Sanctions Decision Generates “Considerable Heat” and Split of Authority; Supreme Court Ultimately Reverses $2.7 Million Award
U.S. Supreme Court
Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178 (Apr. 18, 2017) In this personal injury case, the plaintiff appealed the 9th Circuit’s affirmation of $2.7 million in sanctions. Initially, the parties had settled the case after a long history of discovery disputes. After several months, the defendant became aware of relevant information damaging to the plaintiff that the plaintiff had not previously disclosed. Moreover, the plaintiff admitted to intentionally withholding the documents. The district court found that the plaintiff’s conduct “rose to an egregious level”, and consequently awarded $2.7 million to the defendant to cover the entirety of the defendant’s legal fees from the point that the plaintiff was dishonest during discovery. Recognizing that sanctions must be tied to actual harm, the district court included a contingent award of $2 million, with the difference accounting for other costs. The Supreme Court, relying entirely on established precedent, found that sanctions are to be compensatory, and not punitive, in nature. It upheld the but-for test: that the injured party is entitled to damages that would not have occurred but for the other party’s misconduct. While the Court acknowledged the plaintiff’s misconduct and the importance of discretion in district courts, it upheld its established standard that the imposed sanctioned must be limited to compensate for the misconduct with a documented causal standard, and nothing more. Because the district court went beyond established precedent, and the Court of Appeals affirmed, the Supreme Court reversed and remanded to the district court for review based on the but-for test.