Mother v. Cassidy, James ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 01-2832
MOTHER and FATHER, et al.,
Plaintiffs-Appellees,
v.
JAMES CASSIDY, et al.,
Defendants-Appellants.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 3259—Joan Humphrey Lefkow, Judge.
____________
ARGUED FEBRUARY 18, 2003—DECIDED JULY 30, 2003
____________
Before RIPPLE, DIANE P. WOOD, and EVANS, Circuit
Judges.
DIANE P. WOOD, Circuit Judge. This case presents an
interesting twist on the perennial problem of how to
coordinate related federal and state court litigation. Put
simply, the question is whether a district court may trans-
fer the determination of costs allowed under FED. R. CIV. P.
54(d) for a prevailing defendant to a state court that has
before it certain state-law claims that were originally part
of the federal suit, when the plaintiff has voluntarily dis-
missed her federal-law claims with prejudice under FED. R.
CIV. P. 41. For a number of reasons, we conclude that the
answer is no, and we therefore reverse and remand so that
2 No. 01-2832
the district court may decide what costs should be awarded
for the defendants.
I
Although as the case has reached us it concerns purely
procedural issues, it arose out of a particularly wrenching
murder investigation in the City of Chicago. In the summer
of 1998, eleven-year-old Ryan Harris was murdered. Sus-
picion fell upon two young boys—R.G. and his eight-year-old
companion E.H. (For the harrowing details of the botched
investigation, see Maurice Possley & Steve Mills, Charges
Dropped Against 2 Boys, CHICAGO TRIBUNE, September 5,
1998, at 1.) A month after charges were brought against the
boys, it became clear that an adult had committed the
crime, and the charges were dropped. About a year later, in
May 1999, the parties known here as Mother and Father
(their true names are available to the court but under seal;
we refer to them as M&F for convenience) brought this suit
in federal court on behalf of their son R.G. against the City
of Chicago and several Chicago police officers, raising both
federal and state claims. The parents of E.H. brought sim-
ilar proceedings in state court. Despite the fact that many
of the underlying facts were likely to be identical, the par-
ties had no interest in coordinating their respective law-
suits. As a result, discovery was duplicative and costly,
involving for M&F’s federal lawsuit alone more than 70
depositions and 30,000 documents, at a cost of more than
$100,000.
In May 2001, nearly two years after the original com-
plaints were filed in federal and state court, M&F moved for
voluntary withdrawal of their federal claims pursuant to
FED. R. CIV. P. 41. In their motion, they stated their in-
tention to re-file their state-law claims in state court and to
seek consolidation with the related E.H. litigation. In an
No. 01-2832 3
order dated June 12, 2001, the district court agreed to
dismiss the federal-law claims without prejudice for the
time being, but it indicated that the dismissal would be
converted to one with prejudice upon M&F’s state court
filing. In addition, the district court ruled over the City’s
objection that the costs of the federal case would not be
assessed at all in federal court, but instead would be
assessed by the state court at the conclusion of its proceed-
ings. The City moved for reconsideration, but the district
court made no material change in its ruling. On June 26,
2001, it announced that the “Rule 54 costs would travel to
the state court” and that whichever party prevailed in state
court would be entitled to an award of costs from that court.
The City now appeals.
II
We turn first to the question of our ability to adjudicate
the question the City has presented. Although M&F have
cast that issue in jurisdictional terms, that much at least is
easy to reject. They do not seriously contest the fact that
the district court has dismissed all claims of all parties, and
that the federal claims have now been dismissed with
prejudice. That is enough to create a final judgment for
purposes of appellate jurisdiction under 28 U.S.C. § 1291.
What they are really arguing is that we should rule against
the City with dispatch because it has waived its claim to
costs under FED. R. CIV. P. 54(d) by failing to raise it before
the district court until the motion to reconsider.
In general, of course, a party may not raise on appeal an
issue it did not present to the district court. United
States v. Payne, 102 F.3d 289, 293 (7th Cir. 1996). That rule
is not invariable, however, and it is particularly inapplica-
ble if the aggrieved party raised the issue at the first
opportunity it had. Our review of the rather unusual
4 No. 01-2832
proceedings that took place here convinces us that the City
did alert the district court to its position as soon as it could.
The initial June 12 order, after all, was a dismissal without
prejudice, and thus was not enough to make the City
a prevailing party for Rule 54 purposes. Szabo Food Serv.,
Inc. v. Canteen Corp., 823 F.2d 1073, 1077 (7th Cir.
1987). There is thus no mystery about why the City did not
file a Rule 54 motion immediately after that order. It was
only after the district court’s June 26 order was entered
that it became clear that the dismissal had been changed
into one with prejudice, and thus that the City’s right to
costs under FED. R. CIV. P. 54 was in play. Prior to the entry
of the revised order, the City was under no obligation to
present Rule 54 arguments in anticipation of dismissal with
prejudice. Accordingly, we have no trouble finding that the
City has not waived or forfeited its right to complain on
appeal about the district court’s refusal to entertain any
application for costs on its behalf.
M&F also argue that the costs issue is not properly before
us because the City filed its actual bill of costs pursuant to
Rule 54 in the district court only after it had filed a notice
of appeal. Our review of the record confirms that this
sequence of the filings is accurate: the City filed its notice
of appeal on July 11, three weeks after the court’s June 21
order, and then it filed a bill of costs two days later, on July
13, 2001. At worst, however, this sequence means that the
bill of costs was a meaningless document. The notice of
appeal transferred jurisdiction over the costs question to
this court. Kusay v. United States, 62 F.3d 192, 193 (7th
Cir. 1995). The district court was not quibbling about
whether the City ran up bills that were too high: it was
refusing categorically to award costs, and it is that categori-
cal refusal that the City is challenging here. If M&F had
prevailed here, the City’s filing could have been tossed in
the trash; the consequence of the City’s prevailing is that
No. 01-2832 5
full proceedings on the costs issue must now go forward in
the district court.
III
On the merits, the City’s principal claim is that the
district court abused its discretion by failing to award it
costs “as of course” as required by Rule 54. M&F respond
that the district court had the power under Rule 41 to
abrogate the normal Rule 54 entitlement to costs, and more
specifically that it had the power under Rule 41 to decide
that the costs issue would (in the court’s own words)
“travel” to the state court. We must therefore consider not
only how Rules 41 and 54 operate together, but also, even
if we agreed that some Rule 41 conditions affecting Rule 54
were permissible, whether this one was.
A
Whether the district court’s power under Rule 41 to con-
dition a voluntary dismissal “upon such terms and condi-
tions as the court deems proper” includes the power to
refuse to award Rule 54 costs to a prevailing party is a
question of law that we review de novo. Jaffee v.
Redmond, 142 F.3d 409, 412 (7th Cir. 1998). As the City
notes, a voluntary dismissal with prejudice renders the
opposing party a “prevailing party” within the meaning
of Rule 54. First Commodity Traders, Inc. v. Heinhold
Commodities, Inc., 766 F.2d 1007, 1015 (7th Cir. 1985); see
also Tex. State Teachers Assoc. v. Garland Indep. Sch. Dist.,
489 U.S. 782, 792-93 (1989) (noting that, in the analogous
context of the award of attorney’s fees under § 1988, a
prevailing party must have worked a “material alteration
of the legal relationship of the parties”). In addition, Rule
54(d)(1) expressly notes that the award of costs is “as of
course,” and we have interpreted this language as creating
6 No. 01-2832
a strong presumption that the prevailing party will recover
costs. M.T. Bonk Co. v. Milton Bradley Co., 945 F.2d
1404, 1409 (7th Cir. 1991). We have recognized only two
situations in which the denial of costs might be warranted:
the first involves misconduct of the party seeking costs, and
the second involves a pragmatic exercise of discretion to
deny or reduce a costs order if the losing party is indigent.
See Contreras v. City of Chicago, 119 F.3d 1286, 1295 (7th
Cir. 1997); Weeks v. Samsung Heavy Indus., Co., 126 F.3d
926, 945 (7th Cir. 1997); Congregation of the Passion, Holy
Cross Province v. Touche, Ross & Co., 854 F.2d 219, 222
(7th Cir. 1988). But see McGill v. Faulkner, 18 F.3d 456,
458 (7th Cir. 1994) (noting that litigants proceeding in
forma pauperis are still exposed to awards of costs). If
Rule 54 were the sole focus of our inquiry, it is clear that
the City would be entitled to costs unless the court found
that the City was guilty of misconduct or the plaintiffs had
no ability to pay.
Yet Rule 54 does not stand alone here. Rule 41(a)(2)
grants a district court broad discretion to impose conditions
on a voluntary dismissal of a claim. See FED. R. CIV. P.
41(a)(2); Chavez v. Ill. State Police, 251 F.3d 612, 654-55
(7th Cir. 2001); Marlow v. Winston & Strawn, 19 F.3d 300,
303 (7th Cir. 1994); see also 9 CHARLES A. WRIGHT &
ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE
§ 2366, at 302-03 (2d ed. 1995). The one exception to this
broad grant of discretion that has often been recognized is
the situation in which the party opposing dismissal would
be prejudiced by the proposed condition. See Tyco Labs.,
Inc. v. Koppers Co., 627 F.2d 54, 56 (7th Cir. 1980). Further-
more, prejudice to a party cannot be the only constraining
force on possible conditions. It seems plain that a district
court would equally abuse its discretion if it purported to
impose conditions utterly unrelated to the litigation, for
example.
No. 01-2832 7
In reconciling these two rules, we find it helpful to begin
with the actual language used in each one. The relevant
part of Rule 54 reads as follows:
(d) Costs; Attorneys’ Fees.
(1) Costs Other than Attorneys’ Fees. 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; but
costs against the United States, its officers, and agen-
cies shall be imposed only to the extent permitted by
law. Such costs may be taxed by the clerk on one day’s
notice. On motion served within 5 days thereafter, the
action of the clerk may be reviewed by the court.
(2) Attorneys’ Fees. [Not applicable here.]
Although the principal part of Rule 41 that is pertinent is
subpart (a)(2), we also reproduce subpart (d) for the light it
may throw on the question before us:
(a) Voluntary Dismissal: Effect Thereof.
(2) By Order of Court. Except as provided in para-
graph (1) of this subdivision of this rule, an action shall
not be dismissed at the plaintiff’s instance save upon
order of the court and upon such terms and conditions
as the court deems proper. If a counterclaim has been
pleaded by a defendant prior to the service upon the
defendant of the plaintiff’s motion to dismiss, the action
shall not be dismissed against the defendant’s objection
unless the counterclaim can remain pending for inde-
pendent adjudication by the court. Unless otherwise
specified in the order, a dismissal under this paragraph
is without prejudice.
* * *
8 No. 01-2832
(d) Costs of Previously-Dismissed Action. If a plaintiff
who has once dismissed an action in any court com-
mences an action based upon or including the same
claim against the same defendant, the court may make
such order for the payment of costs of the action previ-
ously dismissed as it may deem proper and may stay
the proceedings in the action until the plaintiff has
complied with the order.
We learn from these rules first that Rule 54(d)(1) ac-
knowledges that the court may have power otherwise to
direct something about costs, even though the prevailing
party is entitled to them “as a matter of course.” We also
learn that while Rule 41(a) has no language suggesting
limits on the possible terms and conditions the court may
impose, Rule 41(d) addresses the specific situation of the
approach a federal court should take when prior litigation
has occurred. It says nothing about what the federal court
should do when it is the first court to dispose of a case in a
situation where several courts are likely to be involved.
Nothing in the text of either Rule creates a hierarchy as
between Rule 41 and Rule 54, as it would be impossible to
say that the general language of Rule 41 qualifies as the
kind of “express provision” for an exception to a costs order
contemplated by the opening clause of Rule 54(d). The latter
language was at issue in Payne v. Milwaukee County, 288
F.3d 1021 (7th Cir. 2002), where we decided that Rule
68—which expressly calls for the plaintiff to bear the
defendant’s costs where a final judgment is less favorable
than an earlier offer of judgment—did constitute an “ex-
press provision” that could suspend the presumptive award
of costs under Rule 54(d). Id. at 1027. But, apart from the
inapplicable subsection (d), Rule 41 contains no comparable
“express provision.”
In light of this general indeterminacy, we think it best to
adhere to the general rule that governs entitlements to Rule
No. 01-2832 9
54 costs: that is, costs must be awarded to a prevailing
party unless one of the recognized situations warranting a
denial of costs is present. In this connection, it is perhaps
worth noting that Rule 41 dismissals are normally to be
done without prejudice, as the text we have reproduced
explicitly says, and thus costs will generally not be an issue.
Where the dismissal is with prejudice, however, as it was
here, nothing in the language of Rule 41 suggests that the
prevailing defendant should not enjoy the normal benefits
of a final judgment in its favor. Attorneys’ fees stand on a
different footing because there is no parallel rule either in
Rule 54 or elsewhere creating any presumption of entitle-
ment to such fees (a fact that sometimes surprises our
overseas friends). Thus, decisions that have upheld awards
of attorneys’ fees as a condition of dismissal do not have
much bearing on the problem before us. See Marlow, 19
F.3d at 306; Cauley v. Wilson, 754 F.2d 769, 771-72 (7th
Cir. 1985). In the end, we agree with the City that the
expansive reading of Rule 41 urged upon us by M&F would
nullify the “as of course” clause of Rule 54. The district
court therefore acted beyond its authority when it at-
tempted to deny the City its right to costs as a condition of
the Rule 41 dismissal.
B
We emphasize, however, that we are not ruling here and
now that the City is entitled to an award of costs. Because
of the way this problem arose, M&F have never had an
opportunity to show that they might be able to avoid either
part or all of the awardable costs here, based on either bad
faith on the City’s part (which, we add, does not appear in
the limited record we have before us) or their own indigency
and inability to satisfy a costs order. On remand, the
district court will be entirely free to explore both these
10 No. 01-2832
preliminary issues and any detailed issues that may arise
in the request for costs that the City will file.
IV
Even if it were possible to read Rule 41 as in some
instances authorizing a refusal to award costs for reasons
that go beyond those contemplated by Rule 54, we would
still reverse the particular order the district court entered.
Nothing in any of the Federal Rules of Civil Procedure with
which we are familiar authorizes the kind of wholesale
delegation to the state court that the district court wished
to effectuate here. This was not a decision that something
specific the City had done, or the plaintiffs had done,
warranted a new exception to the general rule about costs;
it instead was an effort to fold the voluntarily aborted
federal litigation into the planned state court proceeding
and to relinquish the federal court’s power to make its own
costs determination based on the litigation it had just
concluded.
To begin with, neither the federal statutes governing
court procedure nor the federal procedural rules authorize
that kind of delegation of power to the state court. Further-
more, it seems to us that an order by the federal court
directing the state court to assess the conduct of both
parties in litigation that did not even occur before it would
raise serious constitutional questions under the Supreme
Court’s anti-commandeering decisions. See, e.g., Printz v.
United States, 521 U.S. 898 (1997). Also relevant is the
Court’s reluctance to order state courts to enter particular
forms of retroactive relief. See McKesson Corp. v. Div. of
Alcoholic Beverages & Tobacco, 496 U.S. 18, 31, 51-52
(1990). Finally, it seems to us that a federal court’s issuance
of a directive to a state court would be an affront to basic
principles of comity. See Michigan v. Long, 463 U.S. 1032,
No. 01-2832 11
1040 (1983); see also Younger v. Harris, 401 U.S. 37, 43
(1971) (noting the “longstanding public policy against
federal court interference with state court proceedings”).
Even if the district court had jurisdiction to enter this type
of order, it is unclear how any federal court apart from the
Supreme Court of the United States could ensure compli-
ance with the standards of FED. R. CIV. P. 54, because the
Rooker-Feldman doctrine would foreclose lower federal-
court review of any costs determination by the state court.
See Dist. of Columbia Court of Appeals v. Feldman, 460
U.S. 462, 482 (1983); Rooker v. Fid. Trust Co., 263 U.S.
413, 416 (1923); Ritter v. Ross, 992 F.2d 750, 753-54 (7th
Cir. 1993).
To the extent the district court’s order reflected only a
“request” to the state court, we have a different set of
problems. The state court is under no obligation to honor
any such request, which means that the City’s rights as a
prevailing party in the federal litigation may never be
vindicated. Worse, even if the state court was disposed to
honor the federal court’s request, there is no assurance that
the state court could do all that the district court contem-
plated. The state court may lack the authority to award
costs using the standards of FED. R. CIV. P. Illinois, as is
its unquestioned right, has a different law governing the
award of costs in actions brought in its courts. See 735
ILL. COMP. STAT. 5/5-108. Under that law, the City is
probably not entitled to some costs that would be part of a
normal Rule 54 order.
A brief comparison of the federal- and state-level rules for
awarding costs bears out this latter concern. The Illinois
Supreme Court Rules, for example, limit depositions to
three hours in the absence of a showing of good cause for
extension. ILL. SUP. CT. R. 206(d). The corresponding federal
rules, by contrast, limit depositions to seven hours, with a
similar good-cause showing for extension. FED. R. CIV. P.
12 No. 01-2832
30(d)(2). Given the City’s claim that 56 of the 70 depositions
taken as part of discovery in the federal case were longer
than three hours, this makes it possible, and perhaps likely,
that the state court’s award of costs would fall short of the
compensation the City could expect under the federal rules
(to the extent that “costs” in either system would encompass
matters relating to deposition length).
More importantly, federal and state rules differ signifi-
cantly in terms of what expenses are “necessary” and thus
taxable as costs. The Illinois Supreme Court, pursuant to
its statutory authorization to promulgate rules for the
assessment of costs, see 735 ILL. COMP. STAT. 5/1-105,
has held that a successful litigant is not entitled to re-
cover “the ordinary expenses of litigation.” Galowich v.
Beech Aircraft Corp., 441 N.E.2d 318, 322 (Ill. 1982). In
Galowich, this meant that “discovery” depositions—as
distinguished from “evidence” depositions—are taxable as
costs only to the extent they are “necessarily used at trial.”
Id. And while the Illinois Supreme Court has continued
to flesh out the meaning of the phrases “ordinary expenses
of litigation” and “necessarily used at trial,” see, e.g.,
Vicencio v. Lincoln-Way Builders, Inc., 789 N.E.2d 290, 297-
98 (Ill. 2003), the Galowich Court expressly held that the
“necessarily used” requirement prevents a defendant from
ever recovering expenses for discovery depositions from
plaintiffs who, like M&F, voluntarily dismiss their case
before trial. 441 N.E.2d at 322.
By contrast, the introduction of a deposition at trial is not
a prerequisite to taxability in a federal court. The determi-
nation of necessity under 28 U.S.C. § 1920, the principal
statute governing recoverable costs in federal court, must
be made in light of the facts known at the time of the
deposition, without regard to intervening developments that
render the deposition unneeded for further use. Hudson
v. Nabisco Brands, Inc., 758 F.2d 1237, 1243 (7th Cir.
No. 01-2832 13
1985), overruled on unrelated grounds, Provident Bank v.
Manor Steel Corp., 882 F.2d 258, 261 n.5 (7th Cir. 1989).
Because a voluntary dismissal is not a predictable outcome
at the time a deposition is taken, the federal costs scheme
conflicts with Galowich’s per se rule of non-taxability in
cases involving voluntary dismissals. Moreover, while 28
U.S.C. § 1920 makes clear that a judge may not tax as
costs certain kinds of expenses that are not “necessarily
obtained for use in the case,” 28 U.S.C. § 1920(2), (4);
Kulumani v. Blue Cross Blue Shield Ass’n, 224 F.3d 681,
685 (7th Cir. 2000), this language applies only to court
reporter fees and photocopies of deposition transcripts.
As a result, and quite apart from Galowich’s preclusion of
costs awards in cases ending in voluntary dismissal, the
restriction created by federal law is significantly narrower
than the Illinois rule that none of the costs relating to
particular kinds of depositions are taxable.
Finally, it makes sense as a policy matter to leave with
each court the responsibility for applying its own rule about
costs. The City here is entitled to an immediate determina-
tion of costs for the case it has now won. Proceedings in
state court may drag on for some time, or they may be
resolved promptly: no one knows. Should M&F prevail on
any of their state-law claims, however, they are free to ask
the state court to award costs that include whatever sums
they had to pay to the City in this litigation. The state court
will be in a far better position then to see how much
duplication of effort was involved and how much adjust-
ment is appropriate. Naturally, if the City prevails in state
court, it presumably will make whatever additional request
for costs it believes would be warranted under state law.
The state court would then be able to consider any argu-
ment M&F wanted to make about potential double recovery
of costs for the City.
14 No. 01-2832
V
The final question we must consider concerns the scope of
the district court’s proceedings on remand. At a minimum,
as we have already indicated, both M&F and the City are
entitled to a full adjudication of both the City’s right to
costs and the amount of any costs that might be appropri-
ate. But at oral argument, M&F asked us (in the alternative
to an affirmance) to go further and to re-open the district
court’s dismissal order, arguing that they would not have
consented to the district court’s terms of dismissal under
Rule 41 had they known that Rule 54 costs would not travel
to the state court for determination by that court.
But for one fatal problem, this would be a plausible
argument. M&F’s suggestion is in keeping with the rule
“that a plaintiff seeking a ‘voluntary’ dismissal is not
required to accept whatever conditions the court may im-
pose as a prerequisite for dismissal” and “that the ‘terms
and conditions’ clause of Rule 41(a)(2) grants plaintiff the
option of withdrawing his motion if the district court’s
conditions are too onerous, and proceeding instead to trial
on the merits.” Marlow, 19 F.3d at 304; see also Lau v.
Glendora Unified Sch. Dist., 792 F.2d 929, 930 (9th Cir.
1986); GAF Corp. v. Transamerica Ins. Co., 665 F.2d 364,
367-68 (D.C. Cir. 1981); 9 CHARLES A. WRIGHT & ARTHUR R.
MILLER, FEDERAL PRACTICE & PROCEDURE § 2366, at 303
(2d ed. 1995). The problem to which we alluded, however,
goes to the scope of this appeal. M&F did not file a cross-
appeal seeking such an alteration of the district court’s
judgment. Withdrawal of the Rule 41 dismissal and full
reinstatement of the federal court case would be an action
going far beyond an alternate ground for affirmance of a
refusal to award costs. See El Paso Natural Gas Co. v.
Neztsosie, 526 U.S. 473, 479 (1999); Greenwell v. Aztar
Indiana Gaming Corp., 268 F.3d 486, 494 (7th Cir. 2001);
Adkins v. Mid-American Growers, Inc., 167 F.3d 355, 360
No. 01-2832 15
(7th Cir. 1999). Thus, the remand will be limited to the
costs question, as we have described it.
VI
For these reasons, we VACATE the district court’s order
and REMAND for further proceedings consistent with this
opinion.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—7-30-03