San Antonio v. Hotels.com, L.P.

The case originated from a lawsuit filed by the City of San Antonio, Texas, against Hotels.com, L.P. and other online travel companies, alleging underpayment of municipal hotel occupancy taxes. The district court ruled in favor of the online travel companies, and the Fifth Circuit affirmed. As the prevailing party, Hotels.com sought to recover appellate costs under Federal Rule of Appellate Procedure 39, including substantial expenses for preparing the appellate record. San Antonio objected, arguing the district court had discretion to deny or reduce such costs. The Supreme Court granted certiorari to resolve a circuit split on whether Rule 39(e) costs are categorically mandatory or subject to district court discretion. The Court unanimously held that district courts retain discretion to reduce or deny appellate costs.

The Supreme Court issued a unanimous decision authored by Justice Alito, holding that district courts are not required to award all costs enumerated in Rule 39(e). Instead, district courts have discretion to reduce or deny such costs, and the Fifth Circuit's judgment was vacated and remanded for further proceedings consistent with this interpretation.

Whether Federal Rule of Appellate Procedure 39(e) categorically entitles a prevailing party to recover all specified costs on appeal, or whether district courts possess discretion to reduce or deny such costs, particularly expenses related to preparation of the record.

The ruling clarified the scope of judicial discretion in allocating appellate costs under federal procedural rules, resolving a long-standing circuit split. It provides district courts with flexibility to consider case-specific circumstances when determining cost awards, thereby influencing litigation strategy and settlement dynamics in federal civil appeals. The decision also reinforces the principle that procedural rules should not be read to mandate inflexible cost-shifting absent clear statutory language.