Neal & Co., Inc. v. U.S.

• Decision Date: 19 August 1997
• Docket Number: No. 97-5027,97-5027
• Parties: 41 Cont.Cas.Fed. (CCH) P 77,153 NEAL & COMPANY, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 683

121 F.3d 683

41 Cont.Cas.Fed. (CCH) P 77,153

NEAL & COMPANY, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.

No. 97-5027.

United States Court of Appeals, Federal Circuit.

Aug. 19, 1997.

R.R. DeYoung, Wade & De Young, Anchorage, AK, for plaintiff-appellant.

E. Michael Chiaparas, Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, DC, argued for defendant-appellee. With him on the brief were Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director, and Jeanne E. Davidson, Assistant Director.

Before LOURIE, RADER, and SCHALL, Circuit Judges.

RADER, Circuit Judge.

The United States Court of Federal Claims awarded damages to Neal & Company, Inc. (NCI) in its suit against the United States for breach of contract. Neal & Co., Inc. v. United States, 36 Fed. Cl. 600 (1996). NCI appeals the trial court's decision that each party would bear its own costs and the trial court's denial of its Motion for Award of Costs. Because the Equal Access to Justice Act (EAJA) vests discretion in the trial court to award costs and NCI has shown no abuse of that discretion, this court affirms.

I.

In 1988 NCI entered into a contract with the United States Coast Guard to build thirty units of family housing at the U.S. Coast Guard Support Center on Kodiak Island, Alaska. Throughout the performance of this contract, NCI and the Coast Guard had many disputes which have been extensively documented in the opinion of the Court of Federal Claims. See Neal, 36 Fed. Cl. at 606-10. NCI filed suit against the United States in 1993 under the Contract Disputes Act, 41 U.S.C. § 605 (1994), seeking recovery of withheld funds and damages for differing site conditions, delays, and other alleged breaches. The Coast Guard filed counterclaims seeking liquidated damages for NCI's alleged delays and incomplete or defective work.

Following a three-and-one-half week trial, the Court of Federal Claims rejected the bulk of the Coast Guard's counterclaims, found for NCI on four of its nine claims, and awarded NCI damages in the amount of $792,143.83. Neal, 36 Fed. Cl. at 649. The trial court also declared that each side would bear its own costs. Id. Despite the trial court's denial of costs, NCI submitted a Motion for Award of Costs together with a Bill of Costs totaling approximately $90,000. The Court of Federal Claims denied NCI's claim as an untimely motion for reconsideration. NCI appeals both this denial and the trial court's original denial of costs.

II.

For reasons discussed in this decision, this court reviews a cost award under an abuse of discretion standard. See Manildra Milling Corp. v. Ogilvie Mills, Inc., 76 F.3d 1178, 1180-81 (Fed.Cir.1996); Syntex Ophthalmics v. Novicky, 795 F.2d 983, 986 (Fed.Cir.1986). Under this standard, this appeals court will not disturb the trial court's decision on costs unless the appellant shows an abuse of discretion. See Syntex, 795 F.2d at 986 (citing Farmer v. Arabian Am. Oil Co., 379 U.S. 227, 85 S.Ct. 411, 13 L.Ed.2d 248 (1964)). "Such abuses must be unusual and exceptional; we will not merely substitute our judgment for that of the [trial court]." PPG Indus., Inc. v. Celanese Polymer Specialties Co., 840 F.2d 1565, 1572 (Fed.Cir.1988) (Bissell J., additional views).

NCI's claim for costs rests on Rule of the Court of Federal Claims (RCFC) 54(d). This rule provides:

Except when express provision therefor is made either in a statute of the United States or in these rules, costs shall be allowed as a matter of course to the prevailing party in any action not dismissed for lack of subject matter jurisdiction, unless the court otherwise directs; but costs against the United States shall be imposed only to the extent permitted by law.

RCFC 54(d) (emphasis added). This rule almost mirrors the language of the Fed.R.Civ.P. 54(d)(1) to the effect that, in the absence of a governing statute, a prevailing party receives costs as a matter of course. Under its exception clause, however, this rule cannot apply when another statute governs the award of costs. In this case, a statute--the Equal Access to Justice Act--(EAJA) expressly governs, providing that: "a judgment for costs ... may be awarded to the prevailing party in any civil action brought by or against the United States." 28 U.S.C. § 2412(a)(1) (1994). Because this appeal arises from a civil action brought by NCI against the United States, EAJA, not RCFC 54, governs the award of costs.

Indeed, because the jurisdiction of the Court of Federal Claims is limited to cases brought against (or crossclaims by) the United States, see Frank T. Peartree & Roger L. Nieman, Handbook on Practice Before the United States Claims Court and the United States Court of Appeals for the Federal Circuit 7 (Hon. Arthur L. Burnett, Sr. ed., Federal Bar Association 1986), RCFC 54(d) would not seem to apply to any case before that court unless 28 U.S.C. § 2412(a) was changed. ^* EAJA governs costs in civil actions brought "by or against the United States"; the jurisdiction of the Court of Federal Claims embraces only civil actions brought against (or counterclaims by) the United States. Therefore, as long as EAJA remains in force, only the introductory exception of RCFC 54(d) would apply to cases before the Court of Federal Claims. With EAJA governing the award of costs in all cases within its jurisdiction, the Court of Federal Claims would not have occasion to apply the "as a matter of course" directions in its rule 54.

Because the language of EAJA quoted above applies to this case, this court examines as a threshold issue whether NCI is the prevailing party. NCI contends that it prevailed because the trial court awarded damages of almost $800,000. Although agreeing that prevailing party status is a threshold question, the Government takes no position on whether NCI qualifies.

With regard to the standard for qualification as a "prevailing party," the Supreme Court has abandoned earlier doctrines requiring "case-by-case scrutiny by federal courts into whether plaintiffs prevailed 'essentially' on 'central issues.' " Ruckelshaus v. Sierra Club, 463 U.S. 680, 688, 103 S.Ct. 3274, 3278, 77 L.Ed.2d 938 (1983). Moreover a party may prevail without winning extensive damages. See Farrar v. Hobby, 506 U.S. 103, 105-107, 113 S.Ct. 566, 569-70, 121 L.Ed.2d 494 (1992) (a civil rights plaintiff who received nominal damages nevertheless prevailed under 42 U.S.C. § 1988). In Farrar, the Court explained that "a plaintiff 'prevails' when actual relief on the merits of his claim materially alters the legal relationship between the parties by modifying the defendant's behavior in a way that directly benefits the plaintiff." Id. at 111-12, 113 S.Ct. at 573-74.

Applying these principles under EAJA, this court has noted that a party may prevail without winning a complete victory or fully recovering its requested damages. See Naekel v. Department of Transp., 884 F.2d 1378, 1379 (Fed.Cir.1989) (Under the theory of apportionment, a contractor who receives only a partial judgment is a "prevailing party" under the EAJA and may recover a pro rata portion of its fees and expenses.). Indeed a partial victory does not preclude an award of costs, though the substantiality of the victory may influence the amount of the award. Id. In any event, a party which prevails only in part may nonetheless qualify for an award of costs under EAJA.

In this case, NCI qualifies as a prevailing party. Of its total original claim of $6,899,606, NCI received $792,143 in damages--11.5% of its claim. While the Government characterizes NCI's damage award as only minimal success, this court need not delve into the details of the award to determine whether it is "substantial" enough, or meets some undefined level of sufficiency. See Ruckelshaus, 463 U.S. at 688, 103 S.Ct. at 3279. Because NCI has obtained a sizable damage judgment, it qualifies as a prevailing party. Specifically, NCI prevailed on four of its nine claims, a sufficient realignment of the legal relationship between the parties to qualify NCI as the prevailing party under 28 U.S.C. § 2412(a)(1).

This threshold issue, however, only introduces the central issue in this case--whether the Court of Federal Claims abused its discretion under EAJA by declining to award NCI costs. More specifically, this case asks whether the trial court abused its discretion by declining to offer an explanation of its reasons for refusing costs.

Courts following Fed.R.Civ.P. 54(d)(1) have acknowledged in its language a presumption in favor of costs to the prevailing party and an obligation for a trial court to explain its variance from the presumption. See, e.g., Sun Ship, Inc. v. Lehman, 655 F.2d 1311, 1317 (D.C.Cir.1981) ("[T]he traditional interpretation of rule 54(d) requires that district courts should neither deny nor reduce a prevailing party's request for costs without first articulating some good reason for doing so. Every circuit court that has analyzed the issue has concluded that the trial court commits reversible error when it denies the prevailing party costs without explanation."). This interpretation follows easily from the language of the rule: "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) (emphasis added). Indeed this appeals court agrees that this language creates a "presumption in Rule 54(d)(1) that costs are to be awarded." Manildra, 76 F.3d at 1183. Because the language of Fed.R.Civ.P. 54(d)(1) and that of RCFC 54(d) are almost identical, the presumption under Fed.R.Civ.P. 54(d)(1) could conceivably apply to RCFC 54(d).

However, as already noted, RCFC 54(d), and hence any interpretations of it, do not apply in this case, because EAJA governs. This court next examines whether EAJA creates a similar presumption in favor of an award of costs. In the event EAJA erects such a...