Costco Wholesale Corp. v. Hoen

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
COSTCO WHOLESALE CORPORATION, 
a Washington corporation,
Plaintiff-Appellant,
v. No. 06-36040
ROGER HOEN; VERA ING; MERRITT
D. LONG, in their official  D.C. No.
CV-04-00360-MJP
capacities as members of the
OPINION
Washington State Liquor Control
Board; WASHINGTON BEER & WINE
WHOLESALERS ASSOCIATION,
Defendants-Appellees.

Appeal from the United States District Court
for the Western District of Washington
Marsha J. Pechman, District Judge, Presiding
Argued and Submitted
April 11, 2008—Seattle, Washington
Filed August 15, 2008
Before: Carlos T. Bea and Milan D. Smith, Jr.,
Circuit Judges, and Joseph M. Hood,* Senior Judge.
Opinion by Judge Milan D. Smith, Jr.
*The Honorable Joseph M. Hood, Senior United States District Judge
for the Eastern District of Kentucky, sitting by designation.
10755
10758 COSTCO WHOLESALE CORP. v. HOEN
COUNSEL
David J. Burman, Perkins Coie LLP, Seattle, Washington, for
the plaintiff-appellant.
Paul R. Romain and John C. Guadnola, Gordon Thomas
Honeywell Malanca Peterson & Daheim LLP, Tacoma,
Washington, for the intervenor-appellee.
OPINION
MILAN D. SMITH, JR., Circuit Judge:
In this appeal, we consider the circumstances in which an
intervenor may be held liable for attorney’s fees and costs
under 42 U.S.C. § 1988(b) and 15 U.S.C. § 26. Costco
COSTCO WHOLESALE CORP. v. HOEN 10759
Wholesale Corporation (Costco) brought claims against the
Washington State Liquor Control Board and certain state offi-
cials (collectively, State Defendants), contending that several
of Washington’s liquor laws violate the Commerce Clause
and federal antitrust law. Intervenor-Appellee Washington
Beer and Wine Wholesalers Association (WBWWA) materi-
ally assisted the State Defendants throughout the litigation,
and its members had much at stake financially because of
Costco’s claims. The district court ruled in favor of Costco on
the majority of the claims, but held that only the State Defen-
dants were liable for attorney’s fees and costs under § 1988(b)
and § 26. Costco challenges the district court’s decision not to
impose joint and several liability for those expenses on
WBWWA. We affirm on the question of WBWWA’s liability
under § 1988(b), but vacate and remand with respect to § 26.
I. BACKGROUND
Washington regulates the sale and distribution of alcoholic
beverages through a three-tiered system that strictly limits the
pricing authority and business practices of beverage produc-
ers, distributors, and retailers. Costco filed an action against
the State Defendants contending, in Count I, that several
aspects of this system violate the Sherman Antitrust Act, 15
U.S.C. § 1 et seq. Count II alleged that Revised Code of
Washington §§ 66.24.170 and 66.24.240 violate the Com-
merce Clause of the United States Constitution by permitting
only Washington-based wineries and breweries to distribute
directly to retailers in the state. Count III claimed that the
restraints challenged in Counts I and II give rise to a cause of
action under 42 U.S.C. § 1983. Count IV contended that the
challenged provisions also deprived Costco of rights secured
by the Washington Constitution.
Shortly after the filing of the complaint, WBWWA, a non-
profit professional trade organization comprised of beer and
wine distributors, filed a motion to intervene as a defendant
pursuant to Federal Rule of Civil Procedure 24(a). The district
10760 COSTCO WHOLESALE CORP. v. HOEN
court granted the motion after finding that (1) WBWWA had
a protectable interest in the litigation because Costco’s claims
challenged the statutes and regulations underlying WBWWA
members’ contractual arrangements with producers and retail-
ers, and (2) the State Defendants would not necessarily ade-
quately represent WBWWA’s interests in the litigation.
Thereafter, WBWWA materially assisted the State Defen-
dants in defending the challenged laws at every stage of the
litigation.
Costco mostly prevailed in the district court notwithstand-
ing WBWWA’s intervention. Following the United States
Supreme Court’s decision in Granholm v. Heald, 544 U.S.
460 (2005), the district court granted summary judgment in
favor of Costco on Count II of the Complaint and the related
part of Count III, holding that Revised Code of Washington
§§ 66.24.170 and 66.24.240 violate the Commerce Clause by
discriminating against out-of-state breweries and wineries. To
remedy the violation, Costco requested an injunction permit-
ting out-of-state producers of beer and wine to distribute
directly to in-state retailers. However, the district court
declined to order that remedy, finding that it would be exces-
sively disruptive of the State’s regulatory scheme, and instead
enjoined in-state producers from distributing directly to in-
state retailers. The court stayed the entry of judgment to per-
mit the Washington Legislature a reasonable period within
which to either withdraw the direct-sales privilege from in-
state producers or to extend the privilege to out-of-state pro-
ducers. The Legislature responded by passing a measure that
extended the privilege to out-of-state producers for a period
of two years.
In substantial part, the district court also ruled in Costco’s
favor on cross-motions for summary judgment concerning
Count I. With one exception, the court also held that all of the
challenged restraints violate federal antitrust law. Accord-
ingly, WBWWA’s and the State Defendants’ motions were
denied. The court denied Costco’s motion for summary judg-
COSTCO WHOLESALE CORP. v. HOEN 10761
ment as well, but only because there were disputed issues of
material fact concerning whether the challenged restraints
were defensible as valid exercises of the State’s powers under
the Twenty-first Amendment.
The district court subsequently held a bench trial to adjudi-
cate the Twenty-first Amendment defense to Costco’s anti-
trust claims. Based on the evidence presented, the court
concluded that the Twenty-first Amendment did not shield the
restraints found invalid under the Sherman Act. The district
court then enjoined the State Liquor Control Board from
enforcing any of the restraints except for the retailer-to-
retailer sales ban.
Based on its adjudication of the motions for summary judg-
ment and at the bench trial, the district court entered judgment
in favor of Costco on all aspects of Count I except for the
retailer-to-retailer sales ban. The court also entered judgment
in favor of Costco on Count II and the related portion of
Count III. Judgment was entered in favor of the State Defen-
dants and WBWWA on the retailer-to-retailer sales ban under
Count I, and on Count IV without prejudice to Costco pursu-
ing that claim in state court.
The State Defendants and WBWWA appealed to our court
the adjudication of Count I, and Costco cross-appealed the
district court’s decision concerning the legality of the retailer-
to-retailer sales ban. We reversed the district court in part and
affirmed in part in Costco Wholesale Corp. v. Maleng, 514
F.3d 915 (9th Cir. 2008). We affirmed by holding that the
price-posting and price-holding requirements violate the Sher-
man Act, that those requirements are not saved by the
Twenty-first Amendment, and that the retailer-to-retailer sales
ban comports with the Sherman Act. Id. at 946. We reversed
by holding that none of the other challenged restraints violate
the Sherman Act. Id. The judgment on Counts II, III, and IV
was not reviewed. Id. at 923 n.5.
10762 COSTCO WHOLESALE CORP. v. HOEN
While Maleng was pending on appeal, the district court
adjudicated liability for attorney’s fees and costs. The parties
stipulated that Costco was entitled to $1,635,741 in fees and
$66,972 in costs and that the State Defendants were liable.
However, the parties disagreed about whether WBWWA
should be jointly and severally liable along with the State
Defendants. Applying Independent Federation of Flight
Attendants v. Zipes, 491 U.S. 754 (1989), the district court
held that WBWWA was not liable for fees and costs because
WBWWA did not violate federal antitrust law or Costco’s
constitutional rights and did not defend the state laws in a
frivolous manner. Costco now appeals that decision.1
II. JURISDICTION AND STANDARD OF REVIEW
28 U.S.C. § 1291 confers jurisdiction to review a district
court’s denial of attorney’s fees. Thomas v. City of Tacoma,
410 F.3d 644, 647 (9th Cir. 2005). “Awards of attorney’s fees
are generally reviewed for an abuse of discretion.” Id. How-
ever, “[a]ny elements of legal analysis and statutory interpre-
tation that figure in the district court’s attorneys’ fees decision
are reviewed de novo.” Barrios v. Cal. Interscholastic Fed’n,
277 F.3d 1128, 1133 (9th Cir. 2002).
III. DISCUSSION
The parties’ dispute concerns whether Independent Federa-
tion of Flight Attendants v. Zipes, 491 U.S. 754 (1989), per-
mits Costco to recover attorney fees and costs from
WBWWA. Zipes involved a class of flight attendants who
sued their airline employer for sex discrimination under Title
1
While this appeal was pending, the State Defendants paid to Costco
$375,000 in attorney’s fees and $10,048.80 in costs. According to the dis-
trict court, this payment fully discharged the State Defendants’ obligation
under § 1988(b), and left $1,260,741 in outstanding fees and $56,923 in
outstanding costs associated with the antitrust claims. The payment, how-
ever, does not affect whether WBWWA should be held jointly and sever-
ally liable, the issue now before this court.
COSTCO WHOLESALE CORP. v. HOEN 10763
VII of the Civil Rights Act of 1964. Id. at 755. After almost
ten years of litigation, the parties reached a comprehensive
settlement. Id. at 756-57. The petitioner flight attendants’
union intervened to challenge the settlement on behalf of
flight attendants not affected by the employer’s discrimina-
tory practice, but the district court, Seventh Circuit, and
Supreme Court successively rejected that challenge and
upheld the agreement. Id. at 757. The original class of plain-
tiff flight-attendants then sought attorney’s fees against the
union. Id. at 757-58. The district court and court of appeals
awarded fees, but Zipes reversed, holding that a district court
should not grant fees under 42 U.S.C. § 2000e-5(k) against an
“innocent” intervenor unless the intervenor’s action was “friv-
olous, unreasonable, or without foundation.” Id. at 761.
[1] Because Costco partially prevailed on its antitrust
claims under Count I and prevailed on its § 1983 claim under
Counts II and III, there are two possible statutory bases for
imposing liability for attorney’s fees and costs on WBWWA.
The first is 42 U.S.C. § 1988(b), which provides that “[i]n any
action proceeding to enforce a provision of [42 U.S.C. §]
1983 . . . the court, in its discretion, may allow the prevailing
party . . . a reasonable attorney’s fee as part of the costs.” The
second is 15 U.S.C. § 26, which provides that a court “shall
award the cost of suit, including a reasonable attorney’s fee,”
to any plaintiff who files an action seeking injunctive relief
“against threatened loss or damage by a violation of the fed-
eral antitrust laws” and “substantially prevails.” We address
whether the district court erred in ruling that Zipes precludes
WBWWA’s fee liability under both statutes.
A. Liability under 42 U.S.C. § 1988(b)
[2] The rule in Zipes extends to questions of intervenor lia-
bility for fees and costs under 42 U.S.C. § 1988(b), the § 1983
fee statute. Democratic Party of Wash. State v. Reed, 388
F.3d 1281, 1288 (9th Cir. 2004); Sable Commc’ns of Cal. Inc.
v. Pac. Tel. & Tel. Co., 890 F.2d 184, 194 n.20 (9th Cir.
10764 COSTCO WHOLESALE CORP. v. HOEN
1989). Thus, Ҥ 1988 fee awards should be made against los-
ing intervenors . . . ‘only where the intervenors’ action was
frivolous, unreasonable, or without foundation.’ ” Reed, 388
F.3d at 1288 (quoting Zipes, 491 U.S. at 761).
Costco argues that WBWWA should be held liable for fees
and costs notwithstanding this precedent for two reasons: (1)
Zipes does not apply because WBWWA was not an “inno-
cent” intervenor, and (2) even if Zipes applies, WBWWA’s
defense of the direct-shipping statutes was frivolous in light
of Granholm v. Heald, 544 U.S. 460 (2005). For the reasons
set forth below, we hold that WBWWA is not liable for fees
and costs associated with Costco’s successful claim under 42
U.S.C. § 1983.
1. Was WBWWA an “innocent” intervenor?
Costco argues that WBWWA is not an “innocent” interve-
nor, and that Zipes is therefore distinguishable, because
WBWWA (1) actively defended the unconstitutional laws at
every stage of the litigation, (2) lobbied for the Washington
Legislature to pass those laws, and (3) created an anti-
competitive market by adhering to the laws once they became
effective. We address these arguments in turn.
i. Defense of the unconstitutional state laws
[3] Costco’s first argument is unpersuasive because Zipes
uses the term “innocent” to refer simply to an intervenor who
has not been found liable for engaging in unlawful activity.
See 491 U.S. at 762-63. The facts of that case make clear that
an intervenor does not become blameworthy merely by
actively litigating an issue and thereby making it more diffi-
cult for an opposing party to prevail: The intervenor in Zipes
had singlehandedly challenged the flight attendants’ settle-
ment agreement in the district court and on appeal before the
Seventh Circuit and Supreme Court. 491 U.S. at 757. This liti-
gation lasted for nearly three years and cost the flight atten-
COSTCO WHOLESALE CORP. v. HOEN 10765
dants almost $200,000 in attorney’s fees, id. at 770-71
(Marshall, J., dissenting), but Zipes still found the intervenor
“innocent” because the intervenor was not found to have vio-
lated Title VII, id. at 766. WBWWA is similarly “innocent”
insofar as neither the district court nor this court in Maleng
found WBWWA liable with respect to Costco’s § 1983 claim.
See Maleng, 514 F.3d at 923 n.5; see also Reed, 388 F.3d at
1288 (holding that a losing intervenor was not liable for fees
under § 1988(b) even though “the [intervenor’s] arguments
doubtless required the plaintiffs’ lawyers to spend additional
time” litigating the case).
ii. Lobbying activity
Costco contends that WBWWA is not innocent because its
lobbying led the Washington Legislature to pass the unconsti-
tutional direct-sales privilege. This argument is also at odds
with Zipes because it suggests that an intervenor may be
found blameworthy without any prior finding of liability for
engagement in unlawful activity. See 491 U.S. at 762-63.
Moreover, there is no evidence in the record that WBWWA
lobbied for the direct-sales privilege or that such lobbying
was the reason for the enactment of the privilege.
iii. Compliance with the unconstitutional state laws
[4] Costco further contends that WBWWA is not innocent
because it adhered to the direct-sales privilege, thereby ensur-
ing the law’s discriminatory effect. Again, the argument disre-
gards the definition of “innocent” found in Zipes. Id. Because
WBWWA was not found liable under § 1983 for adhering to
the discriminatory direct-sales privilege, WBWWA is inno-
cent for the purpose of determining fee liability under
§ 1988(b). Id.
10766 COSTCO WHOLESALE CORP. v. HOEN
2. Was WBWWA’s defense against the § 1983 claim
frivolous?
[5] Because WBWWA was an innocent intervenor,
§ 1988(b) liability is permissible under Zipes only if
WBWWA’s manner of litigating2 the § 1983 claim was “friv-
olous, unreasonable, or without foundation.” 491 U.S. at 761.
Costco argues that fees are appropriate even if Zipes applies
because it was frivolous for WBWWA to attempt to defend
Washington’s direct-shipping statutes after the Supreme
Court’s decision in Granholm v. Heald, 544 U.S. 460 (2005),
which was decided while Costco’s lawsuit was pending in the
district court.
To evaluate Costco’s contention, we compare the holdings
of Granholm with the arguments advanced by WBWWA.
Granholm held that Michigan and New York laws permitting
only in-state wineries to sell directly to in-state consumers
violated the Commerce Clause because they “mandate[d] dif-
ferential treatment of in-state and out-of-state economic inter-
ests that benefit[ted] the former and burden[ed] the latter.”
544 U.S. at 472 (citation and internal quotation marks omit-
ted). The Court also held that the Twenty-first Amendment
did not save the discriminatory laws because the Amendment
“does not give States the authority to pass nonuniform laws
in order to discriminate against out-of-state goods.” Id. at
2
Zipes focused on whether the innocent intervenor’s “action,” rather
than its conduct during the litigation, was frivolous, unreasonable, or with-
out foundation. Id. There is presently no intervenor’s “action” to speak of
because WBWWA never brought claims against Costco. However, Zipes’s
focus on intervenor actions appears to derive simply from the facts of the
case, which involved a lawsuit brought by an intervenor. We see no reason
why the rule in Zipes should not also apply to individual claims or argu-
ments advanced by an intervenor. Indeed, Reed implicitly extended the
holding of Zipes to intervenor defendants and their conduct during litiga-
tion. See 388 F.3d at 1288. We follow that precedent in focusing this part
of our analysis on whether WBWWA advanced a frivolous argument in
the proceedings below.
COSTCO WHOLESALE CORP. v. HOEN 10767
484-85. Granholm further held that although state laws that
discriminate against interstate commerce can be upheld if they
“advance[ ] a legitimate local purpose that cannot be ade-
quately served by reasonable nondiscriminatory alternatives,”
the Michigan and New York laws failed to advance such a
purpose. Id. at 489, 490-93. The states argued that the restric-
tion of the direct-shipping privilege to in-state wineries served
the purposes of keeping alcohol out of the hands of minors
and facilitating tax collection, id. at 489, but Granholm found
this argument unpersuasive. The Supreme Court found that
the first asserted justification lacked merit because “minors
are just as likely to order wine from in-state producers as from
out-of-state ones.” Id. at 490. The second lacked merit
because tax collection could be achieved without discriminat-
ing against interstate commerce. Id. at 491-92.
[6] Costco moved for summary judgment on Counts II and
III in light of Granholm shortly after that case was decided.
WBWWA opposed the motion by attempting to distinguish
Granholm as involving state laws that prohibited out-of-state
wineries from selling directly to consumers, rather than laws,
like the Washington statutes, that prohibit out-of-state distrib-
utors from selling directly to in-state retailers. According to
WBWWA, the difference is important because sales to retail-
ers involve substantially greater quantities of alcohol, and
involve types of beverages—such as beer—that are more
likely to be consumed by minors and chronic abusers.
WBWWA asserted that these unique characteristics of alcohol
sales to retailers, combined with state interests in tax collec-
tion and controlling the orderly distribution of alcohol from
in-state suppliers, created a greater governmental interest in
regulation.
[7] We conclude that the district court did not abuse its dis-
cretion in finding that WBWWA’s argument was not frivo-
lous. Much of the language in Granholm is broad enough to
establish that Washington’s direct-sales privilege is unconsti-
tutional, but the facts of the case were sufficiently distinct to
10768 COSTCO WHOLESALE CORP. v. HOEN
make WBWWA’s argument colorable, even if it was ulti-
mately unpersuasive. Moreover, because Granholm had only
recently been decided, no Ninth Circuit authority then existed
clarifying the decision and its scope. We are particularly
reluctant to find a colorable argument frivolous when it has
been advanced on a novel issue. Cf. Barnes Found. v. Town-
ship of Lower Merion, 242 F.3d 151, 158 (3d Cir. 2001) (ana-
lyzing whether claims are frivolous in part based on whether
“the question in issue was one of first impression requiring
judicial resolution”). Because it was not an abuse of discretion
to find that WBWWA’s arguments were not frivolous, the
district court appropriately declined to hold WBWWA liable
under § 1988(b).
B. Liability under 15 U.S.C. § 26
[8] The remaining question is whether WBWWA is liable
for fees and costs under 15 U.S.C. § 26 in connection with
Costco’s antitrust claims. Section 26 provides that a court
“shall award the cost of suit, including a reasonable attorney’s
fee,” to any plaintiff who files an action seeking injunctive
relief “against threatened loss or damage by a violation of the
federal antitrust laws” and “substantially prevails.” The dis-
trict court held that Zipes applies to § 26 and that WBWWA
was not liable under the statute because WBWWA did not
violate the Sherman Act and did not make any frivolous argu-
ments against Costco’s antitrust claims. Costco argues that the
district court erred because Zipes does not apply to § 26.
1. Does Zipes apply to 15 U.S.C. § 26?
[9] We agree with Costco that Zipes does not control the
application of 15 U.S.C. § 26 to intervenors. The language of
§ 26 is significantly different than the language of the statute
in Zipes, 42 U.S.C. § 2000e-5(k). Unlike § 2000e-5(k), which
makes the award of fees and costs discretionary, § 26 makes
such an award mandatory. This difference is important. The
Supreme Court crafted the rule in Zipes to limit a district
COSTCO WHOLESALE CORP. v. HOEN 10769
court’s discretion to award fees under § 2000e-5(k) and simi-
lar statutes. See 491 U.S. at 758-59; see also Martin v. Frank-
lin Capital Corp., 546 U.S. 132, 139 (2005) (interpreting
Zipes in this manner). The Court made fee liability dependent
upon the blameworthiness of the intervenor because the “large
objectives” of the Civil Rights Act of 1964, which “embrace
certain equitable considerations,” suggest that culpability is an
important guide to the manner in which discretion should be
exercised under § 2000e-5(k). Zipes, 491 U.S. at 759. How-
ever, because fee shifting under § 26 is mandatory, equity
cannot influence the determination of whether fees and costs
should be awarded to substantially prevailing plaintiffs under
that statute. We see little basis for extending a rule intended
to limit the exercise of discretion to a statute that leaves no
room for discretion in the first place.
[10] The narrow range of actions to which § 26 applies also
counsels against extending Zipes. Whereas § 2000e-5(k) per-
mits fees in actions both for damages and injunctive relief,
§ 26 mandates fees only in successful injunction actions. In
many cases, this narrow focus will render incoherent Zipes’s
emphasis on innocence and blameworthiness. See 491 U.S. at
761-63. This is because where a plaintiff seeks to enjoin pro-
spective unlawful conduct, it cannot fairly be said that the
defendant, much less the assisting intervenor, is a “wrongdo-
er.” Id. at 762. That designation, like Zipes’s general focus on
blameworthiness, is more appropriately applied in successful
actions for damages, where the plaintiff has necessarily dem-
onstrated past unlawful behavior.
[11] Moreover, extending Zipes to § 26 would conflict with
the purpose of the statute. Congress made fee awards manda-
tory under § 26 to “encourage[ ] . . . private parties to bring
and maintain meritorious antitrust injunction cases.” H.R.
Rep. No. 94-499(I), at 20 (1975), reprinted in 1976
U.S.C.C.A.N. 2572, 2589-90. Mandatory awards were seen as
necessary to protect the injunction-seeking plaintiff’s finan-
cial incentive to file suit because antitrust cases are “normally
10770 COSTCO WHOLESALE CORP. v. HOEN
very expensive to bring and maintain” and claims for injunc-
tive relief by nature provide no prospect of money damages.
Id., 1976 U.S.C.C.A.N. at 2588-89. Extending the Zipes rule
to § 26 would deter private enforcement of the federal anti-
trust laws by encouraging entities such as WBWWA to vigor-
ously defend anti-competitive state laws with little fear of fee
liability, and leading potential plaintiffs to feel less confident
of success because of the increased likelihood of intervention
from sometimes powerful third parties.
Zipes explains that liability for fees is generally unwar-
ranted against innocent intervenors under § 2000e-5(k) even
though an intervenor’s non-liability reduces the likelihood of
full fee recovery and thus gives a plaintiff a marginally
weaker incentive to file suit. 491 U.S. at 762. However, we
construe the mandatory language in § 26 as reflecting greater
congressional concern for ensuring fee recovery in meritori-
ous antitrust injunction actions. Given that concern, the rule
in Zipes operates in greater tension with the purpose of § 26
than it does with that of § 2000e-5(k).
[12] In light of these differences, and because Zipes sug-
gests only that its rule should apply to statutes similar to
§ 2000e-5(k), see 491 U.S. at 759 n.2, we hold that Zipes does
not control the question of intervenor liability for fees and
costs under § 26. Other cases applying Zipes are consistent
with this view, with several extending Zipes to statutes that,
like § 2000e-5(k), permit discretionary fee awards for suc-
cessful parties, see Martin v. Franklin Capital Group, 546
U.S. 132 (2005) (28 U.S.C. § 1447(c)); Reed, 388 F.3d at
1288 (§ 1988(b)); Johnson v. Florida, 348 F.3d 1334 (11th
Cir. 2003) (42 U.S.C. § 1997c(d)), and others distinguishing
Zipes where the text of the relevant statute is unique, see, e.g.,
Ohio River Valley Envtl. Coal., Inc. v. Green Valley Coal Co.,
511 F.3d 407, 416 (4th Cir. 2007) (30 U.S.C. § 1270(d)).
COSTCO WHOLESALE CORP. v. HOEN 10771
2. Does § 26 permit the imposition of fees and costs on
WBWWA?
Even though Zipes does not control, it does not necessarily
follow that WBWWA is liable for fees and costs under § 26.
The question remains whether WBWWA can appropriately be
held liable as an intervenor under the statute. Section 26 on
its terms does not resolve the question; while it discusses the
successful plaintiff’s entitlement to fees and costs, it does not
clarify from whom such expenses may be recovered.
[13] Turning, therefore, to the purpose of § 26, we hold that
the statute permits WBWWA to be held liable for fees and
costs because WBWWA (a) had a significant financial inter-
est at stake in the litigation because Costco’s complaint chal-
lenged the statutes and regulations underlying WBWWA
members’ contractual arrangements with beer and wine pro-
ducers and retailers, and (b) acted like a fully involved defen-
dant throughout the litigation. WBWWA filed its own answer
to the complaint, a motion for a partial stay, a response to one
of Costco’s motions for summary judgment, and, eventually,
a notice of appeal. These filings advanced several positions
not argued by the State Defendants. WBWWA and the State
Defendants also jointly moved for judgment on the pleadings,
proposed findings of fact and conclusions of law, and filed
trial briefs. WBWWA even presented its own witnesses and
shared time with the State Defendants in offering opening and
closing arguments at the bench trial. These actions increased
Costco’s cost of seeking relief, and they were carried out
because of WBWWA’s direct economic interest in the out-
come of the lawsuit. The costs imposed on Costco in these
circumstances are of the type from which § 26 seeks to pro-
tect the injunction-seeking plaintiff. See H.R. Rep. No. 94-
499(I), at 20 (1975), reprinted in 1976 U.S.C.C.A.N. 2572,
2589-90. That WBWWA was not found liable for unlawful
conduct is immaterial to this analysis because the purpose of
fee-shifting under § 26 is to protect the potential plaintiff’s
incentive for suit, not to punish wrongdoing. Id.
10772 COSTCO WHOLESALE CORP. v. HOEN
3. May WBWWA be found liable for attorney fees
under § 26 after Maleng?
[14] Although § 26 permits fee liability against intervenors
on the basis noted above, it is still not clear that WBWWA
can be appropriately held liable. Fees and costs are required
under § 26 only if the plaintiff “substantially prevails” in its
action for injunctive relief. The briefing provided to this court
by the parties operates on the assumption that this require-
ment was satisfied by Costco’s success on most of its antitrust
claims. That assumption was warranted after the proceedings
before the district court, which adjudged that all but one of the
restraints challenged in Count I violated federal antitrust law.
However, in Maleng, we reversed most of the district court’s
judgment on Count I and held that only the claims regarding
the price-posting and price-holding requirements were merito-
rious. 514 F.3d at 946. Considering this result, it is no longer
clear that Costco “substantially prevailed” on Count I.
Because the district court had no opportunity after Maleng to
address the issue, we remand for a determination of whether
Costco’s success on its antitrust claims was sufficient under
the statute to permit the imposition of liability for fees and
costs against WBWWA and, if so, the appropriate amount of
recovery.
IV. CONCLUSION
We AFFIRM the district court’s decision that WBWWA is
not liable for fees and costs under 42 U.S.C. § 1988(b). How-
ever, we VACATE on the issue of fee liability under 15
U.S.C. § 26 and REMAND for a determination of whether
Costco “substantially prevailed” on its antitrust claims within
the meaning of that statute. The parties shall bear their own
costs on appeal.
AFFIRMED in part; VACATED in part; REMANDED.