Appeal Bonds,  Appellate Procedure,  Attorney Fees,  Costs

Ninth Circuit: Anticipated Attorney Fees on Appeal Can be Considered in Calculation of Appeal Cost Bond — Sometimes

In Azizian v. Wilkinson, case no. 05-15847 (August 23, 2007), the Ninth Circuit faced, for the first time,  an issue on which other circuits have split: “whether, or under what circumstances, appellate attorney’s fees are ‘costs on appeal’ that a district court may require an appellant to secure in a bond ordered under Federal Rule of Appellate Procedure 7.”  It provides its conclusion at the outset of the opinion:

We conclude that a district court may require an appellant to secure appellate attorney’s fees in a Rule 7 bond, but only if an applicable fee-shifting statute includes them in its definition of recoverable costs, and only if the appellee is eligible to recover such fees.

Appellant Wilkinson is a class member who objected to the class action settlement approved by the district court between the certified class of consumers and a number of retail stores accused of antitrust violations with respect to cosmetics.  She appealed from the order approving the settlement.

Plaintiffs sought a bond under FRAP 7 of nearly $13 million, which included a $600,000 component for twice the plaintiffs’ anticipated attorney fees on appeal.  FRAP 7 provides that 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.”

The district court ordered a bond of only $42,000, but it included a $40,000 appellate attorney fee component.  It reasoned that appellate attorney fees could be considered “costs” on appeal because: “(1) the fee-shifting provision in Section 4 of the Clayton Act, 15 U.S.C. § 15, defines attorney’s fees as among the costs recoverable, and (2) ‘the Court of Appeals [was] likely to find that the instant ppeal[ ] [was] frivolous.’”

Regarding the district court’s first justification, the court goes through a very detailed analysis of the cases from other circuits, then states that “[w]e agree with the Second, Sixth, and Eleventh Circuits and hold that the term ‘costs on appeal’ in Rule 7 includes all expenses defined as ‘costs’ by an applicable fee-shifting statute, including attorney’s fees.” The court gave four reasons for its holding:

(1) FRAP 7 does not define “costs on appeal,” and multiple statutes already defined attorney fees as recoverable costs when FRAP 7 was adopted.  Thus, the court concludes that the drafters of the rule intended it to apply whenever a fee-shifting statute defines attorney fees as costs.

(2) FRAP 39, which governs the award of costs on appeal, does not contain any language that would prohibit the adopted approach.

(3) Statutes defining costs to include attorney fees should be taken “at their word.”

(4) Including fees on appeal in calculating the bond whenever they may be recovered as costs is consistent with the district court’s role in taxing “the full range” of costs on appeal after the case is transferred back to the district court at the conclusion of the appeal.

In the end, this doesn’t help these plaintiffs, however, because they are not eligible to recover fees under the fee-shifting statute at issue.  Thus, the court vacates the portion of the bond corresponding to attorney fees on appeal.

Note, too, that the Ninth Circuit rejected the second rationale of the district court: the likelihood that the appeal would be found frivolous, and thus the plaintiffs-appellees would be entitled to their attorney fees as a sanction.  The court finds that it is too difficult for the district court to judge the frivolousness of an appeal, and that large bonds based on this uncertainty could unjustifiably chill an appeal.  Finally, it notes that it is up to the Court of Appeals, rather than the district court, to award fees in the case of a frivolous appeal.

Bottom line: don’t forget to include anticipated attorney fees on appeal as a component of your request for a bond under FRAP 7 whenever the case involves a fee-shifting provision that includes attorney fees in the definition of recoverable costs to which you would be entitled.

ADDENDUM (8/23/07): The Ninth Circuit also notes that FRAP 7 is permissive. Thus, a district court is not required to include a fee component in a cost bond any time there is a fee shifting provision that makes the appellee eligible to recover its fees. Countervailing considerations, such as financial hardship that would unduly burden the right of appeal, may justify not incuding a fee component in the bond amount.

– Also read about contructions bonds.