Steve Moore v. CITGO Refng & Chem Co., L.P. ( 2013 )

Case: 12-41175 Document: 00512437492 Page: 1 Date Filed: 11/12/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
November 12, 2013
No. 12-41175
Lyle W. Cayce
Clerk
STEVE MOORE; RUBEN PENA; RONALD E. GANER; RUSSELL EDLIN;
CIRIACO VILLARREAL, JR., et al.,
Plaintiffs–Appellants,
versus
CITGO REFINING AND CHEMICALS COMPANY, L.P.,
Defendant–Appellee.
***************
No. 12-41292
STEVE MOORE; RUBEN PENA; RONALD E. GANER; RUSSELL EDLIN;
CIRIACO VILLARREAL, JR.; RUDY RAMIREZ;
MICHAEL JOHN WEDGEL; ROBERT G. GARCIA; JERRY DAVILA;
CRAIG SIGMOND CORLEY; ROLAND V. GUZMAN;
RUDOLFO R. MARTINEZ; RONALD D. STUBBS; LUIS R. GALVAN, II;
CHARLES JOHN BREIDENBACH; DAVID BELLOWS; DAVID D. RUIZ;
DONALD HEDRICK; ROBERT SCOTT; WILLIAM F. WAGGONER, JR.;
JAIME REQUENEZ; EDUARDO MARTINEZ, SR.; GREGORY G. SMITH;
RICK G. SALINAS; DIANA G. REDDELL; CHESTER HARRISON,
Plaintiffs–Appellees,
versus
CITGO REFINING AND CHEMICALS COMPANY, L.P.,
Defendant–Appellant.
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Appeals from the United States District Court
for the Southern District of Texas
Before SMITH, DENNIS, and HIGGINSON, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
Console supervisors at a refinery alleged that their employer, CITGO
Refining and Chemicals Company, L.P. (“CITGO”), misclassified them as exempt
from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”),
29 U.S.C. §§ 201–219. In two separate discovery sanctions, the district court
dismissed twenty-one of twenty-four plaintiffs.1 After granting CITGO’s motion
to exclude testimony regarding damages by the three remaining plaintiffs, the
court granted summary judgment for CITGO based on plaintiffs’ inability to
prove damages; the court, however, reduced CITGO’s award of taxable costs. We
affirm the summary judgment but reverse and render the award of costs.
I.
CITGO served plaintiffs with requests for discovery and interrogatories.
After CITGO alleged that plaintiffs’ responses were deficient, the district court
entered its first discovery order, requiring plaintiffs to produce documents and
respond to interrogatories. CITGO again complained of plaintiffs’ continued non
compliance, whereupon the court entered a second discovery order requiring
1
Initially, twenty-six plaintiffs sued; the district court dismissed two who had aban-
doned their claims. This appeal concerns only the twenty-four remaining plaintiffs.
2
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plaintiffs to preserve documents, respond to specific interrogatories, and produce
documents. The court scheduled an evidentiary hearing and warned that
“[p]laintiffs who are found to have violated this Court’s Order to preserve their
notes and/or documents, will have their claims dismissed.”
After two evidentiary hearings that included live testimony from eighteen
plaintiffs, the court concluded that seventeen of them “had failed to participate
in discovery, failed to properly supplement responses, and failed to preserve doc-
uments.” Pursuant to Federal Rule of Civil Procedure 37(b)(2)(A)(v), the court
dismissed the claims of all seventeen as a discovery sanction.2
CITGO moved for summary judgment on the merits, contending that the
seven remaining plaintiffs were exempt from the overtime-pay requirements of
the FLSA pursuant to the exemptions for administrative, executive, combina-
tion, and highly compensated employees; and that liability, if any, must be calcu-
lated pursuant to the fluctuating-workweek method and was subject to a two-
year statute of limitations. The court did not rule on CITGO’s summary-
judgment motion before four additional plaintiffs were dismissed for further dis-
covery violations.
As part of its second discovery order, the court instructed plaintiffs to
“produce either: (1) the emails that are responsive to Interrogatory No. 16 and/or
Request for Production No. 41; or (2) a list of all of their respective personal
email addresses, along with the relevant account names and passwords. . . . .”
Further, “[i]f any Plaintiff deletes any of his personal emails after the date of the
2
Rule 37(b)(2)(A)(v) provides, in relevant part, that “[i]f a party . . . fails to obey an
order to provide or permit discovery . . . the court where the action is pending may issue fur-
ther just orders . . . includ[ing] . . . dismissing the action or proceeding in whole or in part . . . .”
3
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entry of this Order, the Court will impose on that Plaintiff a monetary sanction
of one hundred dollars ($100) for each deleted email.”
Among the plaintiffs who elected to disclose their email accounts and pass-
words, three deleted emails notwithstanding the order, and a fourth made no
effort to preserve the contents of his inbox. Following a further evidentiary
hearing, the court gave the offending plaintiffs the option of “either: (1) dismissal
of their claims against CITGO with prejudice; or (2) . . . monetary sanctions . . . .
Plaintiffs elected to dismiss their claims against CITGO with prejudice.”
Giving no reasons, the court denied CITGO’s motion for summary judg-
ment as to the three remaining plaintiffs. It then granted CITGO’s motion to
prevent those plaintiffs from testifying at trial about damages, because “after
over a year of discovery, not one Plaintiff has yet to provide CITGO with any cal-
culation or estimation of the damages he is seeking.” See FED. R. CIV. P. 37(b)-
(2)(A)(ii). Plaintiffs, moreover, had failed timely to designate an expert on dam-
ages, and the court had denied their motion to designate out of time.
Because plaintiffs had no way of proving an essential element, CITGO’s
ensuing motion for summary judgment on damages was unopposed. The district
court granted that motion, dismissed plaintiffs’ claims with prejudice, and
entered final judgment in favor of CITGO. Although CITGO submitted a bill of
costs for more than $50,000,3 the court awarded only $5000, based in part on a
finding of CITGO’s “enormous wealth” and plaintiffs’ “limited resources.”
Both parties appeal. Plaintiffs contend that the district court erred by
(1) entering discovery sanctions dismissing seventeen plaintiffs (the “January
3
CITGO requested $53,065.72 for deposition transcripts and $2,262.41 for copies. The
court denied reimbursement for the latter, a ruling that CITGO does not appeal.
4
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Sanction”); (2) entering discovery sanctions dismissing four additional plaintiffs
(the “March Sanction”); and (3) dismissing the three remaining plaintiffs after
preventing them from testifying about damages. CITGO (4) re-urges its motion
on the merits as an alternative ground for summary judgment against the final
three plaintiffs and (5) avers that the court erred by reducing its cost award.
II.
“A district court has broad discretion in all discovery matters, and such
discretion will not be disturbed ordinarily unless there are unusual circum-
stances showing a clear abuse.” Kelly v. Syria Shell Petroleum Dev. B.V., 213
F.3d 841, 855 (5th Cir. 2000) (internal quotation omitted). “The district court’s
underlying findings of fact are reviewed for clear error and its underlying conclu-
sions of law reviewed de novo.” Smith & Fuller, P.A. v. Cooper Tire & Rubber
Co., 685 F.3d 486, 488 (5th Cir. 2012) (internal quotation marks omitted).
Because plaintiffs do not allege a legal error, i.e., it is undisputed that the
district court applied the correct test; the only question is whether it clearly
erred in its findings of fact. “Clear error review is especially rigorous when we
review a lower court’s assessment of trial testimony, because the trier of fact has
seen and judged the witnesses.” In re Eldercare Props., Ltd., 568 F.3d 506, 515
(5th Cir. 2009) (internal quotation marks omitted).
Rule 37(b)(A)(v) expressly contemplates dismissal, and the district court’s
discretion thereunder is broad. Bluitt v. Arco Chem., 777 F.2d 188, 191 (5th Cir.
1985). “The courts have consistently demonstrated their willingness to impose
the ultimate sanction of dismissal or default.” GREGORY P. JOSEPH, SANCTIONS:
THE FEDERAL LAW OF LITIGATION ABUSE § 49(B)(4), at 729 (5th ed. 2013) (citation
5
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omitted). “[D]ismissal is a severe sanction that implicates due process.” FDIC
v. Conner, 20 F.3d 1376, 1380 (5th Cir. 1994). Rule 37 dismissal, however “must
be available to the district court in appropriate cases, not merely to penalize
those whose conduct may be deemed to warrant such a sanction, but to deter
those who might be tempted to such conduct in the absence of such a deterrent.”
Nat’l Hockey League v. Metro. Hockey Club, Inc., 427 U.S. 639, 643 (1976) (per
curiam).
“The question . . . is not . . . whether the Court of Appeals [ ] would as an
original matter have dismissed the action; it is whether the District Court
abused its discretion in so doing.” Id. at 642. The Court’s Rule 37 dismissal
guidance is but a specific application of its general instructions regarding clear
error review: “If the district court’s account of the evidence is plausible in light
of the record viewed in its entirety, the court of appeals may not reverse it even
though convinced that had it been sitting as the trier of fact, it would have
weighed the evidence differently.” Anderson v. City of Bessemer City, N.C., 470
U.S. 564, 573–74 (1985).
[S]everal factors [“Conner factors”] must be present before a district
court may dismiss a case with prejudice as a sanction for violating
a discovery order: (1) “the refusal to comply results from willfulness
or bad faith and is accompanied by a clear record of delay or contu-
macious conduct;” (2) the violation of the discovery order must be
attributable to the client instead of the attorney, (3) the violating
party’s misconduct “must substantially prejudice the opposing
party;” and (4) a less drastic sanction would not substantially
achieve the desired deterrent effect.
Doe v. Am. Airlines, 283 F. App’x 289, 291 (5th Cir. 2008) (per curiam) (quoting
Conner, 20 F.3d at 1380–81); accord GREGORY P. JOSEPH , supra, § 49(B)(4),
6
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at 740 (quoting Conner, 20 F.3d at 1380–81).
After hearing two days of testimony and making specific findings regard-
ing each of eighteen plaintiffs (January Sanction), the court addressed each fac-
tor in detail. As a preliminary matter, plaintiffs contend that an alleged ambigu-
ity in the second discovery order deprived them of “fair notice that their claims
were subject to dismissal at the evidentiary hearing.” They cite no authority for
that proposition, and notice is not among the Conner factors governing dismissal.
As a factual matter, moreover, the order was unambiguous: “Plaintiffs who are
found to have violated this Court’s Order to preserve their notes and/or docu-
ments, will have their claims dismissed.” The court made specific findings,
moreover, that each and every dismissed plaintiff failed to preserve documents.
Plaintiffs maintain that their violation of the discovery order was only
negligent. The district court, however, inferred wilfulness from conduct: “Plain-
tiffs were aware of the Court’s rulings, and nevertheless failed to conduct them-
selves in accordance with them. This failure evidences a blatant disregard for
the judicial process, and constitutes willful and contumacious conduct.”
The court did not abuse its discretion by refusing to credit, following sub-
stantial testimony, plaintiffs’ claims that their disobedience was grounded in
confusion or sincere misunderstanding. Their failure to request clarification of
the order militates against such a finding. See Worrell v. Hous. Can! Academy,
424 F. App’x 330, 337 (5th Cir. 2011) (per curiam). Even if such a reading is
plausible, the district court’s opposite conclusion—reached after a detailed exam-
ination of each plaintiff’s conduct—was not implausible. “Where there are two
permissible views of the evidence, the factfinder’s choice between them cannot
be clearly erroneous.” Anderson, 470 U.S. at 574.
7
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Plaintiffs assert that their failure to preserve handwritten notes and per-
sonal emails did not substantially prejudice CITGO. Plaintiffs testified that
their work notes contained information that was not available in electronic rec-
ords or elsewhere. It was therefore not clear error for the district court to con-
clude that “the notes Plaintiffs routinely destroyed or failed to preserve would
have been the best evidence of their daily tasks.” (January Sanction.)
Although conceding it possessed information regarding the duration of
plaintiffs’ internet use, CITGO asserts those records are not accurate proxy for
how much time was spent on personal email while on the clock. The district
court specifically found, however, that “emails go directly to two of Defendant’s
defenses” (January Sanction), and CITGO’s prospective trial exhibits included
more than twenty emails from the one then-remaining plaintiff who used per-
sonal email at work. The prejudice finding was not clearly erroneous.
Plaintiffs contend that dismissal was improper because a less drastic sanc-
tion would have achieved the desired effect. They rely primarily on district court
and out-of-circuit cases, but this circuit has rejected the view that a court is
“required to attempt to coax [parties] into compliance with its order by imposing
incrementally increasing sanctions.” United States v. $49,000 Currency, 330
F.3d 371, 379 (5th Cir. 2003).
The district court dismissed the seventeen plaintiffs only after issuing two
discovery orders, one of which specifically warned that dismissal would be the
penalty for noncompliance. The court, moreover, entered specific factual find-
ings regarding each plaintiff—and, notably, did not dismiss one plaintiff whom
it found to be in compliance. (January Sanction.) On this record, we find no
8
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abuse of discretion, notwithstanding the severity of the sanction.4
Discovery rulings—especially those taken after live testimony—are pecul-
iarly within the competence of the district court, and the factual findings at issue
here are no exception. Plaintiffs’ briefing does not focus on (or even distinguish)
their individual courses of conduct, as the district court did, so their claim must
be that the district court got it wrong regarding all seventeen dismissed plain-
tiffs. That is an implausible result, given the plaintiff-specific findings and care-
ful application of each Conner factor to the facts. We therefore affirm the Jan-
uary Sanction.
III.
In its March Sanction, the district court dismissed four additional plain-
tiffs who disclosed their personal email addresses and passwords after the sec-
ond discovery order but then either deleted emails or, in the case of one plaintiff,
failed to preserve inbox contents. The dismissal again occurred after live testi-
mony, plaintiff-specific findings, and application of the Conner factors.
There was no abuse of discretion. Three plaintiffs deleted emails in direct
4
See Emerick v. Fenick Indus., Inc., 539 F.2d 1379, 1381 (5th Cir. 1976) (“It is not our
responsibility as a reviewing court to say whether we would have chosen a more moderate
sanction. It is our responsibility solely to decide whether the district court could, in its discre-
tion, have determined the appellant’s conduct to be so flagrant as to justify [the sanctions at
issue].”); see also Nat’l Hockey League, 427 U.S. at 643 (“It might well be that [t]hese [plain-
tiffs] would faithfully comply with all future discovery orders entered by the District Court in
this case. But other parties to other lawsuits would feel freer than we think Rule 37 contem-
plates they should feel to flout other discovery orders of other district courts. Under the cir-
cumstances of this case, we hold that the District Judge did not abuse his discretion in finding
bad faith on the part of these respondents, and concluding that the extreme sanction of dismis-
sal was appropriate in this case . . . .”).
9
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contradiction of an order—and despite dismissal of their co-plaintiffs, in part, for
similar conduct—and a fourth thwarted the order through inaction.
Plaintiffs again attribute their conduct to negligence or misunderstanding
rather than wilfulness. The district court, however, characterized that explana-
tion as “particularly disingenuous and offensive in light of the fact that seven-
teen co-plaintiffs were previously dismissed raising these same tired excuses.”
The plaintiffs had at least constructive notice of the second discovery order;
allowing parties to avoid sanctions by not reading documents in their own case
would erode courts’ ability to enforce their lawful edicts. The implicit finding of
wilfulness was not clearly erroneous.
To the extent plaintiffs have preserved a claim that their noncompliance
did not prejudice CITGO, the court did not abuse its discretion by finding that
“[t]he discovery that was destroyed by plaintiffs may have been essential to
CITGO’s defense, and without it, CITGO is certainly disadvantaged. Moreover,
CITGO has expended considerable funds in pursuing discovery that has led
nowhere.”
Particularly unpersuasive, in the context of the March Sanction, is plain-
tiffs’ contention regarding a lesser sanction. Plaintiffs elected dismissal with
prejudice in lieu of the very sanction they now seek ($100 per deleted email).
They did not challenge that choice at the time and will not now be heard to repu-
diate it. The four plaintiffs dismissed in the March Sanction, moreover, were not
in fact deterred by either the discovery orders or the earlier dismissal of seven-
teen co-plaintiffs for similar conduct. There is no showing that any lesser sanc-
tion would have been effective.
10
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IV.
The district court made three significant determinations regarding dam-
ages. The court denied the request of the seven remaining plaintiffs to desig-
nate a damages expert out of time. It subsequently barred the final three plain-
tiffs from testifying to damages. Summary judgment on damages followed.
It is somewhat unclear which of these issues, if any, plaintiffs have
preserved on appeal. Our independent review of the record shows that neither
the denial of plaintiffs’ untimely motion to designate an expert nor the discovery
sanction preventing their direct testimony on damages was an abuse of
discretion.
At most, plaintiffs’ initial brief could be generously construed as a com-
pound argument that the two rulings on damages, followed by summary judg-
ment, erroneously prohibited them from presenting evidence of damages.
Although plaintiffs have explained why they failed timely to designate an expert
(which failure they concede), they have not shown that the denial of their motion
to do so after the deadline was reversible error. There is no evidence, other than
plaintiffs’ ipse dixit, that the court ordered an off-the-record “stand-down” on dis-
covery or that such stand-down, even if ordered, tolled the deadline for designat-
ing an expert.
The subsequent order barring plaintiffs from testifying about damages is
a sanction that is expressly permitted by Federal Rule of Civil Procedure 37(b)-
(2)(A)(ii). Whether the district court abused its discretion in deploying it is
determined by examining “(1) the importance of the witnesses’ testimony; (2) the
prejudice to the opposing party of allowing the witnesses to testify; (3) the possi-
bility of curing such prejudice by granting a continuance; and (4) the explana-
11
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tion, if any, for the party’s failure to comply with the discovery order.” Sierra
Club v. Cedar Point Oil Co., 73 F.3d 546, 572 (5th Cir. 1996).
In applying the Sierra Club factors, the court determined that there was
no good explanation for plaintiffs’ delay in providing damages calculations and
that allowing testimony without discovery would prejudice CITGO.5 That “evi-
dence of damages is an essential element of Plaintiffs’ FLSA claims” militates
in favor of allowing it, notwithstanding any discovery violations. The court made
no explicit finding regarding a continuance, though we note that the trial was
continued for eight months after denial of plaintiffs’ motion to designate an
expert out of time.
Considering them holistically, the Sierra Club factors weigh in favor of a
finding that the court did not abuse its discretion. Especially important is that,
“after over a year of discovery, not one Plaintiff ha[d] yet . . . provide[d] CITGO
with any calculation or estimation of . . . damages”—“despite the fact that they
had in their possession . . . badge records and the Court had specifically informed
Plaintiffs that they could provide their ‘best estimate.’”
CITGO’s eventual motion for summary judgment on damages was unop-
posed, and the district court found no remaining issues of material fact. Having
consented to the judgment, plaintiffs cannot challenge it for the first time on
appeal. See Nissho-Iwai Am. Corp. v. Kline, 845 F.2d 1300, 1307 (5th Cir.
1988).6
5
See also FED. R. CIV. P. 37(c)(1) (barring introducing of undiscovered information into
evidence unless failure to disclose was harmless or justified).
6
Because we affirm the discovery sanctions and summary judgment, we do not reach
(continued...)
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V.
“Unless a federal statute, the [Federal Rules], or a court order provides
otherwise, costs—other than attorney’s fees—should be allowed to the prevailing
party.” FED. R. CIV. P. 54(d)(1). “Because the Rule authorizes the district court
to deny the award, we review that exercise of authority for abuse of discretion.”
Pacheco v. Mineta, 448 F.3d 783, 793 (5th Cir. 2006). It follows that a reduction
in a cost award is likewise reviewed for abuse of discretion.
In Pacheco, the court cited a leading treatise for the proposition that “[a]
wide range of reasons have been invoked to justify withholding costs from the
prevailing party.” Id. at 794 (citation and internal quotation marks omitted).
The court enumerated illustrative reasons, but “only for the purpose of exposi-
tion.” Id. at 794 n.18. It expressly declined to “decide whether any of these is
a sufficient reason to deny costs.” Id. (emphasis added).
Although it is undisputed that CITGO is the prevailing party, the district
court reduced CITGO’s cost award based on (1) a finding of plaintiffs’ good faith,
(2) CITGO’s “enormous wealth,” and (3) “Plaintiffs[’] limited resources.” The
court erred as a matter of law in relying on CITGO’s “enormous wealth”—or the
comparative wealth of the parties—as a basis for reducing the cost award.
Neither the district court nor plaintiffs have invoked any Fifth Circuit authority
other than Pacheco’s descriptive list. At least four circuits, however, have
rejected a “relative wealth” rationale, and “[t]he fact that the prevailing party
6
(...continued)
the alternative grounds proffered by CITGO. We decline to consider whether the district court
erred by denying CITGO’s initial motion for summary judgment on the merits, because plain-
tiffs were properly classified as exempt under the FLSA.
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is substantially more wealthy than the losing party is not a sufficient ground for
denying or limiting costs to the prevailing party.”7
[T]he plain language of Rule 54(d) does not contemplate a court bas-
ing awards on a comparison of the parties’ financial strengths. To
do so would not only undermine the presumption that Rule 54(d)(1)
creates in prevailing parties’ favor, but it would also undermine the
foundation of the legal system that justice is administered to all
equally, regardless of wealth or status.
Cherry, 186 F.3d at 448.
Thus, Congress did not intend Rule 54(d) to be swallowed by an “enor-
mous” or “relative” wealth exception: As a practical matter, the approach
adopted by the district court would be impermissibly punitive by preventing
profitable corporations such as CITGO from recovering costs when litigating
against individuals acting in good faith. Consistent with the great weight of
authority from the federal circuits, reducing or eliminating a prevailing party’s
cost award based on its wealth—either relative or absolute—is impermissible as
a matter of law.
It is not entirely evident whether the district court intended plaintiffs’
“limited resources” to be an independent basis for the cost reduction or whether,
7
10 JAMES W. MOORE ET AL., MOORE’S FEDERAL PRACTICE § 54.101[1][b], at 54–156 (3d
ed. 2013); accord In re Paoli R.R. Yard PCB Litig., 221 F.3d 449, 468 (3d Cir. 2000) (stating
that disparities in wealth may not be considered); Smith v. Se. Pa. Transp. Auth., 47 F.3d 97,
99–100 (3d Cir. 1995) (per curiam) (holding that plaintiff’s limited resources did not justify
reduction of cost award where plaintiff is able to pay); Cherry v. Champion Int’l Corp., 186
F.3d 442, 447–48 (4th Cir. 1999) (stating that comparitive economic power is not a factor
regarding presumption that prevailing party recovers its costs); Reed v. Int’l Union of Auto.,
Aerospace, & Agric. Implement Workers, Local Union No. 663, 945 F.2d 198, 204 (7th Cir.
1991) (declaring that financial disparity is no basis to deny costs); Chapman v. AI Transp., 229
F.3d 1012, 1038–39 (11th Cir. 2000) (en banc) (reasoning that court should not consider rela-
tive wealth of parties).
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instead, it was a dependent part of a comparative-wealth analysis. In any event,
we recognize that some circuits have permitted alteration of a cost award based
on a combined finding of good faith and limited resources.8 The parties agree,
however, that the question of what role “limited resources” play in reducing an
award presents a question of first impression in the Fifth Circuit.
On these facts, we decline to disturb the careful balance established by the
Federal Rules, which provide that taxable costs are presumptively awarded to
the prevailing party. Where, as here, the prevailing party incurred a few thou-
sand dollars per plaintiff in carefully documented out-of-pocket expenses for
taking depositions, and those plaintiffs were making in the neighborhood of
$100,000 per year, it would have been reversible error for the district court to
reduce the cost award based on a finding of “limited resources.”9
The summary judgment is AFFIRMED. The order reducing costs is
REVERSED, and a cost award is RENDERED in favor of CITGO for $53,065.72.
8
E.g., Moore v. Cnty. of Delaware, 586 F.3d 219, 221–22 (2d Cir. 2009); Champion Pro-
duce, Inc. v. Ruby Robinson Co., 342 F.3d 1016, 1022 (9th Cir. 2003); Cross v. Gen. Motors
Corp., 721 F.2d 1152, 1157 (8th Cir. 1983).
9
This conclusion regarding “limited resources” has no bearing on whether a losing
party who has demonstrated indigency may properly be excused from paying a prevailing
party’s costs or may properly be permitted to pay reduced costs. See 10 JAMES W. MOORE
ET AL., supra, § 54.101[1][b], at 54–157 (“Most circuits hold that a substantiated claim of the
losing party’s indigency may justify a reduction . . . of costs . . . .”). As their attorney conceded
at oral argument, plaintiffs are not indigent, nor did the district court make a finding to that
effect.
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DENNIS, Circuit Judge, concurring in part and dissenting in part.
I concur in Parts II and III of the majority’s opinion, holding that the
district court did not abuse its discretion by sanctioning Plaintiffs whom it
found had repeatedly and willfully violated discovery orders. I likewise join the
majority’s conclusion in Part IV that the district court did not abuse its
discretion by excluding the Plaintiffs’ testimony on damages, denying the
untimely designation of an expert on damages, and ultimately granting
summary judgment for CITGO. However, I respectfully dissent from Section V
of the majority opinion because I believe the district court was well within its
discretion to reduce CITGO’s cost award based on the circumstances of this case
and the comparatively disparate financial resources of the parties.
I.
Pursuant to Federal Rule of Civil Procedure 54(d), a district court may
award costs to a prevailing party. An appellate court reviews a district court’s
cost award under a deferential abuse–of–discretion standard. Energy Mgmt.
Corp. v. City of Shreveport, 467 F.3d 471, 483 (5th Cir. 2006). A district court
that denies or reduces a cost award to a prevailing party must articulate
justifications for so doing. Id. (“[I]f the court does not award costs to the
prevailing party, we require the district court to state its reasons.” (quoting
Salley v. E.I. DuPont de Nemours & Co., 966 F.2d 1011, 1017 (5th Cir. 1992)).
In Pacheco v. Mineta, 448 F.3d 783 (5th Cir. 2006), this court held that in
conjunction with a finding that the non-prevailing party brought suit in good
faith, district courts may consider various factors to determine what, if any, costs
should be awarded to the prevailing party. The Pacheco factors include: “(1) the
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losing party’s limited financial resources; (2) misconduct by the prevailing party;
(3) close and difficult legal issues presented; (4) substantial benefit conferred to
the public; and (5) the prevailing party's enormous financial resources.” Id. at
794 (citing 10 Charles Alan Wright & Arthur R. Miller, FEDERAL PRACTICE AND
PROCEDURE § 2668, at 234 (1998)). As noted by the majority, this Court in
Pacheco explained in a footnote that the five enumerated factors were listed
“only for the purpose of exposition. [We did not] decide whether any of these is
a sufficient reason to deny costs.” Id. at 794 n.18.
II.
After final judgment was entered in CITGO’s favor, CITGO filed a motion
seeking costs of approximately $53,000. On November 26, 2012, the district court
issued an opinion, awarding CITGO $5,000 in costs. The district court applied
Pacheco and found that despite the discovery disputes in this case, there was no
record evidence to conclude that Plaintiffs filed suit in bad faith. The court
further found that although the issues were in dispute, they were “neither novel
or complex.” The district court then considered the resources of the parties,
finding that CITGO has “enormous wealth” and that Plaintiffs have “limited
resources.” Because of the disparity in financial resources between the parties,
the court found that the amount of costs “requested by CITGO would amount to
an additional sanction, and is not appropriate.” Furthermore, the court noted,
in its discussion of attorneys’ fees, that four Plaintiffs had previously elected to
dismiss their claims against CITGO rather than incur monetary sanctions.
“Those Plaintiffs voluntarily elected dismissal of their claims, and as such
avoided imposition of a monetary sanction. . . . The dismissal of their claims
adequately addressed the proven discovery violations.”
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III.
Looking to case law from four sister-circuits, the majority opinion
concludes that “reducing or eliminating a party’s cost award based on its
wealth—either relative or absolute—is impermissible as a matter of law.” I
respectfully disagree that a consideration of the parties’ financial resources is
impermissible as a matter of law. Rather, our very own case law under Pacheco,
the text of Federal Rule of Civil Procedure 54(d)(1), as well as persuasive case
law from three sister-circuits suggest otherwise.
First, this court in Pacheco indicated that a comparative wealth analysis
may be a proper means for reducing or denying costs to the prevailing party.
After Pacheco was announced, this court and district courts in our circuit have
adopted these five factors as instructive in guiding the district court’s discretion
in assigning costs. See, e.g., Wade v. Peterson, 416 F. Appx 354, 356
(5th Cir. 2011) (“[I]n this circuit, courts may, but are not required to excuse a
losing party from paying costs only if he brought suit in good faith and can
demonstrate at least one of the five factors set forth in Pacheco v. Mineta, 448
F.3d 783, 794 (5th Cir. 2006). . . . ”); Frischhertz v. SmithKline Beechan Corp.,
No. 10-2125, 2013 WL 3894021 (E.D. La. July 26, 2013) (finding that “[i]f the
court excuses the losing party from paying costs, it must explain its reasons for
doing so. In order to do so, the litigant must have brought their claim in good
faith and be able to demonstrate at least one of five factors, discussed below.”
(citing Pacheco, 448 F.3d at 794) (citation omitted)).
Second, as noted by the majority opinion, Federal Rule of Civil procedure
54(d)(1) states: “Unless a federal statute, the [Federal Rules of Civil Procedure],
or a court order provides otherwise, costs—other than attorney’s fees—should be
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allowed to the prevailing party.” Relying on the reasoning of a Fourth Circuit
opinion, the majority suggests that the plain language of the Rule establishes a
strong presumption in favor of awarding costs, and thus district courts should
not be permitted to decline to award costs on the basis of the relative–wealth
exception. Although I do not dispute that the text of the Rule presumes that
costs will be awarded to prevailing parties, the majority cannot ignore that the
Rule also expressly contemplates that a court may simply order otherwise. Given
the explicit discretion granted to district courts by the Rule, I fail to see how we
can read into it a prohibition against considering the parties’ financial means.
Third, the majority misleadingly asserts that the “great weight of
authority from the federal circuits” compels the conclusion that a compara-
tive–wealth analysis is impermissible as a matter of law. As the majority notes,
the Third, Fourth, Sixth, and Eleventh Circuits reject a comparative–wealth
analysis in assessing costs. See Chapman v. AI Transp., 229 F.3d 1012, 1039
(11th Cir. 2000); Cherry v. Champion Int’l Corp., 186 F.3d 442, 448 (4th Cir.
1999); Smith v. Se. Penn. Transp. Auth., 47 F.3d 97, 99-100 (3d Cir. 1995); White
& White, Inc. v. Am. Hosp. Supply Corp., 786 F.2d 728, 730 (6th Cir. 1986).
However, the Second, Eighth, and Ninth Circuits expressly permit consideration
of the comparative–wealth of the parties. See Moore v. Cnty. of Del., 586 F.3d
219, 221-222 (2d Cir. 2009) (“While we do not and need not compile an
exhaustive list of those factors here, denial of costs may be appropriate where
a losing party can demonstrate misconduct by a prevailing party, the public
importance of the case, the difficulty of the issues presented, or its own limited
financial resources.”) (emphasis added); Champion Produce, Inc. v. Ruby
Robinson Co., 342 F.3d 1016, 1022 (9th Cir. 2003) (“We have previously
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approved as appropriate reasons for denying costs: (1) a losing party’s limited
financial resources; (2) misconduct by the prevailing party; and (3) ‘the chilling
effect of imposing . . . high costs on future civil rights litigants.’”) (emphasis
added) (alteration in original); Cross v. Gen. Motors Corp., 721 F.2d 1152, 1157
(8th Cir. 1983) (“The district court’s order indicates that the trial judge
considered Cross’s limited financial resources[] . . . . In so doing, the district
court did not abuse its discretion.”); see also Poe v. John Deere Co., 695 F.2d
1103, 1108 (8th Cir. 1982) (“It is of course within a court’s discretion to deny
costs because a plaintiff is poor or for other good reason[] . . . .”). Thus, there is
no “great weight of authority,” as the majority contends. Rather, whereas four
circuits reject the comparative–wealth analysis, three permit it, and, addition-
ally, two sister circuits allow for a narrow indigency exception for costs.1
Moreover, I fear that the majority’s rule will prohibit district courts from
considering the relative wealth of the parties, consequently chilling potential
bona fide claims by plaintiffs who lack disposable income. See, e.g., Ass’n of Mex.-
Am. Educators v. California, 231 F.3d 572, 593 (9th Cir. 2000) (“[D]ivesting
district courts of discretion to limit or to refuse such overwhelming costs in
important, close, but ultimately unsuccessful civil rights cases like this one
might have the regrettable effect of discouraging potential plaintiffs from
1
The Seventh and Tenth Circuits allow for a narrowly construed indigency exception,
permitting district courts to deny costs when the non-prevailing party presents sufficient
evidence of indigency. Johnson v. Okla. ex rel. Univ. of Okla. Bd. of Regents, 229 F.3d 1163(10th Cir. 2000) (unpublished); Corder v. Lucent Tech. Inc., 162 F.3d 924, 929 (7th Cir. 1998).
Although the indigency exception is distinct from a comparative–wealth analysis, I believe the
Seventh and Tenth Circuit case law on this issue is relevant for this discussion in that it
indicates that these circuits are likewise willing to address the parties’ limited financial
resources in determining cost awards.
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bringing such cases at all.”).
IV.
The district court here did not abuse its discretion when it applied the
language from Fifth Circuit precedent to reduce CITGO’s costs. As noted, the
district court found that there was no evidence to suggest that the suit was not
brought in good faith, and thus went on to apply the Pacheco factors, comparing
the great economic wealth of CITGO—a large corporation with over nine billion
dollars of assets—with the comparatively limited resources of the losing
Plaintiffs. The court further justified its reduction of fees and costs by explaining
that substantial sanctions were already imposed upon the Plaintiffs in the form
of dismissals and exclusion of testimony and that, therefore, any additional
sanction in the form of costs or fees, imposed upon these Plaintiffs of “modest
means,” would have been unjust. Furthermore, the court reasoned that four
Plaintiffs had voluntarily elected to avoid monetary sanctions in favor of
dismissal, and thus should not be straddled with both dismissal of their claims
and additional costs.
Accordingly, I would affirm the district court’s reduced cost award, and
dissent from the majority’s contrary opinion.
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