Phil Goldberg and Kathryn Constance discuss the impact that a recent Supreme Court decision could have on sanctions over discovery and other litigation disputes.
The U.S. Supreme Court, in the little-known case Goodyear v. Haeger this past term, set important limits on a judge’s inherent authority sanctions, which could have significant implications in discovery disputes. The Court held that when imposing sanctions, a judge must determine which fees and costs would not have been borne “but for” the misconduct and can assess only “the fees the innocent party incurred solely because” of that misconduct. This ruling is important for defense lawyers because it should restrain judges from over-penalizing corporate defendants and provide a check on plaintiffs’ lawyers who seek to unfairly game the sanction system.
This particular case arose out of a discovery dispute, where the plaintiffs alleged that Goodyear failed to turn over a document they believed was responsive to their discovery requests. The judge agreed with the plaintiffs and fined Goodyear $2.7 million in sanctions, which represented all of the plaintiffs’ legal fees and costs incurred after the alleged discovery violation. The judge acknowledged that he did not draw any causal connection between the failure to produce this document and fees incurred. Rather, he found that the discovery failure tainted the entire litigation and assessed all of the subsequent fees and costs.
In a unanimous 8-0 decision, the Supreme Court vacated the sanction. See 581 US _ (2017). The Court explained that fee-shifting sanctions are constitutionally limited to reimbursing the aggrieved parties for costs they would not have incurred “but for” the alleged malfeasance. They are solely compensatory sanctions. If an award extends beyond the costs and fees caused by the alleged malfeasance, it crosses the boundary and becomes a punitive sanction. If the court seeks to impose punitive sanctions, the defendant is owed heightened due process protections such as those afforded in criminal proceedings, including a higher standard of proof.
While the opinion was fairly short, the ruling could have a large impact if properly implemented. Defense counsel could use it to ensure that there remains a semblance of balance between inherent authority and rulebased sanctions, and to impede plaintiffs’ lawyers from manipulating sanctions to generate money for cases, particularly those that lack substantive merit.
About the Authors:
Phil Goldberg is the Managing Partner of Shook, Hardy & Bacon’s Washington, D.C. office and the Director of the Progressive Policy Institute’s Center for Civil Justice. He filed an amicus brief in Goodyear v. Haeger on behalf of the National Association of Manufacturers and serves on the IADC Civil Justice Response and Appellate Practice Committees. He can be reached at firstname.lastname@example.org.
Kathryn Constance is Senior Counsel to the Electronic Discovery Institute, a non-profit organization dedicated to resolving electronic discovery challenges.