City of San Antonio, Texas v., L.P.

LII note: the oral arguments in City of San Antonio, Texas v., L.P. are now available from Oyez. The U.S. Supreme Court has now decided City of San Antonio, Texas v., L.P. .


May district courts deny or reduce appellate costs deemed “taxable” under the Federal Rules of Appellate Procedure?

Oral argument: 
April 21, 2021

This case asks the Supreme Court to decide whether district courts have the discretion to adjust “taxable” appellate costs under Federal Rule of Appellate Procedure 39(e). In 2006, a district court entered judgment for Petitioner City of San Antonio and taxed appellate costs against Respondent In 2017, the Court of Appeals for the Fifth Circuit vacated the district court judgment and ordered the City of San Antonio to pay appellate costs to The City of San Antonio argues that the permissive language of “taxable” in Rule 39(e) and the bifurcated structure of the subdivisions of Rule 39 justify district courts’ discretionary authority to adjust appellate costs after the appellate court has determined which parties are entitled to costs. argues that the mandatory language of Rule 39(e) justifies the Fifth Circuit’s decision and that appellate courts are better equipped to determine the question of appellate costs. The outcome of this case has implications for the allocation of appellate costs between parties in litigation where appellate bonds, penalties, and interest can reach millions of dollars, as well as the efficiency of court proceedings concerning the determination of appellate costs.

Questions as Framed for the Court by the Parties 

Whether, as the U.S. Court of Appeals for the 5th Circuit alone has held, district courts “lack[] discretion to deny or reduce” appellate costs deemed “taxable” in district court under Federal Rule of Appellate Procedure 39(e).


In 2006, the City of San Antonio filed a class action lawsuit against online travel companies (“OTCs”), including, Hotwire, Orbitz, and Travelocity, for failure to pay municipal hotel occupancy taxes in full. City of San Antonio v., L.P. (2020) at 162. The lawsuit was brought on behalf of 173 Texas municipalities and claimed that the OTCs were underpaying hotel occupancy taxes included in hotel reservations facilitated by the online services. Id. In 2011, a federal district court ordered the OTCs to pay occupancy taxes on the hotel reservations they facilitated, and found that the hotel occupancy tax applies to the retail room rate, not the negotiated discounted room rate. Id. The district court denied the OTCs’ motion to amend its decision and entered a final judgment against the OTCs. Id. After the OTCs requested appeal bonds, the district court approved the amount requested and stayed the judgment until the resolution of all post-judgment motions. Id. Between May 2013 and November 2014, the OTCs filed their appeal bonds three times. Id. In 2016, the district court resolved the matter by denying the OTCs’ remaining post-judgment motions and entering a judgment of $84,123,089 in penalties, unpaid taxes, and interest against the OTCs. Id. at 162–63.

In 2007, the City of Houston similarly sued OTCs seeking damages and penalties for unpaid hotel occupancy taxes on the retail rates that exceed the discounted rates that hotels invoiced OTCs for listing hotel rooms on their website. City of Houston v., L.P. at 708, 710. In contrast to the City of San Antonio case, the state trial court granted the OTCs’ summary judgment against the City of Houston. Id. The City of Houston appealed the trial court’s legal finding that the ordinance and resolution imposing hotel occupancy taxes applied to the discounted rate instead of the retail rate of the hotel reservation. Id. at 715–16. In 2011, the Court of Appeals for the Fourteenth Circuit concluded that the trial court correctly interpreted the local ordinance and resolution at issue and affirmed the trial court’s judgment in favor of the OTCs. Id. at 718.

In 2017, the Court of Appeals for the Fifth Circuit (“Fifth Circuit”) vacated the district court’s judgment against the OTCs and found the state court’s decision controlling on the tax issue. City of San Antonio v., L.P. (2017) at 724. The Fifth Circuit ordered the City of San Antonio to pay the OTCs the “costs on appeal to be taxed by the Clerk of this Court.” City of San Antonio v., L.P. (2020) at 163. The district court subsequently entered a final judgment for the OTCs, “releasing all supersedeas bonds, and awarding costs to the OTCs as the prevailing parties.” Id. The OTCs filed a bill of costs in the district court, including $2,008,359 for the OTCs’ appeal bond premiums and “post-judgment interest” to be paid by the non-prevailing party. Id. The City of San Antonio urged the district court to reduce the amount of premiums from the bill of costs. Id. The district court denied the City of San Antonio’s request for a payment reduction and entered a bill of costs against the city for $2,226,724.37. Id. The City of San Antonio appealed the appeal bond cost amount to the Fifth Circuit. Id. In May 2020, the Fifth Circuit affirmed the district court’s denial. Id. at 167.

The City of San Antonio then petitioned for a writ of certiorari to appeal the issue before the Supreme Court of the United States, and on January 8, 2021, the Court granted certiorari.



Petitioner City of San Antonio (“San Antonio”) argues that the text and structure of Rule 39(e) of the Federal Rules of Appellate Procedure afford district courts discretion to “reduce or deny cost awards.” Brief for Petitioner, City of San Antonio at 13–14. San Antonio argues that the word “taxable” in Rule 39(e) is permissive, as it denotes the possibility of being taxed but “does not compel a district court to award anything.” Id. Citing the Fifth Circuit in Sioux, San Antonio argues that the Fifth Circuit relied on an outdated version of Rule 39(e) that explicitly stated that costs “shall be taxed in the district court.” Id. at 14. However, since such mandatory language was removed by Rule 39(e)’s 1998 amendment, San Antonio argues that there is no ground to justify the Fifth Circuit’s ruling in Sioux. Id. Hence, San Antonio contends that the advisory committee responsible for drafting the amendment preserved the district court’s discretionary power by selecting a permissive term in the Rule and omitting a mandatory one. Id. at 19. Pointing to Rule 54(d)(1) and Section 1920, San Antonio further asserts that there are multiple ways to grant courts discretion over costs. Id. San Antonio argues that Rule 39(e) confers district courts discretion over costs even without the permissive phrase “unless the court orders otherwise” found in Rule 54(d)(1) because including such phrase would have posed problems unique to Rule 39(e). Id. at 18–19. Specifically, San Antonio argues that including “unless the court orders otherwise” in Rule 39(e) would have unnecessarily disrupted its purpose by (1) overpowering district courts, and (2) permitting litigants to seek appellate costs at appellate courts, which would upset the appellate court’s Rule 39(a) determination concerning which parties are taxed. Id. at 19. In other words, San Antonio contends that inserting such a clause in Rule 39(e) would have impermissibly granted district courts power to award costs to parties not entitled to those costs under Rule 39(a). Id.

Respondent counters that the inclusion of the word “taxable” in Rule 39(e) does not confer district courts discretion over costs. Brief for Respondents,, L.P. et al. at 19. argues that the lack of an express mandatory term in Rule 39(e) is not evidence of a conferral of discretion over costs. Id. at 20­. Instead, asserts that a lack of discretion can be inferred by looking at other language in the Rule, such as mention of the appellate court’s “sole authority” to determine award of full appellate costs, the district court’s duty to act “for the benefit of the party entitled to costs,” and lack of the phrase “unless the court orders otherwise.” Id. at 30. argues that district courts do not have discretion to determine costs because Rule 39(a) and other Federal Rules of Appellate Procedure include a default rule: the entitlement determined in district court depends on the outcome of the appeal. Id. at 20­–21. therefore contends that appellate courts possess the sole authority to decide whether a party is entitled to costs. Id. at 20­–21. also argues that San Antonio overestimates the weight of the 1998 amendment following the decision in Sioux because the advisory committee responsible for drafting the amendment stated the change in language was intended only to be “stylistic” and not substantive. Id. at 32. also contends that Rule 39(e) omits the permissive phrase “unless the court orders otherwise,” despite its presence in other subdivisions of Rule 39, which strongly suggests that the drafters of the rule did not intend that discretionary authority over costs be vested in district courts. Id at 26.


San Antonio argues that Rule 39(a) was not intended to vest appellate courts with sole discretionary authority over costs because it would leave district courts with largely perfunctory tasks in awarding costs. See Brief for Petitioner at 16–17. Specifically, San Antonio contends that if Rule 39(a) is understood to only authorize appellate courts to award Rule 39(e) costs, then there would be no reason to remand the issue to the district courts to enter a ministerial order over the costs. Id. at 17. San Antonio asserts that ignores the structure of Rule 39, which proceeds in two distinct stages: (1) Rule 39(a) gives appellate courts authority over determining who receives cost awards (2) and then Rules 39(c)-(e) authorize courts in collateral proceedings to decide “what costs are available and how those costs must be taxed.” Id. at 18.

San Antonio further argues that appellate courts are poorly positioned to determine issues relevant to the collateral issues of Rule 39(e) at the time of Rule 39(a)’s initial determination because appellate courts have not yet determined what costs are relevant. Id. Since the Rule 39(a) determination at the appellate level occurs before costs have even been requested, San Antonio asserts that the Rule 39(e) determination must occur at the district court on remand after costs have been formally requested by the parties. Id. at 17–18. In light of the bifurcated structure of Rule 39, San Antonio argues that district courts are in a better position to determine what costs are relevant and the weight afforded to each side’s arguments. Id. argues that the district court only has a ministerial duty to judicially determine the correct amount of the prevailing party’s costs under Rule 39(e). Brief for Respondents at 27. asserts that because the language in Rule 39(e) uses “taxed in the district court,” rather than “taxed by the district court,” the role of district courts regarding costs is a modest one and is limited to a “clerical matter that can be done by the court clerk.” Id. at 28. Specifically, contends that district courts play a “largely ministerial role” confined to merely determining “the amounts incurred in each Rule 39(e) category,” which may require no involvement whatsoever by the district court judge. Id. at 28–29. also argues that the logical extension of the division between Rule 39(a) and Rule 39(e) only leads to the conclusion that district courts should not upset the appellate court’s decision on cost entitlement. Id. at 24. maintains that appellate courts have the authority to determine entitlements to costs and district courts have no authority to object to or decline those assessments. Id. at 24–25. further asserts that appellate courts are better-positioned to determine “entitlement to all categories of appellate costs.” Id. at 38–39. contends that parties routinely make arguments for and against costs in the court of appeals. Id. at 41. argues that San Antonio’s proposed argument will upend the orderly administration of Rule 39 by permitting district courts to deviate from appellate courts’ final determinations regarding equitable questions. Id. at 40. also argues that San Antonio overstates the significance of non-circuit appellate decisions in its claim of a widespread practice regarding district court assessment of costs. Id. at 44.



A group of organizations affiliated with local governments (collectively “local government organizations”), in support of the City of San Antonio, contend that reductions of taxable appellate costs are appropriate in light of the financial burden large appellate bond premiums impose on litigants. See Brief of Amici Curiae National Association of Counties et al., in Support of Petitioner at 10–13. The local government organizations assert that local governments are frequently a party to litigation and thus subject to substantial taxable appellate costs that include sizeable appellate bond premiums. Id. at 13. The local government organizations contend that significant considerations unique to litigation at the trial court level may compel a court to reduce or deny appellate costs, such as parties’ relative abilities to pay and the public policy concerns for indigent litigants. Id. at 16–17. The local government organizations argue that many of these considerations arise only in district court after testimony and evidence have been introduced before the fact finder and that these considerations bear directly on the amount of appellate costs a party has the ability to pay. Id. at 16–18. The local government organizations specifically argue that the district court should retain discretion in taxing appellate costs to parties after firsthand consideration of the cost amounts, the losing party’s good faith, the strength and importance of the unsuccessful legal positions, the reasons for the incurred costs, and the losing party’s ability to pay. Id. at 17–18. argues that the substantial appellate bond premiums are appropriately included in taxable appellate costs because each party in this case knew that if the district court judgment was reversed on appeal, the bond premiums would be recovered as litigation costs. Opposition Brief for Respondents,, L.P. et al. at 17. also contends that appellate courts already weigh equitable considerations, including “the nature and significance of the result of the appeal,” when awarding appellate costs, so subsequent appellate cost adjustments would be a “recipe for wasteful litigation.” Id. at 41.


San Antonio argues that the Fifth Circuit’s holding will contravene the design and purpose of Rule 39 by forcing litigants to dispute those matters on appeal and disrupt legal norms. Brief for Petitioner, City of San Antonio at 19. San Antonio argues that the issues pertaining to costs are generally fact intensive, making appellate courts ill-equipped to handle those issues. Id. at 20. Thus, because appellate courts typically do not hear testimony, create a factual record, or resolve factual disputes in the first instance, San Antonio concludes that forcing litigants to bring cost issues in appellate courts is improper. Id. at 20–21. San Antonio argues that there is no proper mechanism for disputing cost issues at the appellate level in any other circuit court of appeals. Id. at 26. Further, San Antonio contends that every other appellate court in this country follows the approach contrary to the Fifth Circuit, instead delegating the role of Rule 39(e) cost resolution to district courts. Id. at 25. San Antonio thus argues that following the Fifth Circuit’s reasoning will disrupt the nationwide legal norm. Id. at 27. disputes the claim that a national norm exists to support district court discretion over costs, and argues that only one circuit court of appeals case has decided in favor of district court discretion. Brief for Respondents,, L.P. et al. at 44. asserts that its position is supported by a plain reading of the federal rule’s text, which clearly states that only appellate courts have discretion to modify appellate cost awards. Opposition Brief for Respondents at 18. argues that appellate court discretion over appellate costs is proper because only one court should decide appropriate appellate costs, and it is practical for it to be the appellate court that heard the issue on appeal. Brief for Respondents at 38. further contends that a mechanism for disputing cost issues currently exists at the appellate level in the form of motions, briefs, bill-of-costs submissions, and petitions for rehearing. Id. at 41–42.

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