Goodyear Tire & Rubber Co. v. Haeger

The Haegers sued Goodyear, alleging that the failure of a Goodyear G159 tire caused their motorhome to swerve and flip over. After years of contentious discovery, marked by Goodyear’s slow response to repeated requests for internal G159 test results, the parties settled. Months later, the Haegers’ lawyer learned that, in another lawsuit involving the G159, Goodyear had disclosed test results indicating that the tire got unusually hot at highway speeds. Goodyear conceded withholding the information. The district court exercised its inherent power to sanction bad-faith behavior to award the Haegers $2.7 million—their legal fees and costs since the moment, early in the litigation, of Goodyear’s first dishonest discovery response. The court held that in cases of egregious behavior, a court can award all attorney’s fees incurred in a case, without any need to find a causal link between the expenses and the sanctionable conduct. The court made a contingent award of $2 million, to take effect if the Ninth Circuit reversed the larger award, deducting fees related to other defendants and to proving medical damages. The Ninth Circuit affirmed the $2.7 million award. The Supreme Court reversed. When a federal court exercises its inherent authority to sanction bad-faith conduct by ordering a litigant to pay the other side’s legal fees, the award is limited to fees that the innocent party would not have incurred but for the bad faith. The sanction must be compensatory, not punitive. The Haegers did not show that this litigation would have settled as soon as Goodyear divulged the heat-test results and cannot demonstrate that Goodyear’s non-disclosure so permeated the suit as to make that misconduct a but-for cause of every subsequent legal expense. View "Goodyear Tire & Rubber Co. v. Haeger" on Justia Law