IN THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT NO NANCY C. CHERRY, CHAMPION INTERNATIONAL CORPORATION,

Transcription

1 IN THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT NO NANCY C. CHERRY, v. Plaintiff-Appellee, CHAMPION INTERNATIONAL CORPORATION, Defendant-Appellant. On Appeal from the U.S. District Court For the Western District of North Carolina Asheville Division BRIEF AMICUS CURIAE OF THE EQUAL EMPLOYMENT ADVISORY COUNCIL IN SUPPORT OF DEFENDANT-APPELLANT Ann Elizabeth Reesman Corrie L. Fischel* McGUINESS & WILLIAMS 1015 Fifteenth Street, N.W. Suite 1200 Washington, DC (202) Attorneys for Amicus Curiae EQUAL EMPLOYMENT ADVISORY COUNCIL October 30, 1998 *Counsel of Record

2 TABLE OF CONTENTS TABLE OF AUTHORITIES... iii STATEMENT OF JURISDICTION... 1 STATEMENT OF THE ISSUE... 1 INTEREST OF THE AMICUS CURIAE... 1 STATEMENT OF THE CASE... 3 SUMMARY OF ARGUMENT... 4 ARGUMENT... 6 I. THIS COURT SHOULD ADOPT THE STANDARD SET FORTH BY SEVERAL OF ITS SISTER CIRCUITS THAT DISCRETION TO DENY COSTS TO THE PREVAILING PARTY SHOULD BE CONFINED TO SOME EVIDENCE OF FAULT ON THE PART OF THE PREVAILING PARTY... 6 A. This Court, as Well as the Majority of Its Sister Courts, Have Held That Under Federal Rule of Civil Procedure 54 (d) (1), a Presumption Exists That Costs Be Awarded to the Prevailing Party Unless the Losing Party Demonstrates That Good Cause Is Present... 6 B. A Court Must Justify Its Decision to Deny Costs by Articulating Some Good Reason for Doing So Which Should Be Limited to Evidence of Fault on the Part of the Prevailing Party... 8 C. Good Faith, Modest Means, and Disparity in Economic Power Are Not Legitimate Reasons to Punish the Prevailing Party by Denying Costs Good Faith Should Not Be a Substantive Consideration in an Award of Costs Under Fed. R. Civ. P. 54 (d) The Fact That a Losing Party Is of Modest Means Is Not a Proper Reason to Deny Costs to a Prevailing Party The Economic Disparity Between Parties Should Not Be a Factor in Denying an Award of Costs to the Prevailing Party...13

3 II. III. THIS COURT SHOULD FOLLOW THE LEAD OF SEVERAL OF ITS SISTER CIRCUITS IN FINDING THAT NO TITLE VII EXCEPTION EXISTS TO FED. R. CIV. P. 54(d) IMPORTANT POLICY CONSIDERATIONS REQUIRE THIS COURT TO SET LIMITS ON THE DISTRICT S COURT S ABILITY TO EXERCISE DISCRETION UNDER FED. R. CIV. P. 54(d)(1) IN THE CONTEXT OF EMPLOYMENT DISCRIMINATION SUITS A. Congress Gave Plaintiffs Ample Incentive to Sue Under Title VII Through Passage of the Civil Rights Act of B. The Complex and Costly Nature of Title VII Litigation for Both Defendants and the Courts Supports the Conclusion That Courts Should Award Defendants Costs When They Prevail Unless They Are at Fault CONCLUSION ii

4 TABLE OF AUTHORITIES CASES Aerotech, Inc. v. Estes, 110 F.3d 1523 (10th Cir. 1997)...4, 6, 9 Badillo v. Central Steel & Wire Co., 717 F.2d 1160 (7th Cir. 1983)...9, 13 Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978)...15 Christoforou v. Ryder Truck Rental, Inc., 668 F. Supp. 294 (S.D.N.Y. 1987)...16 Congregation of the Passion, Holy Cross Province v. Touche, Ross & Co., 854 F.2d 219 (7th Cir. 1988)...4, 8 Coyne-Delany Co. v. Capital Development Board, 717 F.2d 385 (7th Cir. 1983)...6, 9, 13 Croker v. Boeing Co., 662 F.2d 975 (7th Cir. 1982)... 5, 14, 15 Delta Air Lines, Inc. v. August, 450 U.S. 346 (1981)...6 Delta Air Lines, Inc. v. Colbert, 692 F.2d 489 (7th Cir. 1982)... passim Dual v. Cleland, 79 F.R.D. 696 (D.D.C. 1978)...15 Flint v. Haynes, 651 F.2d 970 (4th Cir. 1981)...10, 12 Gardner v. Southern Railway Systems, 675 F.2d 949 (8th Cir. 1982)...7 Harris v. Forsyth, 742 F.2d 1277 (11th Cir. 1984)...13 Hudson v. Nabisco Brands, 758 F.2d 1237 (7th Cir. 1985)...7, 8, 14 iii

5 Mercy v. County of Suffolk, 748 F.2d 52 (2d Cir. 1984)...12, 16 National Information Services, Inc. v. TRW, Inc., 51 F.3d 1470 (9th Cir. 1995)... passim National Organization for Women v. Bank of California, 680 F.2d 1291 (9th Cir. 1982)...16 In re San Juan Dupont Plaza Hotel Fire Litigation, 994 F.2d 956 (1st Cir. 1993)...7 Smith v. Southeastern Pennsylvania Transportation Authority, 47 F.3d 97 (3d Cir. 1995)...7, 9 Teague v. Bakker, 35 F.3d 978 (4th Cir. 1994), cert. denied, 513 U.S (1995)... 4, 6, 10, 11 Washington v. Patlis, 916 F.2d 1036 (5th Cir. 1990)... 5, 12, 14 White & White, Inc. v. American Hospital Supply Corp., 786 F.2d 728 (6th Cir. 1986)...7, 9 Woods v. Adams Run Associates, 1997 U.S. Dist. LEXIS 6865 (E.D. Pa. May 12, 1997), aff'd without op., 151 F.3d 1027 (3d Cir. 1997)...19 STATUTES Age Discrimination in Employment Act, 29 U.S.C. 621 et seq....2 Americans with Disabilities Act, 42 U.S.C et seq Civil Rights Act of 1991, Pub. L. No , 105 Stat (1991)...5, 18 Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq.... 2, 3, U.S.C. 1981a... 3, U.S.C , 16 iv

6 LEGISLATIVE HISTORY 136 Cong. Rec. S2104 (daily ed. Mar. 26, 1990)...20 MISCELLANEOUS. Administrative Office of the United States Courts, Reports of the Proceedings of the Judicial Conference of the United States (1991, 1997)...18 Federal Rule of Civil Procedure 54(d)(1)... passim Federal Rule of Evidence v

7 The Equal Employment Advisory Council respectfully submits this brief amicus curiae, by leave of Court granted October 27, The brief urges this Court to reverse the decision below, and thus supports the position of Defendant-Appellant Champion International Corporation before this Court. STATEMENT OF JURISDICTION Amicus defers to the jurisdictional statements of the Appellant. STATEMENT OF THE ISSUE Did the magistrate abuse his discretion by denying an award of costs to a prevailing defendant? INTEREST OF THE AMICUS CURIAE The Equal Employment Advisory Council (EEAC or Council) is a nationwide association of employers organized in 1976 to promote sound approaches to the elimination of employment discrimination. Its membership includes over 300 major U.S. corporations. EEAC s directors and officers include many of industry s leading experts in the field of equal employment opportunity. Their combined experience gives the Council a unique depth of understanding of the practical, as well as legal, considerations relevant to the proper interpretation and application of equal employment policies and requirements. EEAC s members are firmly committed to the principles of nondiscrimination and equal employment opportunity.

8 All of EEAC s members are employers subject to Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. 2000e et seq. (Title VII), the Americans with Disabilities Act, 42 U.S.C et seq. (ADA), the Age Discrimination in Employment Act, 29 U.S.C. 621 et seq. (ADEA), and other equal employment statutes and regulations. As employers, and as potential defendants to discrimination lawsuits, EEAC s members are concerned about the proliferation of such lawsuits, and the substantial expense of defending against baseless charges. For this reason, EEAC s member companies are extremely interested in the issue presented to the Court in this case. The magistrate abused his discretion pursuant to Federal Rule of Civil Procedure 54(d)(1) in denying Defendant-Appellant Champion International Corporation (Champion) an award of costs after having granted summary judgment in Champion s favor on all counts. Specifically, the magistrate incorrectly shifted the burden of proof to Champion to show that an award of costs was warranted rather than awarding costs to them as the prevailing party as of course as Rule 54(d)(1) provides. Further, the magistrate abused his discretion by basing his denial of costs on impermissible considerations such as: the good faith with which plaintiff allegedly brought her claim; plaintiff s alleged modest means, the comparative imbalance of economic power between the parties, and the important public interest served by encouraging others in similar circumstances to pursue colorable Title VII claims. Rather, the magistrate should deny an award of costs to the prevailing party only if the prevailing party acted in some improper manner during the course of the proceedings. The issue presented in this appeal is of substantial importance well beyond the interests of the parties to this case. The Civil Rights Act of 1991 added compensatory 2

9 and punitive damages as remedies for violation of Title VII and the ADA, 42 U.S.C. 1981a. The number of discrimination lawsuits filed annually increased nearly threefold between 1990 and 1997, from 8,297 to 24,174. Employers throughout the country justifiably are concerned about becoming the targets of groundless litigation. They will be even more concerned if they have no practical hope of recovering their expenses in defending themselves against such claims. Because of its interest in the application of the nation s civil rights laws, EEAC has, since its founding in 1976, filed more that 430 briefs as amicus curiae in cases before the United States Supreme Court, the United States Circuit Courts of Appeals and various state supreme courts. EEAC has an interest in, and a familiarity with, the issues and policy concerns presented to the Court in the case. Indeed, because of its significant experience in these matters, EEAC is uniquely situated to brief this Court on the importance of the issues beyond the immediate concerns of the parties to the case. STATEMENT OF THE CASE Plaintiff-Appellee Nancy C. Cherry, a former employee of Defendant-Appellant Champion International Corporation, sued Champion under Title VII of the Civil Rights Act of 1964 as amended, 42 U.S. C. 2000e et seq. (J.A. at 7.) Cherry claimed that during her employment at Champion, Champion subjected her to a sexually hostile working environment and constructively discharged her. Cherry also sued Champion under North Carolina law for intentional infliction of emotional distress. (Id. at 44.) Cherry s claim was based on eight incidents that occurred between 1988 and 1995, only one of which was timely under Title VII. 3

10 The magistrate granted summary judgment for Champion on each claim. (Id. at 25, 28.) The magistrate denied Champion costs, however, on the basis that Cherry had pursued her claims in good faith. (Id. at 25.) Upon Champion s request for reconsideration, the magistrate again denied Champion an award of costs, because of Cherry s good faith, modest means, comparative lack of economic power [and because of] the important public interest served by encouraging others in similar circumstances to pursue colorable Title VII claims. (Id. at 81.) Champion has appealed the magistrate s ruling. SUMMARY OF ARGUMENT The Federal Rules of Civil Procedure state that [e]xcept when express provision therefor is made either in a statute of the United States or in these rules, costs other than attorneys fees shall be allowed as of course to the prevailing party unless the court otherwise directs... Fed. R. Civ. P. 54(d)(1). The import of this rule is that it places the burden on the losing party, not the prevailing party, to present evidence as to why costs should not be awarded as of course. Congregation of the Passion, Holy Cross Province v. Touche, Ross & Co., 854 F.2d 219, 222 (7th Cir. 1988). Further, the losing party must articulate some good reason why this presumption should be overcome. Teague v. Bakker, 35 F.3d 978 (4th Cir. 1994), cert. denied, 513 U.S (1995). This Court should adopt the rationale used by several of its sister circuits that costs generally should not be awarded unless the losing party presents evidence of some improper conduct on the part of the prevailing party. Delta Air Lines, Inc. v. Colbert, 692 F.2d 489 (7th Cir. 1982); Aerotech, Inc. v. Estes, 110 F.3d 1523 (10th Cir. 1997); National Info. Servs., Inc. v. TRW, Inc., 51 F.3d 1470 (9th Cir. 4

11 1995). Otherwise, this Court effectively will be punishing the prevailing party simply because it was able to successfully defend itself against ultimately meritless claims. This Court should reject the rationale used by the magistrate below that good faith, modest means, and the economic disparity between the parties is a basis for denying an award of costs to the prevailing party. This Court should further reject the notion that Title VII of the Civil Rights Act of 1964 creates an exception to the general rule that costs should be awarded to the prevailing party because it is in the public interest to have Title VII claims brought forth. See Washington v. Patlis, 916 F.2d 1036 (5th Cir. 1990); Croker v. Boeing Co., 662 F.2d 975 (7th Cir. 1982); National Info. Servs., Inc. v. TRW, Inc., 51 F.3d 1470 (9th Cir. 1995); Delta Air Lines, Inc. v. Colbert, 692 F.2d 489 (7th Cir. 1982). Substantial public policy concerns require that this Court place limits on lower courts exercise of discretion as well. The passage of the Civil Rights Act of 1991, Pub. L. No , 105 Stat 1071 (1991), which now entitles prevailing plaintiffs to compensatory and punitive damage awards, creates a powerful incentive to file an employment discrimination lawsuit, one that far outweighs any disincentive a plaintiff might have to refrain from filing a civil rights action because he or she may have to pay costs if not ultimately successful. Nuisance suits and threats to sue have become a powerful tool that Title VII plaintiffs and their lawyers can use with virtually no risk to themselves to extort monetary settlements from law-abiding employers. This Court should not further add to this problem by allowing plaintiffs who pursue meritless cases from even shouldering the responsibilities to pay costs in an unsuccessful lawsuit. 5

12 ARGUMENT I. THIS COURT SHOULD ADOPT THE STANDARD SET FORTH BY SEVERAL OF ITS SISTER CIRCUITS THAT DISCRETION TO DENY COSTS TO THE PREVAILING PARTY SHOULD BE CONFINED TO SOME EVIDENCE OF FAULT ON THE PART OF THE PREVAILING PARTY A. This Court, as Well as the Majority of Its Sister Courts, Have Held that Under Federal Rule of Civil Procedure 54(d)(1), a Presumption Exists That Costs Be Awarded to the Prevailing Party Unless the Losing Party Demonstrates That Good Cause Is Present Federal Rule of Civil Procedure 54(d)(1) explicitly states: Except when express provision therefor is made either in a statute of the United States or in these rules, costs other than attorneys fees shall be allowed as of course to the prevailing party unless the court otherwise directs... Fed. R. Civ. P. 54(d)(1). 1 As of course means as a matter of right. Black s Law Dictionary 1080 (6th ed. 1990). This Court explicitly has stated that Federal Rule of Civil Procedure 54(d)(1) makes clear that, in the ordinary course, a prevailing party is entitled to an award of costs unless good cause is shown. Teague v. Bakker, 35 F.3d 978, 996 (4th Cir. 1994), cert. denied, 513 U.S (1995). Indeed, the rule gives rise to a presumption in favor of an award of costs to the prevailing party. Id., citing Delta Air Lines, Inc. v. August, 450 U.S. 346, 352 (1981); Coyne Delany Co. v. Capital Dev. Bd., 717 F.2d 385, 390 (7th Cir. 1983). The majority of this Court s sister circuits that have addressed this issue also have concluded that such a presumption exists. See Aerotech, Inc. v. Estes, 110 F.3d 1523, 1526 (10th Cir. 1997) (Rule 54 creates a presumption that costs will be awarded to the 1 In 1993, Rule 54 was amended to separate the provisions for an award of costs and an award of attorneys fees into two distinct sections. However, this change did not affect the substance of the rule. Teague, 35 F.3d at 995 n.25. 6

13 prevailing party); National Info. Servs., Inc. v. TRW, Inc., 51 F.3d 1470, 1472 (9th Cir. 1995) (Presumption supported by the explicit language of Rule 54(d)(1) which makes the award of costs to a prevailing party automatic in the absence of an express direction to the contrary by the district court. ); Gardner v. Southern Ry. Sys., 675 F.2d 949, 954 (8th Cir. 1982) ( Rule 54 creates a presumption that the prevailing party is entitled to costs. ); White & White, Inc. v. American Hosp. Supply Corp., 786 F.2d 728, 732 (6th Cir. 1986) ( It is incumbent upon the unsuccessful party to show circumstances sufficient to overcome the presumption favoring an award of costs to the prevailing party. ); Smith v. Southeastern Pa. Transp. Auth., 47 F.3d 97, 99 (3d Cir. 1995) ( A prevailing party generally is entitled to an award of costs unless the award would be inequitable. ); In re San Juan Dupont Plaza Hotel Fire Litig., 994 F.2d 956, 962 (1st Cir. 1993) ( We further believe that this negative discretion - the power to deny recovery of costs that are categorically eligible for taxation under Rule 54(d) - operates in the long shadow of a background presumption favoring cost recovery for prevailing parties.") The practical import of this presumption is that the losing party must produce evidence to overcome the general rule that costs should be assessed against them. The Federal Rules of Evidence provide that : In all civil actions and proceedings not otherwise provided for by Act of Congress or by these rules, a presumption imposes on the party against whom it is directed the burden of going forward with evidence to rebut or meet the presumption... Fed. R. Evid. 301 (emphasis added). Therefore, the losing party must demonstrate a good reason why costs should not be awarded to the prevailing party. Hudson v. Nabisco Brands, 758 F. 2d 1237 (7th Cir. 1985). 7

14 While it is true that lower courts have the discretion not to award costs to a prevailing party, this discretion is extremely limited. Indeed, as the Seventh Circuit aptly stated: Even though we speak of Rule 54(d) as creating a presumption with the ultimate decision on costs being with the district court s discretion, the presumption is sufficiently strong, and the district court s discretion sufficiently limited, so as to not affect the conclusion that a judgment silent about costs is one allowing costs. But unless and until the losing party affirmatively shows that the prevailing party is not entitled to costs, the district court must award them, as of course. Congregation of the Passion, Holy Cross Province v. Touche, Ross & Co., 854 F.2d 219, 222 (7th Cir. 1988). In the case at bar, the magistrate improperly shifted the burden to the prevailing party to demonstrate why the losing party should pay costs. This Court should, however, reaffirm the general principle that Rule 54(d)(1) places the burden on the losing party to affirmatively set forth evidence as to why costs should not be awarded, and reject the magistrate s faulty reasoning below. B. A Court Must Justify Its Decision to Deny Costs by Articulating Some Good Reason for Doing So Which Should Be Limited to Evidence of Fault on the Part of the Prevailing Party Although a district court has discretion pursuant to Rule 54(d) to not award costs as a matter of course when a losing party sets forth competent evidence, it is important that this Court limit the exercise of this discretionary power. This Court should adopt the principle established by the Seventh, Ninth and Tenth Circuits that a good reason for overriding the presumption that costs should be awarded to the prevailing party must generally involve evidence that the prevailing party acted in an improper manner. See Hudson, 758 F.2d at 1242 ("In general, to overcome the presumption in favor of a grant 8

15 of costs, the losing party must demonstrate that there has been some fault, misconduct, default, or action worthy of penalty on the part of the prevailing side. ); National Info. Servs., 51 F.3d at 1472 ( A district court... must award costs unless the prevailing party is guilty of some fault, misconduct, or default worthy of punishment. ); Aerotech, Inc., 110 F.3d at (same). See also Smith, 47 F.3d at 99 (To deny costs to the prevailing party is in the nature of a penalty for some defection on his part in the course of litigation. ); White & White, Inc., 786 F.2d at 730 (Circumstances where denial of costs is a proper exercise of discretion include cases where the prevailing party should be penalized. ) In rejecting the notion that factors other than fault can overcome this presumption, the Seventh, 2 Ninth, and Tenth Circuits recognized that denying a prevailing party costs is a punishment or penalty, and therefore there must be a good reason for doing so. The Ninth Circuit, in an attempt to preempt an accusation that such a standard places strict limits on the discretion afforded to judges when awarding costs, stated that [t]he only limit we set today is the rule that a district court cannot punish a party by denying costs unless the party has done something to deserve it. National Info. Servs., 51 F.3d at The Tenth Circuit echoed this statement in Aerotech, [b]ecause a denial of costs is a severe penalty, there must be some apparent reason to penalize the party if costs are to be denied. Aerotech, 110 F.3d at This Court already has established that when a court exercises its judicial discretion to deny costs, it must justify its decision by articulating some good reason for 2 Two Seventh Circuit panels did hold that indigency or the resources of the party could be a factor, contrary to other Seventh Circuit opinions addressing this issue. See Badillo v. Central Steel & Wire Co., 717 F.2d 1160, 1165 (7th Cir. 1983) and Coyne Delany Co., 717 F.2d at

16 doing so. Teague, 35 F.3d at 996. In Teague, a case involving alleged fraud, this Court acknowledged that it has yet to have occasion to elucidate what might constitute a good reason in this context, and proceeded to look to its sister circuits for guidance. Id. This Circuit ultimately did not set forth a standard for good cause in Teague, but did conclude that the district court did not abuse its discretion in denying an award of costs to the defendants when it considered the good faith of the plaintiffs in pursuing their claims, the closeness of the outcome, the modest means of the plaintiffs and that the plaintiffs had fallen victim to fraud. Id. 3 Teague is distinguishable from the case at bar, however, because the closeness of the outcome was a significant factor considered, one that really suggested that the defendants narrowly escaped liability for fraud and therefore acted improperly. Indeed, in Teague, this Court reinstated one count of securities fraud that the lower court had dismissed against the defendants. This Court should articulate a standard for good cause under Fed. R. Civ. P. 54(d)(1) that places limits on a lower court s discretion similar to those adopted by the Seventh, Ninth, and Tenth Circuits. Here, this Court should instruct lower courts that they may exercise their discretion to deny an award of costs to a prevailing party only if the losing party presents evidence of improper conduct on the part of the prevailing party. Otherwise, this Court effectively will be punishing a prevailing defendant when it has done nothing more than successfully defend itself. 3 As discussed below, an earlier Fourth Circuit panel held that indigency should not be a factor in considering whether an award of costs should be denied. Flint v. Haynes, 651 F.2d 970 (4th Cir. 1981). 10

17 C. Good Faith, Modest Means, and Disparity in Economic Power Are Not Legitimate Reasons to Punish the Prevailing Party by Denying Costs 1. Good Faith Should Not Be a Substantive Consideration in an Award of Costs Under Fed. R. Civ. P. 54(d) This Court established in Teague that the mere fact that a suit may have been brought in good faith is alone insufficient to warrant a denial of costs in favor of a prevailing defendant [because] to hold otherwise would frustrate the rule that, in the ordinary case, a prevailing party is entitled to an award of costs. Teague, 35 F.3d at 996 (internal citations omitted). While observing that good faith could be a factor in determining whether costs should be awarded, this Court stated that it would be a virtual prerequisite to a denial of costs to a prevailing party. Id. Indeed, all parties, as the Ninth Circuit noted, have an obligation to act in good faith and with proper purpose pursuant to Rule 11 of the Federal Rules of Civil Procedure. National Info. Servs., 51 F.3d at Here, in his initial decision issued sua sponte denying costs, the magistrate relied exclusively on plaintiff s good faith. Upon reconsideration, he indicated that the plaintiff s good faith was an important factor in his decision to deny an award of costs. This Court should reestablish that good faith is a necessary prerequisite to even bring a challenge to an award of costs. Thus, good faith should, at most, be a neutral factor, not an affirmative factor on which to base a decision to deny costs. A plaintiff should not be rewarded for merely proceeding in a manner that is required for parties pursuing claims in court. 11

18 2. The Fact That a Losing Party Is of Modest Means Is Not a Proper Reason to Deny Costs to a Prevailing Party While this Court in Teague found that the district court did not abuse its discretion by denying costs to defendant in part because of the plaintiff s modest means, this Court does not view modest means as a ticket to a denial of costs. In Flint v. Haynes, 651 F.2d 970 (4th Cir. 1981), this Court explicitly rejected such a plea from the indigent losing parties pursuing their civil rights claims under 42 U.S. C. Section In Flint, the plaintiffs argued that costs should rarely be assessed against indigents because it might prevent indigent civil rights litigants from obtaining access to court to redress their grievances. Id. at 973. In rejecting the indigency argument, this Court observed the following: Id when costs are assessed only in extreme or exceptional cases, those persons granted leave to proceed in forma pauperis have virtually nothing to lose and everything to gain, and the purpose of section 1915 equal access for the poor and rich is distorted. Non-indigents who contemplate litigation are routinely forced to decide whether their claim is worth it. We see no reason to treat indigents differently in this respect. Several other circuit courts agree with this Court s rationale that the losing party s inability to pay should not negate the presumption of awarding costs to a prevailing party. See Mercy v. County of Suffolk, 748 F.2d 52, 54 (2d Cir. 1984) (Award of costs proper despite losing parties pleas of economic hardship); Washington v. Patlis, 916 F.2d 1036 (5th Cir. 1990) (Appropriate to tax costs against losing Title VII plaintiff proceeding in forma pauperis); Delta Air Lines, Inc., 692 F.2d at 491 (The fact that the losing employee may be hard-pressed to pay costs is unfortunate but not a good basis for denying costs). 4 The Court in Teague did not cite Flint in its discussion of the proper boundaries for exercising discretion under Fed. R. Civ. P. 54(d). 12

19 But see Badillo, 717 F.2d at 1165 (Relying inappropriately on Delta, finding indigency could be a factor in denying an award of costs.); Coyne Delany Co. 717 F.2d at 390 (Resources of parties can be an objective factor). See also Harris v. Forsyth, 742 F.2d 1277, 1278 (11th Cir. 1984) (Court can tax costs against indigent prisoner.) 5 It was inappropriate for the court below to cite modest means to deny an award of costs, since a claim of indigency is not a generally accepted factor in this Circuit to support such an argument. As emphasized above, it is important that this Court establish that a plaintiff must have some degree of responsibility for pursuing an action in court. While it may be unfortunate that a plaintiff of modest means ultimately loses his or her case, this is a calculated risk a plaintiff must take. Otherwise, an innocent defendant will suffer simply because a plaintiff had nothing to lose. Such an unfair result should not be approved by this Court. 3. The Economic Disparity Between Parties Should Not Be a Factor in Denying an Award of Costs to the Prevailing Party A third factor that the magistrate incorrectly considered was the relative economic positions of the parties. This Court, however, should adopt the reasoning of several of its sister circuits that have addressed this issue and reject the notion that a disparity in economic power is enough to overcome the presumption that the prevailing party is entitled to an award of costs. The Third Circuit, in rejecting such an argument, observed that to disallow an award of costs based on the relative economic positions of the parties would be unfair to those who would ultimately bear the burden of [paying the large 5 The Appellant below did not even assert that she was indigent. Indeed, the magistrate s opinion noted that the plaintiff was able to pay her own costs to counsel. 13

20 institutions ] costs, the customers and the taxpayers [of a large institution.] Smith, 47 F.3d at 99. Similarly, the Seventh Circuit rejected the suggestion that relative economic disparity should be a factor in determining whether costs should be awarded to the prevailing party. In Hudson, the Seventh Circuit held that a general rule that disparate wherewithal alone would defeat a claim for costs would upset the dictates of rule 54(d).... Hudson, 758 F.2d at This Court also should reject economic disparity as a basis for denying costs to a prevailing party. If a party wishes to bring a lawsuit in federal court, he or she should assume some degree of risk and responsibility in the event of an adverse result. Disallowing costs based on economic disparity removes any incentive not to initiate a meritless action. This Court should refrain from punishing a defendant simply because it has greater resources than a plaintiff who brings a deficient claim. Such a result is not only inequitable, it is also fundamentally unfair. II. THIS COURT SHOULD FOLLOW THE LEAD OF SEVERAL OF ITS SISTER CIRCUITS IN FINDING THAT NO TITLE VII EXCEPTION EXISTS TO FED. R. CIV. P. 54(d) Several of this Court s sister circuits also have concluded that Title VII does not make an exception to the general rule that federal courts may award costs to the prevailing party under Rule 54(d). Washington v. Patlis, 916 F.2d 1036, 1040 (5th Cir. 1990); Croker v. Boeing Co., 662 F.2d 975, 998 (3d Cir. 1980); Delta Air Lines, Inc. v. Colbert, 692 F.2d 489, 490 (7th Cir. 1982); National Info. Servs., Inc. v. TRW, Inc., 51 14

21 F.3d 1470 (9th Cir. 1995). 6 In Washington, the court dismissed plaintiff s employment discrimination claim on summary judgment. The court found it appropriate to tax costs against the plaintiff proceeding in forma pauperis, since no Title VII exception exists to Rule 54. The Third Circuit in Croker reached a similar conclusion. In rejecting the notion that Title VII carved out an exception to Rule 54(d), the court stated, [e]ven if we were persuaded that there should be such an exception, we believe it is for the rulemakers to decide. Thus, we do not agree with the employees that costs may be awarded to a prevailing Title VII defendant only under unusual circumstances. Croker, 662 F.2d at 998. Relying on Croker, the Seventh Circuit found in Delta Air Lines that the district court abused its discretion by denying costs to the prevailing employer in part because it was a Title VII suit. Delta Air Lines, 692 F.2d at 490. Rejecting the lower court s reliance on Christiansburg, the Seventh Circuit pointed out that Rule 54 (d) leaves less discretion to the judge to deny costs and that Title VII carved out no blanket exception from Rule 54(d) as that rule now stands. Id. In reaching this conclusion, the court observed: 6 It is important to note that in Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978), the Supreme Court held that a prevailing defendant in an employment discrimination case should only be awarded attorneys fees if the claim was frivolous, unreasonable, or groundless, or... the plaintiff continued to litigate after it clearly became so... regardless of whether the plaintiff brought or continued the claim in bad faith. 434 U.S. at 422. (emphasis added) The application of this standard to an award of costs, however, has been squarely rejected by several circuit courts. See Croker, 662 F.2d at 998 (Rejecting plaintiff s argument that Christiansburg argument should apply); Delta Airlines, 692 F.2d at 490 (7th Cir. 1982) (Observing that Christiansburg related to attorneys fees, not to costs; further noting that Rule 54 leaves less discretion to the judge to deny costs.). But see Dual v. Cleland, 79 F.R.D. 696, 697 (D.D.C. 1978) (Christiansburg standard applies to cost awards). 15

22 The wording and structure of Title VII indicate no such exclusion-nor does 54(d) or any other rule. We should therefore apply the normal principle that later-passed legislation must be read to harmonize with the federal rule if that is at all feasible. Id. at The Seventh Circuit further held that if the awarding of costs could be thwarted every time the unsuccessful party is a normal average party and not a knave, Rule 54(d) would have little substance remaining. Id. at 490. Similarly, the Ninth Circuit also rejected the faulty proposition that the Christiansburg standard for awarding attorneys fees also applies to a cost award in a Title VII action because there is no express statutory provision for doing so. National Organization for Women v. Bank of California, 680 F.2d 1291, 1294 (9th Cir. 1982). The magistrate below cites Christoforou v. Ryder Truck Rental, Inc., 668 F. Supp. 294, 304 (S.D.N.Y. 1987) for the proposition that the important public interest served by the pursuit of colorable Title VII claims should be a factor to be considered in denying costs. The Second Circuit, however, specifically rejected a public interest argument as a reason for denying costs to the prevailing party in a case where the plaintiffs filed a civil rights case under 42 U.S.C Mercy v. County of Suffolk, 748 F.2d 52, 54 (2d Cir. 1984). 7 In Mercy, the plaintiffs brought a case against the county for alleged police brutality. After losing their case, plaintiffs argued that an award of costs should not be made against them because their suit conferred important benefits on the public by informing the public that there is police brutality in Suffolk County, that the award of costs imposed an economic hardship on plaintiffs, and that such an award will deter future claimants from instituting meritorious litigation. Id. 7 Although the Christoforou decision was decided after Mercy, the court in Christoforou does not discuss Mercy, but instead relied on other district court decisions for precedent. 16

23 Unpersuaded by the plaintiffs arguments, the Second Circuit found that [t]he contention that their lawsuit had value to the public in calling attention to the problem of police brutality pales beside the fact that the lawsuit did not establish such brutality here. Id. Stating that the assessment of public benefit in such circumstances is best left to the trial judge, the Court stated: Id. Plaintiff s contention that future meritorious suits will be deterred ignores the probability that those with meritorious claims will prevail and not be subject to an award of costs against them. We think the exposure to liability for normal court costs will more likely discourage the bringing of frivolous claims than the bringing of meritorious ones. Although Mercy did not involve an action proceeding under Title VII, the same rationale applies to discrimination lawsuits because Mercy focused upon the issue of whether an award of costs will chill plaintiffs from commencing civil rights lawsuits that will ultimately benefit the public. Notwithstanding any public benefit that may be derived from the successful pursuit of such claims, as the Second Circuit correctly pointed out, there must be some minimal accountability by plaintiffs who wish to bring claims - even those arguably in the public interest - so that there exists some deterrent to the filing of frivolous claims. 17

24 III. IMPORTANT POLICY CONSIDERATIONS REQUIRE THIS COURT TO SET LIMITS ON THE DISTRICT S COURT S ABILITY TO EXERCISE DISCRETION UNDER FED. R. CIV. P. 54(d) IN THE CONTEXT OF EMPLOYMENT DISCRIMINATION SUITS A. Congress Gave Plaintiffs Ample Incentive to Sue Under Title VII Through Passage of the Civil Rights Act of 1991 When Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e et. seq., first was enacted, the only remedies available to a prevailing plaintiff were backpay, reinstatement, and other equitable relief, along with attorneys fees and costs. Since that time, however, Congress enacted the Civil Rights Act of 1991, Pub. L. No , 105 Stat (1991), adding the remedies of compensatory and punitive damages to the equitable remedies already provided. 42 U.S.C. 1981a. By making monetary damages available to plaintiffs, the 1991 Civil Rights Act created additional incentives for individuals to file suit. The individual who now sues under Title VII may seek to vindicate her rights and change her workplace, or she may simply be motivated by the opportunity to receive monetary damages or settlement payments. Indeed, the increase in the number of employment discrimination lawsuits filed since the Act was passed suggests that, at least to a substantial extent, money matters. In 1990, 8,297 employment discrimination cases were filed in federal courts across the country. That number increased annually to 24,174 for the twelve month period ending September 30, Administrative Office of the United States Courts, Reports of the Proceedings of the Judicial Conference of the United States (1991, 1997). Enterprising plaintiffs attorneys, too, have been motivated by the increased opportunities the Act presents. They have been quick to recognize that the potential value of a lawsuit, in terms of damages alone, is largely a factor of the number of 18

25 plaintiffs that can be brought together. Since 1991, plaintiffs attorneys increasingly have turned to class actions as the vehicles amass large groups of potential plaintiffs to seek damages. In 1991, 32 class actions alleging employment discrimination were filed in federal courts. During the twelve month period ending in September of 1996, just under four years after the Civil Rights Act was enacted, that figure had more than doubled to reach 68, representing countless putative plaintiffs. Id. These statistics reveal a change in the landscape of civil rights litigation. Any potential chilling effect of awarding costs to a prevailing defendant in a civil rights actions pales in comparison to the new incentives to litigate. A uniform approach towards clarification of the standard that a district court should use to exercise discretion under 54(d) will signify to the district courts that they should not give undue weight to any chilling effect associated with awarding costs to prevailing defendants. District courts should be instructed to follow the logic used by Judge Newcomer of the Eastern District of Pennsylvania when he accurately concluded that the prevailing defendant should be awarded both costs and attorneys fees because: [t]he award of attorneys fees and costs in this case will not have a chilling effect on future civil rights litigation because it merely reaffirms the principle that litigants should only pursue those claims which are meritorious and have some foundation in fact and law. A person cannot shield a frivolous claim by cloaking it in the garb of a civil rights violation. Woods v. Adams Run Assocs., 1997 U.S. Dist. LEXIS 6865 (E.D. Pa. May 12, 1997), aff'd without op., 151 F.3d 1027 (3d Cir. 1997). 19

26 B. The Complex and Costly Nature of Title VII Litigation for Both Defendants and the Courts Supports the Conclusion That Courts Should Award Defendants Costs When They Prevail Unless They Are at Fault The costs of Title VII litigation have become burdensome not only for the defendants, but also for the courts. As noted above, the Civil Rights Act of 1991 has tripled the incidence of individual lawsuits and doubled the number of class action suits filed annually. Defending against meritless Title VII allegations is extremely burdensome, even to larger employers who must make substantial internal adjustments to finance such litigation. 8 Indeed, this is only the tip of the iceberg. Countless more cases are threatened. Employers face severe pressure to settle even meritless cases, though there is no countervailing pressure on plaintiffs not to file them. If district courts start denying costs to prevailing defendants based on inappropriate factors, employers will continue to pay out substantial sums in unmeritorious cases, based on a simple business judgment that doing so will cost less than a successful defense. It is important to be aware that a substantial number of Title VII cases do not involve large, nationwide corporations. In such circumstances, the costs of mounting a successful defense not only constitute a burden on commerce but also may jeopardize the 8 In testimony presented to the Senate Committee on Labor and Human Resources, the U.S. Chamber of Commerce argued against the need for an additional deterrent to prevent discrimination in the form of compensatory and punitive damages, noting that: [e]xperience has shown that the average cost of defending a single plaintiff employment discrimination action through trial can be between $100,000 and $150,000, and often it is much more. Of course, the employer must also pay the employee s attorney s fees and costs if the employee prevails. Thus, an employer who discriminates is facing at least $200,000-$300,000 in litigation costs alone. This is more than ample deterrence for any employer. 136 Cong. Rec. S2104 (daily ed. Mar. 26, 1990) (statement of James C. Paras, Esq.). 20

27 operations and even the economic survival of the employer, as well as the employer s other employees and their families. Therefore, district courts concerned with the financial ability of the losing party to pay costs, the relative economic power of the parties, and the fact the case was brought in good faith should also consider the inequities on the other side of the fence. CONCLUSION For the foregoing reasons, EEAC respectfully requests that the decision to deny costs be reversed. Respectfully submitted, Ann Elizabeth Reesman Corrie L. Fischel* McGUINESS & WILLIAMS 1015 Fifteenth Street, N.W. Suite 1200 Washington, DC (202) Attorneys for Amicus Curiae EQUAL EMPLOYMENT ADVISORY COUNCIL *Counsel of Record October 30,

28 22 Corrie Fischel M:\1013\1303\brief\champion argument.doc