Eleventh Circuit Holds That There Can Be No “Prevailing Party” in a Federal Lawsuit for Purposes of Fed. R. Civ. P. 54(d)(1), Adding to Circuit Split

In Royal Palm Properties, LLC v. Pink Palm Properties, LLC, No. 21-10872 (11th Cir. July 7, 2022), the Eleventh Circuit holds that where a case ends in a “split judgment and both parties lost on their claims,”  there can be “no clear winner” and “thus, no prevailing party” for purposes of awarding costs under Fed. R. Civ. P. 54(d)(1).

“Today we decide if civil lawsuits are more like regular or postseason National Football League (NFL) games. That is, can they end in a tie or must a winner always be named?”

“We think they are more like regular season games. Courts, unlike the NFL, are not in the business of declaring winners; they are in the business of settling legal disputes. And, sometimes, legal disputes do not have a clear winner (in legalese, a ‘prevailing party’). As such, courts are not required to declare a winner—or a ‘prevailing party’—in every case.”

Two South Florida resort hotels sued each other alleging Lanham Act and other theories concerning the registered service mark “Royal Palm Properties” (Trademark). “Royal Palm’s infringement claim and Pink Palm’s . . . counterclaims of noninfringement and cancellation proceeded to trial. Following a three-day trial, the jury unanimously found that Pink Palm did not infringe the Trademark and that the Trademark was not invalid on the grounds asserted by Pink Palm.” The district court granted Rule 50 judgment as a matter of law to Pink Palm and invalidate Royal Palm’s claim, but the Eleventh Circuit reinstated the jury verdict. Royal Palm Props., LLC v. Pink Palm Props., LLC, 950 F.3d 776, 780 (11th Cir. 2020) (Royal Palm I).

On remand, Pink Palm moved for costs under Rule 54(d)(1) and the Lanham Act’s fee-shifting section. Yet the district “court reasoned that neither Pink Palm nor Royal Palm could be viewed as the prevailing party since each party brought significant claims that were ultimately unsuccessful” and thus awarded no costs. “Although this outcome is unusual, the unusual facts of this case warrant it. The Parties point to no precedent requiring a court to declare a prevailing party in every case.”

The Eleventh Circuit affirms. “Before we can decide whether the district court erred by failing to name Pink Palm the prevailing party, however, we must address a threshold issue: Are courts required to name a prevailing party in every case, or can there be no prevailing party? . . . . At issue here is the designation of prevailing party status and the awarding of costs under Federal Rule of Civil Procedure 54. Rule 54(d)(1) provides that, ‘[u]nless a federal statute, these rules, or a court order provides otherwise, costs—other than attorney’s fees—should be allowed to the prevailing party.’”

“We can . . . distill from the Supreme Court’s prevailing party jurisprudence that there are two requirements for a party to reach prevailing party status. First, the party must be awarded some relief on the merits of its claim by the court . . . . Second, the party must be able to point to a resolution of the dispute which materially altered the legal relationship between the parties.”

But “[w]hile the Supreme Court has issued multiple opinions providing guidance on how to determine who is the prevailing party in various contexts, the Court has not yet addressed whether there has to be a prevailing party under Rule 54. This is a question of first impression for our court and the circuit courts to have weighed in on the issue are split.”

The panel rejects the possibility that (1) multiple parties can prevail because the language of Rule 54(d)(1) is singular (“the prevailing party”). It thus considers the alternatives that the court (2) must or (3) need not identify a prevailing party. While the Federal Circuit has ruled in favor of (2), the Second, Fifth, and Eighth Circuits have all ruled in favor of (3).

The Eleventh Circuit goes with (3). “Adopting a rule that allows room for scenarios where neither party satisfies the ‘minimum’ alteration-of-the-legal-relationship requirement for prevailing party status makes sense . . . . Nothing in Rule 54, nor in Supreme Court precedent, requires the district court to arbitrarily name a winner in such instances where neither party crosses the threshold to prevailing party status.”

“When the resolution of the parties’ legal dispute does not result in a material change in their legal relationship, there is, by the Supreme Court’s definition, no prevailing party. We therefore now hold that (1) the text of Rule 54(d) does not allow for multiple prevailing parties, and (2) there is not always a prevailing party in every case. Simply put, a district court may find (at most) one prevailing party, but it is not required to do so in every case.”

The panel finally affirms the district court’s denial of Rule 54(d)(1) costs to all parties. “Here, both Royal Palm and Pink Palm ‘rebuffed’ the other’s claim as to the Trademark . . . . Under these circumstances, we don’t see how either party can be named the ‘prevailing party.’”