Chief Judge Imposes Severe Sanctions

Almost one year after the parties settled the case, the plaintiff's attorney wrote to Goodyear's national coordinating trial counsel expressing concern over the adequacy and truthfulness of the disclosures made by Goodyear in the prior litigation.  Id. at *18.  Counsel's concern were sparked by a newspaper article describing a separate litigation where the plaintiff presented heat and speed tests and failure rate data that helped him secure a $5.6 million award against Goodyear.  Id.  Unsatisfied with counsel's responses, in May 2011, the plaintiffs' filed a motion for sanctions asserting discovery fraud alleging that Goodyear knowingly concealed documents responsive to discovery requests. Id. at *19.  After a thorough investigation by the court, Judge Silver concluded that Goodyear, its national coordinating trial counsel, and Arizona trial counsel engaged in bad faith conduct by concealing relevant documents, making numerous false and misleading statements to the court, and delaying the discovery of relevant documents throughout the prior litigation.  Id. at *21. 

Acting pursuant to the court's inherent power, Judge Silver sanctioned Goodyear and its counsel by ordering them to pay all attorney fees and costs incurred by the plaintiffs after Goodyear served its supplemental responses to Plaintiffs First Request for Production of Documents, which occurred in September 2006.  Id. at *41. Judge Silver apportioned the sanctions based on respective culpability: Arizona trial counsel responsible for 20 percent and Goodyear and its national trial counsel jointly and severally responsible for 80 percent.  Id.  Due to the national litigation surrounding the G159 tires, Judge Silver also required Goodyear to file a copy of Judge Silver's order in any G159 case initiated after November 8, 2012.  Id. at 42.

There are several reasons the 42-page Haeger opinion should be limited in its effect on the award of sanctions pursuant to the court's inherent power. First, Judge Silver's award of all attorney fees from the date Goodyear served its supplemental responses diverges from clear Ninth Circuit precedent requiring a direct causal link between the bad faith conduct and harm incurred. Judge Silver's opinion relied heavily on Chambers v. NASCO, Inc., 501 U.S. 32 (1991) for the notion that a court's imposition of attorneys fees is not limited to awarding sanctions directly caused by a party's bad faith conduct.  Haeger,2012 WL 5896190,at *37-38. 

Judge Silver explained that in the Ninth Circuit, a court's inherent power to impose sanctions "usually must be premised on a specific factual finding of a direct causal link between the sanctionable conduct and the alleged harm," but recognized exceptional cases where a court may award all attorney fees when a party's conduct is "truly egregious."  Id. at *35 (reconciling Miller v City of Los Angeles, 661 F.3d 1024 (9th Cir. 2011)).  In applying this reconciled reasoning, Judge Silver limited fees incurred from the first time Goodyear engaged in the wrongful conduct and, in acknowledging that the decision was imprecise, explained that "it would be impossible to point to precise causal links between all the sanctionable behavior and the expenses incurred by the Plaintiffs."  Id. at *41. 

Notwithstanding Judge Silver's reasoning, the Ninth Circuit and other federal courts routinely require a direct causal link between the sanctionable conduct and the attorney fees incurred by the wrongful conduct. See, e.g., B.K.B. v. Maui Police Dep't, 276 F.3d 1091, 1109 (9th Cir. 2002) (upholding sanctions that reflected the actual harm incurred by the plaintiff); Mark Industries Limited v. Sea Captains Choice, Inc., 50 F.3d 730, 733 (9th Cir. 1995) (reversing the trial court's award of all attorney fees for a client against his attorney reasoning that only fees from the date of the wrongful conduct (i.e., the filing of the frivolous motion to dismiss) was appropriate); Barrey v. Ocwen Loan Servicing, LLC, CV-09-00573-PHX-GMS, 2009 WL 1940717, at *2 (D. Ariz. July 2, 2009) (citing Ninth Circuit precedent and Chambers for the notion that the court may impose attorney fees to sanction a non-party whose actions or omissions cause the parties to incur additional expenses). 

Thus, Judge Silver's decision to award all attorney fees from the date Goodyear engaged in the wrongful conduct resulted from the status of the litigation, the extensive length of the docket, and Judge Silver's determination to impose sanctions on Goodyear and its counsel for engaging in bad faith conduct rather than the traditional assessment of attorney fees incurred as a result of the wrongful conduct.

Likewise, Judge Silver's creatively fashioned nonmonetary sanction requiring Goodyear to submit her opinion in all subsequent G159 cases resulted from the particular facts and status of the Haeger litigation and Goodyear's involvement in other litigation across the country. Indeed, Judge Silver recognized that because of the parties' settlement and the plaintiffs intent "not to rescind their agreement," the typical nonmonetary sanctions available to the court such as vacating a judgment, entering a default judgment, or dismissing the suit were not available. Haeger,2012 WL 5896190,at *36.  Therefore, while this particular nonmonetary sanction probably falls within the court's broad inherent power to fashion an appropriate sanction, see, e.g., Lewis v. Telephone Employees Credit Union, 87 F.3d 1537, 1558 (9th Cir. 1996) (sanction excluding expert testimony due to prejudicial ex parte contact with defendant "was not carefully fashioned" or tailored), this sanction is unique to the national litigation surrounding the G159 tire and the prior settlement of the Haeger case.  

Second, Judge Silver's award of sanctions does not consider whether the plaintiffs' attorney fees are reasonable. Judge Silver directs the plaintiffs to file "documentation establishing the amount of attorney fees and costs incurred after Goodyear served its supplemental responses to the plaintiffs' First Request and holds Arizona trial counsel responsible for 20 percent and Goodyear and its national trial counsel jointly and severally responsible for 80 percent of those fees. Haeger,2012 WL 5896190,at *41-42. Judge Silver's opinion does not imply that the plaintiffs' attorney fees will be assessed for reasonableness. 

Other federal courts imposing attorney fees as a sanction pursuant to the court's inherent power, however, evaluate whether the fees incurred are reasonable when imposing the sanction amount. See Leon v. IDX Sys. Corp., 464 F.3d 951, 961 (9th Cir. 2006) (an award of attorneys fees was reasonable and related to the party engaging in spoliation of relevant evidence); Surowiec v. Capital Title Agency, Inc., 790 F. Supp. 2d 997, 1011 (D. Ariz. 2011) ("As a sanction for Capital's discovery abuses, the Court, pursuant to Rule 37 and its inherent powers, will require Capital to (1) reimburse the actual expenses Plaintiff incurred as a result of the misconduct, including the expense for the second-round of depositions, and (2) pay reasonable attorney fees to compensate Plaintiff for the time he spent challenging the misconduct, preparing for and taking the additional depositions, and bringing the instant motion.").

Taken together, while Haeger takes an expansive view of a court's inherent power to sanction in view of Ninth Circuit precedent, the particular facts of the case and Judge Silver's failure to evaluate the reasonableness of the plaintiffs' fees should limit its effect on such inherent sanctioning power. 

Keywords: litigation, solo practitioners, small firms, misconduct, sanctions, attorney fees, Ninth Circuit, bad faith conduct, direct causal link

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