Supreme Court of the United States

Goodyear Tire & Rubber Company, Petitioner v. Leroy Haeger

April 18, 2017581 U.S. 101

Summary

The Supreme Court held that when a federal court uses its inherent authority to sanction bad-faith litigation conduct by ordering payment of the opponent's attorney's fees, the award must be compensatory rather than punitive and is limited to fees the innocent party would not have incurred but for the misconduct. Applying that but-for causation standard, the Court concluded that neither the District Court's $2.7 million award nor the Ninth Circuit's affirmance complied, because the lower courts dispensed with any causal link between Goodyear's discovery fraud and the fees awarded. The Court reversed and remanded, directing that the waiver question concerning the District Court's contingent $2 million award be resolved first below and, absent waiver, that fees be recalculated under the but-for standard.

Holding

  • Whether attorney's fees ordered paid under a federal court's inherent authority to sanction bad-faith litigation conduct must be limited to fees caused by the misconduct.. Yes. Such awards, imposed through civil procedures, must be compensatory rather than punitive and therefore may cover only the fees the innocent party incurred solely because of the misconduct - i.e., the fees that party would not have incurred but for the bad faith.
  • Whether the District Court's $2.7 million fee award and the Ninth Circuit's affirmance complied with the but-for causation standard.. No. The District Court expressly disclaimed any causal-link requirement for 'truly egregious' misconduct, and the Ninth Circuit applied only a temporal limitation (fees incurred during Goodyear's bad faith); neither supports an award of fees that would have been incurred absent the misconduct, and the record cannot sustain the full $2.7 million award.
  • Whether the District Court's contingent $2 million award should now stand or whether the District Court must reconsider from scratch which fees to shift.. The waiver question must be resolved first below. The Court declined to decide in the first instance whether Goodyear waived any challenge to the $2 million contingent award; if waiver is found, the case ends, and if not, the District Court must reassess fees in line with the but-for causation requirement.

Docket 15–1406.

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