CHAMPION PRODUCE, INCORPORATED, an Idaho corporation, Plaintiff-Appellant,
v.
RUBY ROBINSON CO., INC., a corporation, Defendant-Appellee.
Champion Produce, Incorporated, an Idaho corporation, Plaintiff-Appellee,
v.
Ruby Robinson Co., Inc., a corporation, Defendant-Appellant.
No. 01-35887.
No. 01-35893.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted March 6, 2003 — Seattle, Washington.
Filed September 8, 2003.
COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED Terry C. Copple and Terri R. Yost, Davison, Copple, Copple & Copple, Boise, Idaho, for the plaintiff-appellant/appellee.
Rex Blackburn, Evans & Keane, and Robert M. Andalman, III, Altheimer & Gray, Chicago, Illinois, for the defendant-appellee/appellant.
Appeal from the United States District Court for the District of Idaho; Larry M. Boyle, Magistrate Judge, Presiding. D.C. No. CV-00-00383-LMB.
Before: STEPHEN REINHARDT, WILLIAM A. FLETCHER and RONALD M. GOULD, Circuit Judges.
OPINION
WILLIAM A. FLETCHER, Circuit Judge.
The cross appeals in this diversity case arise out of a breach of contract. Each party appeals aspects of the district court's post-judgment order. We affirm. Among other things, we hold that the cost-shifting provision of Federal Rule of Civil Procedure 68 does not permit an award of post-offer attorneys' fees when the underlying state statute authorizes an award of attorneys' fees to a prevailing party as part of costs, but when the party seeking attorneys' fees under the rule is not a prevailing party within the meaning of that statute.
I. Background
Champion Produce, Inc. ("Champion") grows and packages produce, which it then sells to buyers throughout the United States. Ruby Robinson Co. ("Ruby") buys produce from companies like Champion, which it resells to retailers and restaurants. In August 1999, Champion and Ruby entered a contract under which Ruby agreed to purchase onions from Champion during the 1999-2000 onion season. The following June, Champion filed suit against Ruby in Idaho state court, alleging that Ruby had breached the contract and seeking $338,137.09 in damages, plus prejudgment interest, attorneys' fees, and costs. Ruby removed to federal court based on diversity of citizenship.
After removal but before entry of judgment, Ruby made Champion an offer of judgment of $150,000 pursuant to Federal Rule of Civil Procedure 68. Rule 68 provides that "a party defending a claim may serve upon the adverse party an offer to allow judgment to be taken against the defending party for the money or property or to the effect specified in the offer, with costs then accrued." If the offeree rejects the offer, and "the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after making the offer." Fed.R.Civ.P. 68. Ruby's Rule 68 offer explicitly stated that it was "inclusive of all interest, costs, attorneys fees or other amounts that Champion could claim in this matter against Ruby."
Champion rejected Ruby's offer. After trial, the jury returned a verdict for Champion for $103,513.75, substantially less than both the damages sought in the complaint ($338,137.09) and Ruby's offer of judgment ($150,000). The jury also answered special interrogatories, in which it stated that Ruby was in breach but also that the contract had been partially waived or modified.
Pursuant to Federal Rule of Civil Procedure 59(e), Champion moved to amend the judgment to include $12,421.65 in prejudgment interest, as well as $41,794.85 in costs and attorneys' fees incurred prior to Ruby's Rule 68 offer. The inclusion of these amounts in the judgment would have resulted in a judgment larger than Ruby's Rule 68 offer, and thus would have avoided cost-shifting under the rule. Champion also moved to amend the judgment to include post-offer costs and attorneys' fees. The district court denied Champion's motions.
Ruby moved for an award of post-offer costs and attorneys' fees under Rule 68. The district court granted Ruby's motion for post-offer costs. It refused, however, to award post-offer attorneys' fees.
Both parties timely appealed. Champion contends that the district court: (1) erred in denying its motion for prejudgment interest, and for pre-offer costs and pre-offer attorneys' fees; (2) erred in denying its motion for post-offer costs and post-offer attorneys' fees; and (3) erred in granting Ruby's motion for post-offer costs. Ruby contends the district court erred in denying its motion for post-offer attorneys' fees.
We review a denial of prejudgment interest under state law for abuse of discretion. Mutuelles Unies v. Kroll & Linstrom,
For the reasons that follow, we affirm the district court in all respects.
II. Discussion
A. Denial of Prejudgment Interest and Pre-Offer Costs and Attorneys' Fees to Champion
Champion appeals the district court's denial of its motion to amend the judgment to include prejudgment interest and pre-offer costs and attorneys' fees. Where a Rule 68 offer explicitly states that it is inclusive of prejudgment interest and pre-offer costs and attorneys' fees, the judgment to which the offer is compared must include these items if they are awarded. Only pre-offer costs and attorneys' fees are included for purposes of comparison, because post-offer costs and fees "merely offset part of the expense of continuing the litigation to trial, and should [therefore] not be included in the calculus." Marek v. Chesny,
1. Denial of Prejudgment Interest to Champion
The district court properly looked to Idaho law to determine Champion's right to prejudgment interest. Mutuelles Unies,
In Farm Development Corp. v. Hernandez,
In order for interest to be computed from the date of the contract, the amount upon which the interest is to be based must have been mathematically and definitely ascertainable. Farm Development has limited its claim for interest solely to that amount due for the fertilizer, contending that since the number of pounds of fertilizer per acre is set forth in the contract, the amount due is mathematically ascertainable. The evidence introduced by the parties was conflicting on the amount actually paid and the value thereof and the trial court believed that no exact price has been proven and further, that the price used for the award was obtained by merely striking a balance within the range of prices offered by the evidence. It cannot be said, therefore, that the amount was ascertainable `by mere mathematical processes.'
Id. at 300. See also Bouten Constr. Co. v. H.F. Magnuson Co.,
Champion argued at trial that it incurred roughly $330,000 in damages due to Ruby's breach. Ruby countered that to the extent a contract existed, the parties had modified and/or waived the price and/or quantity terms. The jury agreed with Ruby. Special Interrogatory #4 asked:
Do you find that Ruby Robinson has proven by clear and convincing evidence that the parties' contract ... was modified by the parties, or that Champion Produce waived the terms of the contract relating to quantity or price?
The jury answered: "Yes, but only in part." It awarded Champion $103,513.75 in damages, a figure neither party had advanced at trial.
Champion contends that because the jury appears to have used two numbers introduced into evidence to compute the $103,513.75 damage award, the amount was "ascertainable by a mere mathematic calculation." The fact that the damages became mathematically ascertainable after the jury decided, in light of conflicting evidence, which numbers were relevant does not render the damages mathematically ascertainable within the meaning of Idaho Code § 28-22-104(1). If it were otherwise, damages would be "mathematically ascertainable" in every case in which the trier of fact ultimately determines the relevant numbers and then calculates the award based on those numbers. This result would be contrary to Idaho law. See Opportunity, L.L.C. v. Ossewarde,
2. Denial of Pre-Offer Costs to Champion
An award of standard costs in federal district court is normally governed by Federal Rule of Civil Procedure 54(d), even in diversity cases. See In re Merrill Lynch Relocation Mgmt., Inc.,
The discretion of the district court, however, is not unlimited. As we explained in Mexican-American Educators,
[a] district court must "specify reasons" for its refusal to award costs. On appeal, we determine whether the reasons that the district court has specified are appropriate and whether, considering those reasons, the court abused its discretion in denying costs.
. . . .
Federal Rule of Civil Procedure 54(d)(1) establishes that costs are to be awarded as a matter of course in the ordinary case. Our requirement that a district court give reasons for denying costs is, in essence, a requirement that the court explain why a case is not "ordinary" and why, in the circumstances, it would be inappropriate or inequitable to award costs.
In this case, the district court assumed, for purposes of its analysis, that Champion was the "prevailing party" within the meaning of Rule 54(d)(1). See D. Idaho Local Rule 54.1(b) ("Generally, the prevailing party is the one who successfully prosecutes the action or successfully defends against it, prevails on the merits of the main issue, and the one in whose favor the decision or verdict is rendered and judgment entered."). It nonetheless refused to award Champion pre-offer costs for three reasons. First, the court noted that "[a]lthough Plaintiff ultimately prevailed on its breach of contract claim, the damages awarded by the jury were significantly less than the amount of damages Plaintiff initially claimed was due under the contract." Second, it noted that "despite Plaintiff's argument to the contrary, Defendant's Rule 68 offer of judgment exceeded the amount of the final judgment in Plaintiff's favor." Third, it noted that the "Defendant ultimately prevailed with respect to its affirmative defenses of modification and waiver of the contract, which is evidenced by the fact that the jury awarded Plaintiff damages in an amount much less than what Plaintiff claimed was due under the contract."
The first and third reasons are closely related. The core of each reason is that the plaintiff in a contract action recovered substantially less in damages than it had sought. The first reason focuses on simple disparity between the amount sought and the amount recovered; the third reason expands the focus somewhat by pointing out the amount recovered was reduced because two affirmative defenses had been successful. We hold today that these reasons can support a discretionary decision to deny costs to a prevailing party in a contract action. Our holding is consistent with the decisions of other circuits in approving such reasons. See, e.g., Teague v. Bakker,
We hold that Champion's rejection of Ruby's Rule 68 offer was not an appropriate reason for denying Champion its pre-offer costs, however.1 Rule 68 operates to shift to the plaintiff responsibility for post-offer costs that could have been avoided had the plaintiff made the right choice and accepted the defendant's Rule 68 offer — "costs it ought not to have incurred." Payne v. Milwaukee County,
Permitting a district court, in the exercise of its discretion under Rule 54(d), to deny pre-offer costs based on a plaintiff's rejection of a Rule 68 offer would interfere with the incentive scheme created by Rule 68. Rule 68 encourages a defendant to offer settlement early because the cost-clock begins running as soon as a defendant makes an offer. See Delta Air Lines, Inc. v. August,
We nonetheless affirm the denial of costs because the other two reasons given by the district court for denying Champion's costs are both appropriate and sufficient to support the district court's decision. See White & White,
3. Denial of Pre-Offer Attorneys' Fees to Champion
An award of attorneys' fees incurred in a suit based on state substantive law is generally governed by state law. See Kona Enters., Inc. v. Estate of Bishop,
Under Idaho law, the trial court has discretion to determine who, if anyone, prevailed in a case. Weaver v. Millard,
The district court explained its decision:
In the Court's opinion, neither party in this action has wholly prevailed. Although a jury verdict was rendered in favor of Plaintiff with respect to the main claim in this action (i.e., the breach of contract claim), the damages awarded were significantly less than the amount of damages Plaintiff initially claimed it was entitled to under the contract. The jury apparently awarded a smaller amount of damages than what was requested because it believed that the contract prices had been modified or waived by Plaintiff, essentially finding in favor of Defendant with respect to its two affirmative defenses of modification and waiver. In addition, although it could be argued that Plaintiff is the prevailing party because it obtained a judgment in its favor, it could equally be argued that Defendant is the prevailing party because its Rule 68 offer exceeded the final judgment in favor of Plaintiff. Both parties prevailed in certain respects on different claims and affirmative defenses.
In light of the above, the Court concludes that neither party is the prevailing party for purposes of awarding attorneys' fees under I.C. § 12-1[2]0(3).
Champion's relatively small recovery compared to the damages sought and the success of Ruby's modification and waiver defenses are valid reasons under Idaho law for denying Champion prevailing party status in this contract case. See Weaver,
Champion argues that the district court erred by relying on its rejection of Ruby's Rule 68 offer as a justification for denying prevailing party status, based on Ireland v. Ireland,
B. Denial of Post-Offer Costs and Attorneys' Fees to Champion
Champion also appeals the district court's denial of its motion for post-offer costs and attorneys' fees. A plaintiff that rejects a Rule 68 offer in excess of the judgment ultimately obtained at trial must bear its own and the defendant's post-offer costs. Haworth v. Nevada,
1. Denial of Post-Offer Costs (Excluding Attorneys' Fees) to Champion
Because Ruby's Rule 68 offer exceeded Champion's final judgment, the cost-shifting provision of the rule applied. Champion does not dispute that if the cost-shifting provision applied the district court properly denied it standard post-offer costs (i.e., costs excluding attorneys' fees).
2. Denial of Post-Offer Attorneys' Fees to Champion
The Supreme Court's construction of Rule 68 in Marek v. Chesny,
The Court agreed with defendants. It held that under § 1988 plaintiff's attorneys' fees were part of Rule 68 "costs." It explained that because Rule 68 does not itself define "costs," the most reasonable inference is that the term "costs" in Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute or other authority. In other words, all costs properly awardable in an action are to be considered within the scope of Rule 68 "costs." Thus, absent congressional expressions to the contrary, where the underlying statute defines "costs" to include attorney's fees, [] such fees are to be included as costs for purposes of Rule 68.
Like the underlying statute in Marek, the underlying statute in this case defines attorneys' fees as a part of "costs." See Idaho Code § 12-120(3)("[T]he prevailing party shall be allowed a reasonable attorney's fee to be set by the court, to be taxed and collected as costs."). Cf. Haworth,
Champion makes two arguments that, taken in combination, it hopes will permit an escape from Rule 68 and Marek. First, it argues that it was a "prevailing party" under § 12-120(3), and thus, absent Rule 68, would have been entitled to attorneys' fees under that statute. In other words, Champion argues that it is in the same position as the plaintiff in Marek, who had prevailed in his § 1983 suit and would have been entitled to attorneys' fees under § 1988 if he had not been subject to cost-shifting under Rule 68. The district court, however, concluded that Champion was not a prevailing party under § 12-120(3), and we have sustained the district court's decision on that point.
Second, Champion argues that Marek does not apply because the underlying fee-granting statute is state rather than federal, and because, in its view, Idaho's version of Rule 68 does not restrict a prevailing plaintiff's right to recover attorneys' fees.2 Even if we agreed with Champion's first argument that it is a prevailing party under § 12-120(3), we would nonetheless reject its second argument that Marek applies only to federal fee-granting statutes. As we have recently explained, "[t]he Federal Rules of Civil Procedure apply irrespective of the source of subject matter jurisdiction, and irrespective of whether the substantive law at issue is state or federal." Vess v. Ciba-Geigy Corp. USA,
With only one exception, the Supreme Court has construed valid Federal Rules of Civil Procedure to have the same meaning irrespective of whether the underlying substantive law is federal or state, and irrespective of any differences between federal and state procedural law. That exception is Rule 3, which governs the timing of commencement of a civil suit and the tolling of statutes of limitations. See West v. Conrail,
The Seventh Circuit in Marek had rejected the interpretation of Rule 68 advanced by the defendants based in part on a belief that such an interpretation would give substantive consequence to Rule 68 and would thus violate the Rules Enabling Act. See Chesny v. Marek,
We therefore hold that the district court properly denied post-offer attorneys' fees to Champion. Champion is not a prevailing party under Idaho Code § 12-120(3). But even if it had been a prevailing party, it would not have been entitled to post-offer attorneys' fees because Marek's construction of Rule 68 applies not only to federal fee-granting statutes but also to state fee-granting statutes.
C. Grant of Post-Offer Costs (Excluding Attorneys' Fees) to Ruby
Finally, Champion appeals the district court's grant of Ruby's motion for an award of post-offer costs (excluding attorneys' fees). Because Ruby made an offer of judgment under Rule 68 that exceeded the amount Champion ultimately recovered, the cost-shifting provision of the rule applies. The district court therefore properly awarded post-offer costs (excluding attorneys' fees) to Ruby. See Trident,
D. Denial of Post-Offer Attorneys' Fees to Ruby
Ruby appeals the district court's denial of its motion for post-offer attorneys' fees. Ruby argues that Rule 68, as interpreted in Marek, not only prohibits Champion from recovering its own post-offer attorneys' fees, but also requires that Champion pay Ruby's post-offer attorneys' fees. In the alternative, Ruby argues that it was the "prevailing party" and thus was entitled to attorneys' fees pursuant to Idaho Code § 12-120(3). The district court properly rejected both arguments.
The district court explained that the Supreme Court in Marek merely held that a prevailing plaintiff subject to the cost-shifting provision of Rule 68 cannot recover its own post-offer attorneys' fees where the underlying statute defines those fees as an item of "costs." The Supreme Court explicitly did not consider the question whether that plaintiff must not only lose the post-offer attorneys' fees to which it would have been otherwise entitled, but must also pay the defendant's post-offer attorneys' fees. See Marek,
The question whether Rule 68 and Marek require a plaintiff to pay a defendant's post-offer attorneys' fees, when the underlying statute permits a "prevailing" party to recover attorneys' fees "as costs" but when the defendant is not a prevailing party under that statute, has produced a circuit split. The First and Seventh Circuits have held that a plaintiff in that situation is not required to pay the defendant's attorneys' fees. See Crossman v. Marcoccio,
(1) Rule 68 requires a plaintiff to pay a defendant's post-offer costs;
(2) Rule 68 costs, according to Marek, are determined by looking to the underlying substantive statute governing costs;
(3) the underlying substantive statute governing costs permits the recovery of attorneys' fees as part of costs;
(4) Rule 68 therefore requires the plaintiff to pay the defendant's post-offer attorneys' fees.
Crossman,
The Eleventh Circuit disagrees with the approach of the First and Seventh Circuits. In Jordan v. Time, Inc.,
The language contained in Rule 68 is mandatory; the district court does not have the discretion to rule otherwise.... Costs as used herein includes attorneys' fees. Under Marek v. Chesny, Rule 68 "costs" include attorneys' fees when the underlying statute so prescribes. The Copyright Act so specifies, 17 U.S.C. § 505.
We have not answered the precise question posed in this case, but we have answered an analogous question. In United States v. Trident Seafoods Corp., the United States sued Trident for violations of the Clean Air Act. After rejecting Trident's Rule 68 offer, the United States ultimately obtained a smaller judgment. Trident argued that it was entitled to attorneys' fees pursuant to Rule 68 and 42 U.S.C. § 7413(b). Section 7413(b) defines attorneys' fees as an item of costs, but permits a defendant to recover such fees in an action "if the court finds that such action was unreasonable." We rejected Trident's argument that it was entitled to attorneys' fees under Rule 68, explaining that "[t]he only interpretation that gives meaning to every word in both Rule 68 and the Clean Air Act is that `costs' in Rule 68 include attorneys' fees only if the action was unreasonable."
Similarly, the Eighth Circuit held in O'Brien v. City of Greers Ferry,
Today we join the First and Seventh Circuits in holding that Rule 68 "costs" do not include a non-prevailing defendant's post-offer attorneys' fees when the underlying statute awards attorneys' fees to a prevailing party. Just as attorneys' fees are not "properly awardable" to a defendant in a Clean Air Act case unless "the court finds that such action was unreasonable," Trident,
In this case, the district court expressly held that Ruby did not prevail under Idaho Code § 12-120(3) and that attorneys' fees were therefore not "properly awardable under the relevant substantive statute or other authority." Marek,
The fact that a non-prevailing defendant is entitled to an award of standard post-offer costs (i.e., costs excluding attorneys' fees) under Rule 68 does not undermine our holding. See, e.g., Haworth,
The Court in Marek held that Rule 68 does not violate the Rules Enabling Act in prohibiting a prevailing plaintiff from recovering attorneys' fees despite a fee statute under which the party would otherwise recover fees. But it would be a greater interference with substantive rights if Rule 68 were read to give a non-prevailing defendant an affirmative right to recover attorney's fees from a plaintiff who had won a damage judgment at trial (albeit a smaller judgment than the offer of settlement). See Grosvenor,
Finally, Ruby argues, in the alternative, that it is the "prevailing party" in this action, thus entitled to an award of fees under Idaho Code § 12-120(3). Ruby relies on Leavitt v. Swain,
The decision of the district court is AFFIRMED.
Notes:
Notes
Where an award of pre-offer costs will render the plaintiff's judgment in excess of a Rule 68 offer, it is obviously inappropriate to use that offer as a reason to deny costs. Only if the costs are denied will the offer truly be higher than the judgment, thus justifying the denial. In this case, the award or denial of pre-offer costs could not have affected the Rule 68 calculus, however, so the same circular logic is not at work. The denial of prejudgment interest meant that Ruby's offer exceeded Champion's judgment regardless of the outcome of the motion for pre-offer costs or fees
Champion relies onIreland v. Ireland, discussed supra. While that case suggests that Idaho might not read its version of Rule 68 in the way the Marek Court read federal Rule 68, it did not squarely address the issue because the relevant underlying statutes in that case did not define attorneys' fees "as costs." See Idaho Code § 12-121; Idaho R. Civ. P. 54(e)(1).