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Goodyear Tire and Rubber Co. v. Haeger

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Supreme Court of the United States
Goodyear Tire and Rubber Co. v. Haeger
Reference: 15-1406
Issue: Inherent powers
Term: 2016
Important Dates
Argument: January 10, 2017
Decided: April 18, 2017
Outcome
Ninth Circuit Court of Appeals reversed and remanded
Vote
8-0 to reverse and remand
Majority
Chief Justice John G. Roberts • Anthony Kennedy • Clarence Thomas • Ruth Bader Ginsburg • Stephen Breyer • Samuel Alito • Sonia Sotomayor • Elena Kagan


Goodyear Tire and Rubber Company v. Haeger is a case argued during the October 2016 term of the U.S. Supreme Court. Argument in the case was held on January 10, 2017. The case came on a writ of certiorari to the United States Court of Appeals for the 9th Circuit. On April 18, 2017, in a unanimous opinion by Justice Elena Kagan, the court reversed and remanded the judgment of the Ninth Circuit Court of Appeals.

In this case, the court held that when a federal court exercises its inherent authority to sanction a litigant acting in bad faith, the award must be limited to the fees the innocent party incurred because of the bad faith of the offending party during litigation. Any fees beyond litigation misconduct, however, cannot be awarded under a court's inherent authority.

HIGHLIGHTS
  • The case: A federal district court imposed post-settlement compensatory sanctions for $2.7 million against Goodyear and its counsel for acting in bad faith. The court did so under its inherent authority and without the protections of criminal due process for Goodyear and its counsel, which is required for imposing punitive sanctions.
  • The issue: What are the limits on a federal district court's power to impose compensatory sanctions under its own inherent authority?
  • The outcome: On April 18, 2017, the court reversed and remanded the judgment of the Ninth Circuit Court of Appeals.


    • In brief: Haeger and his family were injured in a 2003 crash of Haeger's motor home. Haeger claimed that a tire manufactured by Goodyear and mounted originally on the motor home was to blame because, Haeger alleged, the tire was not designed to be mounted on a motor home. Haeger died from unrelated causes years later. In 2010, prior to the start of a trial in federal district court, Goodyear, through its counsel Basil Musnuff and Graeme Hancock, announced a settlement with the Haegers. In 2011, however, the Haegers filed for additional sanctions, arguing that Goodyear failed to produce evidence of certain test scores for the tires during discovery. Goodyear argued that it never promised to produce all records, but Judge Roslyn Silver held that Goodyear and its attorneys "engaged in repeated and deliberate attempts to frustrate the resolution of this case on the merits." The district court, after noting sanctions under procedural and statutory authority were unavailable because the Haegers' case had been settled, used its inherent powers to impose compensatory sanctions against Goodyear and its counsel for not acting in good faith. The Ninth Circuit Court of Appeals affirmed the district court's judgment, holding that "sanctions can be compensatory even if the specific amount of sanctions is not directly caused by the alleged misconduct." Goodyear argues that, in the absence of showing a direct harm caused by the tires, they should be allowed to challenge the award under rights of due process. Argument in the case was held on January 10, 2017.

    You can review the Ninth Circuit's opinion here.[1]
    Click on the tabs below to learn more about this Supreme Court case.

    Case

    Background

    This is a case about the propriety of a district court imposing sanctions under its own inherent authority.

    In June 2003, the Haeger family was seriously injured when a tire manufactured by Goodyear, a Goodyear G159 tire, failed while the Haegers were driving their motor home on a highway. The failure of the tire caused the Haegers' motor home to swerve off the road and overturn. In 2005, the Haegers filed a lawsuit against Goodyear in Arizona state court, but Goodyear filed a motion to remove the lawsuit to a federal district court. Goodyear was represented by Basil Musnuff, who was Goodyear's "national coordinating counsel" for all cases involving G159 tires, and by Graeme Hancock, who was Goodyear's counsel in Arizona. Both Musnuff and Goodyear's in-house counsel, Deborah Okey, had responsibility for reviewing and approving any responses to discovery requests made during the case. In several pre-trial discovery motions, the Haeger family's counsel sought test results for the G159 from Goodyear. On April 14, 2010, the first day of the trial, the Haegers accepted a settlement from Goodyear and the district court closed the case.[1]

    Some time after the settlement, however, the Haegers' lawyer "saw an article stating that Goodyear had produced internal heat and speed testing in a separate case involving the G159 tire, and he realized that Goodyear had withheld evidence it was required to produce during discovery." Based on this, the Haegers filed a motion for sanctions against Goodyear in May 2011. In February 2012, the district court issued a proposed order sanctioning Goodyear based on Goodyear’s failure to produce certain test information as well as for the repeated representations made by attorney Hancock that all required documents had been produced. In March 2012, the court held an evidentiary hearing at which they found that testimony from both Musnuff and Hancock was unreliable and untruthful and that "Mr. Hancock, Mr. Musnuff, and Goodyear engaged in repeated and deliberate attempts to frustrate the resolution of this case on the merits." In consideration of the fact that the case was closed, the district court used its inherent authority to issue an award in excess of 2.7 million dollars to the Haegers based on the court's conclusion that Goodyear and its counsel engaged in a "years-long course of misconduct." The court determined that Hancock was responsible for 20% of the costs and that Musnuff and Goodyear were jointly responsible for the remaining 80%. Goodyear, Musnuff, and Hancock appealed to the United States Court of Appeals for the 9th Circuit.[1]

    Writing for a unanimous three-judge panel, Judge Milan Smith affirmed the decision of the district court. The court held that "the district court did not abuse its discretion in concluding that Hancock, Musnuff, and Goodyear each acted in bad faith" and that there was "no doubt that the Sanctionees’ bad faith conduct caused significant harm in forcing the Haegers to engage in sham litigation, and in their likely foregoing millions of dollars in the settlement they accepted under false pretenses of the Sanctionees, as found by the district court in light of Goodyear’s conduct in the Other G159 Cases." Based on the panel's interpretation of the U.S. Supreme Court's holding in Chambers v. NASCO, which governs the use of a federal court's inherent authority, the circuit panel held that "the district court's findings and ruling in this case regarding monetary sanctions fully comply with the law."[1]

    Petitioner's challenge

    Goodyear, the petitioner, is challenging the Ninth Circuit's affirmance of a district court order and award issued under the district court's inherent authority. Goodyear alleges that the district court exceeded its inherent authority in issuing the order rather than relying on other procedural rules available to federal courts.

    Certiorari granted

    On May 16, 2016, Goodyear Tire and Rubber Co., the petitioner, initiated proceedings in the Supreme Court of the United States in filing a petition for a writ of certiorari to the United States Court of Appeals for the 9th Circuit. The U.S. Supreme Court granted Goodyear's certiorari request on September 29, 2016, limiting argument to question 1 of the petition. Argument in this case had been consolidated with argument in a separate appeal, Musnuff v. Haeger, but Musnuff's petition for certiorari was dismissed on October 25, 2016, pursuant to Supreme Court Rule 46. Argument in the case was held on January 10, 2017.

    Arguments


    Question presented

    Question presented:

    "Is a federal court required to tailor compensatory civil sanctions imposed under inherent powers to harm directly caused by sanctionable misconduct when the court does not afford sanctioned parties the protections of criminal due process?"[2]


    Audio

    • Audio of oral argument:[3]



    Transcript

    • Transcript of oral argument:[4]

    Outcome

    Decision

    Justice Elena Kagan delivered the opinion for a unanimous court. The court held that when a federal court exercises its inherent authority to sanction a litigant acting in bad faith, the award must be limited to the fees the innocent party incurred because of the bad faith of the offending party during litigation. Any fees beyond litigation misconduct, however, cannot be awarded under a court's inherent authority.[5]

    Opinion

    After a review of the procedural history of the case, Justice Kagan noted that both parties agreed on a great deal concerning the law in this case. She wrote,[5]

    “

    It is an oddity of this case that both sides agree with just about everything said ... about the pertinent law. Do legal fees awarded under a court’s inherent sanctioning authority have to be compensatory rather than punitive when civil litigation procedures are used? The Haegers and Goodyear alike say yes. Does that mean the fees awarded must be causally related to the sanctioned party’s misconduct? A joint yes on that too. More specifically, does the appropriate causal test limit the fees ... to those that would not have been incurred but for the bad faith? No argument there either. And in an exceptional case ... could that test produce an award extending as far as all of the wronged party’s legal fees? Once again, agreement (if with differing degrees of enthusiasm). All the parties really argue about here is what that law means for this case.[6]

    		”

    Justice Kagan noted that both the district court and the Ninth Circuit failed to use the appropriate standard to allocate an award under a court's inherent authority in this case. However, the court noted that a legal issue pertaining to the judgment was beyond the court's reach at this time as they would have to decide in the first instance whether Goodyear waived the ability to challenge a $2 million award issued by the district court. They remanded the case to the Ninth Circuit to address that issue, noting,[5]

    “

    That leaves the question whether the contingent $2 million award should now stand—or, alternatively, whether the District Court must reconsider from scratch which fees to shift. In the absence of any waiver issue, we would insist on the latter course. Although the District Court considered causation in arriving at its back-up award, we cannot tell from its sparse discussion whether its understanding of that requirement corresponds to the standard we have described. That uncertainty points toward demanding a do-over, under the unequivocally right legal rules. But the Haegers contend that Goodyear has waived any ability to challenge the $2 million award. In their view, that sum reflected Goodyear’s own submission—which it may not now amend—that only about $700,000 of the fees sought would have been incurred 'regardless of Goodyear’s behavior.' ... The Court of Appeals did not previously address that issue, and we decline to decide it in the first instance. ... The possibility of waiver should therefore be the initial order of business below. If a waiver is found, that is the end of this case. If not, the District Court must reassess fees in line with a but-for causation requirement.[6]

    		”

    Concurring opinions

    There were no concurring opinions filed in this case.

    Dissenting opinions

    There were no dissenting opinions filed in this case.


    The opinion


    Filings

    The court granted Goodyear Tire and Rubber Co.'s certiorari request on September 29, 2016.

    Merits filings

    Parties' filings

    Goodyear Tire & Rubber Company, the petitioner, filed a merits brief on November 14, 2016.

    Leroy Haeger et al., the respondents, filed a merits brief on December 14, 2016.

    Goodyear filed a reply brief on the merits on January 3, 2017.

    Amicus curiae filings

    The following groups filed amicus curiae briefs in support of the petitioner, Goodyear Tire and Rubber Company:

    • Brief of the National Association of Manufacturers

    Certiorari filings

    Parties' filings

    • Goodyear Tire and Rubber Co., the petitioner, filed a petition for certiorari on May 16, 2016.
    • LeRoy Haeger et al., the respondents, filed a brief in opposition to certiorari on June 20, 2016.

    See also

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 U.S. Court of Appeals for the Ninth Circuit, LeRoy Haeger et al. v. The Goodyear Tire & Rubber Company et al., February 16, 2016
    2. ↑ Supreme Court of the United States, Goodyear Tire v. Haeger, September 29, 2016
    3. ↑ Supreme Court of the United States, Goodyear Tire & Rubber Co. v. Haeger, argued January 10, 2017
    4. ↑ Supreme Court of the United States, Goodyear Tire and Rubber Co. v. Haeger, argued January 10, 2017
    5. ↑ 5.0 5.1 5.2 Supreme Court of the United States, Goodyear Tire & Rubber Co. v, Haeger et al., decided April 18, 2017
    6. ↑ 6.0 6.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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