Discovery Sanction Award Overturned

Originally published by Thomas J. Crane.

Most lawyers avoid discovery sanctions like the plague. Yet, some parties accept the risk. One recent sanctions award amounted to $2.7 million. In a lawsuit entitled Goodyear Tire & Rubber Co. v. Haeger, the U.S. Supreme Court heard an appeal regarding that very lag sanction award. Justice Elena Kagan ruled in a unanimous opinion that the amount was too large. It exceeds the fees incurred by the wronged party due to Goodyear’s discovery abuse.

The parties had reached an agreement to settle the lawsuit when the plaintiffs learned that Goodyear had failed to produce the results of a tire test. The Arizona judge awarded sanctions based on the legal fees incurred since the date when the defendant failed to produce the requested information. The Supreme Court court, however, said that was error. The amount of the fees should be based on fees incurred due to the discovery abuse. The higher court required a “But for” standard that looks at the expenses incurred due to the discovery abuse. The court asks what would have been incurred but for the discovery abuse.

The plaintiffs responded that $2 million in attorney fees were incurred after the abuse was discovered. The parties would have settled otherwise, they argued. But, the Supreme Court noted the district court awarded $2 million in fees if the $2.7 million was overturned, indicating the district court did not believe the $2.7 million was directly due to the discovery abuse. The federal district court would have to reconsider its $2 million contingent award in night of the Supreme Court ruling. See ABA Bar Journal report.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

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