San Antonio v. Hotels.com, L. P.
The Supreme Court ruled unanimously that once a federal appeals court decides how to divide litigation costs between the parties, the trial court below has no power to second-guess or reduce that award.
The decision clarifies a narrow but recurring point of federal court procedure: control over appellate costs belongs to the appeals court, not the trial court that originally handled the case.
How it got here: The trial court held it lacked discretion to reduce the cost award under Fifth Circuit precedent; the Fifth Circuit affirmed; San Antonio asked the Supreme Court to step in and the Court agreed to hear the case.
The Case in Depth
What happened
San Antonio and 173 Texas municipalities won a roughly $55 million judgment against popular online travel companies — like Hotels.com — for underpaying hotel occupancy taxes. The companies obtained supersedeas bonds (insurance-like instruments that pause a money judgment while an appeal proceeds) and ultimately won on appeal. They then sought to recover more than $2.3 million in bond premiums as litigation costs. San Antonio asked the trial court to reduce those costs on fairness grounds, but the trial court ruled it had no power to do so.
The question before the Court
When a federal appeals court awards litigation costs to the winning side, can the trial court below reduce or refuse those costs on fairness grounds?
The Court's answer
No — a district court cannot reduce or override the share of appellate costs awarded by a court of appeals under the federal rules governing appeals. The appeals court has full discretion to decide how costs are divided among the parties, and once it makes that call, the party receiving the award is "entitled" to those costs — meaning it has a legal right to them, not merely a chance to seek them. Allowing the trial court to reopen the question would directly undercut whatever allocation the appeals court had already made.
The trial court's role when these costs come back to it is limited: it verifies that the amounts requested are accurate and that the paperwork complies with applicable rules. It cannot relitigate the fairness of the appeals court's allocation. Parties who want to contest how an appeals court divided costs must do so in the appeals court itself — for example, by filing a motion under Federal Rule of Appellate Procedure 27.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Parties who lose an appeal — including governments, businesses, and individuals — cannot go back to the trial court and ask it to reduce the costs the appeals court awarded to the winner. To challenge how an appeals court divided costs, a party must raise that objection in the appeals court itself. This matters most in high-stakes appeals where bond or printing costs run into the millions.
What changes now
The online travel companies receive their $2.2 million cost award, and San Antonio cannot seek further reduction in the trial court. Going forward, litigants who want to challenge an appeals court's allocation of costs under Rule 39 must raise those objections in the appeals court itself — through a motion under Rule 27 or other available procedures — before or at the time the mandate issues, rather than waiting until the matter returns to the trial court.
What this does not decide
The ruling does not prevent a court of appeals from voluntarily delegating the task of allocating Rule 39(e) costs to the district court — a practice several appeals courts already use and which the Court explicitly endorsed. The Court also declined to decide whether supersedeas bond premiums are properly taxable under the general federal costs statute, 28 U.S.C. § 1920.
How the Court got there
The legal reasoning, step by step
- Federal Rule of Appellate Procedure 39 sets default rules for awarding costs after an appeal — for example, the loser normally pays — but also lets the court of appeals 'order otherwise,' departing from those defaults in any way it sees fit. The Court read this broad language to include the power to divide costs proportionally between the parties, not just award everything to one side or nothing at all.
- Rule 39(a)(4) reinforced this reading: when a judgment is affirmed in part and reversed in part, costs are awarded 'only as the court orders,' which most naturally means the appeals court can split costs in proportion to each party's degree of success. It would make little sense to read that provision as forcing the appeals court to award either all costs or none.
- Rule 39(e) — which lists costs 'taxable in the district court for the benefit of the party entitled to costs' — uses the word 'entitled,' meaning the winning party has a right to those costs once the appeals court awards them. The Court found that a district court taking a second look at the fairness of that award would drain the word 'entitled' of its meaning.
- San Antonio argued that the word 'taxable' in Rule 39(e) is permissive, implying district courts may choose whether to tax the costs at all. The Court rejected this, noting that the phrase 'shall be taxed' was changed to 'are taxable' in a 1998 stylistic overhaul expressly intended to make no substantive changes — so the new wording added no new discretion.
- The phrase 'taxable in the district court' simply identifies which court handles the mechanical task of formally entering the cost award — it makes sense because the costs in Rule 39(e) (bond premiums, record preparation fees, transcript costs, the notice-of-appeal filing fee) all relate to things that happened at the trial court level. The district court's job is to verify the amounts are accurate and proper, not to rebalance the equities.
- The Court dismissed practical objections: appeals courts can voluntarily delegate cost allocation to district courts if they prefer; most appellate costs are modest and estimable; and parties can raise fairness objections directly in the appeals court through a Rule 27 motion or other available procedural vehicles rather than seeking a do-over in the trial court.