Goodyear Tire & Rubber Co. v. Haegar

The power of a federal district court to sanction a litigant by ordering payment of the other side’s attorney’s fees for bad-faith conduct is limited to those fees the innocent party incurred as a result of the misconduct.

Respondents sued Petitioner, a tire manufacturer, alleging a tire defect caused their motorhome to flip. Respondents argued that the defect was caused by heat generated at highway speeds. In discovery, Respondents sought several test results from tire studies completed by Petitioner, but Petitioner refused to produce them. After the case settled, Respondents discovered that Petitioner produced test results in an unrelated lawsuit that supported Respondents’ heat causation theory, which Petitioner admitted it had concealed from Respondents. The district court ordered sanctions against Petitioner for discovery fraud, because it “knowingly concealed” the test results. In its sanctions award to Respondents, the district court determined that an award of attorney’s fees could include both fees that were tied to the misconduct and fees that were not. In the alternative, the district court also included a “contingent award” that included only fees that directly linked to Petitioner’s misconduct. Petitioner appealed and the Ninth Circuit affirmed the full award. The U.S. Supreme Court took the case in order to decide whether the discovery sanction is limited to those fees that can be causally linked to the misconduct of a litigant. The Court determined that the district court’s authority to award this type of sanction was limited to fees that could be linked to the misconduct. The Court reasoned that this type of sanction is compensatory and not putative, which means it should go no further than compensating the party for “losses sustained.” REVERSED and REMANDED.