Closing The Loop

In the summer of 2003, the Haeger family loaded up their motorhome and headed east for a medical conference. As they were driving down the highway, their Goodyear tire blew out, sending their Gulf Stream careening off the side of the road and the Haegers’ Great Dane flying through the windshield. (The Haegers and their dog all survived.) 

The Haegers will mark the 14th anniversary of the crash this Wednesday, but the legal battle over the blowout still continues to unfold, years after their suit came to a close. Discovery misconduct brought the case all the way to the Supreme Court this April, while last week, in the most recent episode, a Ninth Circuit judge once again publicly condemned Goodyear's attorneys' "egregious" behavior during discovery, behavior that was "unworthy of members of the bar." 

 

Sanctions Against Goodyear and Counsel

Following the accident, the Haegers sued Goodyear Rubber & Tire Co., alleging that the company’s faulty tires were responsible for their accident and dozens of similar crashes.

During discovery, the family repeatedly requested internal tests from Goodyear, tests on the effects of heat and speed on the tires’ durability which may have shown Goodyear’s knowledge of the product’s risks. The ESI existed, but it was never produced. Goodyear and its attorneys either did not search for or withheld the relevant tests, despite repeated requests.

And they could have gotten away with it, if it wasn’t for some pesky subsequent litigation. While the Haegers settled their suit on the eve of trial, having never seen the test results, their attorney eventually discovered that the withheld ESI had been produced in a later lawsuit. 

In November, 2012, the district court imposed $2.7 million in sanctions against Goodyear and its attorneys for their decision “to delay the production of relevant information, make misleading and false in-court statements, and conceal relevant documents.”

“The necessity for sanctions in these circumstances is obvious,” District Court Judge Roslyn O. Silver explained. “But the form those sanctions should take presents a very difficult question,” given that the case was closed and that drawing “precise causal connections between the misconduct and the fees Plaintiffs incurred” would be “impossible.”

The basis for sanctions was also questionable. The court could not rely on 28 U.S.C. § 1927, which allows sanctions for attorneys who multiply proceedings “unreasonably and vexatiously,” because it would not reach Goodyear as a company, but only its attorneys. Federal Rule of Civil Procedure 11, the court explained, could not apply because a final order had already been issued. Thus, the court relied on its inherent authority to sanction Goodyear and its counsel, awarding the Haegers all attorneys' fees incurred since virtually the beginning of the discovery process. As the court explained:

This allocation decision is, of necessity, somewhat imprecise. Goodyear and its attorneys adopted a strategy, implemented in this case to great effect, to resist all legitimate discovery, withhold obviously responsive documents, allow Plaintiffs and their experts to operate under erroneous facts, disclose small subsets of documents as late as possible, and otherwise attempt to turn this case based on a motor vehicle accident into an Arizona version of Jarnydce and Jarndyce. 

(For those who are behind on their Dickens, Jarnydce and Jarndyce is the fictional court case from “Bleak House” and a symbol of absurd, never-ending legal proceedings, wherein "a lawsuit is the end of reason and not as we presuppose, the beginning of reasoned argument.")  

 

The Consequences for Discovery Misconduct Are Far From Over

Those sanctions were upheld by the Ninth Circuit and appealed to the Supreme Court, which ruled in April that courts must establish a “causal link” between the sanctions and the bad-faith discovery misconduct. 

Despite being that rarest of legal creatures -- a Supreme Court case on eDiscovery! -- Goodyear hasn’t gotten much attention. When we talked to U.S. Magistrate Judge James C. Francis, of the Southern District of New York, he wagered that the case’s impact will be “extremely limited,” given in part to it’s unique factual situation and the narrowness of the Supreme Court’s ruling.

After all, there hopefully won’t be many cases where attorneys hide ESI from their opponents only for the deception to be revealed after the conclusion of the dispute. And Goodyear, in Judge Francis’s interpretation, doesn’t do much to change the way courts sanction parties for discovery misconduct. “All it said,” Judge Francis explains, is that court’s looking to impose punitive sanctions “have to provide the party with due process as you would in any contempt proceeding.”

But it’s not like the offending attorneys walked away scot-free. As Michael Simon noted during Logikcull’s recent 2017 eDiscovery Case Law Update Webinar (Rewatch it here! Download the white paper here!) Goodyear’s attorneys could face disciplinary action. And one of the lawyers, Fennemore Craig’s Graeme Hancock who was sanctioned $550,000, settled before the case was taken up to the Supreme Court.

But on remand, practitioners are getting another reminder of the consequences of misbehaving during discovery, thanks to Ninth Circuit Judge Milan D. Smith, Jr.

On Thursday, June 8th, the Ninth Circuit vacated the $2.7 million award against Goodyear and sent the case back to district court for further proceedings. Judge Smith issued a dissent that called out the Goodyear attorneys for their “disgrace.”

 

Ninth Circuit Dissent Includes a Serious Dressing Down

Substantively, Smith’s dissent focuses on whether Goodyear had waived its causation challenge to the sanction award. The question of waiver was left open by the Supreme Court’s ruling and the Ninth itself should determine in the first instance whether Goodyear had indeed waived that challenge, according to Judge Smith. He would find on the merits that Goodyear had indeed failed to challenge the majority of costs and fees requested by the Haegers.

Further, Judge Smith writes, even if Goodyear is found not to have waived its challenge, “I believe that the district court’s $2 million contingency sanctions award has already met the new standard the Supreme Court set”.

He then ends by reminding us all of the extent of the attorneys' failings in this case. It’s not a light-handed approach. The attorneys are excoriated for deceit, dishonor, and disgrace, reminded that the Supreme Court said nothing to vindicate their behavior, and told that they have “abandoned [the] basic principles” behind litigation: 

On a final note, I emphasize that the misconduct in this case was egregious and in bad faith, as expressly found by the district court in 49 pages of factual analysis. Indeed, Goodyear did not contest the district court’s assessment of the misconduct before the Supreme Court. Goodyear Tire & Rubber Co., 137 S. Ct. at 1184 (“The court’s assessment of Goodyear’s actions was harsh (and is not contested here).”). The deceit and dishonorable conduct of Graeme Hancock and Basil J. Musnuff in this case were unworthy of members of the bar, and their disgrace serves as an admonition to all members of the bar. As the district court noted in its opinion:

“Litigation is not a game. It is the timehonored method of seeking the truth, finding the truth, and doing justice. When a corporation and its counsel refuse to produce directly relevant information an opposing party is entitled to receive, they have abandoned these basic principles in favor of their own interests. The little voice in every attorney’s conscience that murmurs turn over all material information was ignored.”

It’s a condemnation that every attorney should pay attention to and a reminder that the Goodyear saga isn’t over yet. We’ll be keeping an eye on what happens in the district court and we suggest you do too.

This post was authored by Casey C. Sullivan, Esq., who leads education and awareness efforts at Logikcull. You can reach him at casey.sullivan@logikcull.com or on Twitter at @caseycsull.

 Tags: sanctions Caselaw

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