Thought Leadership and Industry Trends
Sanctions for discovery misconduct: The latest from the US Supreme Court
By William Belt, Managing Director, Consulting, CDS.
In a rare discovery-related opinion, the US Supreme Court recently addressed how to calculate damages in the event of discovery misconduct. For litigants, the decision is a mix of good news and bad news as it reinforces the court’s inherent power to sanction bad faith behavior while limiting damages to those caused by the misconduct.
Goodyear Tire & Rubber Co. v. Haeger et al. involved a lawsuit over the alleged failure of a Goodyear tire, which caused an accident. After several years of contentious discovery, the case settled. Months later, the plaintiffs discovered that in another lawsuit involving that tire model, Goodyear had disclosed test results indicating that the tire got unusually hot at highway speeds. Goodyear conceded withholding the information. The plaintiffs then sought sanctions for discovery fraud, urging that Goodyear’s misconduct entitled them to attorney’s fees and costs expended in the litigation.
The District Court found that Goodyear had engaged in an extended course of misconduct and awarded the plaintiffs all their legal fees and costs from the moment when Goodyear made its first dishonest discovery response. The court relied on its “inherent power” to sanction bad-faith behavior and stated that in cases of particularly egregious behavior, a court can award a party all of the attorney’s fees incurred in a case, without any need to find a “causal link between [the expenses and] the sanctionable conduct.” The 9th Circuit Court of Appeals affirmed.
The US Supreme Court reaffirmed that courts have an inherent power to sanction discovery misconduct, but reversed and remanded on the damages calculation. The Court held that the party suffering the loss that resulted from the discovery misconduct was only entitled to damages that were the result of the misconduct. In calculating damages, the standard to be used is a “but for” causation test – i.e. damages are limited to those that would not have occurred “but for” the misconduct.
For litigants, the ruling illustrates that even with clearer guidelines on discovery sanctions under the revised Federal Rules of Civil Procedure, the court still maintains an inherent power to sanction. As a result, parties have to be vigilant about complying with their discovery obligations or face severe consequences. However, it’s also clear that courts will impose common sense limits and not automatically apply the most severe sanctions except in the most egregious cases. This makes the use of experts all the more important in dealing with another party’s request for sanctions.
Experts are invaluable in describing how evidence was handled and preserved and providing credible explanations as to why lost evidence was not bad faith misconduct. Attorneys must make sure they conduct eDiscovery in a manner they can later defend with testimony and evidence in response to a challenge. EDiscovery service providers are an integral part of this process.
Contact us for a consultation regarding how we can help you manage your eDiscovery.