City of San Antonio v. Hotels.com, L.P.

Whether, as the Fifth Circuit alone has held, district courts “lack[] discretion to deny or reduce” appellate costs deemed “taxable” in district court under Fed. R. App. P. 39(e).

Four categories of “costs on appeal are taxable in the district court for the benefit of the party entitled to costs under this rule” under Fed. R. App. P. 39(e). In In re Sioux Ltd., Sec. Litig., No. 87-6167, 1991 WL 182578, at *1 (5th Cir. Mar. 4, 1991), the Fifth Circuit interpreted the 1991 version of Rule 39(e) and found that “district court[s] ha[ve] no discretion whether, when, to what extent, or to which party to award costs”; a full costs award were “mandatory.”  Rule 39(e) was amended in 1998. However, prior to and subsequent to that amendment, every other circuit to have addressed the question contrarily held that the “district court[s] ha[ve] broad discretion to deny costs to a successful appellee under Rule 39(e).” Republic Tobacco Co. v. N. Atl. Trading Co., 481 F.3d 442, 449 (7th Cir. 2007).  The panel of the Fifth Circuit, in this case, recognized that “most other circuits” adopted a different position but stated that it was bound by the precedent in In re Sioux Ltd. The Fifth Circuit denied rehearing and essentially affirmed a $2 million cost award against the City of San Antonio, notwithstanding the district court’s finding “persuasive” reasons to reduce or deny the award.  Petitioner argues that the lower court’s decision in In re Sioux Ltd. did not focus on the correct operative clause.  Petitioner argues that the rule states that the costs are not addressed in appellate court but are addressed in district court and the rule does not require that all awards are “mandatory.”