Be Wary of Rule 54(d)'s Costs Provision

In setting forth its rationale for this conclusion, the Cosgrove court relied on the Eighth Circuit's analysis in Poe v. John Deere Co., 695 F.2d 1103, 1108 (8th Cir. 1982): “Whereas the magnitude and unpredictability of attorney's fees would deter parties with meritorious claims from litigation, the costs of the suit in the traditional sense are predictable and, compared with the costs of attorney's fees, small.” Other circuits have adhered to the rationale set forth in Cosgrove and Poe. See, e.g., Trevino v. Holly Sugar Co., 811 F.2d 896 (5th Cir. 1987).

District Courts' Exercise of 'Discretion' Rule 54(d), however, grants district courts “discretion to refuse to tax costs in favor of the prevailing party,” Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 442 (1987); ARP Films, Inc. v. Marvel Entertainment Group, Inc., 952 F.2d 643 (2d Cir. 1991), and plaintiffs' attorneys have employed a variety of arguments to persuade district courts to refuse to grant motions for costs by prevailing employers. These efforts have, at best, met with mixed success. In Xerox Corp. v. 3Com Corp., 2000 WL 1899799 (W.D.N.Y. 2000), the court found that the fact that the plaintiff's case was brought in good faith and was close and difficult did not represent a basis for denying costs. And, in Bilezikjian v. Baxter Healthcare Corp., 1999 WL 945522 (S.D.N.Y. 1999), the court rejected the plaintiff's equitable argument that costs should be denied because the defendant was wealthy.

Nonetheless, at least a few courts have urged restraint in assessing costs against unsuccessful plaintiffs, perhaps most notably the First Circuit in Whitney Brothers Co. v. Bluefield Supply Co., 60 F.3d 8 (1st Cir. 1995). In that case, the First Circuit cautioned that a district court's power to award costs “must be exercised with restrain and discretion,” and therefore “should be used sparingly and reserved for egregious circumstances.” Id. at 13.

Courts in scattered jurisdictions have been receptive to a number of different arguments advanced by plaintiffs' lawyers for disallowing or reducing costs. Factors that such courts have cited in paring down or even denying costs to a prevailing defendant include excessive or unnecessary conduct by the prevailing party, injustice in a presumptive cost award or request, a losing party's indigence, cases where the outcome was extremely close or questionable, and the use of uneconomical methods by the prevailing party. Arguments that an award of costs will have a chilling effect on civil rights plaintiffs, though seemingly plausible, have not fared well. In the end, however, determinations of costs applications and objections to them are often subjective and fact-specific.

Two areas where plaintiffs' counsel have had at least limited success in persuading district courts to reduce costs awards are those in which the plaintiff is indigent and those that are “close calls.” The Third Circuit in In re Paoli Railroad Yard PCB Litigation, 221 F.3d 449 (3rd Cir. 2000), stated that a factor district courts “may consider in determining a costs award” is “the closeness of the issues raised.” Id. at 463. In Cherry v. Champion International Corp., 186 F.3d 442, 446 (4th Cir. 1999), the Fourth Circuit also acknowledged that “the closeness and difficulty of the issues decided” may “justify denying an award of costs.”

Perhaps the most effective tool available to counsel objecting to costs awards against plaintiffs is the limited financial resources argument. The Seventh and Ninth Circuits have been particularly outspoken on this issue, with the Seventh Circuit holding that “the losing party's inability to pay will suffice to justify denying costs.” Weeks v. Samsung Heavy Indus. Co., 126 F.3d 926, 945 (7th Cir. 1997). The Ninth Circuit arrived at a similar conclusion in Association of Mexican-American Educators v. State of California, 231 F.3d 572, 592 (9th Cir. 2000), where it found that “the losing party's limited financial resources” are a “reason … for refusing to award costs to a prevailing party.” See also Stanley v. University of California, 178 F.3d 1069 (9th Cir. 1999).

If an unsuccessful plaintiff is destitute, there is a reasonable chance that a court will, at a minimum, significantly reduce costs which the plaintiff cannot possibly pay. Lower income plaintiffs, particularly those with meritorious cases, also have a prospect of the court reducing any costs award against them. In such cases, plaintiffs' counsel should press this argument and hope that they are not among those judges which have upheld costs awards even against indigent prisoners.

Costs That May Be Taxed

Even assuming that a court is inclined to grant costs to a prevailing defendant, it may well approve some costs while expressing reservations about others. Perhaps the most common category of costs for which prevailing defendants seek payment is deposition transcripts. 28 U.S.C. ' 1920 permits taxation of costs for deposition transcripts where the deposition was “necessarily obtained for use in the case.” This standard is usually considered to have been met where the prevailing party has used the depositions in a motion for summary judgment. In L&B 57th Street, Inc. v. E.M. Blanchard, Inc., 1997 WL 403430 (S.D.N.Y. 1997), aff'd, 143 F.3d 88 (2d Cir. 1998), the court observed that “[d]epositions are considered 'used' if they were submitted as part of the summary judgment motion and used by the Court in reaching its decision.” Id. at *2. See also Whitfield v. Scully, 241 F.3d 264 (2d Cir. 2001). If a party takes a large number of depositions, some of which are clearly not necessary to defend the case, it may not be awarded costs for depositions of marginal witnesses. In Cherry v. Champion International Corp., supra, the court identified “excessiveness in a particular case” as a factor warranting denial of costs, and such excessiveness would certainly encompass unnecessary depositions. Id. at 446.

Other expenses generally considered as costs, such as the expense of photocopying motion papers, are generally deemed to be expenses for which an unsuccessful plaintiff may be taxed. It should be noted, however, that fees and related expenses for expert witnesses are “not recoverable, except to the extent of the $40-per-day statutory fee and travel expenses for witnesses in general.” Harris Trust and Savings Bank v. John Hancock Mutual Life Insurance Co., 137 F. Supp. 2d 351, 360 (S.D.N.Y. 2001). Moreover, a prevailing party may not recover expert witness fees unless the statute explicitly provides for such recovery. West Virginia Univ. Hospitals, Inc. v. Casey, 499 U.S. 83 (1991).

Conclusion

The widely accepted rationale for permitting taxation of costs by a prevailing defendant in an employment discrimination case, ie, that such costs are likely to be relatively low when compared to attorney's fees, is a questionable one. In a case where there are numerous depositions and considerable motion practice, even costs can accumulate to a point where a lower-income plaintiff – a category into which many employment discrimination plaintiffs fall – may find payment of such costs to be a crushing financial burden. In some cases, it is not unrealistic to project that such costs may be in the range of $10,000 to $15,000. An order to pay such costs to a prevailing defendant can be devastating to an individual with an annual income of $40,000.

Courts should give greater consideration both to the potential burden of cost awards on lower-income plaintiffs as well as to the fact that, in reality, routine awards of costs may in fact have more of a chilling effect on civil rights plaintiffs than has been recognized. At the same time, before commencing litigation on behalf of a lower income plaintiff, plaintiff's employment lawyers would be well advised to inform their client that, should his or her case prove unsuccessful, an onerous costs award may be an unwelcome result.

Plaintiffs' employment lawyers contemplating bringing Title VII or other discrimination suits have long felt secure in the knowledge that, even if they lose at trial or at the summary judgment stage, their client will not be assessed attorney's fees. Any ambiguity regarding the meaning of a “prevailing party” entitled to fees under the Federal Rules was resolved by the Supreme Court's decision in Christiansburg Garment Co. v. EEOC , 434 U.S. 412 (1977). The Supreme Court denied fees to the prevailing defendant employer in that Title VII case, pointing out that the EEOC's actions in bringing the case could not be characterized as without merit or unreasonable. Specifically, the Court held that “a plaintiff may not be assessed his opponent's attorney's fees unless a court finds that his claim was frivolous, unreasonable or groundless.” Id. at 422. Indeed, had the Supreme Court ruled otherwise, many lower-income individuals with meritorious discrimination claims might have been dissuaded from pursuing them.

Subsequent cases have shown that the Christiansburg standard is an exceedingly difficult one for a defendant to meet. For example, in Hill v. Board of Education, CV 87-3008 (ILG) (E.D.N.Y. 1993), the court at trial granted the defendants' motion to dismiss after the conclusion of plaintiff's case, noting that the plaintiff's Title VII claim had no merit whatsoever and that no evidence had been produced in support of his claim. Nonetheless, the court later denied defendants' motion for attorneys' fees, finding that the Christiansburg test had not been satisfied.

The near-immunity of unsuccessful discrimination plaintiffs to motions by prevailing employers for attorney's fees, however, should not obscure that fact that Fed. R. Civ. P. 54 (d) also provides for the award of costs to a prevailing party. For several reasons, many plaintiffs' employment lawyers overlook or misunderstand the fact that the standard for awarding costs to a prevailing party is quite different than the one for attorneys' fees. In Cosgrove v. Sears, Roebuck & Co. , 191 F.3d 98 (2d Cir. 1999), an unsuccessful plaintiff in a Title VII case appealed the district court's award of costs against her, arguing that the defendant had not satisfied Christiansburg's “useless, baseless or frivolous” test. The Second Circuit disagreed, stating that Rule 54(d) “grants costs to a prevailing party as a matter of course in the absence of a countervailing statute or rule.” Id. at 101 [emphasis added]. In addressing the argument that the Christiansburg test should also apply to applications by prevailing employers for costs, the court stated that “[w]e see no reason … to apply the same type of heightened standard to the assessment of costs.” Id.

In setting forth its rationale for this conclusion, the Cosgrove court relied on the Eighth Circuit's analysis in Poe v. John Deere Co. , 695 F.2d 1103, 1108 (8th Cir. 1982): “Whereas the magnitude and unpredictability of attorney's fees would deter parties with meritorious claims from litigation, the costs of the suit in the traditional sense are predictable and, compared with the costs of attorney's fees, small.” Other circuits have adhered to the rationale set forth in Cosgrove and Poe . See, e.g., Trevino v. Holly Sugar Co. , 811 F.2d 896 (5th Cir. 1987).

District Courts' Exercise of 'Discretion' Rule 54(d), however, grants district courts “discretion to refuse to tax costs in favor of the prevailing party,” Crawford Fitting Co. v. J.T. Gibbons, Inc. , 482 U.S. 437, 442 (1987); ARP Films, Inc. v. Marvel Entertainment Group, Inc. , 952 F.2d 643 (2d Cir. 1991), and plaintiffs' attorneys have employed a variety of arguments to persuade district courts to refuse to grant motions for costs by prevailing employers. These efforts have, at best, met with mixed success. In Xerox Corp. v. 3Com Corp., 2000 WL 1899799 (W.D.N.Y. 2000), the court found that the fact that the plaintiff's case was brought in good faith and was close and difficult did not represent a basis for denying costs. And, in Bilezikjian v. Baxter Healthcare Corp., 1999 WL 945522 (S.D.N.Y. 1999), the court rejected the plaintiff's equitable argument that costs should be denied because the defendant was wealthy.

Nonetheless, at least a few courts have urged restraint in assessing costs against unsuccessful plaintiffs, perhaps most notably the First Circuit in Whitney Brothers Co. v. Bluefield Supply Co. , 60 F.3d 8 (1st Cir. 1995). In that case, the First Circuit cautioned that a district court's power to award costs “must be exercised with restrain and discretion,” and therefore “should be used sparingly and reserved for egregious circumstances.” Id. at 13.

Courts in scattered jurisdictions have been receptive to a number of different arguments advanced by plaintiffs' lawyers for disallowing or reducing costs. Factors that such courts have cited in paring down or even denying costs to a prevailing defendant include excessive or unnecessary conduct by the prevailing party, injustice in a presumptive cost award or request, a losing party's indigence, cases where the outcome was extremely close or questionable, and the use of uneconomical methods by the prevailing party. Arguments that an award of costs will have a chilling effect on civil rights plaintiffs, though seemingly plausible, have not fared well. In the end, however, determinations of costs applications and objections to them are often subjective and fact-specific.

Two areas where plaintiffs' counsel have had at least limited success in persuading district courts to reduce costs awards are those in which the plaintiff is indigent and those that are “close calls.” The Third Circuit in In re Paoli Railroad Yard PCB Litigation, 221 F.3d 449 (3rd Cir. 2000), stated that a factor district courts “may consider in determining a costs award” is “the closeness of the issues raised.” Id. at 463. In Cherry v. Champion International Corp. , 186 F.3d 442, 446 (4th Cir. 1999), the Fourth Circuit also acknowledged that “the closeness and difficulty of the issues decided” may “justify denying an award of costs.”

Perhaps the most effective tool available to counsel objecting to costs awards against plaintiffs is the limited financial resources argument. The Seventh and Ninth Circuits have been particularly outspoken on this issue, with the Seventh Circuit holding that “the losing party's inability to pay will suffice to justify denying costs.” Weeks v. Samsung Heavy Indus. Co., 126 F.3d 926, 945 (7th Cir. 1997). The Ninth Circuit arrived at a similar conclusion in Association of Mexican-American Educators v. State of California , 231 F.3d 572, 592 (9th Cir. 2000), where it found that “the losing party's limited financial resources” are a “reason … for refusing to award costs to a prevailing party.” See also Stanley v. University of California , 178 F.3d 1069 (9th Cir. 1999).

If an unsuccessful plaintiff is destitute, there is a reasonable chance that a court will, at a minimum, significantly reduce costs which the plaintiff cannot possibly pay. Lower income plaintiffs, particularly those with meritorious cases, also have a prospect of the court reducing any costs award against them. In such cases, plaintiffs' counsel should press this argument and hope that they are not among those judges which have upheld costs awards even against indigent prisoners.

Costs That May Be Taxed

Even assuming that a court is inclined to grant costs to a prevailing defendant, it may well approve some costs while expressing reservations about others. Perhaps the most common category of costs for which prevailing defendants seek payment is deposition transcripts. 28 U.S.C. ' 1920 permits taxation of costs for deposition transcripts where the deposition was “necessarily obtained for use in the case.” This standard is usually considered to have been met where the prevailing party has used the depositions in a motion for summary judgment. In L&B 57th Street, Inc. v. E.M. Blanchard, Inc., 1997 WL 403430 (S.D.N.Y. 1997), aff'd, 143 F.3d 88 (2d Cir. 1998), the court observed that “[d]epositions are considered 'used' if they were submitted as part of the summary judgment motion and used by the Court in reaching its decision.” Id. at *2. See also Whitfield v. Scully , 241 F.3d 264 (2d Cir. 2001). If a party takes a large number of depositions, some of which are clearly not necessary to defend the case, it may not be awarded costs for depositions of marginal witnesses. In Cherry v. Champion International Corp., supra, the court identified “excessiveness in a particular case” as a factor warranting denial of costs, and such excessiveness would certainly encompass unnecessary depositions. Id. at 446.

Other expenses generally considered as costs, such as the expense of photocopying motion papers, are generally deemed to be expenses for which an unsuccessful plaintiff may be taxed. It should be noted, however, that fees and related expenses for expert witnesses are “not recoverable, except to the extent of the $40-per-day statutory fee and travel expenses for witnesses in general.” Harris Trust and Savings Bank v. John Hancock Mutual Life Insurance Co. , 137 F. Supp. 2d 351, 360 (S.D.N.Y. 2001). Moreover, a prevailing party may not recover expert witness fees unless the statute explicitly provides for such recovery. West Virginia Univ. Hospitals, Inc. v. Casey , 499 U.S. 83 (1991).

Conclusion

The widely accepted rationale for permitting taxation of costs by a prevailing defendant in an employment discrimination case, ie, that such costs are likely to be relatively low when compared to attorney's fees, is a questionable one. In a case where there are numerous depositions and considerable motion practice, even costs can accumulate to a point where a lower-income plaintiff – a category into which many employment discrimination plaintiffs fall – may find payment of such costs to be a crushing financial burden. In some cases, it is not unrealistic to project that such costs may be in the range of $10,000 to $15,000. An order to pay such costs to a prevailing defendant can be devastating to an individual with an annual income of $40,000.

Courts should give greater consideration both to the potential burden of cost awards on lower-income plaintiffs as well as to the fact that, in reality, routine awards of costs may in fact have more of a chilling effect on civil rights plaintiffs than has been recognized. At the same time, before commencing litigation on behalf of a lower income plaintiff, plaintiff's employment lawyers would be well advised to inform their client that, should his or her case prove unsuccessful, an onerous costs award may be an unwelcome result.