United States Court of Appeals
Fifth Circuit
F I L E D
REVISED AUGUST 8, 2005
June 24, 2005
IN THE UNITED STATES COURT OF APPEALS
Charles R. Fulbruge III
FOR THE FIFTH CIRCUIT Clerk
____________________
No. 04-50531
____________________
UNITED TEACHER ASSOCIATES INSURANCE CO
Plaintiff - Appellant
v.
UNION LABOR LIFE INSURANCE COMPANY; UNION STANDARD OF AMERICA LIFE
INSURANCE CO
Defendants - Appellees
___________________________________________________________________
____________________
No. 04-50852
____________________
UNITED TEACHER ASSOCIATES INSURANCE CO
Plaintiff - Counter Defendant - Appellees
v.
UNION LABOR LIFE INSURANCE COMPANY; UNION STANDARD OF AMERICA LIFE
INSURANCE CO
Defendants - Counter Claimants - Appellants
_________________________________________________________________
Appeals from the United States District Court
for the Western District of Texas, Austin
_________________________________________________________________
Before KING, Chief Judge, and BARKSDALE and STEWART, Circuit
Judges.
KING, Chief Judge:
Plaintiff-Appellant United Teacher Associates Insurance
Company sued Defendants-Appellees Union Labor Life Insurance
Company and Union Standard of America Life Insurance Company for
fraud, alleging that they failed to disclose material information
during the course of a business transaction. The Defendants-
Appellees responded by filing a counterclaim seeking both a
declaration that certain acquisition agreements between the
parties were valid and binding and an order of specific
performance and injunctive relief. After a bench trial, the
district court ruled in favor of the Defendants-Appellees,
granted the relief requested in their counterclaim, and awarded
them costs. Subsequently, however, the district court denied a
motion for further relief pursuant to 28 U.S.C. § 2202 filed by
them.
Plaintiff-Appellant United Teacher Life Insurance Company
now appeals the judgment of the district court, claiming that the
district court erred by: (1) holding that no duty to disclose
exists in Texas absent a confidential or fiduciary relationship;
(2) refusing to certify to the Texas Supreme Court the question
of when a duty to disclose exists in Texas; and (3) improperly
awarding certain costs to the Defendants-Appellees. Union Labor
Life Insurance Company and Union Standard of America Life
Insurance Company also appeal, arguing that the district court
erred when it denied their motion for further relief. The
parties’ appeals have been consolidated. For the following
2
reasons, we AFFIRM in part, VACATE in part, and REMAND to the
district court for further proceedings consistent with this
opinion.
I. FACTUAL AND PROCEDURAL BACKGROUND
In November 1999, Union Labor Life Insurance Company (“Union
Labor”) and its subsidiary, Union Standard of America Life
Insurance Company (“USA Life”) (collectively “Union/USA”), agreed
to sell their Medicare Supplement and Medicare Select insurance
policies (the “Medicare Block”) to United Teacher Associates
Insurance Company (“United Teacher”).
Prior to putting the Medicare Block up for sale, Union/USA
had entered into two consent orders with the Florida Department
of Insurance (“FDI”) that restricted future premium rate
increases on the Medicare Block. First, on May 27, 1997,
Union/USA entered into a consent order restricting premium rate
increases to trend on the Florida Medicare Select policies for a
two-year period, followed by a reevaluation of the anticipated
lifetime loss ratio at the end of this period.1 Second, on June
18, 1999, Union/USA entered into a consent order with the FDI
that allowed for a 12% premium rate increase on the Medicare
Supplement policies in force prior to the effective date of the
1
“Trend” increases are increases based solely on the
growth in claims from year to year because of medical inflation,
the increased utilization of medical services, and general
inflation. They do not take into account the actual experience of
a line of business.
3
consent order, but restricted future increases to trend unless
Union Labor had “credible experience” on new issues.2 According
to United Teacher, the 1997 and 1999 consent orders significantly
affected the profitability of the Medicare Select and Medicare
Supplement policies.
After Union Labor put the Medicare Block up for sale,3 it
assembled a due diligence team, led by Union Labor associate
actuary Jennifer Lazio, to respond to requests for information
from prospective purchasers. When Larry Doze, the president of
United Teacher, learned that the Medicare Block was up for bid
through a broker, he requested information about it. Lazio
responded by sending him the 1998 rate-filing information for the
Medicare Supplement policies and an actuarial memorandum about
the Medicare Select policies. Lazio did not, however, mention
the consent orders. Doze subsequently requested, as part of his
due diligence investigation, other documents and information to
assess the profitability of the Medicare Block. He did not
specifically request information about consent orders or
impediments to future rate increases, and he received no such
2
In Florida, an insurer must issue at least 500 new
policies to get “partial credibility,” and at least 2,000 new
policies to get “full credibility,” in order to obtain future rate
increases based on the actual experience of a line of business.
3
Union Labor was authorized to act as agent for USA Life
in connection with the sale and transfer of the USA Life Medicare
Supplement lines of business included in the Medicare Block.
4
information. United Teacher also conducted an on-site visit to
the offices of Union Labor’s third-party administrator, the
American Insurance Administration Group (“AIAG”), but did not
learn of the consent orders from this visit. At one point in the
negotiations, Lazio told Doze that the FDI had recently approved
a 12% increase in the Medicare Supplement premiums and an 8%
increase in the Medicare Select premiums, but she did not tell
him that these increases were pursuant to the consent orders.
United Teacher now claims that Union/USA was fraudulently hiding
the consent orders from it.
In November 1999, United Teacher decided to purchase the
Medicare Block, and it entered into a letter agreement to that
effect with Union/USA, with a formal written agreement to follow.
In August 2000, United Teacher decided not to follow through with
the purchase. Accordingly, on December 6, 2000, Union/USA sued
United Teacher in the U.S. District Court for the District of
Columbia for relief arising out of United Teacher’s failure to
consummate the transaction. On October 4, 2001, the parties
settled the litigation, and Union/USA agreed to pay United
Teacher $2.5 million for United Teacher to acquire the Medicare
Block from it. At the time of settlement, United Teacher still
did not know about the consent orders.
During the settlement negotiations, United Teacher concluded
that it would need to seek rate increases aggressively on the
Medicare Block to make it profitable. Accordingly, it asked
5
Union/USA to permit it to do the 2001 rate increase filings for
the various states that required them. Union/USA agreed, but it
suggested that it (Union Labor) handle the rate filings for the
state of Florida. United Teacher agreed to this arrangement.
When the FDI only approved increases of 6% and 18% (rather than
the 100% increases requested), Doze asked Union/USA for the 2001
Florida rate filing information, including all communications
with the FDI.
Agreements related to the sale of the Medicare Block (the
“Agreements”) were signed on October 4, 2001, with closing to
occur on October 15, 2001. In a conference call on October 22,
2001, Lazio mentioned for the first time that the 1999 consent
order existed. In response, United Teacher once again requested
the 2001 rate filing information, and on November 8, 2001, Union
Labor produced it to United Teacher. On December 18, 2001,
United Teacher, which by then understood the full impact of the
1999 consent order, notified Union/USA of its intent to rescind
the Medicare Block transaction. By this time, the deadline for
reopening the D.C. lawsuit had passed. That same day, United
Teacher filed suit against Union/USA in Texas state court
alleging fraud and seeking rescission of the Agreements, and it
ceased its efforts at completing the transaction with Union/USA.
According to United Teacher, Union/USA failed to disclose
material facts about the sale of the Medicare Block during the
due diligence phase. At the time of the lawsuit, Union/USA was
6
still administering the Medicare Block and was incurring losses
from claims submitted by the insureds. Union/USA removed the
lawsuit to federal court, United Teacher amended its complaint to
request damages, and Union/USA counterclaimed for a declaratory
judgment that the Agreements were valid and an order of specific
performance against United Teacher. On October 22, 2002, nearly
a year after it learned about the 1999 consent order, United
Teacher, which was investigating a discrepancy in the Medicare
Select line’s lifetime loss ratios, learned for the first time of
the 1997 consent order.
In September 2003, a bench trial was held on United
Teacher’s fraud claim and on Union/USA’s declaratory judgment
counterclaim. The district court subsequently issued written
Findings of Fact and Conclusions of Law (the “Findings”) and a
Final Judgment on March 31, 2004, in which it found that United
Teacher had not proven fraud. In its decision, the district
court stated, inter alia, that: (1) in Texas, “for a duty of
disclosure to arise there must be a confidential or fiduciary
relationship between the parties”; and (2) no confidential or
fiduciary relationship existed between United Teacher and
Union/USA. The district court did not address Union/USA’s
counterclaim in its Findings. Accordingly, Union/USA filed a
motion to alter or amend, in which it requested that the district
court amend its judgment to address its counterclaim. On April
29, 2004, the district court amended its Final Judgment to state
7
that the Agreements “are valid and binding, and that [United
Teacher] must perform its obligations thereunder.” Additionally,
the district court awarded costs to Union/USA. On May 26, 2004,
United Teacher appealed the district court’s Amended Final
Judgment (Case No. 04-50531).
On May 7, 2004, Union/USA demanded that United Teacher
immediately pay all amounts due and owing to Union/USA under the
Agreements and take steps to consummate the transfer of the
Medicare Block.4 According to Union/USA, the amount due and
owing at that time was $8,393,660 (for insurance losses and
expenses associated with the policies that United Teacher had
agreed to assume). United Teacher allegedly failed to pay the
amount that it owed and failed to perform the tasks necessary to
effectuate the district court’s order. Accordingly, Union/USA
filed a Motion to Reopen and for Further Relief (the “motion for
further relief”) under 28 U.S.C. § 2202, in which it asked the
district court to order payment of the money that Union/USA was
owed and to again order United Teacher to perform its obligations
under the Agreements. Without issuing a written opinion or
conducting a hearing, the district court summarily denied the
motion for further relief. Union/USA subsequently filed an
appeal of this denial (Case No. 04-50852). This appeal was
4
According to Union/USA, pursuant to the Agreements and
retroactive to October 1, 1999, United Teacher became Union/USA’s
reinsurer until the policies were transferred to United Teacher.
8
consolidated with United Teacher’s appeal.
II. ANALYSIS
A. The Existence of a Duty to Disclose
United Teacher first claims that the district court erred
when it found that Union/USA had not committed fraud because it
did not have a duty to disclose the consent orders to United
Teacher absent a confidential or fiduciary relationship between
United Teacher and Union/USA. According to United Teacher, a
duty to disclose can exist in Texas even when there is no
confidential or fiduciary relationship between the parties.
United Teacher begins its argument by noting that in Texas,
a plaintiff wishing to prove fraud must establish “a material
representation, which was false, and which was either known to be
false when made or was asserted without knowledge of its truth
. . . .” Formosa Plastics Corp. v. Presidio Eng’rs. &
Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998) (internal
quotation marks omitted). United Teacher also notes that the
Texas Supreme Court has stated that “[w]hen the particular
circumstances impose on a person a duty to speak and he
deliberately remains silent, his silence is equivalent to a false
representation.” Spoljaric v. Percival Tours, Inc., 708 S.W.2d
432, 435 (Tex. 1986). United Teacher then cites Union Pacific
Resources Group, Inc. v. Rhone-Poulenc, Inc., 247 F.3d 574, 586
(5th Cir. 2001), for the claim that a duty to disclose can exist
9
in Texas absent a fiduciary or confidential relationship. In
Rhone-Poulenc, this court stated:
A duty to speak arises by operation of law when (1) a
confidential or fiduciary duty relationship exists
between the parties; or (2) one party learns later that
his previous statement was false and misleading; or (3)
one party knows that the other party is relying on a
concealed fact and does not have an equal opportunity to
discover the truth; or (4) one party voluntarily
discloses some but less than all material facts, so that
he must disclose the whole truth, i.e., all material
facts, lest his partial disclosure convey a false
impression.
247 F.3d at 586. According to United Teacher, the district court
should have invoked the doctrine of stare decisis and held that,
in accordance with Rhone-Poulenc, Union/USA had a duty to
disclose the consent orders. United Teacher also notes that this
court, as well as Texas intermediate appellate courts, have
reached similar conclusions in a number of other cases, both
before and after the Texas Supreme Court decided Bradford v.
Vento, the case on which the district court and Union/USA rely.
See, e.g., Rimade Ltd. v. Hubbard Enters., Inc., 388 F.3d 138,
143 (5th Cir. 2004); Lewis v. Bank of Am. NA, 347 F.3d 587 (5th
Cir. 2003) (per curiam); Citizens Nat’l Bank v. Allen Rae Invs.,
Inc., 142 S.W.3d 459, 476-77 (Tex. App.--Fort Worth 2004);
Pellegrini v. Cliffwood-Blue Moon Joint Venture, 115 S.W.3d 577,
580 (Tex. App.--Beaumont 2003, no pet.); Lesikar v. Rappeport, 33
S.W.3d 282, 299 (Tex. App.--Texarkana 2000, pet. denied); Hoggett
v. Brown, 971 S.W.2d 472, 487 (Tex. App.--Houston [14th Dist.]
1997, pet. denied); Ralston Purina Co. v. McKendrick, 850 S.W.2ed
10
629, 635-36 (Tex. App.--San Antonio 1993, writ denied).
Accordingly, United Teacher contends that the district court, in
making its “Erie guess,” incorrectly stated that the holding in
Rhone-Poulenc was no longer in accord with Texas state law.
Union/USA responds by arguing that in Bradford, which was
decided three weeks after Rhone-Poulenc, the Supreme Court of
Texas conclusively established that a duty to disclose does not
exist in Texas absent a confidential or fiduciary relationship.
In support of this claim, Union/USA cites the following language
from Bradford:
Several courts of appeals have held that a general duty
to disclose information may arise in an arm’s-length
business transaction when a party makes a partial
disclosure that, although true, conveys a false
impression. See, e.g., Hoggett v. Brown, 971 S.W.2d 472,
487 (Tex. App.--Houston [14th Dist.] 1997, no writ);
Ralston Purina, 850 S.W.2d at 636. The Restatement
(Second) of Torts section 551 also recognizes a general
duty to disclose facts in a commercial setting. In such
cases, a party does not make an affirmative
misrepresentation, but what is said is misleading because
other facts are not disclosed. We have never adopted
section 551.
Bradford, 48 S.W.3d at 755-56 (emphasis added) (some internal
citations omitted).5 Additionally, Union/USA notes that the
5
Section 551 of the R ESTATEMENT (S ECOND ) OF T ORTS (1977)
states:
(1) One who fails to disclose to another a fact that he knows
may justifiably induce the other to act or refrain from acting in
a business transaction is subject to the same liability to the
other as though he had represented the nonexistence of the matter
that he has failed to disclose, if, but only if, he is under a duty
to the other to exercise reasonable care to disclose the matter in
question.
11
Texas Supreme Court in Bradford cited its decision in SmithKline
Beecham Corp. v. Doe, 903 S.W.2d 347 (Tex. 1995), in which it
similarly stated that “Section 551 of the RESTATEMENT (SECOND) OF
TORTS recognizes a general duty to disclose facts in a commercial
setting, which could encompass the duty Doe seeks in this
case. . . . This Court has cited section 551 only once, but has
never embraced it as a rule of law in Texas.” Id. (citing
SmithKline Beecham Corp., 903 S.W.2d at 352-53 (internal
citations omitted)). Finally, Union/USA states that this court,
as well as Texas’s intermediate appellate courts, have before and
after Bradford stated that no duty to disclose exists in Texas
absent a fiduciary or confidential relationship. See Coburn
Supply Co., Inc. v. Kohler Co., 342 F.3d 372 (5th Cir. 2003);
(2) One party to a business transaction is under a duty to
exercise reasonable care to disclose to the other before the
transaction is consummated,
(a) matters known to him that the other is entitled to know
because of a fiduciary or other similar relation of trust and
confidence between them; and
(b) matters known to him that he knows to be necessary to
prevent his partial or ambiguous statement of the facts from
being misleading; and
(c) subsequently acquired information that he knows will make
untrue or misleading a previous representation that when made
was true or believed to be so; and
(d) the falsity of a representation not made with the
expectation that it would be acted upon, if he subsequently
learns that the other is about to act in reliance upon it in
a transaction with him; and
(3) facts basic to the transaction, if he knows that the other is
about to enter into it under a mistake as to the them, and that the
other, because of the relationship between them, the customs of the
trade or other objective circumstances, would reasonably expect a
disclosure of those facts.
12
Imperial Premium Fin., Inc. v. Khoury, 129 F.3d 347, 352-53 (5th
Cir. 1998); Bay Colony Ltd. v. Trendmaker, Inc., 121 F.3d 998,
1004 (5th Cir. 1997); Engstrom v. First Nat’l Bank of Eagle Lake,
936 S.W.2d 438, 444-45 (Tex. App.--Houston [14th Dist.] 1996,
writ denied); Travel Music of San Antonio, Inc. v. Douglas, No.
04-00-00757-CV, 2002 WL 1058527, at *4 (Tex. App.--San Antonio,
May 29, 2002) (not designated for publication). Accordingly,
Union/USA argues that the district court correctly concluded that
because the Texas Supreme Court explicitly declined in Bradford
to adopt the disclosure duties described in § 551 and in cases
like Hoggett, and because the Texas Supreme Court has only
explicitly recognized a duty to disclose in the context of a
confidential or fiduciary relationship, a duty to disclose does
not exist in Texas absent a confidential or fiduciary
relationship.
After a bench trial, findings of fact are reviewed for clear
error and issues of law are reviewed de novo. Kona Tech. Corp.
v. S. Pac. Transp. Co., 225 F.3d 595, 601 (5th Cir. 2000). In
order to determine questions of state law, federal courts look to
final decisions of the state’s highest court. Erie R.R. Co. v.
Tompkins, 304 U.S. 64 (1938); St. Paul Fire & Marine Ins. Co. v.
Convalescent Servs., Inc., 193 F.3d 340, 342 (5th Cir. 1999).
While decisions of intermediate state appellate courts provide
guidance, they are not controlling. Matheny v. Glen Falls Ins.
Co., 152 F.3d 348, 354 (5th Cir. 1998). If a state’s highest
13
court has not ruled on the issue in question, a federal court
must determine, to the best of its ability, what the highest
court of the state would decide. St. Paul Marine, 193 F.3d at
342.
A reasonable jurist might well conclude, certainly after
Bradford, that a duty to disclose exists in Texas only in the
context of a confidential or fiduciary relationship. This court
has so held in Coburn, the only Fifth Circuit case that discusses
the relevant portion of Bradford. However, apart from Coburn, it
would be fair to say that courts after Bradford (including this
court) have not gotten the message, but have instead continued to
find that a duty to disclose can exist in Texas absent a
confidential or fiduciary relationship. See, e.g., Rimade, 388
F.3d at 143; Lewis, 347 F.3d at 587; Citizens Nat’l Bank, 142
S.W.3d at 476-77; Pellegrini, 115 S.W.3d at 580; but see Travel
Music, 2002 WL 1058527, at *4.
Fortunately, we need not decide whether a duty to disclose
exists in Texas absent a confidential or fiduciary relationship
because, even if such a duty did exist, United Teacher’s fraud
claim would fail. In Texas, fraud occurs when: (1) the defendant
misrepresented a material fact; (2) the defendant knew the
material representation was false or made it recklessly without
any knowledge of its truth; (3) the defendant made the false
material representation with the intent that it should be acted
upon by the plaintiff; and (4) the plaintiff justifiably relied
14
on the representation and thereby suffered injury. Ernst &
Young, 51 S.W.3d at 577. The first requirement of this test can
be met if the defendant concealed or failed to disclose a
material fact when a duty to disclose existed. See New Process
Steel Corp., Inc. v. Steel Corp. of Texas, Inc., 703 S.W.2d 209,
214 (Tex. App.--Houston [1st Dist.] 1985, writ ref’d n.r.e.);
Moore & Moore Drilling Co. v. White, 345 S.W.2d 550, 555 (Tex.
App.--Dallas 1961, writ ref’d n.r.e.). Assuming, arguendo, that
United Teacher has established the first prong of this test
because Union/USA had a duty to disclose the consent orders,
United Teacher’s fraud claim nevertheless fails because it cannot
prove fraudulent intent. In its Findings of Fact and Conclusions
of Law, the district court noted that Clause 3.11 of the
Agreement for Reinsurance states:
To the best of [Union Labor's] knowledge, information and
belief, no warranty or representation made by the Company
in this Agreement nor in any writing furnished or to be
furnished by [Union Labor] to [United Teacher] pursuant
hereto or in connection herewith contains or will contain
any untrue statement of material fact or omits or will
fail to state, any material fact necessary to make the
statements contained herein or therein not misleading.
The district court interpreted this clause “as an affirmative
representation that Union Labor disclosed all material
information necessary to make other representations related to
the sale not misleading.” The district court then analyzed
whether Union/USA committed fraud by intentionally concealing or
failing to disclose the consent orders during the parties’
15
negotiations, thereby misleading United Teacher. The district
court wrote:
a. Omitted material information. United Teacher
asserts that the omitted material information was the
existence of the consent orders and that disclosing the
existence of the consent orders was necessary to make
other information provided by Union Labor during
negotiations not misleading. There can be no doubt, and
the Court finds, that the existence of the consent orders
and their content was information material to United
Teacher in analyzing the proposed purchase. United
Teacher offers several examples of how information
furnished by Union Labor was rendered misleading by the
failure to disclose the consent order. Lazio disclosed
to Doze that Union Labor received a 12% rate increase on
the Florida Medicare Supplement policies on June 22,
1999, and an 8% increase for the Florida Medicare Select
policies on December 16, 1999, without disclosing that
these increases were related to the 1997 and 1999 consent
orders. Later, in connection with the 2001 Florida rate
filings, Lazio advised Doze that Union Labor had received
an 18% rate increase on the Medicare Select business and
that the 100% request on the Supplement business was
pending. When Florida offered a 6% rate increase (rather
than the 100% requested), Lazio did not inform Doze that
the low increase was the result of the 1999 consent
order.
b. Union Labor’s knowledge and intent. United Teacher
alleges that Union Labor knew the consent orders were
material and intentionally concealed them from United
Teacher during negotiations. As evidence of Union
Labor’s fraudulent intent, United Teacher points to Union
Labor’s insistence on performing the 2001 Florida rate
filing, which, if performed by United Teacher, would have
led to its discovery of the consent orders. United
Teacher argues that Union Labor’s failure to send the
2001 filing information to Doze promptly after he
requested it is further evidence of Union Labor’s intent
to conceal the consent orders. However, Union Labor
explained that it performed the 2001 Florida rate filing
because it had access to the necessary information and
that when Doze later requested the filing information, it
was not readily available because an outside consultant
had actually prepared the filing. Further, Lazio, a
young actuary with almost no experience in conducting due
diligence for the purchase or sale of a business,
16
credibly testified that she did not know that the consent
orders, signed by Union Labor and the Florida Department
of Insurance, would also bind United Teacher and that,
since Doze did not specifically request information in
the category of the consent orders, she did not think to
produce them.
United Teacher has presented evidence that Union Labor
may have intended to conceal the consent orders, but
Union Labor’s explanations for its allegedly suspicious
behavior are plausible. United Teacher has failed in its
burden of proof and persuasion.
United Teacher Assocs. Ins. v. Union Labor Life Ins. Co., 311
F.Supp. 2d 587, 599 (W.D. Tex. 2004) (emphasis added). United
Teacher does not challenge this finding by the district court on
appeal. Nevertheless, it contends that this finding is not
dispositive of its claim of fraud by nondisclosure because the
district court’s analysis regarding intent only applied to fraud
by affirmative misrepresentation. In support of this claim,
United Teacher states that the intent requirement for fraud by
affirmative misrepresentation does not exist with respect to
fraud by nondisclosure. Specifically, United Teacher argues that
it need not prove intent in order to establish fraud by
nondisclosure, since intent is irrelevant when an affirmative
duty to disclose exists and was violated. This is wrong. Courts
in Texas have consistently held that fraud by nondisclosure or
concealment requires proof of all of the elements of fraud by
affirmative misrepresentation, including fraudulent intent, with
the exception that the misrepresentation element can be proven by
the nondisclosure or concealment of a material fact in light of a
17
duty to disclose. See, e.g., Schlumberger Tech. Corp. v.
Swanson, 959 S.W.2d 171, 181 (Tex. 1997) (holding that “fraud by
non-disclosure is simply a subcategory of fraud” requiring, e.g.,
proof of reliance); Columbia/HCA Healthcare v. Cottey, 72 S.W.3d
735, 744-46 & n.5 (Tex. App.--Waco 2002, no pet.) (stating intent
as an element of fraud by nondisclosure and finding sufficient
evidence of intent to support the jury’s verdict); Peltier
Enters., Inc. v. Hilton, 51 S.W.3d 616, 623 (Tex. App.--Tyler
2000) (holding that fraudulent concealment “requires proof of the
same elements [as fraud by affirmative misrepresentation]”).
Because the intent prong is the same in Texas for fraud by
affirmative misrepresentation as it is for fraud by nondisclosure
or concealment, the district court’s finding of a lack of
fraudulent intent would apply equally if the district court had
found that a common law duty to disclose the consent orders
existed. Accordingly, the district court’s unchallenged finding
of no fraudulent intent in the nondisclosure of the consent
orders is fatal to United Teacher’s fraud by nondisclosure claim,
regardless of whether or not a duty to disclose the consent
orders existed. We therefore need not reach the question of
whether a duty to disclose can exist in Texas absent a
confidential or fiduciary relationship.6
6
Because the district court’s finding regarding fraudulent
intent is dispositive of United Teacher’s fraud claim, we need not
address Union/USA’s further argument that United Teacher’s fraud
claim fails because the district court found that United Teacher
18
B. The Denial of Union/USA’s Motion for Further Relief under 28
U.S.C. § 2202
In its appeal, Union/USA argues that the district court erred
by denying its motion for further relief under 28 U.S.C. § 2202.
According to Union/USA, pursuant to the Agreements and retroactive
to October 1, 1999, United Teacher became Union/USA’s reinsurer
with respect to the Medicare Block until the policies were
transferred to United Teacher.7 In its motion to reopen and for
failed to prove justifiable reliance. Likewise, because United
Teacher’s fraud claim fails regardless of whether a duty to
disclose exists in Texas absent a confidential or fiduciary
relationship, we need not certify to the Texas Supreme Court the
question of when a duty to disclose exists in Texas.
7
Section 2.1 of the Coinsurance Reinsurance Agreement (the
“CRA”), which is one of the Agreements, states:
Subject to the terms and conditions of this Agreement,
effective as of the Coinsurance Effective Date,
[Union/USA] hereby cedes to [United Teacher] and [United
Teacher] hereby accepts reinsurance and coinsures on a
one hundred percent (100%) quota share basis
[Union/USA’s] contractual liabilities (other than
Excluded Liabilities) under the Coinsured Policies, by
means of indemnity reinsurance. [Union/USA] and [United
Teacher] mutually agree that, on and after the
Coinsurance Effective Date, [United Teacher] shall be
entitled to exercise all contractual rights and
privileges of [Union/USA] under the Coinsured Policies in
accordance with the terms, provisions and conditions of
such Coinsured Policies. [United Teacher] agrees to be
responsible for one hundred percent (100%) of the
Statutory Reserves and Liabilities applicable to the
Coinsured Policies (other than the Excluded Liabilities),
and shall be fully responsible, at its sole expense, for
administration of the Coinsured Policies in all respects
in the name, and on behalf, of [Union/USA] in accordance
with the terms and conditions of the Services Agreement.
CRA § 2.1. Additionally, Section 2.1.3 of the CRA obliges United
reimburse Union/USA for losses under the policies, stating:
19
further relief, Union/USA sought to recover in the form of a
monetary award the money owed to it under the Agreements, and it
also requested that the district court further order United Teacher
to perform its obligations under the Agreements. Union/USA claims
that it was entitled to monetary relief because the district court
had previously awarded Union/USA: (1) a declaration that the
Agreements are “valid and binding” and that United Teacher “must
perform its obligations thereunder”; and (2) an order of specific
performance as to the Agreements. Nevertheless, the district
court, without a hearing or written opinion, denied Union/USA’s
§ 2202 motion.
In support of its claim that the district court erred by
denying its motion for further relief, Union/USA argues that money
damages should be awarded where such relief is necessary or proper
to effectuate a declaratory judgment. In support of this claim,
Union/USA cites several cases from other circuits that, in
Union/USA’s estimation, have held that a party can effectuate a
prior declaratory judgment by obtaining money damages pursuant to
a motion for further relief under § 2202. Union/USA further argues
that parties often obtain declaratory judgments construing their
rights under agreements and then, at a later date, seek further
On and after the Coinsurance Effective Date [October 1,
1999], [United Teacher] shall bear and shall have
responsibility for reimbursing (Union/USA) for all
payments [Union/USA] makes of liabilities (other than
Excluded Liabilities) with respect to the Coinsured
Policies.
20
relief under § 2202 in the form of a monetary award or equitable
relief in order to realize the full benefit of the declaratory
judgment in their favor. According to Union/USA, if this ability
to seek further relief under § 2202 were removed, favorable
declarations of a party’s rights would be a meaningless exercise.
In this vein, Union/USA claims that the monetary award and
injunctive relief requested in its motion for further relief was
necessary to effectuate properly the declaration of the validity of
the Agreements and the order of specific performance, and it argues
that the district court therefore erred by denying the motion.
After a bench trial, findings of fact are reviewed for clear
error and issues of law are reviewed de novo. Kona Tech. Corp.,
225 F.3d at 601. If the denial of a motion for further relief
under 28 U.S.C. § 2202 is based on a question of law, it is
reviewed de novo. See United Nat’l Ins. Co. v. SST Fitness Corp.,
309 F.3d 914, 916 (6th Cir. 2002); Pro-Eco, Inc. v. Bd. of Comm’rs
of Jay County, Ind., 57 F.3d 505, 508 (7th Cir. 1995); Ins. Servs.
of Beaufort, Inc. v. Aetna Cas. and Surety Co., 966 F.2d 847, 852
(4th Cir. 1992). That said, we have held that the district court’s
decision to grant or deny declaratory relief is reviewed for an
abuse of discretion because 28 U.S.C. § 2201 says that a district
court “may” declare the rights and other legal relations of any
interested parties. See 28 U.S.C. § 2201; Am. States Ins. Co. v.
Bailey, 133 F.3d 363, 368 (5th Cir. 1998) (citing Wilton v. Seven
Falls Co., 515 U.S. 277, 289-90 (1995)). Likewise, because § 2202
21
says that a district court “may” award further relief, the district
court’s refusal to award damages under § 2202 is reviewed for an
abuse of discretion. See 28 U.S.C. § 2202; Besler v. United States
Dep’t of Agric., 639 F.2d 453, 455 (8th Cir. 1981) (applying an
abuse of discretion standard to the denial of further relief under
§ 2202). Finally, this court reviews a district court’s ruling on
the application of res judicata de novo. Sid Richardson Carbon &
Gasoline Co. v. Interenergy Res., Ltd., 99 F.3d 746, 753 (5th Cir.
1996).
Because the district court denied the motion for further
relief without a hearing or written opinion, we do not know why the
district court denied the motion. Accordingly, we first consider
whether Union/USA’s § 2202 motion was the proper type of motion to
effectuate the declaratory judgment in Union/USA’s favor. We then
consider the possible reasons advanced by United Teacher for
denying the requested relief to see if any of them could have
served as the basis for the district court’s decision.
We begin by addressing whether the relief requested by
Union/USA was the sort of relief that the district court could
provide in response to a motion for further relief under § 2202.
Section 2202 states: “Further necessary or proper relief based on
a declaratory judgment or decree may be granted, after reasonable
notice and hearing, against any adverse party whose rights have
been determined by such judgment.” 28 U.S.C. § 2202. This court
has held that under § 2202, “the prevailing party [in a declaratory
22
judgment action] may seek further relief in the form of damages or
an injunction.” Kaspar Wire Works, Inc. v. Leco Eng’g & Mach.,
Inc., 575 F.2d 530, 537 (5th Cir. 1978); see also Nat’l Fire Ins.
Co. of Hartford v. Bd. of Pub. Instruction of Madison County, Fla.,
239 F.2d 370, 376 & n.11 (5th Cir. 1956) (citing § 2202 for the
proposition that “[t]he Federal Declaratory Judgment Act
contemplates that all necessary or proper relief based on the
declaratory judgment should be granted”). Other circuits that have
addressed the type of relief available under § 2202 have reached
similar conclusions. For instance, in Besler, 639 F.2d at 455, the
government prevailed on its counterclaim against a group of
ranchers for a declaratory judgment that it was not estopped from
recovering monies improperly paid to the ranches under a federal
program. Subsequently, the government sought the monies due and,
when the ranchers refused to pay, sought recovery through a § 2202
motion for further relief. As in the present case, the district
court summarily denied the motion without a hearing or opinion.
The Eighth Circuit held that the district court abused its
discretion by summarily denying the motion, and it reversed and
remanded to the district court for a determination of the amounts
owed, stating that monetary relief under § 2202 was appropriate
because the “declaratory judgment previously entered by the
district court conclusively established the government’s right to
recoup the benefits received by the appellees.” Besler, 639 F.2d
at 455. Likewise, in Horn & Hardart Co. v. National Rail Passenger
23
Corp., 843 F.2d 546, 548-49 (D.C. Cir. 1988), the D.C. Circuit
affirmed the district court’s award of further relief under
§ 2202 after one party failed to meet its obligations as set forth
in the court’s prior declaratory judgment. Similarly, in Gant v.
Grand Lodge of Texas, 12 F.3d 998 (10th Cir. 1993), the plaintiff
sought both coercive and declaratory relief in the original
proceeding. Subsequently, the plaintiff sought further relief
pursuant to § 2202 to increase the payments the plaintiff was to
receive under the declaratory judgment. The Tenth Circuit affirmed
the district court’s decision granting the request for further
relief, stating that § 2202 “permits the original judgment to be
supplemented either by damages or by equitable relief even though
coercive relief might have been available at the time of the
declaratory action.” Id. at 1003 (citing 10A C. Wright, A. Miller
& M. Kane, FEDERAL PRACTICE & PROCEDURE § 2771, at 765-67 (2d ed.
1983)). Finally, in Security Mutual Casualty Co. v. Century
Casualty Co., 621 F.2d 1062, 1065-66 (10th Cir. 1980), a reinsurer
filed a declaratory judgment action seeking to limit its exposure
in connection with a judgment against a party insured by the
primary insurer. The primary insurer filed a counterclaim, in
which it requested a declaratory judgment that the reinsurer was
liable to it under the terms of the reinsurance agreement. The
district court found in favor of the primary insurer, issued a
declaratory judgment stating that the reinsurer was liable under
the terms of the reinsurance agreement, and dismissed the case.
24
Sec. Mut., 621 F.2d at 1064. Subsequently, the primary insurer
moved for an amended judgment under FED. R. CIV. P. 60, requesting
that the court calculate, and then award to it, monetary damages.
The district court treated the motion as being made pursuant to the
FED. R. CIV. P. 59(e) and denied it as untimely. The Tenth Circuit
affirmed the district court’s decision, but held that the primary
insurer was clearly entitled to obtain money damages for the
amounts owed to it under the reinsurance agreement pursuant to §
2202. See Sec. Mut., 621 F.2d at 1065-66. According to the Tenth
Circuit, because the district court’s declaratory judgment
established the primary insurer’s rights under the reinsurance
agreement, monetary damages could be obtained through a motion for
further relief pursuant to § 2202. See id. Thus, as is clear from
these cases and from the language of § 2202, a party can file a
motion for further relief requesting monetary damages under § 2202
to effectuate a prior declaratory judgment. Accordingly, Union/USA
filed the right type of motion when it requested further relief
under § 2202 to effectuate the declaratory judgment in its favor
previously entered by the district court.
Having established that Union/USA could seek money damages
through its § 2202 motion for further relief to effectuate the
district court’s prior declaratory judgment, we turn to United
Teacher’s arguments for why such relief was not justified in this
case. United Teacher’s primary argument is that the doctrines of
res judicata and collateral estoppel preclude the further relief
25
requested by Union/USA. This argument fails. United Teacher’s
preclusion argument is based on the premise that Union/USA
requested money damages below and was denied such relief. This
contention is false. Union/USA never requested money damages in
its counterclaim, nor did it request money damages at trial.
Similarly, while Union/USA’s motion to alter or amend referred to
the fact that United Teacher owed money to it, Union/USA did not
request monetary relief against United Teacher in this motion.8 In
support of its claim that Union/USA requested money damages at
trial, United Teacher cites the following exchange between
Union/USA’s counsel, Mr. Christakos, and United Teacher’s counsel,
Mr. Ruiz:
Mr. Christakos: How much does United Teacher currently owe to
Union Labor and USA Life on this transaction?
Mr. Ruiz: Objection, Your Honor. I’m going to object to
the relevance, because that’s not in their counterclaim.
Mr. Christakos: It’s in the counterclaim for declaration
that the agreements are valid, and an order that they
perform them. I would like the most current amount owed
to be in the record; it’s part of that counterclaim.
While this exchange indicated to the district court that United
Teacher’s indebtedness to Union/USA was accruing at a rapid pace,
8
In the motion to alter or amend, Union/USA stated that it
“presented evidence at trial through the testimony of Jennifer
Lazio, that United Teacher owed at least $5 million as of the time
of trial to [Defendants-Appellants] under the agreements at issue.
[Union/USA] presented this evidence expressly in connection with
[its] Counterclaim.” Union/USA did not, however, request monetary
relief in this motion.
26
this exchange alone does not demonstrate that Union/USA requested
money damages as part of its counterclaim. In fact, no discovery
has ever been conducted on Union/USA’s damages, and the record
indicates that prior to Union/USA’s motion for further relief, no
specific request for monetary relief had ever been made to the
court. United Teacher’s citation to Union/USA’s passing remarks
about money damages at trial and in their motion to alter or amend
does not change this fact. Moreover, it would have been illogical
for the district court explicitly to have ordered specific
performance and held that the Agreements (which provided for
monetary damages) were binding, while at the same time implicitly
holding that United Teacher did not have to pay the monetary
damages provided for by the Agreements. Accordingly, because
Union/USA never requested money damages before filing its motion
for further relief, the doctrines of res judicata and collateral
estoppel are inapplicable.9
United Teacher additionally claims that the district court
lacked jurisdiction to grant further relief because United Teacher
9
Other circuits have reached similar conclusions. For
instance, in Security Mutual, the Tenth Circuit held that because
of the district court’s declaratory judgment establishing the
primary insurer’s rights under the reinsurance agreement, “the
closing of the case by the judgment of dismissal was clearly not a
determination against the right of [the primary insurer] to recover
on the reinsurance agreement.” Sec. Mut., 621 F.2d at 1066. The
court further stated that there was no “res judicata problem since
the judgment did not preclude recovery of further relief by [the
primary insurer] on the reinsurance treaty and [the primary
insurer’s] rights determined by the declaratory judgment.” Id.
27
filed its appeal of the district court’s judgment before Union/USA
filed its motion for further relief. This argument also fails.
Courts that have addressed when a motion for further relief may be
brought under § 2202 have consistently held that neither the filing
of an appeal nor a lengthy delay after the trial court’s initial
ruling terminates the court’s authority to grant further relief
pursuant to § 2202. See, e.g., Horn & Hadart Co. v. National Rail
Passenger Corp., 843 F.2d at 548; McNally v. Am. States Ins. Co.,
339 F.2d 186, 187-88 (6th Cir. 1964) (per curiam); Edward B. Marks
Music Corp. v. Charles K. Harris Music Publ’g Co., 255 F.2d 518
(2d. Cir. 1958). The Supreme Court’s decision in Griggs v.
Provident Consumer Discount Co., 459 U.S. 59 (1982), does not
undermine this conclusion. In Griggs, the Supreme Court held that
“[t]he filing of a notice of appeal is an event of jurisdictional
significance--it confers jurisdiction on the court of appeals and
divests the district court of its control over those aspects of the
case involved in the appeal.” Griggs, 459 U.S. at 58 (emphasis
added). If we were to hold that the act of lodging an appeal of a
declaratory judgment nullifies the prevailing party’s right to seek
further relief under § 2202, we would countermand Grigg’s statement
that the filing of an appeal divests the district court of its
control only “over those aspects of the case involved in the
appeal.” See Griggs, 459 U.S. at 58; Horn & Hadart, 843 F.2d at
548 (“To rule otherwise would allow the party against whom a
declaratory judgment is rendered to nullify her adversary’s right
28
to § 2202 relief merely by lodging an appeal. Indeed, such a
forfeiture rule would conflict not only with common sense, but also
with the principle that when a party files a notice of appeal the
district court only surrenders ‘its control over those aspects of
the case involved in the appeal.’” (quoting Griggs, 459 U.S. at
58)); see also Burford Equip. Co. v. Centennial Ins. Co., 857
F.Supp. 1499, 1502 (M.D. Ala. 1994) (holding that the reservation
of jurisdiction for motions for further relief under 28 U.S.C.
§ 2202 is a statutory exception to the rule set forth in Griggs).
Here, United Teacher’s appeal concerns only the district court’s
judgment and award of costs pertaining to Union/USA’s fraud claim.
Accordingly, United Teacher’s separate argument that the district
court was divested of jurisdiction over Union/USA’s motion for
further relief under § 2202 fails.
Finally, United Teacher argues that Union/USA’s motion for
further relief was improper because its request for monetary
damages was a compulsory counterclaim under FED. R. CIV. P. 13(a).10
10
FED. R. CIV. P. 13(a) states:
(a) Compulsory Counterclaims. A pleading shall state as
a counterclaim any claim which at the time of serving the
pleading the pleader has against any opposing party, if
it arises out of the transaction or occurrence that is
the subject matter of the opposing party's claim and does
not require for its adjudication the presence of third
parties of whom the court cannot acquire jurisdiction.
But the pleader need not state the claim if (1) at the
time the action was commenced the claim was the subject
of another pending action, or (2) the opposing party
brought suit upon the claim by attachment or other
process by which the court did not acquire jurisdiction
29
This argument fails because, as Union/USA correctly states,
Union/USA’s request for further relief pursuant to § 2202 was not
an entirely new and different claim, but instead was a request for
additional relief flowing from the successful assertion of its
earlier claim that the Agreements were valid and binding and should
be performed. United Teacher tries to avoid this result by citing
Polymer Industrial Products Co. v. Bridgestone/Firestone, Inc., 347
F.3d 935 (Fed. Cir. 2003), which it says stands for the proposition
that § 2202 is no exception to Rule 13(a). United Teacher’s
reliance on Polymer is unavailing. In Polymer, the plaintiff sued
the defendant for patent infringement. The defendant subsequently
began to manufacture a new, yet similar product, and it
counterclaimed for a declaratory judgment that this new product did
not infringe the plaintiff’s patent rights. The plaintiff never
asserted a counterclaim that the second product infringed its
patent rights. The court found that both products violated the
plaintiff’s patent rights, and it awarded damages with respect to
the first product. The plaintiff then filed a new case seeking
damages for the infringement by the second product, arguing that §
2202 permitted it to obtain such relief. The Federal Circuit
disagreed, holding that the plaintiff’s claim that the second
product infringed its patent rights was a compulsory counterclaim
to render a personal judgment on that claim, and the
pleader is not stating any counterclaim under this Rule
13.
30
that should have been brought in the first action. Polymer, 347
F.3d at 940. Polymer is easily distinguishable from the present
case. The plaintiff in Polymer never instituted a declaratory
judgment claim to enforce its patent rights with respect to the
second product. Accordingly, its claim that it was entitled to
damages because of the infringement caused by the second product
was an entirely new claim. Conversely, in the present case,
Union/USA did institute, and prevail on, a declaratory judgment
claim establishing the validity of the Agreements and the fact that
they should be performed. Thus, Union/USA’s request for further
relief was not a new claim, but instead flowed from, and was
consistent with, the declaratory judgment entered in its favor.
Therefore, United Teacher’s argument that Union/USA’s request for
money damages should have been brought as a compulsory counterclaim
fails.
Accordingly, Union/USA’s motion for further relief was
properly brought under § 2202, and none of the reasons advanced by
United Teacher for why it should be denied is persuasive. The
declaratory judgment previously entered by the district court
conclusively established the validity of the Agreements and the
fact that they should be specifically performed. The district
court’s denial of the motion for further relief would effectively
render this declaratory judgment meaningless. Because of this,
because none of United Teacher’s reasons for denial is valid, and
because the district court did not state its reasons for denying
31
the requested relief, the district court’s denial of Union/USA’s
motion for further relief is unsupportable. See Besler, 639 F.2d
at 455 (holding that the district court abused its discretion when,
without issuing a written opinion, it summarily denied a motion for
further relief pursuant to § 2202). Accordingly, we find that the
district court abused its discretion in denying the motion for
further relief, vacate the district court’s denial of the motion
for further relief, and remand to the district court to conduct
further proceedings to determine the relief to which Union/USA is
entitled.
C. The Award of Costs to Union/USA
Finally, United Teacher claims that the district court abused
its discretion when, after ruling in favor of Union/USA, it awarded
certain costs to it.
We review an appeal of an award of costs for an abuse of
discretion. Kinnear-Weed Corp. v. Humble Oil & Ref. Co., 441 F.2d
631 (5th Cir. 1971). We have previously held that a district court
has broad discretion in awarding costs, and its decision to award
costs will only be reversed upon a clear showing of an abuse of
discretion. Migis v. Pearle Vision, Inc., 135 F.3d 1041, 1049 (5th
Cir. 1998).
Under the FEDERAL RULES OF CIVIL PROCEDURE and Supreme Court
precedent, district courts may award costs, as enumerated in 28
U.S.C. § 1920, to the prevailing party. See FED. R. CIV. P. 54(d);
32
Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 441
(1987). Costs not authorized by statute may not be awarded by the
district court. Crawford Fitting Co., 482 U.S. at 441.
First, United Teacher contends that Union/USA was not entitled
to any fees or costs associated with William DeCinque’s attendance
at trial (his fees and costs totaled $3,088.97 for the week).
DeCinque was Union/USA’s corporate representative at the trial and
was present in the courtroom the entire week. According to United
Teacher, ordinarily no fee may be taxed for someone who simply
comes to the courthouse but does not testify, the presumption being
that he is not a necessary witness. In support of this, United
Teacher Cites two district court cases from outside of this
circuit, Green Construction Co. v. Kansas Power & Light Co., 153
F.R.D. 670, 679 (D. Kan. 1994), and Wolfe v. Wolfe, 570 F. Supp.
826, 829 (D.S.C. 1983).
The district court did not err when it awarded costs for
William DeCinque’s attendance at trial. DeCinque attended the
trial not only as Union/USA’s corporate representative, but also as
a witness with direct knowledge of the facts at issue. Both
Union/USA and United Teacher had designated him as a witness.
During the trial, United Teacher told Union/USA’s counsel that it
preferred to ask DeCinque questions during cross-examination (after
Union/USA called him) rather than during its case in chief. On the
last day of the trial, Union/USA, after consulting with the court
and receiving the approval of United Teacher, decided not to call
33
DeCinque as a witness in order to complete the trial during the
week of September 13, 2003. This court has held that “a court may
award such a fee if the witness was ready to testify but extrinsic
circumstances rendered his testimony unnecessary.” Nissho-Iwai
Co., Ltd. v. Occidental Crude Sales, Inc., 729 F.2d 1530, 1553 (5th
Cir. 1984) (citations omitted); United States v. Lynd, 334 F.2d 13,
16 (5th Cir. 1964) (per curiam) (holding that witness fees would
not be disallowed “merely because during the course of the trial a
good faith determination was made, presumably in order to avoid
delay, unnecessary inconvenience to the Court and parties, and
other substantial expenses incident to prolonging the trial, that
[the witnesses] need not be used . . . .”); see also Quy v. Air
Am., Inc., 667 F.2d 1059, 1064-65 (D.C. Cir. 1981) (noting that at
least one court has held that costs could be recovered “when
counsel refrained from calling the witness because of a desire to
avoid consuming further time”). Accordingly, the district court
did not abuse its discretion in awarding costs to Union/USA for
DeCinque’s attendance at the trial.
Second, United Teacher claims that the district court
improperly awarded costs for travel expenses incurred by DeCinque
and James P. McDermott, two of Union/USA’s witnesses. According to
United Teacher, Union/USA failed to: (1) prove that the travel
expenses for McDermott and DeCinque were the most economical rates
reasonably available to them; and (2) provide receipts for
McDermott’s expenses (including his $911 airline expense) as
34
required by 28 U.S.C. § 1821(c)(1). United Teacher also notes that
Jennifer Lazio obtained airfare for $567.50, which, according to
United Teacher, suggests that DeCinque and McDermott did not
utilize the most economical rate for travel as required by 28
U.S.C. § 1821(c)(1).
With respect to the airfare costs awarded to Union/USA, the
district court again did not abuse its discretion. The relevant
statute, 28 U.S.C. § 1821(c)(1), states:
A witness who travels by common carrier shall be paid for
the actual expenses of travel on the basis of the means
of transportation reasonably utilized and the distance
necessarily traveled to and from such witness's residence
by the shortest practical route in going to and returning
from the place of attendance. Such a witness shall
utilize a common carrier at the most economical rate
reasonably available. A receipt or other evidence of
actual cost shall be furnished.
While United Teacher attempts to show that McDermott and DeCinque
did not use the most economical rate of travel because Jennifer
Lazio’s travel was cheaper, Union/USA correctly points out that
Lazio traveled on different days from McDermott, and she flew out
of Washington, D.C., while DeCinque flew out of Philadelphia.
Union/USA has put forward no other evidence suggesting that
McDermott and DeCinque did not use the most economical rate
available. With respect to United Teacher’s argument that no
receipts for McDermott’s airfare were submitted, McDermott did in
fact submit an invoice for his airfare that was attached to the
Bill of Costs filed by Union/USA in the district court, and the
35
district court accepted this as adequate documentation.11
Accordingly, the district court did not abuse its discretion in
awarding costs for McDermott and DeCinque’s air travel.
Third, United Teacher argues that the district court
improperly awarded costs for photocopies to Union/USA (totaling
$2,485.80). In support of this claim, United Teacher cites
Holmes v. Cessna Aircraft Co., 11 F.3d 63, 64 (5th Cir. 1994)
(per curiam), for the proposition that before the district court
can award fees for photocopies, it must find that the copies were
necessarily obtained for use in the litigation. According to
United Teacher, Union/USA provided the district court with a
redacted invoice that did not identify the use made of the copied
materials, how many pages were copied, or the price per page.
United Teacher argues that based on this, the district court
could not have determined if the copies in question were
necessarily obtained for use in the litigation.
The district court did not abuse its discretion with regard
to the fees it awarded to Union/USA for photocopies. When it
submitted its bill of costs, Union/USA provided a redacted
invoice from its counsel for photocopies made during the month of
September 2003, the month in which the trial was held.
11
The record contains a letter dated September 26, 2003
from McDermott to Nicholas Christakos, Union/USA’s counsel. The
purpose of the letter was to obtain reimbursement for certain fees
McDermott had incurred. Attached to the letter is a redacted
spreadsheet showing, inter alia, a $911 airfare charge.
36
Additionally, Union/USA’s counsel declared under penalty of
perjury that the costs were correct and “necessarily incurred in
this action,” and it informed the court that the copying costs
were for exhibit binders and other trial materials. United
Teacher objected below to Union/USA’s request for these costs,
arguing that Union/USA had not shown that they were necessarily
obtained for use in the litigation. Union/USA replied by
reiterating that the photocopies in question were necessarily
obtained for use in the litigation. It also stated that it was
taking a conservative approach to its fee request insofar as it
was requesting fees incurred for photocopies made only during the
month in which the trial took place (one-fifth of the
photocopying fees that it actually incurred). In its order
awarding costs to Union/USA, the district court specifically
noted that it had considered the request for costs, United
Teacher’s objections, and Union/USA’s reply. It then overruled
United Teacher’s objections and granted Union/USA’s request. The
fact that Union/USA did not precisely itemize its photocopying
costs does not undermine the district court’s award. See
Copeland v. Wasserstein, Perella & Co., Inc., 278 F.3d 472, 484
(5th Cir. 2002) (holding that when a lawyer has made the
requisite declaration that photocopying costs were necessarily
incurred, the court did not abuse its discretion in awarding the
costs even if they were not itemized). Thus, the district court
did not abuse its discretion when it awarded $2,485.80 to
37
Union/USA for photocopies incurred during the litigation.
Finally, United Teacher claims that the district court
abused its discretion when it awarded subsistence allowances for
four of Union/USA’s witnesses (Lake, McDermott, DeCinque, and
Lazio) that were greater than the maximum per diem allowance set
forth in 28 U.S.C. § 1821(d)(2). According to United Teacher,
the maximum allowable per diem rate for Austin, Texas is $126 per
day. It contends, therefore, that, at most, Union/USA was
entitled to $2,268 in subsistence costs for the eighteen days
that these four witnesses attended the trial, not the $4,165.63
that was awarded to it.12
We find that the district court did abuse its discretion
when it awarded subsistence costs to Union/USA in excess of the
per diem amount authorized by statute. Section 1821(d)(2) of
Title 29 of the United States Code states:
A subsistence allowance for a witness shall be paid in an
amount not to exceed the maximum per diem allowance
prescribed by the Administrator of General Services,
pursuant to section 5702(a) of title 5, for official
travel in the area of attendance by employees of the
Federal Government.
29 U.S.C. § 1821(d)(2). The record reflects that the maximum per
diem amount for Austin, Texas, the city where the bench trial in
the present case was held, was $126 per day at the time of trial.
Additionally, Union/USA admits, and the record reflects, that the
12
Union/USA responds that it actually only claimed
$3,845.63 for the subsistence of its four witnesses, not $4,165.63.
38
district court awarded costs above this per diem rate. This
court has held that an award of costs must be vacated when the
costs awarded exceed the maximum per diem amount permitted by
statute. See Holmes, 11 F.3d at 64 (vacating an award of costs
because the district court awarded more than the $40 per day
permitted under 28 U.S.C. § 1821(b)). Union/USA tries to get
around this requirement by citing a district court case decided
in 1968 in North Carolina, Morgan v. Knight, 294 F. Supp. 40, 42
(E.D.N.C. 1968), which allegedly states that costs in excess of
the per diem amount may be awarded in the discretion of the
district court. This use of Morgan is misleading. While the
court in Morgan stated that some courts have awarded costs above
the per diem rate, it then stated that “the better rule seems to
require the court’s approval before the expense is incurred[,]”
and it refused to award costs in excess of the per diem rate.
Id. at 42 (citing Dep’t of Highways v. McWilliams Dredging Co.,
10 F.R.D. 107 (W.D. La. 1950), aff’d 187 F.2d 61 (5th Cir.
1951)). Accordingly, because the district court awarded
subsistence fees in excess of the permissible amount, this award
of fees, like the excessive award in Holmes, shall be vacated and
remanded for the district court’s recalculation in accordance
with 28 U.S.C. § 1821(d)(2).13 Holmes, 11 F.3d at 64.
13
In admitting that the district court awarded fees in
excess of the per diem rate permitted by statute, Union/USA claims
that it requested, and the district court awarded, the “actual
costs” that its witnesses incurred for meals and lodging, rather
39
III. CONCLUSION
For the foregoing reasons, we VACATE the district court’s
judgment awarding witness subsistence fees in excess of the
allowable statutory maximum and REMAND the case for recalculation
of these fees in accordance with 29 U.S.C. § 1821(d)(2). We also
VACATE the district court’s judgment denying Union/USA’s motion
for further relief pursuant to 28 U.S.C. § 2202 and REMAND to the
district court for further proceedings consistent with this
opinion. We AFFIRM the judgment of the district court in all
other respects. Costs shall be born by United Teacher.
than the per diem rate. 28 U.S.C. § 1821(d)(2) does not, however,
permit the award of “actual costs,” but limits such awards to the
per diem rate. According to Union/USA, if the district court found
that it was not entitled to subsistence costs above the per diem
rate authorized by statute, its costs would be reduced by $1577.63.
Id. The exact amount of the reduction, however, can be determined
on remand by the district court. See Holmes, 11 F.3d 64 (remanding
to the district court for recalculation).
40
Untd Tchr Assoc Ins v. Un Labor Life Ins Co
Combined Opinion