The 9th Circuit was reversed by the Supreme Court on Tuesday in Goodyear Tire & Rubber Co. v. Haeger, — S. Ct. —, 2017 WL 1377379 (2017). The case deals with a court’s inherent powers to sanction parties and attorneys. The rule is pretty clear that a court may sanction a party using its inherent power if the party’s conduct was “bad faith, wanton, vexatious, or oppressive,” i.e., more than reckless or even frivolous. But how much? The unanimous Supreme Court said the sanctions “must be compensatory rather than punitive in nature.” It said that the “fee award may go no further than to redress the wronged party ‘for losses sustained’; it may not impose an additional amount as punishment for the sanctioned party’s misbehavior.” Thus, “a court’s shifting of fees is limited to reimbursing the victim.” That is not to say that the sanctions cannot be punitive but if they are, that is essentially a criminal proceeding and the sanctionee has the same rights as other criminal defendants.
In Goodyear, certain reports favorable to the Plaintiff were not turned over to the Plaintiff. The Plaintiff, not knowing that the reports existed, ultimately settled with Goodyear. A year later, the reports were discovered. How is the district court going to figure out “the losses sustained” because of the failure to turnover the reports?
Prof. Erwin Chemerinsky has an excellent analysis of the case in the Los Angeles Daily Journal. He says:
Although unanimous, the Supreme Court’s approach raises troubling questions about why it is imposing such a significant limit on sanctions. Inevitably it is difficult, if not impossible, to know the portion of the fees that would not have been paid but for the misconduct. Moreover, why limit these sanctions to just the attorney fees? If the defendant and its lawyers had turned over the information, as they were required by the law to do, the case undoubtedly would have settled for much more. The better alternative would have been for the Supreme Court to follow the approach of the district court and the 9th Circuit and have accorded the trial judge broad discretion to award sanctions that were appropriate under the circumstances for “egregious” misconduct.