Popeil Bros., Inc. v. Schick Elec., Inc.

• Citation: 516 F.2d 772,184 USPQ 244
• Decision Date: 06 May 1975
• Docket Number: No. 74-1975,74-1975
• Parties: POPEIL BROTHERS, INC., Plaintiff-Appellee, v. SCHICK ELECTRIC, INC., et al., Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 772

516 F.2d 772

186 U.S.P.Q. 244

POPEIL BROTHERS, INC., Plaintiff-Appellee, v. SCHICK ELECTRIC, INC., et al., Defendants-Appellants.

No. 74-1975.

United States Court of Appeals Seventh Circuit.

Argued Feb. 25, 1975.

Decided May 6, 1975.

Walther E. Wyss, John D. Dewey, Edward W. Osann, Jr., Chicago, Ill., Charles R. Miranda, Bridgeport, Conn., for defendants-appellants.

Melvin M. Goldenberg, Chicago, Ill., for plaintiff-appellee.

Before FAIRCHILD, Chief Judge, and CUMMINGS and SPRECHER, Circuit Judges.

SPRECHER, Circuit Judge.

The most significant issue presented by this appeal is whether the district court abused its discretion under Rule 54(d) of the Federal Rules of Civil Procedure by setting aside the taxing of costs in favor of the prevailing party against the unsuccessful party in a case where the judgment dismissing the complaint was silent as to costs and both parties acted in good faith in the prosecution and defense of the proceeding.

I

The plaintiff patent owner sought injunctive relief and damages in separate but consolidated complaints charging each of the defendants with infringement of and inducement to infringe plaintiff's patent. Following a trial before the court, the district court entered findings of fact and conclusions of law and dismissed the complaints, holding that the patent was invalid as anticipated by prior art and for obviousness, that the plaintiff misused the patent, and that the defendants neither infringed it nor induced its infringement. Popeil Brothers, Inc. v. Schick Electric, Inc., 356 F.Supp. 240 (N.D.Ill.1972). The findings and conclusions as well as the judgment entered pursuant to them was utterly silent as to the matter of costs.

Upon plaintiff's appeal, this court affirmed with respect to invalidity, rendering it unnecessary to pass upon misuse and noninfringement. Popeil Brothers, Inc. v. Schick Electric, Inc., 494 F.2d 162 (7th Cir. 1974). The question of district court costs was not raised nor decided in the appeal. However, this court's mandate provided that the district court judgment was affirmed "with costs" and the clerk's customary bill of costs in the amount of $1,202.47, taxing those costs in favor of the defendants, was filed with the clerk of the district court with the mandate.

Upon remand the district court on May 17, 1974, entered a judgment "on mandate." At the same time the district court clerk taxed costs against the plaintiff and in favor of the defendants for $12,471.88, to which the clerk added the costs awarded by this court on the prior appeal of $1,202.47, for a total of $13,674.35. Also on May 17, 1974, the defendants moved pursuant to Rule 37(c) of the Federal Rules of Civil Procedure ¹ for an order awarding defendants their expenses including attorneys' fees in taking depositions in Japan, alleged to have been required as a result of plaintiff's failure to admit the truth of requests for admission in accordance with Rule 36. These additional expenses, including attorneys' fees, amounted to $16,049.09.

The plaintiff moved to set aside the taxing of costs by the clerk and to strike the Rule 37 motion. On October 24, 1974, the district court granted plaintiff's motion to set aside the taxed costs and denied defendants' motion for costs and attorneys' fees under Rule 37.

The defendants have appealed both the setting aside of the $13,674.35 costs and the denial of the $16,049.09 additional expenses.

II

The costs were originally taxed by the clerk of the district court for $13,674.35 pursuant to Rule 54(d) of the Federal Rules of Civil Procedure ² and 28 U.S.C. § 1920. ³ The plaintiff did not object to any of the specific items taxed as costs, but only to the propriety of taxing costs inasmuch as the original order dismissing the complaints had been silent as to costs and that order had been appealed and affirmed. Thus, the issue in this portion of the present appeal does not involve a district court's discretion as to the allowance or disallowance of particular items of costs, but whether the court abused its discretion in disallowing all costs to the prevailing party under the circumstances of this case.

Prior to the promulgation of the Federal Rules of Civil Procedure, there was a "rule of practice established by long usage" that in actions at law the prevailing party was entitled to costs as of right. Ex parte Peterson, 253 U.S. 300, 317-18, 40 S.Ct. 543, 64 L.Ed. 919 (1920). In equity proceedings the allowance and imposition of costs, unless controlled by statute or rule of court, was a matter of discretion. Newton v. Consolidated Gas Co., 265 U.S. 78, 83, 44 S.Ct. 481, 68 L.Ed. 909 (1924); Ex parte Peterson, supra, at 317, 40 S.Ct. 543.

In equity, "(t)he prevailing party is, however, prima facie entitled to costs, and it is incumbent on the unsuccessful party to show circumstances sufficient to overcome the presumption." In re Northern Indiana Oil Co., 192 F.2d 139, 142 (7th Cir. 1951). "This principle must be . . . applied, unless the losing party can show that equity and good conscience require a different judgment." Hodgman v. Atlantic Refining Co., 20 F.2d 949, 951 (D.Del.1927).

Rule 54(d) provides in pertinent part:

Except when express provision therefor is made either in a statute of the United States or in these rules, costs shall be allowed as of course to the prevailing party unless the court otherwise directs . . ..

Fed.R.Civ.P. 54(d) (emphasis added).

The emphasized language, standing alone, would establish under the Federal Rules the former usage at law of awarding costs as of right to the prevailing party. The succeeding language "unless the court otherwise directs" vests a sound discretion in the district court. The district court's discretion is not unfettered, however, or the earlier language would be rendered meaningless.

Professor Moore has concluded that the "latter qualification states an equitable principle . . . (c)omparable to the principle formerly applying in suits in equity." 6 J. Moore, Federal Practice P 54.70(5) at 1312 and n.5. See also Farrar v. Farrar, 106 F.Supp. 238 (W.D.Ark.1952), where the court with reference to the same language stated: "This seems to be a restatement of the old Equity rule with somewhat more emphasis on the prima facie right of the prevailing party to recover costs." Id. at 241.

The Supreme Court, in a passing reference to Rule 54(d) in Farmer v. Arabian American Oil Co., 379 U.S. 227, 85 S.Ct. 411, 13 L.Ed.2d 248 (1964), merely observed that:

While this Rule could be far more definite as to what "costs shall be allowed," the words "unless the court otherwise directs" quite plainly vest some power in the court to allow some "costs."

Id. at 232, 85 S.Ct. at 415.

Consequently, the language of the rule reasonably bears the intendment that the prevailing party is prima facie entitled to costs and it is incumbent on the losing party to overcome the presumption. Lichter Foundation, Inc. v. Welch, 269 F.2d 142, 146 (6th Cir. 1959).

This circuit has through the years adhered to this interpretation and has reversed exercises of discretion which go beyond it. Jones v. Schellenberger, 225 F.2d 784, 794 (7th Cir. 1955), cert. denied, 350 U.S. 989, 76 S.Ct. 476, 100 L.Ed. 855 (1956) ("reprehensible" conduct by the prevailing party triggered the "fullest extent" of discretion against him); Chicago Sugar Co. v. American Sugar Refining Co., 176 F.2d 1, 11 (7th Cir. 1949), cert. denied, 338 U.S. 948, 70 S.Ct. 486, 94 L.Ed. 584 (1950); United States v. E. J. Biggs Const. Co., 116 F.2d 768, 775 (7th Cir. 1940).

Inasmuch as both parties rely upon language in Chicago Sugar Co., supra, it is important to quote from it at some length:

While there is no question that, under Rule 54(d), Rules of Civil Procedure, 28 U.S.C.A. which 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 of course to the prevailing party unless the court otherwise directs; * * * " the court has discretion over the allowance of costs, we think the facts disclosed did not justify the exercise of that discretion. As we understand it, the denial of costs to the prevailing party or the assessment of partial costs against him is in the nature of a penalty for some defection on his part in the course of litigation as, for example, by calling unnecessary witnesses, bringing in unnecessary issues or otherwise encumbering the record, or by delaying in raising objection fatal to the plaintiff's case. (citations omitted). A party, although prevailing, would be denied costs for needlessly bringing or prolonging litigation.

However, there appears to be no indication of any bad faith or deliberate confusion on defendant's part, hence, we are of the opinion that, in the absence of some showing of bad faith or the deliberate adoption of a course of business dealings calculated to render litigation pertaining thereto unnecessarily prolix and expensive, the penalty of denial or apportionment of costs under Rule 54(d) should be imposed only for acts or omissions on the part of the prevailing party in the actual course of the litigation, except that where it is clear that the action was brought in good faith, involving issues as to which the law is in doubt, the court may in its discretion require each party to bear its own costs although the decision is adverse to plaintiff. See Bliss v. Anaconda Copper Mining Co., C.C., 167 F. 1024, 1028. In our case, since the judgment was not for each party to bear its own costs, but rather to pay half of the fees and charges of the master, and since that judgment in fact amounted to a penalty on defendant for prolongation of the litigation, the judgment was erroneous.

Chicago Sugar Co., supra at 11.

Chicago Sugar Co. makes it clear that the presumption that the prevailing party is entitled to costs can only be overcome by the unsuccessful party's showing that the prevailing party...