As Matter of First Impression, Rule 7 Bond Covering “Costs on Appeal” Includes Attorney Fees Awardable Under Fee-Shifting Statute but not Attorney Fees Awardable Under Rule 38 for Frivolous Appeals Ninth Circuit Holds
Plaintiffs filed a class action lawsuit against Federated Department Stores alleging federal antitrust violations in connection with the sale of cosmetics. Azizian v. Federated Dep’t Stores, Inc., 499 F. 3d 950, 954 (9th Cir. 2007). Almost two years later, the district court approved a class action settlement of all class claims on behalf of a nationwide class, id. One member of the class, Kamela Wilkson, objected to the class action settlement and appealed the order approving the settlement; in response, class action plaintiffs requested an appeal bond under FRAP Rule 7 in the amount of $12.8 million, including appellate attorney fees. Id. The district court ordered the objector to post a $42,000 bond – $2,000 for costs and $40,000 for attorney fees, id. While noting a split in authority, the district court required the objector to post bond for attorney fees because (1) the Clayton Act’s fee-shifting provision defines attorney’s fees as recoverable costs, and (2) “the Court of Appeals [was] likely to find that the instant appeal[ ] [was] frivolous.” Id. The objector posted only the $2,000 to cover costs on appeal; plaintiff’s asked the Ninth Circuit’s motions panel to dismiss the appeal for failure to post the requisite bond, but the motion was denied without prejudice. Id. As permitted by the motions panel, plaintiffs renewed this motion in conjunction with their brief on the merits of the class action settlement.
The Ninth Circuit noted that the appeal from the class action settlement presented two issues: (1) as a matter of first impression, “whether, or under what circumstances, appellate attorney’s fees are ‘costs on appeal’ that a district court may require an appellant to secure in a bond” under Rule 7, Azizian, at 953; and (2) whether the appeal should be dismissed for failure to post bond as ordered by the district court, id., at 954. With respect to the first issue, after a lengthy examination of sister circuit cases, see id., at 955-958, the Circuit Court held that “costs on appeal” under Rule 7 “includes all expenses defined as ‘costs’ by an applicable fee-shifting statute, including attorney’s fees,” id., at 958. But while the Ninth Circuit held that attorney fees recoverable under Section 4 of the Clayton Act fell within this test, it further held that attorney fees could not be recovered from an objector to a class action settlement because “unlike some other fee-shifting provisions, Section 4 is asymmetrical.” Id., at 959. Put simply, “Ordering one class member to pay other class members’ appellate attorney’s fees because of a disagreement about the propriety of settlement would not serve the purpose of Section 4 to penalize and deter those who have violated the antitrust laws.” Id., at 960.
The Ninth Circuit further held that a Rule 7 bond cannot include attorney fees that may be awarded as a sanction under Rule 38. Azizian, at 960. In addition to holding that the appeal was not frivolous within the meaning of Rule 38, the Circuit Court explained that an award of Rule 38 attorney fees is “highly exceptional, making it difficult to gauge prospectively, and without the benefit of a fully developed appellate record, whether such an award is likely.” Id. Additionally, permitting potential Rule 38 sanctions to be included in a Rule 7 bond would likely “chill an appeal,” id.; “the question of whether, or how, to deter frivolous appeals is best left to the courts of appeals,” id., at 961.
Finally, we briefly note that the Ninth Circuit denied plaintiffs’ motion to dismiss the appeal for failure of the objector to post the required bond. Whether to dismiss an appeal on this ground lies in the sound discretion of the appellate court. Azizian, at 960. In part, the Circuit Court rejected plaintiff’s argument that dismissal was appropriate due to the “undue prejudice” caused “by delaying completion of the settlement,” explaining that any such prejudice resulted from “[the] appeal itself, not from [objector’s] failure to pay the bond.” Id., at 962