Bond on Appeal May Include Sum for Appellate Attorneys’ Fees If Judgment Is Based on Fee-Shifting Statute (Here, RICO)

From Int’l Floor Crafts, Inc. v. Dziemit, 2011 U.S. App. LEXIS 8181 (1st Cir. April 21, 2011):

Federal Rule of Appellate Procedure 7 states, "In a civil case, the district court may require an appellant to file a bond or provide other security in any form and amount necessary to ensure payment of costs on appeal." Fed. R. App. P. 7. IFC moved in the district court for such a bond after Dziemit filed her notice of appeal, asking that Dziemit be required to post $30,000 to cover $5000 of IFC's anticipated expenses and $25,000 of its appellate attorneys' fees. IFC argued that the inclusion of attorneys' fees in a Rule 7 bond is proper when the statute underlying the litigation contains a fee-shifting provision that includes attorneys' fees as part of costs awardable, as RICO does. The district court granted IFC's motion and ordered Dziemit to post an appeal bond of $10,000 within fifteen days. In doing so, it did not adopt IFC's reasoning and instead held that because Dziemit's appeal bore "the indicia of frivolousness," the bond could include fees as part of the costs on appeal. ***

We review for abuse of discretion a district court's imposition of an appeal bond, including its view that an appeal is frivolous. Sckolnick v. Harlow, 820 F.2d 13, 15 (1st Cir. 1987). Whether attorneys' fees may be part of the "costs on appeal" under Rule 7, however, presents a question of law accorded de novo review. See Riva v. Ficco, 615 F.3d 35, 40 (1st Cir. 2010); Adsani v. Miller, 139 F.3d 67, 71 (2d Cir. 1998).

In accounting for attorneys' fees in the appeal bond, the district court relied on our opinion in Sckolnick v. Harlow, 820 F.2d 13. There, we found a district court did not abuse its discretion by including fees in a bond because it concluded impliedly that "the appeal might be frivolous and . . . an award of sanctions against plaintiff on appeal was a real possibility." Id. at 15. Here, however, we need not evaluate the district court's finding of frivolity because we affirm the issuance of the bond on an alternative ground. See P.R. Ports Auth. v. Umpierre-Solares, 456 F.3d 220, 224 (1st Cir. 2006) ("We may affirm a district court decision on any ground supported by the record."). In doing so, we endorse the majority view that a Rule 7 bond may include appellate attorneys' fees if the applicable statute underlying the litigation contains a fee-shifting provision that accounts for such fees in its definition of recoverable costs and the appellee is eligible to recover them. See Azizian v. Federated Dep't Stores, Inc., 499 F.3d 950 (9th Cir. 2007); In re Cardizem CD Antitrust Litig., 391 F.3d 812 (6th Cir. 2004); Pedraza v. United Guar. Corp., 313 F.3d 1323 (11th Cir. 2002); Adsani, 139 F.3d 67.

As the Second, Sixth, Ninth, and Eleventh Circuits have found, there are several reasons to support our holding. First, Rule 7 does not define the term "costs on appeal." Although the American rule establishes that each party to a litigation is responsible for paying its own attorneys' fees, several statutes enacted prior to both the 1968 adoption of the Federal Rules of Appellate Procedure and the 1979 amendment to Rule 7 contain exceptions to the American rule and define costs recoverable to include fees. See Marek v. Chesny, 473 U.S. 1, 7-8 (1985). Courts understand these fee-shifting statutes to account for appellate fees as well. Azizian, 499 F.3d at 958; see also Farmington Dowel Prods. Co. v. Forster Mfg. Co., 421 F.2d 61, 91 & n.2 (1st Cir. 1970) (noting that Clayton Act, which includes fee-shifting provision comparable to RICO, allows a plaintiff to recover appellate fees if he sustains on appeal a district court judgment of a violation). It is presumed that the Rule drafters were aware of these statutes and understood "costs" under Rule 7 to provide for these fees when applicable. See Adsani, 139 F.3d at 73; see also Marek, 473 U.S. at 8-9.

Supreme Court precedent supports this view. In Marek v. Chesney, 473 U.S. 1, the Court interpreted "costs" as stated in Federal Rule of Civil Procedure 68 to encompass attorneys' fees when a fee-shifting statute included the fees as part of the recoverable costs. ****

Second, our holding is not contrary to Federal Rule of Appellate Procedure 39. Rule 39, entitled "Costs" establishes: (a) against whom costs may be assessed, (b) the circumstances under which costs may be assessed for or against the United States, (c) costs for brief and appendix copies, (d) the procedure for claiming costs, and (e) costs on appeal that are taxable in the district court. Dziemit argues that the list of taxable costs in subdivision (e), which does not include attorneys' fees, defines "costs" for Rule 7 purposes and limits the universe of costs that may be awarded on appeal. We are unconvinced. No part of Rule 39 purports to define costs; each concerns only the procedures for taxing them. Adsani, 139 F.3d at 74. Further, the Rule does not limit "costs on appeal" under Rule 7. The advisory committee's note at the adoption of the Rules explains that "[t]he costs described in [Rule 39(e)] are costs of the appeal and, as such, are within the undertaking of the appeal bond." Fed. R. App. P. 39(e) advisory committee's note (1967) (emphasis added). We understand this to mean that the costs delineated in Rule 39(e) "are among, but not necessarily the only, costs available on appeal" or for a bond. Azizian, 499 F.3d at 958.

[Footnote] 11. Rule 39(e) reads:

The following costs on appeal are taxable in the district court for the benefit of the party entitled to costs under this rule:

(1) the preparation and transmission of the record;

(2) the reporter's transcript, if needed to determine the appeal;

(3) premiums paid for a supersedeas bond or other bond to preserve rights pending appeal; and

(4) the fee for filing the notice of appeal.

[Footnote] 12. We acknowledge that earlier editions of some treatises stated that attorneys' fees were outside the scope of a Rule 7 bond. See Hirschensohn v. Lawyers Title Ins. Corp., No. 96-7312, 1997 U.S. App. LEXIS 13793, at *6 (3d Cir. June 10, 1997) (unpublished) (citing 20 James Wm. Moore, et al., Moore's Federal Practice, § 339.41 (3d ed. 1997); 16A Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 3953 (2d ed. 1996)). More recent editions, however, merely acknowledge the circuit split without endorsing a position. See, e.g., 16A Charles Alan Wright et al., Federal Practice & Procedure § 3953 (4th ed. 2008).

Third, although two cases, one from the D.C. Circuit and one from the Third Circuit, have found Rule 39(e) to restrict the costs calculable for Rule 7 purposes, the cases presented distinguishable circumstances since neither involved a fee-shifting statute. Adsani, 139 F.3d at 73-74; see In re Am. Presidential Lines, Inc., 779 F.2d 714 (D.C. Cir. 1985); Hirschensohn, 1997 U.S. App. LEXIS 13793, at *7 (finding Virgin Island statute did not provide for appellate attorneys' fees). Moreover, the D.C. Circuit has since concluded that Rule 39 "costs" taxable in the district court do include appellate attorneys' fees when the statute underlying the appeal allows the recovery of the fees as part of costs. See Montgomery & Assocs., Inc. v. Commodity Futures Trading Comm'n, 816 F.2d 783, 784 (D.C. Cir. 1987).

Applied here, we find no error of law in the inclusion of attorneys' fees for Dziemit's Rule 7 bond. Under the RICO statute, "Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee" (emphasis added). 18 U.S.C. § 1964(c). We assume for present purposes that appellate fees are part of the fees calculable as costs under RICO; Dziemit does not argue that this is not so, thereby waiving the argument, neither party has briefed the issue, and we have found no authority to counter our assumption. IFC proved below a RICO injury and defends the finding on appeal. We therefore see no reason why Dziemit's appeal bond may not include IFC's anticipated appellate fees.

Dziemit argues that to allow for the inclusion of attorneys' fees in appeal bonds will chill unsuccessful litigants from pursuing their right to appeal district court decisions. This reasoning is unpersuasive. Any bond imposed pursuant to Rule 7 burdens an appeal to some degree, yet we presume that Rule 7 is valid. See Adsani, 139 F.3d at 76. To the extent that a bond may impermissibly burden an appeal, a litigant can move us to stay the bond or to reduce its amount. Here, we are satisfied that Dziemit's rights were not hampered.

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