a contract by which a surety obligates itself
to pay a final judgment rendered against its principal under the
conditions stated in the bond.” 13 A Cyclopedia of Federal
Procedure §62.19 (3d ed. Supp. 2021).
B
The cost dispute before us arises out of
litigation between the city of San Antonio—acting on behalf of a
class of 173 Texas municipalities—and a number of popular online
travel companies (OTCs). In 2006, San Antonio alleged that the OTCs
had been systematically underpaying hotel occupancy taxes by
calculating them using the wholesale rate that the OTCs negotiated
with hotels rather than the retail rate that consumers paid for
hotel rooms. After a jury trial, the District Court entered a
judgment of approximately $55 million in favor of the class.
The OTCs quickly sought to secure supersedeas
bonds to stay the judgment. They negotiated with San Antonio over
the terms of the bonds, and the city ultimately supported the OTCs’
efforts to stay the judgment with supersedeas bonds totaling almost
$69 million, an amount that was calculated to cover the judgment
plus 18 months of interest and further taxes. The District Court
approved the bonds, which were subsequently increased at San
Antonio’s urging to cover what grew to be an $84 million judgment
after years of post-trial motions.
The OTCs eventually appealed, and the Court of
Appeals held that the OTCs had not underpaid the hotel occupancy
taxes. Its mandate stated: “[T]he judgment of the District Court is
vacated and rendered for OTCs.” App. 100. In accordance with
Federal Rule of Appellate Procedure 39(d), the OTCs filed a bill of
costs with the Circuit Clerk and requested $905.60 to cover the
appellate docket fee and the cost of printing their briefs and
appendix. App. to Pet. for Cert. 28a–30a. These items were taxed
without objection. See Rule 39(d)(2).[
1]
Back in the District Court, the OTCs filed a
bill of costs for more than $2.3 million. The lion’s share of these
costs were supersedeas bond premiums. San Antonio objected, urging
the District Court to exercise its discretion and decline to tax
all or most of those costs. The city argued, among other things,
that the OTCs should have pursued alternatives to a supersedeas
bond and that it was unfair for San Antonio to bear the costs for
the entire class rather than just its proportional share of the
judgment. The District Court thought San Antonio had made “some
persuasive arguments.” App. to Pet. for Cert. 16a. But based on
Circuit precedent, the court held that it lacked discretion
“regarding whether, when, to what extent, or to which party to
award costs of the appeal” and that “its sole responsibility [was]
to ensure that only proper costs are awarded.”
Id., at 17a
(internal quotation marks omitted). The court ultimately taxed
costs of just over $2.2 million.
San Antonio appealed, and this time the Court of
Appeals affirmed. 959 F.3d 159 (CA5 2020). It reasoned that its
earlier decision had “reversed” the District Court’s judgment
within the meaning of Rule 39(a)(3) and that it had not departed
from the default allocation under that Rule.
Id., at
164–165.[
2] And the Court of
Appeals held that the District Court was compelled to award the
disputed costs to the OTCs.
Id., at 166–167.
San Antonio sought this Court’s review. We
granted certiorari, 592 U. S. ___ (2021), and now affirm.
II
We hold that Rule 39 does not permit a
district court to alter a court of appeals’ allocation of the costs
listed in subdivision (e) of that Rule.
A
Rule 39 creates a cohesive scheme for taxing
appellate costs. As noted, it sets out default rules that are
geared to five potential outcomes of an appeal: dismissal,
affirmance, reversal, affirmance in part and reversal in part, and
vacatur. Each of these default rules tracks the “venerable
presumption that prevailing parties are entitled to costs.”
Marx, 568 U. S., at 377.
These default rules give way, however, when “the
court orders otherwise.” Rule 39(a). The parties agree that this
reference to “the court” means the court of appeals, not the
district court, see Brief for Petitioner 17–18; Brief for
Respondents 20–21, and we agree with that interpretation. In the
Rules of Appellate Procedure, which “govern procedure in the United
States courts of appeals,” Rule 1(a)(1), references to a “court”
are naturally read to refer to a court of appeals unless the text
or context clearly indicates otherwise.
The parties do not agree, however, on what the
court of appeals has the power to “orde[r].” San Antonio thinks
that the appellate court may say “
who can receive costs
(party A, party B, or neither)” but lacks “authority to divide up
costs.” Reply Brief 5. So, the city argues, the district court must
have the discretion to do that. By contrast, the OTCs argue that
the appellate court has the discretion to divide up the costs as it
deems appropriate and that a district court cannot alter that
allocation. The OTCs have the better of the argument.
The text of subdivision (a) cuts decisively in
their favor. That provision states that the court of appeals need
not follow the default rules, which allocate costs based on the
outcome of the appeal, but can “orde[r] otherwise.” This broad
language does not limit the ways in which the court of appeals can
depart from the default rules, and it certainly does not suggest
that the court of appeals may not divide up costs.
On the contrary, the authority of a court of
appeals to do just that is strongly supported by the relationship
between the default rules and the court of appeals’ authority to
“order otherwise.” For example, under Rule 39(a)(4), if a district
court judgment is affirmed in part and reversed in part, “costs are
taxed only as the court [of appeals] orders.” The most natural
meaning of this provision is that a court of appeals may apportion
costs in accordance with the parties’ relative success, so that if,
for example, the appellant wins what is essentially a 75% victory,
the appellant can be awarded 75% of its costs.[
3] It would be strange to read this provision to
mean that the court of appeals’ only option where a reversal is not
complete is to award the appellant all its costs or no costs at
all. Similarly, in cases that fall under subdivisions (a)(2) and
(a)(3), where the default rules allocate 100% of the costs to the
winning party, it is natural to understand the court of appeals’
authority to “order otherwise” to include the authority to make a
different allocation.
Subdivision (e), which concerns appellate costs
that are taxed in the district court, points in the same direction.
It refers to “the party
entitled to costs under this rule.”
Rule 39(e) (emphasis added). Thus, if a party is awarded costs
under subdivision (a), it is “entitled” to those costs—
i.e.,
has a right to obtain them and not merely to seek them—when a
proper application is made in the district court. See Black’s Law
Dictionary 626 (rev. 4th ed. 1968) (“In its usual sense, to entitle
is to give a right or title”); see also
Estate of Cowart v.
Nicklos Drilling Co.,
505 U.S.
469, 477 (1992) (“Both in legal and general usage, the normal
meaning of entitlement includes a right or benefit for which a
person qualifies”).
Read properly, then, Rule 39 gives discretion
over the allocation of appellate costs to the courts of appeals.
With that settled, it is easy to see why district courts cannot
exercise a second layer of discretion. Suppose that a court of
appeals, in a case in which the district court’s judgment is
affirmed, awards the prevailing appellee 70% of its costs. If the
district court, in an exercise of its own discretion, later reduced
those costs by half, the appellee would receive only 35% of its
costs—in direct violation of the court of appeals’ directions. Or
suppose that the court of appeals, believing that the decision
below was plainly wrong, awards the prevailing appellant 100% of
its costs. It would subvert that allocation if the district court
declined to tax costs or substantially reduced them because it
thought that there was at least a very strong argument in favor of
the decision that the court of appeals had reversed—which, of
course, was the district court’s own decision. In short, the court
of appeals’ determination that a party is “entitled” to costs would
mean little if, as San Antonio believes, the district court could
take a second look at the equities.
San Antonio nonetheless maintains that the plain
text of subdivision (e) vests district courts with discretion over
cost allocations. That provision lists costs that “are
taxable in the district court for the benefit of the party
entitled to costs under this rule.” Rule 39(e) (emphasis added). As
San Antonio notes, the word “taxable” can be used to describe
something that may, but need not necessarily, be taxed. See,
e.g., Random House Dictionary of the English Language 1947
(2d ed. 1987) (defining “taxable” as “capable of being taxed”);
Webster’s Third New International Dictionary 2345 (1976) (same).
And San Antonio argues that the use of this “permissive” term shows
that the district court has discretion to refuse to award costs on
equitable grounds. Brief for Petitioner 15.
San Antonio reads too much into the term
“taxable.” The use of that term does suggest that the costs in
question are not automatically or necessarily taxed when the case
returns to the district court, but that may mean no more than that
the party seeking those costs will not get them unless it submits a
bill of costs with the verification specified by statute and
complies with any other procedural requirements that the local
rules of the court in question impose. See 28 U. S. C.
§§1920, 1924.
This modest understanding of the use of the term
“taxable” is reinforced by the circumstances under which the term
was added to Rule 39. Before 1998, subdivision (e) did not provide
that the listed costs “are taxable in the district court,” but
instead stated that those costs “shall be taxed in the district
court.” Rule 39(e) (1994). The language of Rule 39 was changed in
1998 as part of a general “restyling” of the Rules of Appellate
Procedure, and the Advisory Committee’s Note stated that the
changes made as part of this project were “intended to be stylistic
only.” 28 U. S. C. App., p. 804 (1994 ed., Supp. IV); see
also C. Wright, A. Miller, & C. Struve, Federal Practice and
Procedure, Introduction, §3946.1 (5th ed. Supp. 2021) (1998
restyling was “not intended to make substantive changes”).
The real work done by the phrase “taxable in the
district court” is the specification of the court in which these
costs are to be taxed—that is, in the district court. Assigning
this work to the district court makes good sense. Under Rule 39,
costs incurred in the court of appeals, such as the fee for
docketing the case in that court and the cost of printing the
party’s briefs and appendices, are taxed in the court of appeals.
See Rule 39(d). And the costs incurred in the district court—that
is, the costs listed in subdivision (e)—are taxed in the district
court. These are the costs attributable to “the preparation and
transmission of the record,” “the reporter’s transcript, if needed
to determine the appeal,” “premiums paid for a bond or other
security to preserve rights pending appeal,” and “the fee for
filing the notice of appeal.”
The nature of these costs makes it fitting for
them to be taxed in the district court. The first enumerated
cost—the cost of “the preparation and transmission of the
record”—relates to the district court clerk, who has the
responsibility of performing those tasks. See Fed. Rule App. Proc.
11(b)(2). The second category, the cost of “the reporter’s
transcript,” concerns work done in the district court. See Rule
10(b). The third category, “premiums paid for a bond or other
security to preserve rights pending appeal,” relates to a matter
previously approved by the district court. See Fed. Rule Civ. Proc.
62(b). And the last category, “the fee for filing the notice of
appeal,” is an amount that was paid to the district court clerk.
See 28 U. S. C. §1917.
For the reasons set out above, we hold that
courts of appeals have the discretion to apportion all the
appellate costs covered by Rule 39 and that district courts cannot
alter that allocation.
B
San Antonio offers a variety of practical
arguments why district courts should have the discretion to alter
the allocation of appellate costs, but each of these arguments
falls away upon inspection.
First, San Antonio argues that any limits on a
district court’s discretion are incompatible with the equitable
discretion district courts exercise with respect to certain costs
incurred in the district court.
Those costs are customarily
taxed under Federal Rule of Civil Procedure 54(d), which “gives
courts the discretion to award costs to prevailing parties.”
Taniguchi v.
Kan Pacific Saipan, Ltd.,
566 U.S.
560, 565 (2012); see also 28 U. S. C. §1920 (“A judge
or clerk of any court of the United States
may tax as costs
the following . . . ” (emphasis added)).[
4] In San Antonio’s view, it will
create confusion if a district court acting under Appellate Rule
39(e) lacks the discretion it exercises under Civil Procedure Rule
54(d).
We do not see why our interpretation will lead
to confusion. District courts have discretion in awarding costs
incurred prior to appeal, but when they tax appellate costs, they
perform a different function. This interpretation quite sensibly
gives federal courts at each level primary discretion over costs
relating to their own proceedings. See this Court’s Rule 43;
Fed. Rule App. Proc. 39; Fed. Rule Civ. Proc. 54.
Second, San Antonio contends that appellate
courts are not well-positioned to make cost allocations under Rule
39(a). In its view, decisions about appellate costs might turn on
factual disputes that district courts are better able to resolve.
For example, a party might suggest that taxing costs against it
would be unjust because of its precarious financial position, and
an opposing party might dispute that contention on factual grounds.
San Antonio also contends that it will be difficult to allocate
appellate costs equitably before the amount of those costs is
known.
These concerns are overblown. Most appellate
costs are readily estimable, rarely disputed, and frankly not large
enough to engender contentious litigation in the great majority of
cases. We recognize that supersedeas bond premiums are a bit of an
outlier in that they can grow quite large. See,
e.g.,
The Exxon Valdez v.
Exxon Mobil Corp., 568
F.3d 1077 (CA9 2009) (more than $60 million). But the underlying
supersedeas bonds will often have been negotiated by the parties,
as happened here. They will in any event have been approved by the
district court, see Fed. Rule Civ. Proc. 62(b), and their premiums
will have been paid by one of the parties to the appeal. There is
no reason to think that litigants and courts will be forced to
operate without any sense of the magnitude of the costs at issue.
Indeed, San Antonio admits that it was largely aware of the costs
of the bonds in this case when they were approved, see Tr. of Oral
Arg. 18.
Nor is there reason to think that factual
disputes will pose a recurring problem. Experience proves the
point. Rule 39’s basic structure has been in place for more than 50
years. Compare Fed. Rule App. Proc. 39 with Rule 39 (1968).
And the courts of appeals resolve tens of thousands of cases each
year. Admin. Office of the U. S. Courts, Statistical Tables
for the Federal Judiciary, Table B–1 (Dec. 31, 2020) (counting
46,788 appeals terminated in 2020). Yet San Antonio has not
identified any substantial number of cases where cost allocations
under Rule 39(a) have imposed real difficulties. In sum, we see no
evidence that appellate courts have struggled to allocate costs in
the past, and we have no reason to anticipate new problems in the
future.
In all events, if a court of appeals thinks that
a district court is better suited to allocate the appellate costs
listed in Rule 39(e), the court of appeals may delegate that
responsibility to the district court, as several Courts of Appeals
have done in the past. See,
e.g., Emmenegger v.
Bull Moose Tube Co.,
324 F.3d 616, 626 (CA8 2003);
Guse v.
J. C. Penney
Co., 570 F.2d 679, 681–682 (CA7 1978). The parties agree that
this pragmatic approach is permitted. See Tr. of Oral Arg. 15, 44.
And nothing we say here should be read to cast doubt on it. See
Rule 39(a) (imposing no direct limitations on the court’s
ability to “orde[r] otherwise”); Rule 41(a) (the mandate includes
“any direction about costs”).
Third, San Antonio contends that there would be
no reason for Rule 39(e) costs to be taxed in the district court,
as opposed to the court of appeals, if the district court was
simply required to enter “a ministerial order.” Brief for
Petitioner 17. But it makes sense for these costs to be taxed in
the district court because they relate to events in that court, and
the district court’s responsibility is not ministerial. The
district court will ensure that the amount requested for the
appellate costs in question is “correct.” 28 U. S. C.
§1924. In addition, the district court will consider whether the
costs were “necessarily” incurred, §1924, to the extent that the
costs in question are taxable only if they were needed for the
appeal or to stay the district court’s judgment pending appeal. See
Rule 39(e)(2) (cost of reporter’s transcript taxable only “if
needed to determine the appeal”). Other costs taxable in the
district court under Rule 39(e) are either fixed (subdivision
(e)(4): the fee for filing the notice of appeal); calculated by the
district court clerk (subdivision (e)(1): preparation and
transmission of the record); or concern a matter already approved
by the district court (subdivision (e)(3): supersedeas bond
premiums; see Fed. Rule Civ. Proc. 62(b)).
San Antonio, however, asked the District Court
to do much more. It implored the court to exercise a free-ranging
form of equitable discretion that would directly conflict with the
equitable discretion of the Court of Appeals. See Brief for
Petitioner 20, n. 5 (outlining a wide range of equitable
considerations). And it invited the District Court to deny or
reduce for equitable reasons the bona fide costs that the OTCs had
paid as premiums for supersedeas bonds that were known and
negotiated by San Antonio and were approved by the District Court
without objection under Rule 62. The lower courts were correct to
hold that the District Court lacked the authority to entertain San
Antonio’s broad, equitable arguments.
Finally, San Antonio worries that parties will
be unable to obtain review of their objections to Rule 39(e) costs
if the district court cannot provide relief after the matter
returns to that court. We agree that the current Rules and the
relevant statutes could specify more clearly the procedure that
such a party should follow to bring their arguments to the court of
appeals, but this does not lead to the conclusion that a district
court can reallocate those costs.
Rule 27 sets forth a generally applicable
procedure for seeking relief in a court of appeals, and a simple
motion “for an order” under Rule 27 should suffice to seek an order
under Rule 39(a). Compare Fed. Rule App. Proc. 39(a) (“The
following rules apply unless . . . the court orders
otherwise”) with Rule 27(a) (“An application for an order
. . . is made by motion unless these rules prescribe
another form”). The OTCs also identify instances where parties have
raised their arguments through other procedural vehicles, including
merits briefing, see Rule 28, objections to a bill of costs, see
Rule 39(d)(2), and petitions for rehearing, see Rule 40. Brief for
Respondents 42, nn. 9–11. We do not foreclose litigants from
raising their arguments in any manner consistent with the relevant
federal and local Rules.
In short, we are not persuaded that applying the
plain text of Rule 39 will create the practical problems that San
Antonio envisions.
* * *
The judgment of the Court of Appeals is
affirmed.
It is so ordered.
