The opinion of the court was delivered by: JOHN GRADY, District Judge
MEMORANDUM OPINION AND ORDER
In an order of November 30, 2004, the Court of Appeals referred
the parties to this court for a decision on any "request for
costs associated with North Atlantic's supersedeas bond."
Defendant North Atlantic Trading Company, Inc. ("North Atlantic")
requests the sum of $1,091,054, which it claims was the amount by
which the cost of posting security in the amount required by this
court exceeded the security it would have had to post for the $3
million judgment ultimately approved by the Court of Appeals. The
plaintiff, Republic Tobacco, L.P., ("Republic"), opposes the
request on a number of grounds, including a basic argument that
because North Atlantic was not the "prevailing party" on the
appeal, it is not entitled to any costs in connection with the
supersedeas bond. We will begin with an examination of this legal
argument. Republic points out that it, rather than North Atlantic, was
the prevailing party on all of the liability issues in the case.
The reduction of the damage award, in Republic's view, does not
qualify North Atlantic for any recovery of costs.
We think the rules do entitle North Atlantic to the relief it
seeks. Federal Rule of Appellate Procedure 39(a)(4) provides:
[I]f a judgment is affirmed in part, reversed in
part, modified, or vacated, costs are taxed only as
the court orders.
Subparagraph (e)(3) of the Rule provides: "[P]remiums paid for a
supersedeas bond or other bond to preserve rights pending appeal"
"are taxable in the district court for the benefit of the party
entitled to costs under this rule." The combined effect of these
provisions is to allow the district court to tax supersedeas
costs in favor of a litigant who obtains a partial reversal or
modification of the judgment in the form of reduction of damages.
It other words, having secured the partial reversal or
modification referred to in Rule 39(a)(4), North Atlantic
qualifies for the taxation of supersedeas costs referred to in
Rule 39(e)(3). Relief is not automatic, but rests in the sound
discretion of the district court. A case we regard as instructive
is Emmenegger v. Bull Moose Tube Co., 324 F.3d 616
Cir.), cert. denied, 540 U.S. 947 (2003), cited by North
Atlantic. In that case, an initial judgment for plaintiff was
reversed in part on appeal and remanded for a new trial. The
second trial was before a jury, and plaintiff's claims were different from the first time (state law claims rather than
ERISA, which had been held on appeal to be inapplicable). The
jury returned a substantially lower verdict than plaintiff had
obtained in the first trial. The trial judge awarded the
defendant the portion of its supersedeas costs that exceeded
those it would have incurred in securing the reduced amount
awarded by the jury in the second trial. On a second appeal, the
Eighth Circuit noted that this order of the district court would
be reviewed for abuse of discretion. See id. at 626. The
Court made the following comments about what the district court
In exercising that discretion, the court pointed out
in its order that the Company would not have had to
pay for a supersedeas bond in the first instance but
for the plaintiffs' pursuit of their claims under the
wrong legal theory. The court explained that although
the plaintiffs primarily prevailed on remand, the
Company's success in appealing the ERISA-based PSP
judgment in the first trial resulted in a verdict
against the Company in the second trial that was
several million dollars less than in the first.
Id. at 627. The Court then concluded that the district court
had not abused its discretion. See id. We see no principled
distinction between Emmenegger and the present case.
Emmenegger stands for the proposition that where defendant is
required to post a larger bond than necessary to secure a
judgment reduced on appeal, the defendant should be able to
recoup the difference in cost. The fact that there were two
trials in Emmenegger does not distinguish the case; it is on
all fours with this case in the salient respect that the defendant there was required to incur
the cost of security that turned out to be excessive in light of
the ultimate result on appeal.
Republic argues that it would be unfair to require it to pay
the excess cost of the supersedeas, considering its own costs of
prosecution and the fact that so much of its judgment has been
taken away by our remittitur and the reduction on appeal. We can
see why Republic is disconcerted by what it regards as the final
insult, but, considering the positions of both parties, we do not
think it would be unjust to tax the excess cost to Republic. The
alternative is to let North Atlantic bear the excess cost despite
the fact that it has now been determined that the $18 million
judgment was excessive by $15 million dollars. We can think of no
rational basis for telling North Atlantic that it simply has to
absorb the substantial cost of the excess security. Republic, on
the other hand, had to know there was a significant chance that
the verdict would be reduced on appeal, and the prospect it now
faces can come as no surprise. There was considerable argument
about the amount of the bond. Republic insisted upon security in
the full amount of the judgment even though North Atlantic made
clear that the cost would be in the area of $1 million.
Republic's own offer to provide a loan to North Atlantic was in
that same range. Republic succeeded in persuading us that a bond
in the full amount was necessary, and all that has happened now
is that it is being called upon to bear the consequence of that success in accordance
with the applicable rules.
There are three time periods involved. Federal Rule of
Appellate Procedure 39(a) applies to the supersedeas during the
appeal, and Local Rule 54.1(c) applies to the security posted
prior to the appeal, covering the periods before and after the
remittitur entered by this court. These rules provide ample
authority for granting the relief requested by North Atlantic,
and we believe justice requires that it be granted.
A final objection raised by Republic is that the costs incurred
by North Atlantic were higher than they need have been. We are
not persuaded by Republic's argument. We find credible the
assertion by North Atlantic's president and chief financial
officer, David Brunson, that North Atlantic attempted to obtain a
bond from a bonding company or bank, but was unable to do so
because it had no unencumbered assets to pledge as collateral.
(Declaration of David Brunson in Support of Defendant-Appellant's
Motion for Costs, Ex. 3 to Defendants' Motion to Award Costs, ¶
6.) North Atlantic makes a compelling point when it argues that
it had no possible motive to pay more for a supersedeas than was
necessary. Just as Republic could not count on an affirmance,
neither could North Atlantic be sure of a reversal. Moreover, the
cost of the loan that North Atlantic did obtain appears to be no more than what it would have had to pay to receive the loan
offered by Republic.
For the foregoing reasons, Defendants' Motion to Award North
Atlantic Costs for Securing a Judgment in Excess of $3 Million is
allowed, and the sum of $1,091,054 is taxed as costs against the
plaintiff, Republic Tobacco, L.P., and in favor of the
defendants, North Atlantic Trading Company, Inc., North Atlantic
Operating Company, Inc. and National Tobacco Company, L.P.
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