Untd Tchr Assoc Ins v. Un Labor Life Ins Co

• Court: Court of Appeals for the Fifth Circuit
• Decided: August 8, 2005
• Docket: 04-50531
• Status: Published

Opinion

United States Court of Appeals Fifth Circuit F I L E D REVISED AUGUST 8, 2005 June 24, 2005 IN THE UNITED STATES COURT OF APPEALS Charles R. Fulbruge III FOR THE FIFTH CIRCUIT Clerk

____________________

No. 04-50531 ____________________

UNITED TEACHER ASSOCIATES INSURANCE CO

Plaintiff - Appellant v.

UNION LABOR LIFE INSURANCE COMPANY; UNION STANDARD OF AMERICA LIFE INSURANCE CO

Defendants - Appellees ___________________________________________________________________ ____________________

No. 04-50852 ____________________

Plaintiff - Counter Defendant - Appellees

v.

UNION LABOR LIFE INSURANCE COMPANY; UNION STANDARD OF AMERICA LIFE INSURANCE CO

Defendants - Counter Claimants - Appellants _________________________________________________________________

Appeals from the United States District Court for the Western District of Texas, Austin _________________________________________________________________

Before KING, Chief Judge, and BARKSDALE and STEWART, Circuit Judges.

KING, Chief Judge: Plaintiff-Appellant United Teacher Associates Insurance

Company sued Defendants-Appellees Union Labor Life Insurance

Company and Union Standard of America Life Insurance Company for

fraud, alleging that they failed to disclose material information

during the course of a business transaction. The Defendants-

Appellees responded by filing a counterclaim seeking both a

declaration that certain acquisition agreements between the

parties were valid and binding and an order of specific

performance and injunctive relief. After a bench trial, the

district court ruled in favor of the Defendants-Appellees,

granted the relief requested in their counterclaim, and awarded

them costs. Subsequently, however, the district court denied a

motion for further relief pursuant to 28 U.S.C. § 2202 filed by

them.

Plaintiff-Appellant United Teacher Life Insurance Company

now appeals the judgment of the district court, claiming that the

district court erred by: (1) holding that no duty to disclose

exists in Texas absent a confidential or fiduciary relationship;

(2) refusing to certify to the Texas Supreme Court the question

of when a duty to disclose exists in Texas; and (3) improperly

awarding certain costs to the Defendants-Appellees. Union Labor

Life Insurance Company and Union Standard of America Life

Insurance Company also appeal, arguing that the district court

erred when it denied their motion for further relief. The

parties’ appeals have been consolidated. For the following

2 reasons, we AFFIRM in part, VACATE in part, and REMAND to the

district court for further proceedings consistent with this

opinion.

I. FACTUAL AND PROCEDURAL BACKGROUND

In November 1999, Union Labor Life Insurance Company (“Union

Labor”) and its subsidiary, Union Standard of America Life

Insurance Company (“USA Life”) (collectively “Union/USA”), agreed

to sell their Medicare Supplement and Medicare Select insurance

policies (the “Medicare Block”) to United Teacher Associates

Insurance Company (“United Teacher”).

Prior to putting the Medicare Block up for sale, Union/USA

had entered into two consent orders with the Florida Department

of Insurance (“FDI”) that restricted future premium rate

increases on the Medicare Block. First, on May 27, 1997,

Union/USA entered into a consent order restricting premium rate

increases to trend on the Florida Medicare Select policies for a

two-year period, followed by a reevaluation of the anticipated

lifetime loss ratio at the end of this period.1 Second, on June

18, 1999, Union/USA entered into a consent order with the FDI

that allowed for a 12% premium rate increase on the Medicare

Supplement policies in force prior to the effective date of the

1 “Trend” increases are increases based solely on the growth in claims from year to year because of medical inflation, the increased utilization of medical services, and general inflation. They do not take into account the actual experience of a line of business.

3 consent order, but restricted future increases to trend unless

Union Labor had “credible experience” on new issues.2 According

to United Teacher, the 1997 and 1999 consent orders significantly

affected the profitability of the Medicare Select and Medicare

Supplement policies.

After Union Labor put the Medicare Block up for sale,3 it

assembled a due diligence team, led by Union Labor associate

actuary Jennifer Lazio, to respond to requests for information

from prospective purchasers. When Larry Doze, the president of

United Teacher, learned that the Medicare Block was up for bid

through a broker, he requested information about it. Lazio

responded by sending him the 1998 rate-filing information for the

Medicare Supplement policies and an actuarial memorandum about

the Medicare Select policies. Lazio did not, however, mention

the consent orders. Doze subsequently requested, as part of his

due diligence investigation, other documents and information to

assess the profitability of the Medicare Block. He did not

specifically request information about consent orders or

impediments to future rate increases, and he received no such

2 In Florida, an insurer must issue at least 500 new policies to get “partial credibility,” and at least 2,000 new policies to get “full credibility,” in order to obtain future rate increases based on the actual experience of a line of business. 3 Union Labor was authorized to act as agent for USA Life in connection with the sale and transfer of the USA Life Medicare Supplement lines of business included in the Medicare Block.

4 information. United Teacher also conducted an on-site visit to

the offices of Union Labor’s third-party administrator, the

American Insurance Administration Group (“AIAG”), but did not

learn of the consent orders from this visit. At one point in the

negotiations, Lazio told Doze that the FDI had recently approved

a 12% increase in the Medicare Supplement premiums and an 8%

increase in the Medicare Select premiums, but she did not tell

him that these increases were pursuant to the consent orders.

United Teacher now claims that Union/USA was fraudulently hiding

the consent orders from it.

In November 1999, United Teacher decided to purchase the

Medicare Block, and it entered into a letter agreement to that

effect with Union/USA, with a formal written agreement to follow.

In August 2000, United Teacher decided not to follow through with

the purchase. Accordingly, on December 6, 2000, Union/USA sued

United Teacher in the U.S. District Court for the District of

Columbia for relief arising out of United Teacher’s failure to

consummate the transaction. On October 4, 2001, the parties

settled the litigation, and Union/USA agreed to pay United

Teacher $2.5 million for United Teacher to acquire the Medicare

Block from it. At the time of settlement, United Teacher still

did not know about the consent orders.

During the settlement negotiations, United Teacher concluded

that it would need to seek rate increases aggressively on the

Medicare Block to make it profitable. Accordingly, it asked

5 Union/USA to permit it to do the 2001 rate increase filings for

the various states that required them. Union/USA agreed, but it

suggested that it (Union Labor) handle the rate filings for the

state of Florida. United Teacher agreed to this arrangement.

When the FDI only approved increases of 6% and 18% (rather than

the 100% increases requested), Doze asked Union/USA for the 2001

Florida rate filing information, including all communications

with the FDI.

Agreements related to the sale of the Medicare Block (the

“Agreements”) were signed on October 4, 2001, with closing to

occur on October 15, 2001. In a conference call on October 22,

2001, Lazio mentioned for the first time that the 1999 consent

order existed. In response, United Teacher once again requested

the 2001 rate filing information, and on November 8, 2001, Union

Labor produced it to United Teacher. On December 18, 2001,

United Teacher, which by then understood the full impact of the

1999 consent order, notified Union/USA of its intent to rescind

the Medicare Block transaction. By this time, the deadline for

reopening the D.C. lawsuit had passed. That same day, United

Teacher filed suit against Union/USA in Texas state court

alleging fraud and seeking rescission of the Agreements, and it

ceased its efforts at completing the transaction with Union/USA.

According to United Teacher, Union/USA failed to disclose

material facts about the sale of the Medicare Block during the

due diligence phase. At the time of the lawsuit, Union/USA was

6 still administering the Medicare Block and was incurring losses

from claims submitted by the insureds. Union/USA removed the

lawsuit to federal court, United Teacher amended its complaint to

request damages, and Union/USA counterclaimed for a declaratory

judgment that the Agreements were valid and an order of specific

performance against United Teacher. On October 22, 2002, nearly

a year after it learned about the 1999 consent order, United

Teacher, which was investigating a discrepancy in the Medicare

Select line’s lifetime loss ratios, learned for the first time of

the 1997 consent order.

In September 2003, a bench trial was held on United

Teacher’s fraud claim and on Union/USA’s declaratory judgment

counterclaim. The district court subsequently issued written

Findings of Fact and Conclusions of Law (the “Findings”) and a

Final Judgment on March 31, 2004, in which it found that United

Teacher had not proven fraud. In its decision, the district

court stated, inter alia, that: (1) in Texas, “for a duty of

disclosure to arise there must be a confidential or fiduciary

relationship between the parties”; and (2) no confidential or

fiduciary relationship existed between United Teacher and

Union/USA. The district court did not address Union/USA’s

counterclaim in its Findings. Accordingly, Union/USA filed a

motion to alter or amend, in which it requested that the district

court amend its judgment to address its counterclaim. On April

29, 2004, the district court amended its Final Judgment to state

7 that the Agreements “are valid and binding, and that [United

Teacher] must perform its obligations thereunder.” Additionally,

the district court awarded costs to Union/USA. On May 26, 2004,

United Teacher appealed the district court’s Amended Final

Judgment (Case No. 04-50531).

On May 7, 2004, Union/USA demanded that United Teacher

immediately pay all amounts due and owing to Union/USA under the

Agreements and take steps to consummate the transfer of the

Medicare Block.4 According to Union/USA, the amount due and

owing at that time was $8,393,660 (for insurance losses and

expenses associated with the policies that United Teacher had

agreed to assume). United Teacher allegedly failed to pay the

amount that it owed and failed to perform the tasks necessary to

effectuate the district court’s order. Accordingly, Union/USA

filed a Motion to Reopen and for Further Relief (the “motion for

further relief”) under 28 U.S.C. § 2202, in which it asked the

district court to order payment of the money that Union/USA was

owed and to again order United Teacher to perform its obligations

under the Agreements. Without issuing a written opinion or

conducting a hearing, the district court summarily denied the

motion for further relief. Union/USA subsequently filed an

appeal of this denial (Case No. 04-50852). This appeal was

4 According to Union/USA, pursuant to the Agreements and retroactive to October 1, 1999, United Teacher became Union/USA’s reinsurer until the policies were transferred to United Teacher.

8 consolidated with United Teacher’s appeal.

II. ANALYSIS

A. The Existence of a Duty to Disclose

United Teacher first claims that the district court erred

when it found that Union/USA had not committed fraud because it

did not have a duty to disclose the consent orders to United

Teacher absent a confidential or fiduciary relationship between

United Teacher and Union/USA. According to United Teacher, a

duty to disclose can exist in Texas even when there is no

confidential or fiduciary relationship between the parties.

United Teacher begins its argument by noting that in Texas,

a plaintiff wishing to prove fraud must establish “a material

representation, which was false, and which was either known to be

false when made or was asserted without knowledge of its truth

. . . .” Formosa Plastics Corp. v. Presidio Eng’rs. &

Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998) (internal

quotation marks omitted). United Teacher also notes that the

Texas Supreme Court has stated that “[w]hen the particular

circumstances impose on a person a duty to speak and he

deliberately remains silent, his silence is equivalent to a false

representation.” Spoljaric v. Percival Tours, Inc., 708 S.W.2d

432, 435 (Tex. 1986). United Teacher then cites Union Pacific

Resources Group, Inc. v. Rhone-Poulenc, Inc., 247 F.3d 574, 586

(5th Cir. 2001), for the claim that a duty to disclose can exist

9 in Texas absent a fiduciary or confidential relationship. In

Rhone-Poulenc, this court stated:

A duty to speak arises by operation of law when (1) a confidential or fiduciary duty relationship exists between the parties; or (2) one party learns later that his previous statement was false and misleading; or (3) one party knows that the other party is relying on a concealed fact and does not have an equal opportunity to discover the truth; or (4) one party voluntarily discloses some but less than all material facts, so that he must disclose the whole truth, i.e., all material facts, lest his partial disclosure convey a false impression.

247 F.3d at 586. According to United Teacher, the district court

should have invoked the doctrine of stare decisis and held that,

in accordance with Rhone-Poulenc, Union/USA had a duty to

disclose the consent orders. United Teacher also notes that this

court, as well as Texas intermediate appellate courts, have

reached similar conclusions in a number of other cases, both

before and after the Texas Supreme Court decided Bradford v.

Vento, the case on which the district court and Union/USA rely.

See, e.g., Rimade Ltd. v. Hubbard Enters., Inc., 388 F.3d 138,

143 (5th Cir. 2004); Lewis v. Bank of Am. NA, 347 F.3d 587 (5th

Cir. 2003) (per curiam); Citizens Nat’l Bank v. Allen Rae Invs.,

Inc., 142 S.W.3d 459, 476-77 (Tex. App.--Fort Worth 2004);

Pellegrini v. Cliffwood-Blue Moon Joint Venture, 115 S.W.3d 577,

580 (Tex. App.--Beaumont 2003, no pet.); Lesikar v. Rappeport, 33

S.W.3d 282, 299 (Tex. App.--Texarkana 2000, pet. denied); Hoggett

v. Brown, 971 S.W.2d 472, 487 (Tex. App.--Houston [14th Dist.]

1997, pet. denied); Ralston Purina Co. v. McKendrick, 850 S.W.2ed

10 629, 635-36 (Tex. App.--San Antonio 1993, writ denied).

Accordingly, United Teacher contends that the district court, in

making its “Erie guess,” incorrectly stated that the holding in

Rhone-Poulenc was no longer in accord with Texas state law.

Union/USA responds by arguing that in Bradford, which was

decided three weeks after Rhone-Poulenc, the Supreme Court of

Texas conclusively established that a duty to disclose does not

exist in Texas absent a confidential or fiduciary relationship.

In support of this claim, Union/USA cites the following language

from Bradford:

Several courts of appeals have held that a general duty to disclose information may arise in an arm’s-length business transaction when a party makes a partial disclosure that, although true, conveys a false impression. See, e.g., Hoggett v. Brown, 971 S.W.2d 472, 487 (Tex. App.--Houston [14th Dist.] 1997, no writ); Ralston Purina, 850 S.W.2d at 636. The Restatement (Second) of Torts section 551 also recognizes a general duty to disclose facts in a commercial setting. In such cases, a party does not make an affirmative misrepresentation, but what is said is misleading because other facts are not disclosed. We have never adopted section 551.

Bradford, 48 S.W.3d at 755-56 (emphasis added) (some internal

citations omitted).5 Additionally, Union/USA notes that the

5 Section 551 of the R ESTATEMENT (S ECOND ) OF T ORTS (1977) states:

(1) One who fails to disclose to another a fact that he knows may justifiably induce the other to act or refrain from acting in a business transaction is subject to the same liability to the other as though he had represented the nonexistence of the matter that he has failed to disclose, if, but only if, he is under a duty to the other to exercise reasonable care to disclose the matter in question.

11 Texas Supreme Court in Bradford cited its decision in SmithKline

Beecham Corp. v. Doe, 903 S.W.2d 347 (Tex. 1995), in which it

similarly stated that “Section 551 of the RESTATEMENT (SECOND) OF

TORTS recognizes a general duty to disclose facts in a commercial

setting, which could encompass the duty Doe seeks in this

case. . . . This Court has cited section 551 only once, but has

never embraced it as a rule of law in Texas.” Id. (citing

SmithKline Beecham Corp., 903 S.W.2d at 352-53 (internal

citations omitted)). Finally, Union/USA states that this court,

as well as Texas’s intermediate appellate courts, have before and

after Bradford stated that no duty to disclose exists in Texas

absent a fiduciary or confidential relationship. See Coburn

Supply Co., Inc. v. Kohler Co., 342 F.3d 372 (5th Cir. 2003);

(2) One party to a business transaction is under a duty to exercise reasonable care to disclose to the other before the transaction is consummated, (a) matters known to him that the other is entitled to know because of a fiduciary or other similar relation of trust and confidence between them; and (b) matters known to him that he knows to be necessary to prevent his partial or ambiguous statement of the facts from being misleading; and (c) subsequently acquired information that he knows will make untrue or misleading a previous representation that when made was true or believed to be so; and (d) the falsity of a representation not made with the expectation that it would be acted upon, if he subsequently learns that the other is about to act in reliance upon it in a transaction with him; and (3) facts basic to the transaction, if he knows that the other is about to enter into it under a mistake as to the them, and that the other, because of the relationship between them, the customs of the trade or other objective circumstances, would reasonably expect a disclosure of those facts.

12 Imperial Premium Fin., Inc. v. Khoury, 129 F.3d 347, 352-53 (5th

Cir. 1998); Bay Colony Ltd. v. Trendmaker, Inc., 121 F.3d 998,

1004 (5th Cir. 1997); Engstrom v. First Nat’l Bank of Eagle Lake,

936 S.W.2d 438, 444-45 (Tex. App.--Houston [14th Dist.] 1996,

writ denied); Travel Music of San Antonio, Inc. v. Douglas, No.

04-00-00757-CV, 2002 WL 1058527, at *4 (Tex. App.--San Antonio,

May 29, 2002) (not designated for publication). Accordingly,

Union/USA argues that the district court correctly concluded that

because the Texas Supreme Court explicitly declined in Bradford

to adopt the disclosure duties described in § 551 and in cases

like Hoggett, and because the Texas Supreme Court has only

explicitly recognized a duty to disclose in the context of a

confidential or fiduciary relationship, a duty to disclose does

not exist in Texas absent a confidential or fiduciary

relationship.

After a bench trial, findings of fact are reviewed for clear

error and issues of law are reviewed de novo. Kona Tech. Corp.

v. S. Pac. Transp. Co., 225 F.3d 595, 601 (5th Cir. 2000). In

order to determine questions of state law, federal courts look to

final decisions of the state’s highest court. Erie R.R. Co. v.

Tompkins, 304 U.S. 64 (1938); St. Paul Fire & Marine Ins. Co. v.

Convalescent Servs., Inc., 193 F.3d 340, 342 (5th Cir. 1999).

While decisions of intermediate state appellate courts provide

guidance, they are not controlling. Matheny v. Glen Falls Ins.

Co., 152 F.3d 348, 354 (5th Cir. 1998). If a state’s highest

13 court has not ruled on the issue in question, a federal court

must determine, to the best of its ability, what the highest

court of the state would decide. St. Paul Marine, 193 F.3d at

342.

A reasonable jurist might well conclude, certainly after

Bradford, that a duty to disclose exists in Texas only in the

context of a confidential or fiduciary relationship. This court

has so held in Coburn, the only Fifth Circuit case that discusses

the relevant portion of Bradford. However, apart from Coburn, it

would be fair to say that courts after Bradford (including this

court) have not gotten the message, but have instead continued to

find that a duty to disclose can exist in Texas absent a

confidential or fiduciary relationship. See, e.g., Rimade, 388

F.3d at 143; Lewis, 347 F.3d at 587; Citizens Nat’l Bank, 142

S.W.3d at 476-77; Pellegrini, 115 S.W.3d at 580; but see Travel

Music, 2002 WL 1058527, at *4.

Fortunately, we need not decide whether a duty to disclose

exists in Texas absent a confidential or fiduciary relationship

because, even if such a duty did exist, United Teacher’s fraud

claim would fail. In Texas, fraud occurs when: (1) the defendant

misrepresented a material fact; (2) the defendant knew the

material representation was false or made it recklessly without

any knowledge of its truth; (3) the defendant made the false

material representation with the intent that it should be acted

upon by the plaintiff; and (4) the plaintiff justifiably relied

14 on the representation and thereby suffered injury. Ernst &

Young, 51 S.W.3d at 577. The first requirement of this test can

be met if the defendant concealed or failed to disclose a

material fact when a duty to disclose existed. See New Process

Steel Corp., Inc. v. Steel Corp. of Texas, Inc., 703 S.W.2d 209,

214 (Tex. App.--Houston [1st Dist.] 1985, writ ref’d n.r.e.);

Moore & Moore Drilling Co. v. White, 345 S.W.2d 550, 555 (Tex.

App.--Dallas 1961, writ ref’d n.r.e.). Assuming, arguendo, that

United Teacher has established the first prong of this test

because Union/USA had a duty to disclose the consent orders,

United Teacher’s fraud claim nevertheless fails because it cannot

prove fraudulent intent. In its Findings of Fact and Conclusions

of Law, the district court noted that Clause 3.11 of the

Agreement for Reinsurance states:

To the best of [Union Labor's] knowledge, information and belief, no warranty or representation made by the Company in this Agreement nor in any writing furnished or to be furnished by [Union Labor] to [United Teacher] pursuant hereto or in connection herewith contains or will contain any untrue statement of material fact or omits or will fail to state, any material fact necessary to make the statements contained herein or therein not misleading.

The district court interpreted this clause “as an affirmative

representation that Union Labor disclosed all material

information necessary to make other representations related to

the sale not misleading.” The district court then analyzed

whether Union/USA committed fraud by intentionally concealing or

failing to disclose the consent orders during the parties’

15 negotiations, thereby misleading United Teacher. The district

court wrote:

a. Omitted material information. United Teacher asserts that the omitted material information was the existence of the consent orders and that disclosing the existence of the consent orders was necessary to make other information provided by Union Labor during negotiations not misleading. There can be no doubt, and the Court finds, that the existence of the consent orders and their content was information material to United Teacher in analyzing the proposed purchase. United Teacher offers several examples of how information furnished by Union Labor was rendered misleading by the failure to disclose the consent order. Lazio disclosed to Doze that Union Labor received a 12% rate increase on the Florida Medicare Supplement policies on June 22, 1999, and an 8% increase for the Florida Medicare Select policies on December 16, 1999, without disclosing that these increases were related to the 1997 and 1999 consent orders. Later, in connection with the 2001 Florida rate filings, Lazio advised Doze that Union Labor had received an 18% rate increase on the Medicare Select business and that the 100% request on the Supplement business was pending. When Florida offered a 6% rate increase (rather than the 100% requested), Lazio did not inform Doze that the low increase was the result of the 1999 consent order.

b. Union Labor’s knowledge and intent. United Teacher alleges that Union Labor knew the consent orders were material and intentionally concealed them from United Teacher during negotiations. As evidence of Union Labor’s fraudulent intent, United Teacher points to Union Labor’s insistence on performing the 2001 Florida rate filing, which, if performed by United Teacher, would have led to its discovery of the consent orders. United Teacher argues that Union Labor’s failure to send the 2001 filing information to Doze promptly after he requested it is further evidence of Union Labor’s intent to conceal the consent orders. However, Union Labor explained that it performed the 2001 Florida rate filing because it had access to the necessary information and that when Doze later requested the filing information, it was not readily available because an outside consultant had actually prepared the filing. Further, Lazio, a young actuary with almost no experience in conducting due diligence for the purchase or sale of a business,

16 credibly testified that she did not know that the consent orders, signed by Union Labor and the Florida Department of Insurance, would also bind United Teacher and that, since Doze did not specifically request information in the category of the consent orders, she did not think to produce them.

United Teacher has presented evidence that Union Labor may have intended to conceal the consent orders, but Union Labor’s explanations for its allegedly suspicious behavior are plausible. United Teacher has failed in its burden of proof and persuasion.

United Teacher Assocs. Ins. v. Union Labor Life Ins. Co., 311

F.Supp. 2d 587, 599 (W.D. Tex. 2004) (emphasis added). United

Teacher does not challenge this finding by the district court on

appeal. Nevertheless, it contends that this finding is not

dispositive of its claim of fraud by nondisclosure because the

district court’s analysis regarding intent only applied to fraud

by affirmative misrepresentation. In support of this claim,

United Teacher states that the intent requirement for fraud by

affirmative misrepresentation does not exist with respect to

fraud by nondisclosure. Specifically, United Teacher argues that

it need not prove intent in order to establish fraud by

nondisclosure, since intent is irrelevant when an affirmative

duty to disclose exists and was violated. This is wrong. Courts

in Texas have consistently held that fraud by nondisclosure or

concealment requires proof of all of the elements of fraud by

affirmative misrepresentation, including fraudulent intent, with

the exception that the misrepresentation element can be proven by

the nondisclosure or concealment of a material fact in light of a

17 duty to disclose. See, e.g., Schlumberger Tech. Corp. v.

Swanson, 959 S.W.2d 171, 181 (Tex. 1997) (holding that “fraud by

non-disclosure is simply a subcategory of fraud” requiring, e.g.,

proof of reliance); Columbia/HCA Healthcare v. Cottey, 72 S.W.3d

735, 744-46 & n.5 (Tex. App.--Waco 2002, no pet.) (stating intent

as an element of fraud by nondisclosure and finding sufficient

evidence of intent to support the jury’s verdict); Peltier

Enters., Inc. v. Hilton, 51 S.W.3d 616, 623 (Tex. App.--Tyler

2000) (holding that fraudulent concealment “requires proof of the

same elements [as fraud by affirmative misrepresentation]”).

Because the intent prong is the same in Texas for fraud by

affirmative misrepresentation as it is for fraud by nondisclosure

or concealment, the district court’s finding of a lack of

fraudulent intent would apply equally if the district court had

found that a common law duty to disclose the consent orders

existed. Accordingly, the district court’s unchallenged finding

of no fraudulent intent in the nondisclosure of the consent

orders is fatal to United Teacher’s fraud by nondisclosure claim,

regardless of whether or not a duty to disclose the consent

orders existed. We therefore need not reach the question of

whether a duty to disclose can exist in Texas absent a

confidential or fiduciary relationship.6

6 Because the district court’s finding regarding fraudulent intent is dispositive of United Teacher’s fraud claim, we need not address Union/USA’s further argument that United Teacher’s fraud claim fails because the district court found that United Teacher

18 B. The Denial of Union/USA’s Motion for Further Relief under 28 U.S.C. § 2202

In its appeal, Union/USA argues that the district court erred

by denying its motion for further relief under 28 U.S.C. § 2202.

According to Union/USA, pursuant to the Agreements and retroactive

to October 1, 1999, United Teacher became Union/USA’s reinsurer

with respect to the Medicare Block until the policies were

transferred to United Teacher.7 In its motion to reopen and for

failed to prove justifiable reliance. Likewise, because United Teacher’s fraud claim fails regardless of whether a duty to disclose exists in Texas absent a confidential or fiduciary relationship, we need not certify to the Texas Supreme Court the question of when a duty to disclose exists in Texas. 7 Section 2.1 of the Coinsurance Reinsurance Agreement (the “CRA”), which is one of the Agreements, states:

Subject to the terms and conditions of this Agreement, effective as of the Coinsurance Effective Date, [Union/USA] hereby cedes to [United Teacher] and [United Teacher] hereby accepts reinsurance and coinsures on a one hundred percent (100%) quota share basis [Union/USA’s] contractual liabilities (other than Excluded Liabilities) under the Coinsured Policies, by means of indemnity reinsurance. [Union/USA] and [United Teacher] mutually agree that, on and after the Coinsurance Effective Date, [United Teacher] shall be entitled to exercise all contractual rights and privileges of [Union/USA] under the Coinsured Policies in accordance with the terms, provisions and conditions of such Coinsured Policies. [United Teacher] agrees to be responsible for one hundred percent (100%) of the Statutory Reserves and Liabilities applicable to the Coinsured Policies (other than the Excluded Liabilities), and shall be fully responsible, at its sole expense, for administration of the Coinsured Policies in all respects in the name, and on behalf, of [Union/USA] in accordance with the terms and conditions of the Services Agreement.

CRA § 2.1. Additionally, Section 2.1.3 of the CRA obliges United reimburse Union/USA for losses under the policies, stating:

19 further relief, Union/USA sought to recover in the form of a

monetary award the money owed to it under the Agreements, and it

also requested that the district court further order United Teacher

to perform its obligations under the Agreements. Union/USA claims

that it was entitled to monetary relief because the district court

had previously awarded Union/USA: (1) a declaration that the

Agreements are “valid and binding” and that United Teacher “must

perform its obligations thereunder”; and (2) an order of specific

performance as to the Agreements. Nevertheless, the district

court, without a hearing or written opinion, denied Union/USA’s

§ 2202 motion.

In support of its claim that the district court erred by

denying its motion for further relief, Union/USA argues that money

damages should be awarded where such relief is necessary or proper

to effectuate a declaratory judgment. In support of this claim,

Union/USA cites several cases from other circuits that, in

Union/USA’s estimation, have held that a party can effectuate a

prior declaratory judgment by obtaining money damages pursuant to

a motion for further relief under § 2202. Union/USA further argues

that parties often obtain declaratory judgments construing their

rights under agreements and then, at a later date, seek further

On and after the Coinsurance Effective Date [October 1, 1999], [United Teacher] shall bear and shall have responsibility for reimbursing (Union/USA) for all payments [Union/USA] makes of liabilities (other than Excluded Liabilities) with respect to the Coinsured Policies.

20 relief under § 2202 in the form of a monetary award or equitable

relief in order to realize the full benefit of the declaratory

judgment in their favor. According to Union/USA, if this ability

to seek further relief under § 2202 were removed, favorable

declarations of a party’s rights would be a meaningless exercise.

In this vein, Union/USA claims that the monetary award and

injunctive relief requested in its motion for further relief was

necessary to effectuate properly the declaration of the validity of

the Agreements and the order of specific performance, and it argues

that the district court therefore erred by denying the motion.

error and issues of law are reviewed de novo. Kona Tech. Corp.,

225 F.3d at 601. If the denial of a motion for further relief

under 28 U.S.C. § 2202 is based on a question of law, it is

reviewed de novo. See United Nat’l Ins. Co. v. SST Fitness Corp.,

309 F.3d 914, 916 (6th Cir. 2002); Pro-Eco, Inc. v. Bd. of Comm’rs

of Jay County, Ind., 57 F.3d 505, 508 (7th Cir. 1995); Ins. Servs.

of Beaufort, Inc. v. Aetna Cas. and Surety Co., 966 F.2d 847, 852

(4th Cir. 1992). That said, we have held that the district court’s

decision to grant or deny declaratory relief is reviewed for an

abuse of discretion because 28 U.S.C. § 2201 says that a district

court “may” declare the rights and other legal relations of any

interested parties. See 28 U.S.C. § 2201; Am. States Ins. Co. v.

Bailey, 133 F.3d 363, 368 (5th Cir. 1998) (citing Wilton v. Seven

Falls Co., 515 U.S. 277, 289-90 (1995)). Likewise, because § 2202

21 says that a district court “may” award further relief, the district

court’s refusal to award damages under § 2202 is reviewed for an

abuse of discretion. See 28 U.S.C. § 2202; Besler v. United States

Dep’t of Agric., 639 F.2d 453, 455 (8th Cir. 1981) (applying an

abuse of discretion standard to the denial of further relief under

§ 2202). Finally, this court reviews a district court’s ruling on

the application of res judicata de novo. Sid Richardson Carbon &

Gasoline Co. v. Interenergy Res., Ltd., 99 F.3d 746, 753 (5th Cir.

1996).

Because the district court denied the motion for further

relief without a hearing or written opinion, we do not know why the

district court denied the motion. Accordingly, we first consider

whether Union/USA’s § 2202 motion was the proper type of motion to

effectuate the declaratory judgment in Union/USA’s favor. We then

consider the possible reasons advanced by United Teacher for

denying the requested relief to see if any of them could have

served as the basis for the district court’s decision.

We begin by addressing whether the relief requested by

Union/USA was the sort of relief that the district court could

provide in response to a motion for further relief under § 2202.

Section 2202 states: “Further necessary or proper relief based on

a declaratory judgment or decree may be granted, after reasonable

notice and hearing, against any adverse party whose rights have

been determined by such judgment.” 28 U.S.C. § 2202. This court

has held that under § 2202, “the prevailing party [in a declaratory

22 judgment action] may seek further relief in the form of damages or

an injunction.” Kaspar Wire Works, Inc. v. Leco Eng’g & Mach.,

Inc., 575 F.2d 530, 537 (5th Cir. 1978); see also Nat’l Fire Ins.

Co. of Hartford v. Bd. of Pub. Instruction of Madison County, Fla.,

239 F.2d 370, 376 & n.11 (5th Cir. 1956) (citing § 2202 for the

proposition that “[t]he Federal Declaratory Judgment Act

contemplates that all necessary or proper relief based on the

declaratory judgment should be granted”). Other circuits that have

addressed the type of relief available under § 2202 have reached

similar conclusions. For instance, in Besler, 639 F.2d at 455, the

government prevailed on its counterclaim against a group of

ranchers for a declaratory judgment that it was not estopped from

recovering monies improperly paid to the ranches under a federal

program. Subsequently, the government sought the monies due and,

when the ranchers refused to pay, sought recovery through a § 2202

motion for further relief. As in the present case, the district

court summarily denied the motion without a hearing or opinion.

The Eighth Circuit held that the district court abused its

discretion by summarily denying the motion, and it reversed and

remanded to the district court for a determination of the amounts

owed, stating that monetary relief under § 2202 was appropriate

because the “declaratory judgment previously entered by the

district court conclusively established the government’s right to

recoup the benefits received by the appellees.” Besler, 639 F.2d

at 455. Likewise, in Horn & Hardart Co. v. National Rail Passenger

23 Corp., 843 F.2d 546, 548-49 (D.C. Cir. 1988), the D.C. Circuit

affirmed the district court’s award of further relief under

§ 2202 after one party failed to meet its obligations as set forth

in the court’s prior declaratory judgment. Similarly, in Gant v.

Grand Lodge of Texas, 12 F.3d 998 (10th Cir. 1993), the plaintiff

sought both coercive and declaratory relief in the original

proceeding. Subsequently, the plaintiff sought further relief

pursuant to § 2202 to increase the payments the plaintiff was to

receive under the declaratory judgment. The Tenth Circuit affirmed

the district court’s decision granting the request for further

relief, stating that § 2202 “permits the original judgment to be

supplemented either by damages or by equitable relief even though

coercive relief might have been available at the time of the

declaratory action.” Id. at 1003 (citing 10A C. Wright, A. Miller

& M. Kane, FEDERAL PRACTICE & PROCEDURE § 2771, at 765-67 (2d ed.

1983)). Finally, in Security Mutual Casualty Co. v. Century

Casualty Co., 621 F.2d 1062, 1065-66 (10th Cir. 1980), a reinsurer

filed a declaratory judgment action seeking to limit its exposure

in connection with a judgment against a party insured by the

primary insurer. The primary insurer filed a counterclaim, in

which it requested a declaratory judgment that the reinsurer was

liable to it under the terms of the reinsurance agreement. The

district court found in favor of the primary insurer, issued a

declaratory judgment stating that the reinsurer was liable under

the terms of the reinsurance agreement, and dismissed the case.

24 Sec. Mut., 621 F.2d at 1064. Subsequently, the primary insurer

moved for an amended judgment under FED. R. CIV. P. 60, requesting

that the court calculate, and then award to it, monetary damages.

The district court treated the motion as being made pursuant to the

FED. R. CIV. P. 59(e) and denied it as untimely. The Tenth Circuit

affirmed the district court’s decision, but held that the primary

insurer was clearly entitled to obtain money damages for the

amounts owed to it under the reinsurance agreement pursuant to §

2202. See Sec. Mut., 621 F.2d at 1065-66. According to the Tenth

Circuit, because the district court’s declaratory judgment

established the primary insurer’s rights under the reinsurance

agreement, monetary damages could be obtained through a motion for

further relief pursuant to § 2202. See id. Thus, as is clear from

these cases and from the language of § 2202, a party can file a

motion for further relief requesting monetary damages under § 2202

to effectuate a prior declaratory judgment. Accordingly, Union/USA

filed the right type of motion when it requested further relief

under § 2202 to effectuate the declaratory judgment in its favor

previously entered by the district court.

Having established that Union/USA could seek money damages

through its § 2202 motion for further relief to effectuate the

district court’s prior declaratory judgment, we turn to United

Teacher’s arguments for why such relief was not justified in this

case. United Teacher’s primary argument is that the doctrines of

res judicata and collateral estoppel preclude the further relief

25 requested by Union/USA. This argument fails. United Teacher’s

preclusion argument is based on the premise that Union/USA

requested money damages below and was denied such relief. This

contention is false. Union/USA never requested money damages in

its counterclaim, nor did it request money damages at trial.

Similarly, while Union/USA’s motion to alter or amend referred to

the fact that United Teacher owed money to it, Union/USA did not

request monetary relief against United Teacher in this motion.8 In

support of its claim that Union/USA requested money damages at

trial, United Teacher cites the following exchange between

Union/USA’s counsel, Mr. Christakos, and United Teacher’s counsel,

Mr. Ruiz:

Mr. Christakos: How much does United Teacher currently owe to Union Labor and USA Life on this transaction?

Mr. Ruiz: Objection, Your Honor. I’m going to object to the relevance, because that’s not in their counterclaim.

Mr. Christakos: It’s in the counterclaim for declaration that the agreements are valid, and an order that they perform them. I would like the most current amount owed to be in the record; it’s part of that counterclaim.

While this exchange indicated to the district court that United

Teacher’s indebtedness to Union/USA was accruing at a rapid pace,

8 In the motion to alter or amend, Union/USA stated that it “presented evidence at trial through the testimony of Jennifer Lazio, that United Teacher owed at least $5 million as of the time of trial to [Defendants-Appellants] under the agreements at issue. [Union/USA] presented this evidence expressly in connection with [its] Counterclaim.” Union/USA did not, however, request monetary relief in this motion.

26 this exchange alone does not demonstrate that Union/USA requested

money damages as part of its counterclaim. In fact, no discovery

has ever been conducted on Union/USA’s damages, and the record

indicates that prior to Union/USA’s motion for further relief, no

specific request for monetary relief had ever been made to the

court. United Teacher’s citation to Union/USA’s passing remarks

about money damages at trial and in their motion to alter or amend

does not change this fact. Moreover, it would have been illogical

for the district court explicitly to have ordered specific

performance and held that the Agreements (which provided for

monetary damages) were binding, while at the same time implicitly

holding that United Teacher did not have to pay the monetary

damages provided for by the Agreements. Accordingly, because

Union/USA never requested money damages before filing its motion

for further relief, the doctrines of res judicata and collateral

estoppel are inapplicable.9

United Teacher additionally claims that the district court

lacked jurisdiction to grant further relief because United Teacher

9 Other circuits have reached similar conclusions. For instance, in Security Mutual, the Tenth Circuit held that because of the district court’s declaratory judgment establishing the primary insurer’s rights under the reinsurance agreement, “the closing of the case by the judgment of dismissal was clearly not a determination against the right of [the primary insurer] to recover on the reinsurance agreement.” Sec. Mut., 621 F.2d at 1066. The court further stated that there was no “res judicata problem since the judgment did not preclude recovery of further relief by [the primary insurer] on the reinsurance treaty and [the primary insurer’s] rights determined by the declaratory judgment.” Id.

27 filed its appeal of the district court’s judgment before Union/USA

filed its motion for further relief. This argument also fails.

Courts that have addressed when a motion for further relief may be

brought under § 2202 have consistently held that neither the filing

of an appeal nor a lengthy delay after the trial court’s initial

ruling terminates the court’s authority to grant further relief

pursuant to § 2202. See, e.g., Horn & Hadart Co. v. National Rail

Passenger Corp., 843 F.2d at 548; McNally v. Am. States Ins. Co.,

339 F.2d 186, 187-88 (6th Cir. 1964) (per curiam); Edward B. Marks

Music Corp. v. Charles K. Harris Music Publ’g Co., 255 F.2d 518

(2d. Cir. 1958). The Supreme Court’s decision in Griggs v.

Provident Consumer Discount Co., 459 U.S. 59 (1982), does not

undermine this conclusion. In Griggs, the Supreme Court held that

“[t]he filing of a notice of appeal is an event of jurisdictional

significance--it confers jurisdiction on the court of appeals and

divests the district court of its control over those aspects of the

case involved in the appeal.” Griggs, 459 U.S. at 58 (emphasis

added). If we were to hold that the act of lodging an appeal of a

declaratory judgment nullifies the prevailing party’s right to seek

further relief under § 2202, we would countermand Grigg’s statement

that the filing of an appeal divests the district court of its

control only “over those aspects of the case involved in the

appeal.” See Griggs, 459 U.S. at 58; Horn & Hadart, 843 F.2d at

548 (“To rule otherwise would allow the party against whom a

declaratory judgment is rendered to nullify her adversary’s right

28 to § 2202 relief merely by lodging an appeal. Indeed, such a

forfeiture rule would conflict not only with common sense, but also

with the principle that when a party files a notice of appeal the

district court only surrenders ‘its control over those aspects of

the case involved in the appeal.’” (quoting Griggs, 459 U.S. at

58)); see also Burford Equip. Co. v. Centennial Ins. Co., 857

F.Supp. 1499, 1502 (M.D. Ala. 1994) (holding that the reservation

of jurisdiction for motions for further relief under 28 U.S.C.

§ 2202 is a statutory exception to the rule set forth in Griggs).

Here, United Teacher’s appeal concerns only the district court’s

judgment and award of costs pertaining to Union/USA’s fraud claim.

Accordingly, United Teacher’s separate argument that the district

court was divested of jurisdiction over Union/USA’s motion for

further relief under § 2202 fails.

Finally, United Teacher argues that Union/USA’s motion for

further relief was improper because its request for monetary

damages was a compulsory counterclaim under FED. R. CIV. P. 13(a).10

10 FED. R. CIV. P. 13(a) states:

(a) Compulsory Counterclaims. A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. But the pleader need not state the claim if (1) at the time the action was commenced the claim was the subject of another pending action, or (2) the opposing party brought suit upon the claim by attachment or other process by which the court did not acquire jurisdiction

29 This argument fails because, as Union/USA correctly states,

Union/USA’s request for further relief pursuant to § 2202 was not

an entirely new and different claim, but instead was a request for

additional relief flowing from the successful assertion of its

earlier claim that the Agreements were valid and binding and should

be performed. United Teacher tries to avoid this result by citing

Polymer Industrial Products Co. v. Bridgestone/Firestone, Inc., 347

F.3d 935 (Fed. Cir. 2003), which it says stands for the proposition

that § 2202 is no exception to Rule 13(a). United Teacher’s

reliance on Polymer is unavailing. In Polymer, the plaintiff sued

the defendant for patent infringement. The defendant subsequently

began to manufacture a new, yet similar product, and it

counterclaimed for a declaratory judgment that this new product did

not infringe the plaintiff’s patent rights. The plaintiff never

asserted a counterclaim that the second product infringed its

patent rights. The court found that both products violated the

plaintiff’s patent rights, and it awarded damages with respect to

the first product. The plaintiff then filed a new case seeking

damages for the infringement by the second product, arguing that §

2202 permitted it to obtain such relief. The Federal Circuit

disagreed, holding that the plaintiff’s claim that the second

product infringed its patent rights was a compulsory counterclaim

to render a personal judgment on that claim, and the pleader is not stating any counterclaim under this Rule 13.

30 that should have been brought in the first action. Polymer, 347

F.3d at 940. Polymer is easily distinguishable from the present

case. The plaintiff in Polymer never instituted a declaratory

judgment claim to enforce its patent rights with respect to the

second product. Accordingly, its claim that it was entitled to

damages because of the infringement caused by the second product

was an entirely new claim. Conversely, in the present case,

Union/USA did institute, and prevail on, a declaratory judgment

claim establishing the validity of the Agreements and the fact that

they should be performed. Thus, Union/USA’s request for further

relief was not a new claim, but instead flowed from, and was

consistent with, the declaratory judgment entered in its favor.

Therefore, United Teacher’s argument that Union/USA’s request for

money damages should have been brought as a compulsory counterclaim

fails.

Accordingly, Union/USA’s motion for further relief was

properly brought under § 2202, and none of the reasons advanced by

United Teacher for why it should be denied is persuasive. The

declaratory judgment previously entered by the district court

conclusively established the validity of the Agreements and the

fact that they should be specifically performed. The district

court’s denial of the motion for further relief would effectively

render this declaratory judgment meaningless. Because of this,

because none of United Teacher’s reasons for denial is valid, and

because the district court did not state its reasons for denying

31 the requested relief, the district court’s denial of Union/USA’s

motion for further relief is unsupportable. See Besler, 639 F.2d

at 455 (holding that the district court abused its discretion when,

without issuing a written opinion, it summarily denied a motion for

further relief pursuant to § 2202). Accordingly, we find that the

district court abused its discretion in denying the motion for

further relief, vacate the district court’s denial of the motion

for further relief, and remand to the district court to conduct

further proceedings to determine the relief to which Union/USA is

entitled.

C. The Award of Costs to Union/USA

Finally, United Teacher claims that the district court abused

its discretion when, after ruling in favor of Union/USA, it awarded

certain costs to it.

We review an appeal of an award of costs for an abuse of

discretion. Kinnear-Weed Corp. v. Humble Oil & Ref. Co., 441 F.2d

631 (5th Cir. 1971). We have previously held that a district court

has broad discretion in awarding costs, and its decision to award

costs will only be reversed upon a clear showing of an abuse of

discretion. Migis v. Pearle Vision, Inc., 135 F.3d 1041, 1049 (5th

Cir. 1998).

Under the FEDERAL RULES OF CIVIL PROCEDURE and Supreme Court

precedent, district courts may award costs, as enumerated in 28

U.S.C. § 1920, to the prevailing party. See FED. R. CIV. P. 54(d);

32 Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 441

(1987). Costs not authorized by statute may not be awarded by the

district court. Crawford Fitting Co., 482 U.S. at 441.

First, United Teacher contends that Union/USA was not entitled

to any fees or costs associated with William DeCinque’s attendance

at trial (his fees and costs totaled $3,088.97 for the week).

DeCinque was Union/USA’s corporate representative at the trial and

was present in the courtroom the entire week. According to United

Teacher, ordinarily no fee may be taxed for someone who simply

comes to the courthouse but does not testify, the presumption being

that he is not a necessary witness. In support of this, United

Teacher Cites two district court cases from outside of this

circuit, Green Construction Co. v. Kansas Power & Light Co., 153

F.R.D. 670, 679 (D. Kan. 1994), and Wolfe v. Wolfe, 570 F. Supp.

826, 829 (D.S.C. 1983).

The district court did not err when it awarded costs for

William DeCinque’s attendance at trial. DeCinque attended the

trial not only as Union/USA’s corporate representative, but also as

a witness with direct knowledge of the facts at issue. Both

Union/USA and United Teacher had designated him as a witness.

During the trial, United Teacher told Union/USA’s counsel that it

preferred to ask DeCinque questions during cross-examination (after

Union/USA called him) rather than during its case in chief. On the

last day of the trial, Union/USA, after consulting with the court

and receiving the approval of United Teacher, decided not to call

33 DeCinque as a witness in order to complete the trial during the

week of September 13, 2003. This court has held that “a court may

award such a fee if the witness was ready to testify but extrinsic

circumstances rendered his testimony unnecessary.” Nissho-Iwai

Co., Ltd. v. Occidental Crude Sales, Inc., 729 F.2d 1530, 1553 (5th

Cir. 1984) (citations omitted); United States v. Lynd, 334 F.2d 13,

16 (5th Cir. 1964) (per curiam) (holding that witness fees would

not be disallowed “merely because during the course of the trial a

good faith determination was made, presumably in order to avoid

delay, unnecessary inconvenience to the Court and parties, and

other substantial expenses incident to prolonging the trial, that

[the witnesses] need not be used . . . .”); see also Quy v. Air

Am., Inc., 667 F.2d 1059, 1064-65 (D.C. Cir. 1981) (noting that at

least one court has held that costs could be recovered “when

counsel refrained from calling the witness because of a desire to

avoid consuming further time”). Accordingly, the district court

did not abuse its discretion in awarding costs to Union/USA for

DeCinque’s attendance at the trial.

Second, United Teacher claims that the district court

improperly awarded costs for travel expenses incurred by DeCinque

and James P. McDermott, two of Union/USA’s witnesses. According to

United Teacher, Union/USA failed to: (1) prove that the travel

expenses for McDermott and DeCinque were the most economical rates

reasonably available to them; and (2) provide receipts for

McDermott’s expenses (including his $911 airline expense) as

34 required by 28 U.S.C. § 1821(c)(1). United Teacher also notes that

Jennifer Lazio obtained airfare for $567.50, which, according to

United Teacher, suggests that DeCinque and McDermott did not

utilize the most economical rate for travel as required by 28

U.S.C. § 1821(c)(1).

With respect to the airfare costs awarded to Union/USA, the

district court again did not abuse its discretion. The relevant

statute, 28 U.S.C. § 1821(c)(1), states:

A witness who travels by common carrier shall be paid for the actual expenses of travel on the basis of the means of transportation reasonably utilized and the distance necessarily traveled to and from such witness's residence by the shortest practical route in going to and returning from the place of attendance. Such a witness shall utilize a common carrier at the most economical rate reasonably available. A receipt or other evidence of actual cost shall be furnished.

While United Teacher attempts to show that McDermott and DeCinque

did not use the most economical rate of travel because Jennifer

Lazio’s travel was cheaper, Union/USA correctly points out that

Lazio traveled on different days from McDermott, and she flew out

of Washington, D.C., while DeCinque flew out of Philadelphia.

Union/USA has put forward no other evidence suggesting that

McDermott and DeCinque did not use the most economical rate

available. With respect to United Teacher’s argument that no

receipts for McDermott’s airfare were submitted, McDermott did in

fact submit an invoice for his airfare that was attached to the

Bill of Costs filed by Union/USA in the district court, and the

35 district court accepted this as adequate documentation.11

Accordingly, the district court did not abuse its discretion in

awarding costs for McDermott and DeCinque’s air travel.

Third, United Teacher argues that the district court

improperly awarded costs for photocopies to Union/USA (totaling

$2,485.80). In support of this claim, United Teacher cites

Holmes v. Cessna Aircraft Co., 11 F.3d 63, 64 (5th Cir. 1994)

(per curiam), for the proposition that before the district court

can award fees for photocopies, it must find that the copies were

necessarily obtained for use in the litigation. According to

United Teacher, Union/USA provided the district court with a

redacted invoice that did not identify the use made of the copied

materials, how many pages were copied, or the price per page.

United Teacher argues that based on this, the district court

could not have determined if the copies in question were

necessarily obtained for use in the litigation.

The district court did not abuse its discretion with regard

to the fees it awarded to Union/USA for photocopies. When it

submitted its bill of costs, Union/USA provided a redacted

invoice from its counsel for photocopies made during the month of

September 2003, the month in which the trial was held.

11 The record contains a letter dated September 26, 2003 from McDermott to Nicholas Christakos, Union/USA’s counsel. The purpose of the letter was to obtain reimbursement for certain fees McDermott had incurred. Attached to the letter is a redacted spreadsheet showing, inter alia, a $911 airfare charge.

36 Additionally, Union/USA’s counsel declared under penalty of

perjury that the costs were correct and “necessarily incurred in

this action,” and it informed the court that the copying costs

were for exhibit binders and other trial materials. United

Teacher objected below to Union/USA’s request for these costs,

arguing that Union/USA had not shown that they were necessarily

obtained for use in the litigation. Union/USA replied by

reiterating that the photocopies in question were necessarily

obtained for use in the litigation. It also stated that it was

taking a conservative approach to its fee request insofar as it

was requesting fees incurred for photocopies made only during the

month in which the trial took place (one-fifth of the

photocopying fees that it actually incurred). In its order

awarding costs to Union/USA, the district court specifically

noted that it had considered the request for costs, United

Teacher’s objections, and Union/USA’s reply. It then overruled

United Teacher’s objections and granted Union/USA’s request. The

fact that Union/USA did not precisely itemize its photocopying

costs does not undermine the district court’s award. See

Copeland v. Wasserstein, Perella & Co., Inc., 278 F.3d 472, 484

(5th Cir. 2002) (holding that when a lawyer has made the

requisite declaration that photocopying costs were necessarily

incurred, the court did not abuse its discretion in awarding the

costs even if they were not itemized). Thus, the district court

did not abuse its discretion when it awarded $2,485.80 to

37 Union/USA for photocopies incurred during the litigation.

Finally, United Teacher claims that the district court

abused its discretion when it awarded subsistence allowances for

four of Union/USA’s witnesses (Lake, McDermott, DeCinque, and

Lazio) that were greater than the maximum per diem allowance set

forth in 28 U.S.C. § 1821(d)(2). According to United Teacher,

the maximum allowable per diem rate for Austin, Texas is $126 per

day. It contends, therefore, that, at most, Union/USA was

entitled to $2,268 in subsistence costs for the eighteen days

that these four witnesses attended the trial, not the $4,165.63

that was awarded to it.12

We find that the district court did abuse its discretion

when it awarded subsistence costs to Union/USA in excess of the

per diem amount authorized by statute. Section 1821(d)(2) of

Title 29 of the United States Code states:

A subsistence allowance for a witness shall be paid in an amount not to exceed the maximum per diem allowance prescribed by the Administrator of General Services, pursuant to section 5702(a) of title 5, for official travel in the area of attendance by employees of the Federal Government.

29 U.S.C. § 1821(d)(2). The record reflects that the maximum per

diem amount for Austin, Texas, the city where the bench trial in

the present case was held, was $126 per day at the time of trial.

Additionally, Union/USA admits, and the record reflects, that the

12 Union/USA responds that it actually only claimed $3,845.63 for the subsistence of its four witnesses, not $4,165.63.

38 district court awarded costs above this per diem rate. This

court has held that an award of costs must be vacated when the

costs awarded exceed the maximum per diem amount permitted by

statute. See Holmes, 11 F.3d at 64 (vacating an award of costs

because the district court awarded more than the $40 per day

permitted under 28 U.S.C. § 1821(b)). Union/USA tries to get

around this requirement by citing a district court case decided

in 1968 in North Carolina, Morgan v. Knight, 294 F. Supp. 40, 42

(E.D.N.C. 1968), which allegedly states that costs in excess of

the per diem amount may be awarded in the discretion of the

district court. This use of Morgan is misleading. While the

court in Morgan stated that some courts have awarded costs above

the per diem rate, it then stated that “the better rule seems to

require the court’s approval before the expense is incurred[,]”

and it refused to award costs in excess of the per diem rate.

Id. at 42 (citing Dep’t of Highways v. McWilliams Dredging Co.,

10 F.R.D. 107 (W.D. La. 1950), aff’d 187 F.2d 61 (5th Cir.

1951)). Accordingly, because the district court awarded

subsistence fees in excess of the permissible amount, this award

of fees, like the excessive award in Holmes, shall be vacated and

remanded for the district court’s recalculation in accordance

with 28 U.S.C. § 1821(d)(2).13 Holmes, 11 F.3d at 64.

13 In admitting that the district court awarded fees in excess of the per diem rate permitted by statute, Union/USA claims that it requested, and the district court awarded, the “actual costs” that its witnesses incurred for meals and lodging, rather

39 III. CONCLUSION

For the foregoing reasons, we VACATE the district court’s

judgment awarding witness subsistence fees in excess of the

allowable statutory maximum and REMAND the case for recalculation

of these fees in accordance with 29 U.S.C. § 1821(d)(2). We also

VACATE the district court’s judgment denying Union/USA’s motion

for further relief pursuant to 28 U.S.C. § 2202 and REMAND to the

opinion. We AFFIRM the judgment of the district court in all

other respects. Costs shall be born by United Teacher.

than the per diem rate. 28 U.S.C. § 1821(d)(2) does not, however, permit the award of “actual costs,” but limits such awards to the per diem rate. According to Union/USA, if the district court found that it was not entitled to subsistence costs above the per diem rate authorized by statute, its costs would be reduced by $1577.63. Id. The exact amount of the reduction, however, can be determined on remand by the district court. See Holmes, 11 F.3d 64 (remanding to the district court for recalculation).