The opinion of the court was delivered by: CONSTANCE MOTLEY, Senior District Judge
MEMORANDUM OPINION AND ORDER
Following a jury verdict in favor of plaintiff on defendants'
counterclaims and in favor of defendants on plaintiff's claims,
defendants move the court to award them taxable costs, including
attorney's fees. For the reasons stated below, the motion is GRANTED IN
PART and DENIED IN PART.
The factual and procedural background of this case has been laid out in
full in previous opinions and orders, familiarity with which is assumed.
The court therefore recounts only the facts that bear upon the court's
disposition of the issue presented.
In relevant part, this case arises out of plaintiff Darryl Dagen's
employment with defendants CFC companies. Dagen charged defendants with
constructive discharge, three violations for breach of contract (one of
which was withdrawn prior to trial), failure to pay wages pursuant to New
York Labor Law, intentional interference with contractual relations, and
unjust enrichment. Plaintiff's sought relief in the amount of no less than
$1,053,301.00 in compensatory damages and no less than $10,000,000 in
punitive damages, as well as costs, attorneys' fees, and statutory
Defendants counterclaimed for breach of contract, fraudulent inducement
of contract, conversion, fraud, negligent misrepresentation, unjust
enrichment, and breach of fiduciary duties. They requested damages,
together with costs, reasonable attorneys' fees, interest, all sums
wrongfully obtained by Dagen, punitive damages, out of
pocket losses and expenses.
The court held a jury trial in this case from November 7, 2003 through
November 19, 2003. At the close of plaintiff's case, the defense rested.
The jury returned a verdict in favor of defendants on plaintiff's claims
and in favor of plaintiff on defendants' counterclaims. Accordingly, on
November 28, 2003, the court entered a judgment dismissing plaintiff's
complaint and defendant's counterclaims.
On January 5, 2004, defendants moved the court to award them taxable
costs, including attorneys' fees. They argue that because plaintiff
refused defendants' Offer of Judgment on September 25, 2003 for $50,000
and thereafter recovered a judgment of a lesser amount, they are entitled
to all litigation related costs incurred after that date under
Fed.R.Civ.P. 68. Alternatively, they claim that as the prevailing party,
the court should award them costs under Fed.R.Civ.P. 54(d). Plaintiff
opposes defendants' motion, arguing that Rule 68 does not apply because
plaintiff did not prevail and Rule 54(d) does not entitle defendants to
costs because defendants did not prevail on their counterclaims. Further,
plaintiff argues that even if the court were to award defendants costs
under one or both of the Rules, neither statute entitles defendants to
I. Are Defendants Entitled To Costs?
Fed.R.Civ.P. 54(d)(1) states in relevant part: "Except when express
provision therefor is made either in a statute of the United States or in
these rules, costs other than attorneys' fees shall be allowed as of
course to the prevailing party unless the court otherwise directs." The
decision whether or not to award costs rests with the sound discretion of
the trial court, Cosgrove v. Sears, Roebuck & Co.,
191 F.3d 98, 101-02 (2d Cir. 1999), but as the language of the Rule indicates,
prevailing parties are presumptively entitled to costs. See Delta
Air Lines. Inc. v. August, 450 U.S. 346, 352, 101 S.Ct. 1146 (1981).
The question, then, is who is a "prevailing party?" The Rule provides
no guidance as to the definition of the term. Generally, "the litigant in
whose favor judgment is rendered is the prevailing party for purposes of
Rule 54(d)." Wright, Miller & Kane, Federal Practice and Procedure: Civil 2d § 2667, at 178. The Supreme Court
has stated that "[r]espect for ordinary language requires that a
plaintiff receive at least some relief on the merits of his claim before
he can be said to prevail." Buckhannon Bd. and Care Home, Inc. v.
West Virginia Dept. of Health and Human Resources, 532 U.S. 598,
604, 121 S.Ct. 1835 (2001) citing Hewitt v. Helms, 482 U.S. 755, 760,
107 S.Ct. 2672 (1987). The inquiry focuses on the "material alteration of the
legal relationship of the parties." Farrar v. Hobby,
506 U.S. 103, 111, 113 S.Ct. 566 (1992). According to the Second Circuit, a
plaintiff prevails whenever he or she succeeds on "any significant issue"
in the litigation which achieves some of the benefit the party sought in
bringing suit. Bridges v. Eastman Kodak. 102 F.3d 56, 58 (2d
Cir. 1996). The success must be more than "technical" or "de minimis."
Lyte v. Sara Lee Corp., 950 F.2d 101, 103 (2d Cir. 1991). Here,
although Dagen successfully warded off defendants' counterclaims, he did
not receive relief on the merits or any of the benefits he sought in
bringing suit, nor did his suit materially alter the parties' legal
relationship. As such, Dagen is not the prevailing party in this case.
At the same time, the court entered judgment for plaintiff on
defendants' counterclaims. Plaintiff therefore argues that for the
purposes of Rule 54(d), neither Dagen nor defendants can be considered
the "prevailing party" entitled to costs. To substantiate this claim,
plaintiff cites Srybnik v. Epstein, 230 F.2d 683 (2d Cir.
1956), holding that "where the defendant counterclaims for affirmative