Otay Land Co. v. United Enters. Ltd.

• Decision Date: 14 March 2012
• Docket Number: No. 10–55550.,10–55550.
• Citation: 2012 Daily Journal D.A.R. 3365,12 Cal. Daily Op. Serv. 3008,672 F.3d 1152
• Parties: OTAY LAND COMPANY, a Delaware limited liability company; Flat Rock Land Company, a Delaware limited liability company, Plaintiffs–Appellants, v. UNITED ENTERPRISES LTD., a California limited partnership; United Enterprises, Inc., a Delaware corporation; John T. Knox; The Otay Ranch L.P., a California limited partnership; Baldwin Builders, a California corporation; Sky Communities, Inc., a California corporation; Olin Corporation, a Virginia corporation; Phil G. Scott; Ray Enniss; Patrick J. Patek; Sky Vista, Inc., Defendants–Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

12 Cal. Daily Op. Serv. 3008

2012 Daily Journal D.A.R. 3365

672 F.3d 1152

OTAY LAND COMPANY, a Delaware limited liability company; Flat Rock Land Company, a Delaware limited liability company, Plaintiffs–Appellants,

v.UNITED ENTERPRISES LTD., a California limited partnership; United Enterprises, Inc., a Delaware corporation; John T. Knox; The Otay Ranch L.P., a California limited partnership; Baldwin Builders, a California corporation; Sky Communities, Inc., a California corporation; Olin Corporation, a Virginia corporation; Phil G. Scott; Ray Enniss; Patrick J. Patek; Sky Vista, Inc., Defendants–Appellees.

No. 10–55550.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 8, 2011.Filed March 14, 2012.

James A. Bruen, San Francisco, CA, and Michelle Burton, San Diego, CA, for the plaintiffs-appellants.

Barbara Suzanne Farley, Piedmont, CA, for defendants-appellees United Enterprises Ltd., United Enterprises, Inc., John T. Knox.

R. Gaylord Smith, San Diego, CA, for defendants-appellees United Enterprises Ltd., United Enterprises, Inc., John T. Knox.Thomas A. Teschner, San Diego, CA, for defendants-appellees United Enterprises Ltd., United Enterprises, Inc., John T. Knox, Patrick J. Patek.Mark J. Dillon, Carlsbad, CA, for defendants-appellees The Otay Ranch L.P. and Baldwin Builders, Sky Communities, Inc., Sky Vista, Inc.Stephen A. Sunseri, Carlsbad, CA, for defendants-appellees Baldwin Builders, Sky Communities, Inc., Sky Vista, Inc.Thomas L. Van Wyngarden, Salt Lake City, UT, for defendant-appellee Olin Corporation.Walter Bradley Hill, Orange, CA, for defendant-appellee Phil G. Scott.John J. Freni, San Diego, CA, for defendant-appellee Ray Enniss.Appeal from the United States District Court for the Southern District of California, Roger T. Benitez, District Judge, Presiding. D.C. No. 3:03–cv–02488–BEN–POR.Before: FERDINAND F. FERNANDEZ, KAREN NELSON MOORE,^* and M. MARGARET McKEOWN, Circuit Judges.

OPINION

McKEOWN, Circuit Judge:

Given the complexities of litigation and the escalating magnitude of attorneys' fees, it is no surprise that appellate review of attorneys' fees and costs has focused overwhelmingly on fees. Nonetheless, costs also can add up to a considerable amount and because fees are not always available by contract, statute or otherwise, an award of costs can take on heightened importance.

Under 28 U.S.C. § 1919, when a suit is dismissed for lack of jurisdiction, the court “may order the payment of just costs.” This case requires us to parse the term “just” and consider what constitutes “just costs.” Here, the district court awarded costs to defendants on the ground that they were necessarily incurred in defending the action. Because the district court implied a presumption of award of costs that is absent in the permissive statute, and because it equated incurred costs with “just costs,” we conclude that the court abused its discretion under § 1919.

Background

This case, which is on its second trip to this court, began in December 2003 when Otay Land Company and Flat Rock Company, LLC (collectively, “Otay”) filed a federal action against U.E. Limited, L.P., United Enterprises Ltd., United Enterprises Inc., John T. Knox, Baldwin Builders, The Otay Ranch L.P., Sky Communities, Inc., Sky Vista, Inc., Olin Corporation, Ray Enniss, Phil Scott, and Patrick Patek (collectively, “United Enterprises”). Otay's Third Amended Complaint alleged that United Enterprises, comprised of former owners and operators of a shooting range in Chula Vista, California, was responsible under § 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act and § 7002 of the Resource Conservation and Recovery Act for removing lead and other pollutants from the real property in question, now owned by Otay. The complaint also included a claim under the California Hazardous Substances Account Act, as well as other state causes of action.

After extensive discovery, United Enterprises filed motions for summary judgment and partial summary judgment. The district court granted the motions for summary judgment, dismissing the federal environmental claims on the merits and declining to exercise ancillary jurisdiction over the pendent state law claims. See Otay Land Co. v. U.E. Ltd., L.P., 440 F.Supp.2d 1152, 1157–58 (S.D.Cal.2006), vacated by Otay Land Co. v. United Enters. Ltd., 338 Fed.Appx. 689 (9th Cir.2009). Following the dismissal, Otay filed a nearly identical action against United Enterprises in a California state court. As the prevailing party, United Enterprises submitted its cost bill to the district court. Pursuant to Federal Rule of Civil Procedure 54(d) and 28 U.S.C. § 1920, the district court awarded United Enterprises costs of $271,990.56 for court reporter, witness and service fees. On appeal, our court vacated the district court's judgment and remanded with directions to dismiss Otay's complaint. See Otay Land Co., 338 Fed.Appx. at 691. The panel reasoned that the case was not yet ripe for judicial review because “no public agency has indicated the need for remediation of the subject property and Otay has not demonstrated a reliable basis for its claimed remedial costs....” Id. The panel remanded to the district court for determination of whether defendants were entitled to costs under 28 U.S.C. § 1919. Id. at 692.

On remand, at a hearing on costs, the district court advised the parties:

Counsel, I have to tell you, I have reviewed the case pretty thoroughly. I don't see any reason why costs should not be imposed in this case. Even though there is, perhaps, no prevailing party, it does certainly appear to me that just cause [sic] should be awarded to the defendants. It appears that this action was filed prematurely, and so, therefore, you know, it just makes sense to me to award costs to the defendants.

Otay argued that the district court should not award costs because Otay's state law claims were pending against the same parties in a California court and the discovery at issue would be equally applicable in the state court action. United Enterprises responded that costs validly incurred in defending the federal action should be awarded.

The district court agreed with United Enterprises and again awarded all costs to United Enterprises, this time under § 1919 rather than under § 1920. Reasoning that many courts look to § 1920 for “help” in determining “just” costs under § 1919, the district court noted that costs for deposition transcripts and service of summons and subpoenas are enumerated under § 1920.¹ The district court also observed that the “necessity and reasonableness” of costs may be considered in awarding costs under § 1920. The district court awarded the costs as “necessary because they enabled Defendants to properly ascertain the claims in the case and litigate the case accordingly.”

Analysis

I. Background of § 1919 and Just Costs

Section 1919 provides that “[w]henever any action or suit is dismissed in any district court, the Court of International Trade, or the Court of Federal Claims for want of jurisdiction, such court may order the payment of just costs.” 28 U.S.C. § 1919. Unlike Rule 54(d)(1) (“costs—other than attorney's fees—should be allowed to the prevailing party”), a cost award under § 1919 does not turn on prevailing party status and lies within the sound discretion of the district court. See Miles v. California, 320 F.3d 986, 988 n. 2 (9th Cir.2003) (noting that § 1919 is “permissive,” allows the district court to award “ ‘just costs,’ ” and does not carry a presumption that costs shall be awarded to the “ ‘prevailing party’ ”).

Section 1919 traces its roots to an 1875 congressional act that altered the common law rule that a court lacking jurisdiction had no power to award fees or costs. See Signorile v. Quaker Oats Co., 499 F.2d 142, 144 (7th Cir.1974) (citing McIver v. Wattles, 22 U.S. 650, 9 Wheat. 650, 6 L.Ed. 182 (1824)). Through Section 5 of the Act of March 3, 1875, 18 Stat. 470, 472, Congress conferred on circuit courts the power, when remanding a suit to state court that had been improperly or wrongfully removed to the federal courts, to “make such order as to costs as shall be just.” As explained in Mansfield, C. & L.M. Ry. v. Swan, this provision was “manifestly designed to avoid the application of the general rule, which, in cases where the suit failed for want of jurisdiction, denied the authority of the court to award judgment against the losing party, even for costs.” 111 U.S. 379, 387, 4 S.Ct. 510, 28 L.Ed. 462 (1884).

“The law applied in Mansfield is still on the books, now split into two and modified.” ² Citizens for a Better Env't v. Steel Co., 230 F.3d 923, 927 (7th Cir.2000). According to the Seventh Circuit,

One part appears in 28 U.S.C. § 1919:

Whenever any action or suit is dismissed in any district court, the Court of International Trade, or the Court of Federal Claims for want of jurisdiction, such court may order the payment of just costs.

The other [part] survives as 28 U.S.C. § 1447(c):

If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.

Id. In the years since the passage and recodification of Section 5 of the 1875 Act, Congress has remained silent as to what constitutes “just costs” when an action is dismissed or remanded for lack of jurisdiction.³ We therefore turn to analogous statutes to understand the meaning of the term.

In discussing § 1447(c), the Supreme Court characterized the objective of the Act of March 3, 1875 as the “desire to deter removals sought for the purpose of prolonging litigation and imposing costs on the opposing party, while not undermining Congress' basic decision to afford defendants a right to remove as general matter, when the statutory criteria...