Tiffany and Company v. Costco Wholesale Corporation

Background

Costco moved under Federal Rule of Appellate Procedure 39(e) and an order from the U.S. Court of Appeals for the Second Circuit to recover the premiums it paid for two bonds. The bonds secured a district-court judgment and an attorney-fee award while Costco appealed.

The district court had previously awarded Tiffany and Tiffany (NJ) LLC summary judgment on liability, entered a $21,010,438.35 judgment in Tiffany’s favor, and later awarded Tiffany $5,861,507.83 in attorney’s fees and costs. Costco paid $147,324 in premiums for bonds securing those awards during the appeal. On August 17, 2020, the Second Circuit vacated the judgment and attorney-fee award in their entirety and remanded the case for trial. The district court later discharged the bonds.

On December 7, 2020, the Second Circuit granted Costco’s application for appellate costs in part, taxed $46,662.20 in costs in Costco’s favor, and ordered that Costco could seek its bond costs in the district court. Costco then filed this motion. Tiffany opposed it.

Rule 39 and the Second Circuit’s order

Rule 39(a)(4) provides that when an appellate judgment is vacated, costs are taxed as the appellate court orders. Rule 39(e)(3) identifies premiums paid for a bond or other security to preserve rights pending appeal as costs that may be taxed in the district court.

The court relied on the Second Circuit’s decision in a prior related proceeding, which held that the appellate court determines which party should bear appeal costs, while the district court taxes the costs that Rule 39(e) makes taxable there. Once the appellate court awards costs to a party without limitation, that party may seek both the costs taxed in the appellate court and the Rule 39(e) costs taxed in the district court.

The district court interpreted the Second Circuit’s order as awarding costs to Costco without limitation. In the court’s view, the Second Circuit could have denied Costco bond costs or limited the award but did not do so. The district court therefore concluded that it had to apply the appellate order rather than independently decide whether Tiffany should bear those costs.

Tiffany’s arguments

The court rejected Tiffany’s argument that the Second Circuit merely permitted Costco to ask for bond costs without requiring the district court to award them. It also rejected Tiffany’s contention that amendments to Rule 39 gave the district court discretion to refuse bond costs after the appellate court had awarded costs. The court concluded that the 1998 amendments were intended to be stylistic and did not make a substantive change.

The court also rejected Tiffany’s argument that taxation of the bond costs should wait until the case was resolved on remand. The Second Circuit’s order did not say that Costco had to wait, and the court stated that an appellate cost award is effective immediately and does not depend on the ultimate result of the case after remand.

The court further ruled that the timing requirements in Federal Rule of Civil Procedure 54 did not apply because Costco’s request was based on Rule 39(e), not Rule 54. It also concluded that the Southern and Eastern Districts of New York’s local rule concerning affidavits for ordinary district-court costs did not govern Rule 39 bond costs.

Finally, the court stated that the bond premiums were reasonably necessary because Costco used the bonds to prevent enforcement of the judgment while it appealed. Even if the court had discretion, it said it would award the bond costs to Costco. The court considered it irrelevant that Tiffany might ultimately prevail in the trial proceedings on remand.

Disposition

The court held that Costco’s supersedeas-bond costs were taxable under Rule 39(e), found no dispute about the amount Costco paid, and granted Costco’s application. Tiffany was taxed $147,324.00 in bond costs.