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Andresen v. International Paper Company

United States District Court, C.D. California

June 10, 2015



CHRISTINA A. SNYDER, District Judge.


DEFENDANT'S APPLICATION TO TAX COSTS (Dkt. No. 246, filed April 17, 2015)




On February 13, 2013, plaintiffs Jared Andresen ("Andresen"), Yeghia Bekiarian ("Bekiarian"), and John Duffy ("Duffy") filed a lawsuit against their former employer International Paper Company ("IP" or "defendant") and Does 1 through 50 in Los Angeles County Superior Court. See Dkt. #1. Defendant removed the action to this Court on March 22, 2013, on the basis of diversity jurisdiction. Id. The Second Amended Complaint ("SAC"), filed on July 12, 2013, asserted claims on behalf of all three plaintiffs for (1) failure to pay vested vacation wages upon termination, in violation of Cal. Labor Code § 227.3; (2) waiting time penalties in violation of California Labor Code §§ 202, 203; (3) violations of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200 et seq.; and (4) violations of record-keeping provisions in California Labor Code § 226. Dkt. #21. The SAC also alleged claims on behalf of Andresen and Duffy for failure to pay commission-based wages in violation of several provisions of the California Labor Code. Finally, the SAC asserted claims on behalf of Andresen only for breach of contract and promissory estoppel with regard to severance pay allegedly owed to Andresen. Id. In a related action consolidated with this case for purposes of trial, Daniel Farris v. International Paper Inc., et al., 5:13-cv-00485-CAS-SP (C.D. Cal. filed Mar. 15, 2013), Daniel Farris ("Farris") brought similar claims against IP for unpaid vacation wages and waiting time and record-keeping penalties.

A jury trial began on December 2, 2014 and the first of two anticipated trial phases concluded on December 12, 2014. The jury rendered a verdict, and the Court entered judgment, (1) in favor of defendant on all plaintiffs' claims for vacation wages and waiting time penalties, (2) in favor of defendant on Andresen's claim for severance pay, and (3) in favor of Duffy on Duffy's claim for failure to pay commissions in the amount of $8, 148.48. Dkt. No. 244 at 1-2. The second trial phase was to adjudicate IP's counterclaim and third party complaint against Bekiarian for his alleged responsibility for any accrued but unpaid vacation for which IP was found liable, as well as Bekiarian's counterclaim for indemnification. In light of the jury's verdict, the second phase did not proceed. Id. at 1. The Court dismissed the jury on December 15, 2014, and dismissed IP's counterclaim and third party complaint on December 16, 2014. Id. The Court entered final judgment on April 2, 2015. Id.

On May 18, 2015, the Court held a hearing on motions and applications for costs and fees filed by IP and Duffy. With leave of Court, the parties submitted supplemental briefing addressing issues raised in the Court's tentative order. Dkt. Nos. 284, 285. Having considered the parties' arguments, the Court finds and concludes as follows.


A. Background

On April 17, 2015, defendant filed an application to tax costs as the prevailing party. Dkt. No. 246. As amended after a settlement with Farris, defendant seeks a total of $118, 982.81. Dkt. No. 272-1 at 2. On April 24, 2015, Andresen, Bekiarian, and Duffy (collectively "plaintiffs" for purposes of Section II) filed general and specific objections to defendant's original application. Dkt. No. 260. On April 30, 2015, defendant filed a response to plaintiffs' objections. Dkt. No. 264.

Pursuant to this Court's Local Rules, certain items may be taxed as costs only "[u]pon order of the Court." C.D. Cal. L.R. 54-3.12. On April 17, 2015, defendant filed a motion to recover costs for trial graphics used in its opening and closing statements and for a "hot seat" vendor that electronically displayed exhibits at trial and assisted with trial graphic design. Dkt. No. 245 at 1. Defendant made this motion pursuant to a Local Rule that states that the Court "may" tax costs including "charts, diagrams, and other visual aids reasonably necessary to assist the jury or the Court in understanding the issues at trial." C.D. Cal. L.R. 54-3.12(a). Defendant seeks $57, 036.94 in such "other costs." Dkt. No. 272-1 at 2. Plaintiffs filed an opposition to this motion on April 27, 2015. Dkt. No. 261. Defendants replied on May 4, 2015. Dkt. No. 268. On May 12, 2015, plaintiff filed a notice of new authority in support of their opposition and objections. Dkt. No. 277. Defendant responded to this notice of new authority on May 14, 2015. Dkt. No. 279. After considering the parties' arguments, the Court finds and concludes as follows.

B. Analysis

Plaintiffs make similar general arguments in opposition to defendant's application to tax costs and motion to recover costs pursuant to Local Rule 54-3.12. The Court first addresses these arguments, then turns to plaintiffs' specific objections to various cost items claimed by defendant.

1. Federal Law Governs the Award of Costs in This Case.

Defendant argues that federal procedural law entitles it to recover costs in this action. Plaintiffs argue that defendant is not entitled to recover costs because the governing statute is California Labor Code 218.5, which provides in part:

In any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, the court shall award reasonable attorney's fees and costs to the prevailing party if any party to the action requests attorney's fees and costs upon the initiation of the action. However, if the Page 3 of 25 prevailing party in the court action is not an employee, attorney's fees and costs shall be awarded pursuant to this section only if the court finds that the employee brought the court action in bad faith.

Cal. Labor Code § 218.5(a) (emphasis added). On this choice of law issue, the Court agrees with defendant.

"An award of standard costs in federal district court is normally governed by Federal Rule of Civil Procedure 54(d), even in diversity cases." Champion Produce, Inc. v. Ruby Robinson Co., Inc., 342 F.3d 1016, 1022 (9th Cir. 2003) (citing In re Merrill Lynch Relocation Mgmt., Inc., 812 F.2d 1116, 1120 n.2 (9th Cir. 1987)); see also 10 Wright & Miller, Federal Practice & Procedure § 2669 (3d ed. Apr. 2015) ("The award of costs is governed by federal law."). Rule 54(d) provides in relevant part: "Unless a federal statute, these rules, or a court order provides otherwise, costs-other than attorney's fees-should be allowed to the prevailing party." Fed.R.Civ.P. 54(d)(1).

Plaintiffs do not argue that a federal statute, Federal Rule of Civil Procedure, or court order overrides Rule 54(d) in this case. Rather, plaintiffs contend that costs should be governed by state law because "[f]ederal courts sitting in diversity apply state substantive law and federal procedural law.'" Dkt. No. 260 at 2 (quoting Feldman v. Allstate Ins. Co., 322 F.3d 660, 666 (9th Cir. 2003) (citing Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938))). But the award of costs is a procedural matter. See, e.g., BlueEarth Biofuels, LLC v. Hawaiian Elec. Co., Inc., Civil No. 09-00181 DAE-KSC, 2011 WL 4369303, at *2 n.1 (D. Haw. Aug. 24, 2011) ("Although federal jurisdiction in this case is based upon diversity, because the taxation of costs pursuant to FRCP 54(d)(1) is a procedural matter, federal law applies."); Kolb v. Turner, No. 1:07-cv-0262 OWW DLB, 2008 WL 5478575, at *13 (E.D. Cal. Dec. 31, 2008) ("Costs, as a general matter, are procedural in nature such that an award of costs is governed by federal, not state, law."). As one district court has summarized, "a federal court sitting in diversity... will award costs in accordance with federal law unless a state provision allows for the awarding of costs as part of a substantive, compensatory damages scheme." Kelly v. Echols, No. CIV F05118 AWI SMS, 2005 WL 2105309, at *16 (E.D. Cal. Aug. 30, 2005).

Applying this rule, one court within the Ninth Circuit has rejected plaintiffs' precise argument. In Drumm v. Morningstar, Inc., the plaintiff argued that California Labor Code section 218.5, rather than Rule 54(d), governed the award of costs when he prevailed on his claim that his employer had failed to pay out vested vacation time. 695 F.Supp.2d 1014, 1026-27 (N.D. Cal. 2010). The court disagreed, reasoning, "[s]ince the awarding of costs here is procedural, not substantive, federal law governs, " and rejecting the argument that section 218.5's cost provision constituted a compensatory damages scheme. Id. at 1027. Another district court sitting in California subsequently applied Rule 56(d)(1) to a request for costs where an employer prevailed on Labor Code claims. See Johnson v. Hewlett-Packard Co., No. C 09-03596, 2014 WL 3703993, at *1, 6 (N.D. Cal. July 24, 2014).

Plaintiffs dismiss Drumm and Johnson as irrelevant because they applied a version of Labor Code section 218.5 in effect before amendments made its standard for awarding costs asymmetrical. Previously, section 218.5 directed costs to be awarded to the prevailing party so long as "any party to the action request[ed] attorney's fees and costs upon the initiation of the action." Cal. Labor Code § 218.5 (West 2012) (effective Jan. 1, 2001 to June 30, 2012). As amended, section 218.5 allows an employer to recover costs "only if... the employee brought the court action in bad faith." But the Court fails to see how this amendment undermines Drumm, which concluded that federal law applied because the California statute "simply requires a court to award reasonable attorney's fees and costs to the prevailing party, '" rather than making costs "an element of damages for an unpaid wage claim under California law." Drumm, 695 F.Supp.2d at 1027 (emphasis in original). The section 218.5 language quoted by the Drumm court has not changed, and the subsequent amendments in no way indicate that an award of costs is now "an element of damages."

A comparison with the Ninth Circuit case on which plaintiffs rely makes this point clear. In Clausen v. M/V New Clarissa, the court determined that expert witness fees were governed by Oregon law because the choice of law was "between a federal cost provision, and a state damages provision that permits prevailing plaintiffs under the Oil Spill Act to recover costs of any kind' as one element of its compensatory damages." 339 F.3d 1049, 1064 (9th Cir. 2003) (emphasis in original) (quoting Or. Rev. Stat. § 468.300(6). The statute at issue in Clausen states: "Damages' includes damages, costs, losses, penalties or attorney fees of any kind for which liability may exist under the laws of this state resulting from, arising out of or related to the discharge or threatened discharge of oil." Or. Rev. Stat. § 468.300(6)). Because of this express definition of "damages" as including "costs, " the choice of law issue in Clausen was controlled by the well-settled principle that "[t]he measure of damages is a matter of state substantive law.'" Clausen, 339 F.3d at 1065 (quoting Barbier v. Shearson Lehman Hutton Inc., 948 F.2d 117, 122 (2d Cir. 1991)). Although plaintiffs argue that Labor Code section 218.5 similarly makes costs an element of damages, the statute's actual language ("the court shall award reasonable attorney's fees and costs to the prevailing party") is a far cry from the explicit definition of "costs" as part of "damages" in Clausen, and much closer to the language of Rule 54(d)(1) itself ("costs... should be allowed to the prevailing party"). Further, it is difficult to see how section 218.5's "costs" can be properly considered "damages" when defendants can recover them in cases brought in bad faith. Plaintiffs cite no federal case applying Labor Code section 218.5 to costs instead of Rule 54(d), and the Court sees no reason to depart from the general rule, applied by the Drumm court in a materially indistinguishable case, that federal law governs whether costs should be awarded.

The Court is not persuaded to the contrary by plaintiffs' citation of Williams v. Chino Valley Independent Fire District, 61 Cal.4th 97 (2015). In that case, the California Supreme Court held that a different statute-California Government Code 12965(b), part of the Fair Employment and Housing Act (FEHA)-is "an express exception to [California] Code of Civil Procedure 1032(b) and the former, rather than the latter, therefore governs cost awards in FEHA cases." Williams, 61 Cal.4th at 105.[1] Williams is inapposite because it did not discuss any Labor Code provision and, with regard to the statute it did analyze, held only that the statute is an exception to California Code of Civil Procedure 1032(b), not that it is substantive for Erie purposes or a "compensatory damages" provision within the meaning of Clausen. Further, that the court discussed as persuasive authority federal cases analyzing whether federal statutes such as Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act contain fee or cost-shifting mechanisms that create exceptions to the general rule in Rule 54(d) is of no moment because here, there is no federal statute that could be said to conflict with Rule 54(d).

Finally, plaintiffs argue that the Court should apply state law instead of Rule 54(d) in order to discourage forum shopping. But the Ninth Circuit has stated that although "[t]here may be unusual cases... in which litigation costs are so large" that they constitute a significant incentive to litigate in federal court, "in ordinary cases other factors, like impartiality and speed of the court system, determine the choice of forum, and we design the choice of law rule for the ordinary case, not a hypothetical one." Aceves v. Allstate Ins. Co., 68 F.3d 1160, 1168 (9th Cir. 1995); see also 10 Wright & Miller § 2669 ("Variations between state and federal practice in the assessment of costs after the case has been disposed of do not appear likely to promote forum shopping or to affect the outcome of the litigation' in any significant way and therefore employing federal law does not violate the underlying policies of the Erie principle."). For these reasons, the Court concludes that Federal Rule of Civil Procedure 54(d)-not state law-governs defendant's application and motion for costs.

2. Defendant Is Entitled to Recover Costs Under Federal Law.

"Rule 54(d)(1) creates a presumption in favor of awarding costs to the prevailing party, but the district court may refuse to award costs within its discretion." Champion Produce, 342 F.3d at 1022. The burden falls on the losing party to demonstrate why costs should not be awarded. Stanley v. Univ. of S. Cal., 1789 F.3d 1069, 1079 (9th Cir. 1999). A district court "must specify reasons' for its refusal to tax costs to the losing party, " but "need not give affirmative reasons for awarding costs." Save Our Valley v. Sound Transit, 335 F.3d 932, 945 (9th Cir. 2003) (emphasis in original) (quoting Assoc. of Mexican-American Educators v. California, 231 ...

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