Commercial Litigation and Arbitration

Are Attorneys’ Fees Includable in a Bond Issued under Federal Rule of Appellate Procedure 7? — Circuit Split — Potential Fed.R.App.P. 38 Sanctions for Frivolous Appeal Are Not Includable within Bond

Rossi v. Proctor & Gamble Co., 2014 U.S. Dist. LEXIS 34180 (D.N.J. Mar. 17, 2014):

1.  Attorneys' Fees

Circuits are split on the question of whether or not to include attorneys' fees in a bond issued under Federal Rule of Appellate Procedure 7. See Azizian v. Federated Dep't Stores, Inc., 499 F.3d 950, 955 (9th Cir. 2007). The Second, Sixth, Eleventh, and Ninth Circuits all hold that it is within a district court's discretion to include projected  [*4] attorneys' fees in an appeal bond made pursuant to Rule 7. See id. at 955, 958. However, the D.C. Circuit and Third Circuit have both held that "that Rule 7 does not authorize a bond to cover estimated costs of attorneys' fees."  Hirschensohn, 1997 WL 307777, at *3.

In particular, in Hirschensohn v. Lawyers Title Ins. Corp., the Third Circuit held "that attorneys' fees are distinct from the 'costs' defined by Rule 39." (Id. at *2). In doing so, the Court differentiated cases, such as this one, where the rule in question contains a detailed description of "costs," from cases like Marek v. Chesny, where the rule in question contains no definition of "costs." Compare id. at *2, with Marek v. Chesny, 473 U.S. 7, 9 (1985) (holding that "costs" under Fed. R. of Civ. P. 68 "refer[s] to all costs properly awardable under the relevant substantive statute or other authority" including attorneys' fees); but see Adsani v. Miller, 139 F.3d 67, 74 (2d Cir. 1998) (holding that "Hirschensohn does not address the case where . . . an independent  [*5] federal statute explicitly authorizes attorney's fees 'as part of the costs' both at trial and upon appeal . . . ."). Although Hirschensohn is an unreported decision, its reasoning remains sound. Thus, the Court sees no reason to deviate from the Third Circuit's practice of excluding attorneys' fees from Rule 7 appeal bonds.


3.  Costs and Damages for Frivolous Appeal

Finally, Plaintiff argues that, "[w]here a district court believes that the recovery of sanctions and fees is possible under Rule 38, such amount should be considered in the assessment of an appeal  [*6] bond." (Pl. Br. in Supp. of Mot. 10.) Plaintiff's argument fails for two reasons.

First, following the logic of Hirschensohn, only those costs enumerated in Rule 39 may be considered by the court in issuing an appeal bond under Rule 7. See Hirschensohn, 1997 WL 307777, at *2-*3. Because prospective damages and costs for frivolous appeals are not enumerated in Rule 39, they are not includable in a Rule 7 appeal bond.

Second, Rule 38 provides that, "[i]f a court of appeals determines that an appeal is frivolous, it may . . . award just damages and single or double costs to the appellee." Fed. R. App. P. 38 (emphasis added). Plaintiff's argument fails because Rule 38, by its very terms, applies to courts of appeal-not district courts. Plaintiff cites no binding legal authority suggesting that a district court may step into the shoes of an appellate court to decide whether an appeal is frivolous under Federal Rule of Appellate Procedure 38. This Court therefore determines that it has no authority to include prospective costs and damages under Rule 38 in a Rule 7 appeal bond.

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