Indigency
excuses payment of costs
By
David Ziemer
david.ziemer@wislawjournal.com
Nov.
29, 2006
|
What
the court held
Case:
Emily Rivera v. City of Chicago, No. 06-1318
Issue:
Is a losing party's indigence a proper basis for denying
costs pursuant to FRCP 54(d)(1)?
Did the losing party meet its burden of showing indigence
in this case?
Holding:
Yes. The indigence exception is well-established, and there
is no reason to repeal it.
No. The losing party presented no evidence concerning her
assets, income, or expenses.
|
The
Seventh Circuit on Nov. 21 de-clined to make the award of costs
against a losing party pursuant to FRCP 54(d)(1) mandatory.
However,
the court did place a greater burden on trial courts if they exercise
discretion not to award costs because of indigence, and a concurrence
suggested that courts should not have discretion to deny costs.
In
2001, former Chicago police officer Mario Morales went to Emily
Rivera’s apartment, identified himself as a police officer
and demanded that Rivera let him in.
Morales
was wearing a bulletproof vest and a badge pouch. Rivera opened
the back door and Morales forcibly entered the apartment. Once
inside, Morales led Rivera upstairs, handcuffed her hands behind
her back and placed her on a bed. While Rivera was handcuffed
upstairs, Morales ransacked the apartment and then left.
Following
the incident, Morales pled guilty to numerous federal felonies,
for which he is currently incarcerated.
Rivera
brought suit against Morales in federal court, alleging a violation
of her Fourth Amendment rights under Section 1983, and a state
law battery claim. She obtained a $175,000 default judgment.
Rivera
then attempted to collect this judgment from the city through
a supplemental collection proceeding under FRCP 69, arguing that
the city was liable, because Morales was a city employee and acted
under color of state law.
The
district court granted summary judgment to the city, after which
the city submitted its bill of costs.
The
court found Rivera indigent and denied costs, based on her affidavit,
stating that she is a single mother of four children, earns a
salary of $1,800 per month, has only a nominal amount of money
in her checking account, receives food stamps, and has no other
assets.
The
affidavit did not list her expenses or include the $175,000 judgment
against Morales among her assets.
The
city appealed, and the court of appeals vacated the order in an
opinion written by Judge Joel M. Flaum, and joined by Judge William
J. Bauer. Judge Frank H. Easterbrook wrote a concurrence.
Statutory
Language
The
court first rejected the city’s argument that it should abolish
the exception that allows indigent losing parties to avoid paying
costs under Rule 54(d)(1).
The
rule provides in pertinent part, “[e]xcept when express provision
therefore is made either in a statute of the United States or
in these rules, costs shall be allowed as of course to the prevailing
party unless the court otherwise directs.”
The
court concluded that the rule provides a presumption that costs
will be awarded, but does not prohibit a district court from considering
indigence when assigning costs to a losing party.
The
court noted that, since 1983, it has allowed district courts to
consider indigence in denying costs under Rule 54(d). Badillo
v. Cent. Steel & Wire Co., 717 F.2d 1160, 1165 (7th Cir. 1983).
In
addition, although the Supreme Court has never adopted an indigence
exception to Rule 54(d), it has never foreclosed it either, and
seven other circuits permit an indigence exception.
In
contrast, only the Sixth Circuit has prohibited district courts
from considering a losing party’s indigence when awarding
costs. McDonald v. Petree, 409 F.3d 724, 732 (6th Cir.2005).
Finding
the exception well-established, the court declined to abandon
it.
Limits
Nevertheless,
the court found that a claim of indigence does not automatically
justify an exception, and held that the evidence was insufficient
to warrant an exception in this case.
First,
the court noted that, where the claim is frivolous, a court can
award costs, even if the defendant is indigent.
Offering
guidance to lower courts, the court adopted a two-part inquiry.
First,
a district court must make a threshold factual finding that the
losing party is incapable of paying costs at present or in the
future, with the burden on the losing party to make that showing.
Documentation
should include evidence of both income and assets, as well as
a schedule of expenses, to ensure that the district court has
clear proof of the non-prevailing party’s financial circumstances.
Second,
the court should consider the amount of costs, the good faith
of the losing party, and the closeness and difficulty of the issues
raised by a case when using its discretion to deny costs. In addition,
the district court should provide an explanation for its decision,
whether to award or deny costs.
The
court wrote, “Though we decline to abolish the indigence
exception, we note that the exception is a narrow one. Rule 54(d)(1)
provides a presumption that costs are awarded to the prevailing
party, and the burden is on the non-prevailing party to overcome
this presumption.”
In
this case, the court found the presumption was not overcome.
The
court noted that she did not supply any information regarding
her monthly expenses. In addition, she earned a salary of $1,800
per month, and lived in a building owned by her mother (speculating
that she may pay below-market rent).
In
addition, one of her four children that she claimed has not lived
with her for two years.
Finally,
the court noted that she has a $175,000 judgment against Morales,
but she has made no efforts to attempt to recover from him. The
court acknowledged that he is in prison and collection may be
impossible. Without having made any attempt to recover, however,
the court found she could not demonstrate indigence.
Accordingly,
the court vacated the order, and remanded for further proceedings.
The
Concurrence
Judge
Easterbrook wrote a separate opinion, concurring with the court’s
decision not to abolish the indigence exception: “Only the
Supreme Court or an amendment under the Rules Enabling Act can
produce national uniformity; there is little point in our moving
restlessly from one side of the conflict to the other.”
However,
he added that, if the court were to express an opinion on the
subject, it would be better to award costs “as of course,”
without an indigence exception.
Easterbrook
wrote, “the parties’ relative wealth is not a good reason
to deny costs to the winner, any more than a losing litigant’s
indigence would be a good reason to withhold an award of damages
for battery, theft, or breach of contract.”
Easterbrook
argued that the proper place to determine whether an indigent
must actually pay the award is bankruptcy court, maintaining,
“If an indigent person hits someone with a car and causes
a $1,000 loss, the court will award $1,000 without regard to the
driver’s income. If an indigent person hits someone with
a lawsuit and causes a $1,000 loss (in costs of defense), the
same consequence should ensue: an award of $1,000. For either
award, whether collection occurs is a question for bankruptcy.”
Excusing
the payment of costs, Easterbrook concluded, does nothing except
“interfere with the Bankruptcy Code’s system.”
Easterbrook
also found the exclusion inconsistent with 28 U.S.C. 1915, which
excuses indigent litigants from prepaying the filing fees.
Easterbrook
noted, “Only pre-payment is excused (emphasis in original),”
but the filer remains liable for the filing fee and costs.
Finally,
Easterbrook listed three more reasons for making the award of
costs routine: avoiding suit-by-suit inquiries; avoiding false
positives, noting, “the very assertion ‘I’m indigent,
so please excuse me’ implies solvency”; and avoiding
disparate treatment of identically situated litigants.
Easterbrook
concluded, “Some [courts] regularly excuse costs for indigents;
some never do; some draw hard-to-articulate lines. Rights measured
by the chancellor’s foot are not ‘rights’ of any
kind, and such a stochastic process is not the administration
of justice. We need rules that apply in an even-handed fashion.”
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