Seventh Circuit Reverses Order Denying Costs Because the Case Was “Close”

Foley & Lardner LLP

Can federal courts deny a prevailing party litigation costs because it was a close case? According to the Seventh Circuit’s recent opinion in United States ex rel. Pileco, Inc. v. Slurry Systems, Inc., No. 14-1267 (7th Cir. Oct. 28, 2015), written by Judge Richard Posner, the answer is “yes,” though only under limited circumstances, when the loser is indigent.

Pileco arose out of a dispute regarding an allegedly defective 40-ton trench-cutting machine, sold by Pileco to Slurry for use on a Corps of Engineers project. The bulk of the court’s opinion concerned the case’s odd procedural history, which featured two trials—the first a $23.4 million net win for Slurry, and the second a $2.23 million net win for Pileco. The retrial had been ordered on account of jury confusion the first time around, and, not surprisingly, given those varying outcomes, Slurry appealed the second verdict.

Pileco cross-appealed for its litigation costs. One of the district court’s reasons for denying those costs was that, “had the first jury done a more careful job in filling out the verdict form[, the court] would have rendered judgment in favor of Slurry and then Pileco would not have been entitled to costs.” Slip Op. 9-10. The trial court apparently thought that the closeness of the case was sufficient reason to deny Pileco its costs.

As Judge Posner explained in his opinion for the court, “the closeness of a case can be a reason for denying an award of costs to the prevailing party in cases in which the losing party is indigent, but only when deciding whether the indigent party should be held liable for his opponent’s costs.” Slip Op. 10 (emphasis added). Judge Posner’s opinion cited two decisions of the Seventh Circuit from the last decade for this principle, noting that this indigent-litigant rule was “a pragmatic exercise of discretion.” Id. As well it should be. The old adage about trying to squeeze blood from a turnip comes to mind.

In all events, Slurry was not indigent, so the “closeness” principle could not apply here. The upshot for Pileco, therefore, was that it could recover its costs.

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