How to Handle Costs When Plaintiffs Claim They Are Penniless

By Kristina Doan Gruenberg

In litigation, the party who wins generally gets to recover costs from the losing party.  This can include the costs of deposition transcripts, filing fees, photocopying, and witness fees.  These costs are recoverable in almost all cases; in contrast, attorney’s fees are only recoverable in more limited circumstances.  Costs can add up, and they can be an important bargaining chip in a case.  For example, a plaintiff who realizes that he has a weak case may voluntarily dismiss the case in exchange for a waiver of costs.

But what happens if a party proceeds with the lawsuit, loses, and then claims he cannot pay?

This comes up frequently in civil rights litigation as often people bringing cases against law enforcement and custody officers have limited resources, such as inmates.  This also comes up in employment cases where a person may claim that he does not have resources to repay costs because he lost his job.

Under the rules, there is a presumption that the losing party has to pay costs.  However, the courts have discretion to deny costs under certain circumstances.  The Ninth Circuit has held that the courts should consider a losing party’s financial status.  Additionally, in civil rights cases, the courts are supposed to consider whether imposing a high amount of costs against a plaintiff would have a “chilling effect” that would deter others from bringing civil rights cases.

Based on some of these Ninth Circuit cases, a losing party may believe that he can escape costs by claiming that he does not have financial resources.  But it is not that easy. The losing side has a high burden of showing why costs should be denied.

First, the losing party must actually show that they can’t pay, such as by attaching their trust account statements or other records. Often lawyers will try to skirt around facts by failing to give specifics, not providing any documentation, omitting information, or providing a declaration of counsel instead of the losing party himself.  Prevailing parties should not be afraid to point out the lack of specifics and lack of proof.  The winning side can also point out that the losing side had no problem paying for initial filing fees or an appeal of the case, or that the person has other sources of money.  For example, in wrongful conviction cases, a party may have received hundreds of thousands of dollars from the state already via the Victim’s Compensation Government Claim Board process.

Second, parties with limited resources cannot simply escape all costs; the costs must be high.  Many losing parties cite to the case Assoc. of Mexican-Am. Educators v. California, 231 F.3d 572, 591 (9th Cir. 2000).  In that case, Defendants prevailed on a motion for summary judgment and sought $216,443.67 in costs against plaintiffs, which the court denied.  The court found the costs were so “extraordinarily high” it would deter people from bringing civil rights claims.  However, in the majority of cases, the prevailing party is not seeking hundreds of thousands of dollars of costs, but rather an amount in the range of $5,000-$20,000, which is seen as a reasonable amount.

Third, being an inmate or detainee with in forma pauperis (“IFP”) status is not enough to escape paying costs.  Federal courts in California have routinely awarded costs in prisoner civil rights cases in which the plaintiff is indigent.[1]  This is because the courts have held that the Prison Litigation Reform Act (“PLRA”) does not exempt an IFP plaintiff from paying costs.  See 28 U.S.C. § 1915(f)(2)(A)) (“Proceedings in forma pauperis. . . . If the judgment against a prisoner includes the payment of costs under this subsection, the prisoner shall be required to pay the full amount of the costs ordered.”).

Finally, the losing side has to show that his case had some merit and/or raised important issues for society.  In Assoc. of Mexican-Am. Educators v. California, the court found that even though the group of teachers lost, their challenge to California’s hiring requirements led to some changes and raised important issues about the public education system.  This can be contrasted with many civil rights cases, particularly inmate litigation, which are brought by vexatious litigants and lack merit.

Although it is important to be mindful of the other side’s financial situation, the losing side should not automatically get a free pass when he claims he can’t pay.  It is important to challenge attempts to avoid costs.  Forcing the losing party to pay costs not only helps the prevailing party become financially whole again, it can help deter frivolous litigation.  A party who feels like they have nothing to lose is more likely to proceed with a weak case.   Even if the party never pays the full amount of costs, but has a judgment on the books, some portion would be deducted from the proceeds of any future receipts such as a settlement, judgment, inheritance, or even canteen money sent by his family members.

[1] See, e.g., Nicholson v. Medina, 2014 WL 824199 (E.D. Cal. March 3, 2014) (awarding costs of $2,887.75); Villa v. Rowe, 2012 WL 4083678, at *1 (N.D. Cal. Sept. 17, 2012) (awarding costs of $5,360); Duvigneaud v. Garcia, 2007 WL 2009800, at *3 (S.D. Cal. July 5, 2007) (awarding costs of $3,967.31).

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