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L-3 Communications Corp. v. OSI Systems

June 2, 2010

L-3 COMMUNICATIONS CORPORATION, PLAINTIFF-COUNTER-DEFENDANT-APPELLEE,
v.
OSI SYSTEMS, INC., DEFENDANT-COUNTERCLAIMANT-APPELLANT.



SYLLABUS BY THE COURT

Defendant-Counterclaimant-Appellant ("Appellant") appeals from a district court order taxing to Appellant, under Federal Rule of Appellate Procedure 39(e), the Plaintiff-Counter-Defendant-Appellee's ("Appellee") costs of obtaining a letter of credit to secure the judgment on appeal. Because this Court's order awarding costs to Appellee without limitation pursuant to Rule 39(a)(4) entitled Appellee to seek from the district court any and all permissible items of appellate costs properly taxed by that court pursuant to Rule 39(e), we reject Appellant's argument to the contrary and affirm the order of the district court.

Affirmed.

The opinion of the court was delivered by: Debra Ann Livingston, Circuit Judge

Argued: December 7, 2009

Before: KATZMANN and LIVINGSTON, Circuit Judges, and*fn1 STANTON, District Judge.

Appellant OSI Systems, Inc. ("OSI") appeals from an April 27, 2009, order of the United States District Court for the Southern District of New York (Crotty, J.)upholding the district court clerk's decision to tax to OSI, pursuant to Federal Rule of Appellate Procedure ("Rule") 39(e), the costs incurred by Appellee L-3 Communications Corporation ("L-3") in obtaining a letter of credit to preserve rights pending appeal. OSI argues that even when this Court has ordered appellate costs to be taxed to a party pursuant to Rule 39(a)(4), a district court is nevertheless without authority to tax any particular item of such appellate costs pursuant to Rule 39(e) unless this Court has expressly authorized the taxing of that item. We disagree. We conclude that this Court's order granting without limitation L-3's motion to tax costs pursuant to Rule 39(a)(4) entitled L-3 to seek from the district court any and all permissible items of appellate costs properly taxed by that court pursuant to Rule 39(e). Accordingly, we affirm the order of the district court.

BACKGROUND

L-3 and OSI are suppliers of security detection machines used in airports and government buildings. In the fall of 2001, the two companies became interested in acquiring and dividing between them certain parts of the security detection business of a third company. See L-3 Comms. Corp. v. OSI Sys., Inc., 283 F. App'x 830, 831 (2d Cir. 2008). L-3 and OSI entered into a letter of intent, which they subsequently amended, with regard to the proposed deal and thereafter engaged in negotiations to divide assets of the third company that had been purchased by L-3. By November 2002, however, their relationship had deteriorated, and on November 15, 2002, L-3 filed an action against OSI in the Southern District of New York seeking a declaration that it had fulfilled its obligation under the amended letter of intent to negotiate in good faith. Id. at 834. OSI counterclaimed for, inter alia, actual and constructive fraud and breach of fiduciary duty. Id.

On March 2, 2007, after a jury trial on OSI's fraud and breach of fiduciary duty claims, the district court entered an award against L-3 for over $125 million in compensatory and punitive damages. Id. at 831. The parties agreed to stay*fn2 the district court's judgment while L-3 appealed the judgment to this Court, but OSI required L-3 to secure the judgment. L-3 obtained a letter of credit in the amount of $138,750,000, incurring costs of over $1.5 million. On June 27, 2008, this Court decided by summary order that the district court had erred in concluding as a matter of law that L-3 owed OSI a fiduciary duty. Accordingly, this Court reversed the judgment of the district court as to OSI's breach of fiduciary duty and constructive fraud claims; it also vacated the district court's judgment as to the actual fraud claim and remanded to the district court for a new trial solely on this claim. Id. at 837-38.

L-3 subsequently sought to recover its costs associated with the appeal. Since the judgment against L-3 was reversed in part and vacated in part and remanded, L-3 was required by Rule 39(a)(4) to obtain an order from this Court establishing its entitlement to costs. Accordingly, on July 11, 2008, L-3 moved this Court to "tax the costs of appeal against Appellee OSI Systems, pursuant to Fed. R. App. P. 39(a)(4)." In the brief accompanying its motion, L-3 explained that it sought an order from this Court: (1) "awarding L-3 the cost of the docketing fee for its appeal, and the reproduction costs associated with the necessary copies of its briefs and appendix, for a total of $2,724.08"; and (2) in addition, "stating that appellate costs, including the costs listed in Federal Rule of Appellate Procedure 39(e), are taxed against OSI" so that L-3 might obtain from the district court "an award of the particular appellate costs that are 'taxable in the district court for the benefit of the party entitled to costs under this rule.' Fed. R. App. P. 39(e)." L-3 specifically noted that upon this Court taxing appellate costs against OSI, L-3 would "move in the district court pursuant to Rule 39(e) to recover the approximately $1.75 million in costs that L-3 ha[d] incurred in order to secure the $125.6 million judgment pending appeal." OSI submitted a brief opposing L-3's motion.

On August 8, 2008, this Court granted L-3's motion, stating only: "IT IS HEREBY ORDERED that [the] motion to tax the costs pursuant to FRAP 39(a)(4) is GRANTED." On August 13, 2008, L-3 submitted to this Court an itemized statement of costs to be taxed against OSI in this Court, including docketing fees and printing costs, totaling $2,724.08. On September 11, 2008, this Court issued an order taxing these costs under Rule 39(c). The Court's June 27, 2008, summary order reversing in part and vacating in part and remanding issued as a mandate on that same day.

On October 3, 2008, L-3 wrote a letter to the clerk of the court of the Southern District of New York seeking "the appellate costs that, under Rule 39(e), are taxable in the District Court." L-3 explained that it was seeking the cost of the trial transcript as well as the costs L-3 had incurred to secure the judgment on appeal. On November 21, 2008, the clerk of the district court taxed nearly $2.1 million in costs against OSI, which consisted, in large part, of the cost of the letter of credit required to secure the judgment.

On December 3, 2008, OSI appealed the clerk's order to the district court, arguing, inter alia, that since this Court had not specifically "directed taxation of costs under Fed. R. App. P. 39(e) in the district court, the district court may not tax such costs on appeal." On April 27, 2009, after a hearing, the district court rejected OSI's arguments and affirmed the clerk's taxation of costs against OSI, including the costs under Rule 39(e) for the letter of credit. The court explained:

OSI argues that the Appeals Court order must specify that it provides for taxation of costs pursuant to Rule 39(e). There is no such requirement. An order pursuant to Rule 39(a)(4) puts the prevailing party in precisely the same position as a party under Rules 39(a)(1), (2), and (3). A party designated under Rule 39(a)(4) does not have reduced status so that it is limited to a partial recovery of its costs. The prevailing party is entitled to taxable costs at the appellate level, Fed. R. App. P. 39(c) and (d), as well as costs taxed at the district court level under Rule 39(e), unless the Appeals Court rules otherwise. ...


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