Ethics in Brief

Ethics in Brief is designed to present ethical issues that practitioners might well face on a daily basis. It is a service of the Legal Ethics Committee of the San Diego County Bar Association.

Discovery and Gamesmanship Do Not Mix: The Ninth Circuit Affirms $3 Million in Sanctions

The Ninth Circuit upheld a $3 million sanctions award for discovery fraud committed in bad faith (both descriptors of the court) by the sanctionees in Haeger v. Goodyear Tire & Rubber Co., 813 F.3d 1233, 1237 (9th Cir. 2016) (Haeger), cert. gtd., in part, Goodyear Tire v. Haeger, 137 S. Ct. 30, 195 L. Ed. 2d 902 (2016).

The Ninth Circuit decision is instructive on the judicial intolerance for discovery abuse, particularly abuse the court determines to have been in bad faith. The Supreme Court granted certiorari on the question of whether a federal court is required to tailor compensatory civil sanctions imposed under inherent powers to harm directly caused by sanctionable misconduct when the court does not afford sanctioned parties the protections of criminal due process. Goodyear Tire v. Haeger, 137 S. Ct. 30, 195 L. Ed. 2d 902 (2016); Petition for Writ of Certiorari, Haeger, 195 L. Ed. 2d 902, 2016 WL 2937089 (2016) (No. 15-1406).

Setting the tone of the decision, the Ninth Circuit quotes the trial court as follows:

“’Litigation is not a game. It is the time - honored 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.’”  Haegersupra, 813 F.3d at p. 1237 n.1. 

The facts are instructive on why the trial court and the Court of Appeals labelled the actions of Goodyear Tire and its attorneys as discovery fraud committed in bad faith.

The Haegers were seriously injured when one of their motorhome’s Goodyear tires failed while the Haegers were driving the motorhome. Litigation ensued. The Haegers’ attorney sought tire test results from Goodyear through discovery. Goodyear, represented by attorney Musnuff, Goodyear’s national coordinator on tire cases, and attorney Hancock, Goodyear's local counsel, first responded that there were no such tests. After some prodding and representations to the court that there were no test results to be found, one of several test results was produced. Goodyear then advised the court that aside from the one test result there were no other test results. The first day of trial the court was advised of a settlement.

After the case settled, plaintiff’s counsel saw an article stating Goodyear had produced internal heat and speed testing results in a separate case involving the same type tire and realized that Goodyear had withheld evidence during discovery in the Haeger litigation. Plaintiffs’ counsel thereupon filed a motion for sanctions arguing discovery fraud which the trial court concluded to have occurred.

The trial court awarded $548,240 against local counsel Hancock and $2,142,961 against coordinating counsel Musnuff and Goodyear. The trial court wrestled with the issue of how much to award. The court noted that millions of dollars had been awarded to injured plaintiffs in other cases actually tried involving failure of the same tire. Here, because the plaintiffs did not have access to the damaging test results, they were deprived of their ability to obtain an award reflecting the culpability of Goodyear.

To solve the dilemma of how much to award, the trial court determined to award plaintiffs the amount of attorney’s fees incurred in the entirety of the litigation from the first occurrence of the discovery abuse. The trial court made no effort to limit the award to the amount of the fees attributable to the discovery abuse, but rather determined to award an amount perceived to do rough justice.

There are, of course, issues raised regarding the proper procedure utilized by the trial court in making an award which was admittedly not solely remedial. Such issues are now before the United States Supreme Court.

Relevant to the ethics considerations raised by the decision, it is clear that courts will not tolerate discovery games particularly in high-stakes litigation. The terrifying potential of the proceeding before the trial court in Haeger is given emphasis by the fact that Goodyear Tire and the two attorneys were pointing fingers of blame at each other and trying- unsuccessfully- to escape punishment. The end result is probably the termination of several legal careers and personal financial devastation.

There are lessons to be learned from this decision. Discovery is not a game and counsel must be forthright and ensure clients are as well.

-- Charles Berwanger

**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.**