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Haeger v. Goodyear Tire & Rubber Co.

United States District Court, D. Arizona

March 7, 2018

Leroy Haeger, et al., Plaintiffs,
v.
Goodyear Tire & Rubber Company, et al., Defendants.

          ORDER

          Honorable G. Murray Snow United States District Judge

         Pursuant to the Court's Order, (Doc. 1174), the parties filed briefings concerning Defendant Goodyear's vicarious liability and potential waiver of claims. (Docs. 1181- 84). For the reasons stated below, the Court finds that Goodyear is vicariously liable for the acts of its attorneys in this lawsuit; that Basil Musnuff, Graeme Hancock, and Fennemore Craig, P.C. have no additional liability in connection with these lawsuits; and that Goodyear waived any additional objections to fees beyond the objections it made at the District Court.

         BACKGROUND

         The Haegers filed a product liability suit against Goodyear Tire in 2005. After several years of litigation and multiple discovery disputes, the parties settled the lawsuit in 2010. Nearly a year after settling, the Haegers filed a motion for sanctions against Goodyear due to extensive bad faith discovery fraud. (Doc. 938). The District Court found that “[t]he misconduct at issue appears to have stemmed from a deliberate corporate strategy adopted by Goodyear to prevent the disclosure of [certain] test results, ” as supported by “the fact that Goodyear's 30(b)(6) witness did not disclose the test results and even testified that they did not exist.” (Doc. 938). The District Court imposed sanctions and asked for additional briefing to determine the appropriate amount to be awarded. Id.

         In its subsequent brief, the Haegers requested the Court to award the entirety of their legal fees from the lawsuit. In its response brief, Goodyear argued that the award must be proximately caused by Goodyear's conduct and could not “exceed the costs, expenses and attorneys' fees reasonably incurred because of the sanctionable conduct.” (Doc. 1067).

         In the sanctions determination, the District Court noted that the law allowed “an award of sanctions only in the amount of harm directly caused by the sanctionable conduct.” (Doc. 1073). But, the District Court hesitated to apply the causation rule because Goodyear not engaging in discovery fraud would lead to uncertain, ambiguous outcomes. The case could have settled and “one could conclude practically all of Plaintiffs' fees and costs were due to misconduct[, ]” or alternatively, because the lawsuit would have been prolonged for other reasons, “one could conclude practically none of Plaintiffs' fees and costs were due to misconduct . . . .” (Doc. 1073). It further concluded that monetary sanctions “usually must be premised on a specific factual finding of a direct causal link between the sanctionable conduct and the alleged harm” and “[o]nly when the sanctionable conduct rises to a truly egregious level can all of the attorneys' fees incurred in the case be awarded.” (Doc. 1073) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 57 (1991)). Finding that Goodyear's misconduct was repeated and egregious, the District Court decided to award all of the attorney fees. (Doc. 1073).

         The Haegers then filed their fee petition with an accounting of requested fees, (Doc. 1082), and Goodyear objected to certain requests. (Docs. 1100, 1103). In an opening footnote, Goodyear noted that its objections to certain fees should not be construed “as waiving the impropriety of this Court's Order requiring payment of all fees from November 2006 onward as opposed to incremental fees caused by Goodyear's alleged discovery misconduct . . . .” (Doc. 1103 at 1-2, n.1). Goodyear objected to specific fee requests according to several different theories that it identified, including block billing, re-created time, duplication, incompleteness, and “entries outside the scope of the court's sanctions' order.” (Doc. 1103). In its Response Goodyear developed a code for each categorical objection (“A” for re-created time; “B” for block-billing; etc.), and it noted objections by writing the designated coded letter next to each objectionable fee request. (Doc. 1100). Goodyear objected to the large majority of cost and fee entries, and many entries had multiple objections. (Doc. 1100). Goodyear's code “F” objection represented objections to fee requests unrelated to the alleged harm. In total, the Haegers requested nearly $2.8 million, of which Goodyear objected to $722, 406.52 for lack of causation with the code “F” objection.

         Given the extent of the request and the objections, the District Court noted that “it now appears that an inordinately complicated accounting will be required[, ]” and it therefore instructed the parties to meet and confer in an attempt to agree concerning the size of the Court's award. (Doc. 1121). The District Court “recognize[d], however, that Ninth Circuit authority might be read as limiting an award of sanctions to the harm directly caused by the misconduct.” (Doc. 1121) The District Court, therefore, determined to “include an alternative amount of the fees and costs incurred as a direct result of sanctionable conduct” for the purpose of “prevent[ing] the need for future proceedings . . . .” (Doc. 1121). Accordingly, the District Court instructed the parties to attempt to reach settlement on two figures: first, the reasonable number of hours incurred after September 2006; and second, the reasonable number of hours directly attributable to the sanctionable conduct identified in the sanctions order. “If the parties are able to reach agreement on these two figures, the Court will adopt the parties' agreement, awarding the higher figure but also deeming the lower figure an appropriate alternative in the event the sanctions must be so limited.” (Doc. 1121).

         With that direction, the parties met to reach an agreement concerning the appropriate fee and contingent fee, but the parties could not agree on the appropriate award, although they could agree to oppose the appointment of a special master to review the records and propose the appropriate fee. Consequently, the District Court resolved the sanctions amount. As it previously indicated, the Court made “a contingent award in the event a direct linkage between the misconduct and harm is required.” (Doc. 1125). For this contingent award, the District Court sustained the entirety of Goodyear's code “F” objections and reduced the sanctioned amount by $722, 406.52. (Doc. 1125). Thus Goodyear presented argument to the District Court identifying each instance of billing that it alleged was not caused by its sanctionable conduct or that of its agents. In its contingent award, the District Court deducted all such amounts from the award.

         Goodyear appealed the sanctions award to the Ninth Circuit. In its opening brief, Goodyear addressed the contingent award, noting that the “contingent award was based solely on the category of Goodyear's objections” and the District Court “did not review whether all other entries for which Plaintiffs were permitted to recover were directly caused by Goodyear's sanctioned acts as required by [Ninth Circuit precedent].” Opening Brief, Haeger v. Goodyear Tire & Rubber Co., No. 12-17718, Ninth Cir., Doc. 50 at 11. In the same opening brief, Goodyear argued, “But not even the contingent award satisfies the causation requirement, as it fails to deduct many other fees and costs that lack a causal connection to Goodyear's conduct.” Id. at 12. Again, Goodyear argued that while it “is entitled to the deductions reflected in the contingent award and those incurred to litigate sanctions, these deductions alone do not begin to cure the court's failure to limit its award to costs directly caused by Goodyear's alleged misconduct.” Id. at 26. In its Reply Brief to the Ninth Circuit, Goodyear again noted that “the contingent award itself does not cure the inadequacies of the district court's failure to insist on causation.” Reply Brief, Haeger v. Goodyear Tire & Rubber Co., No. 12-17718, Ninth Cir., Doc. 78 at 9, n.4.

         The Ninth Circuit upheld the entire sanctions award because Chambers v. NASCO, Inc., 501 U.S. 32, 57 (1991) allowed an award of all attorneys' fees and costs “once the Sanctionees began flouting their clear discovery obligations and engaging in frequent and severe abuses of the judicial system.” Haeger v. Goodyear Tire & Rubber Co., 813 F.3d 1233, 1249 (9th Cir. 2016). Because the Ninth Circuit affirmed the entire award, it did not address the contingent award in its decision.

         Goodyear then appealed the sanctions award to the United States Supreme Court, where it requested review of two questions. First, “Is a federal court required to tailor . . . sanctions . . . to harm directly caused by sanctionable misconduct . . . ?” Second, “May a court award attorney's fees under its inherent powers as sanctions against a client for actions by its attorneys that are not fairly attributable to the client's own subjective bad faith?” (Doc. 1183, Exh. 1). The Supreme Court accepted review of the first question only. (Doc. 1183, Exh. 2). In its decision, the Supreme Court reversed and remanded the sanctions and held that “[a] sanctioning court must determine which fees were incurred because of, and solely because of, the misconduct at issue . . . .” Goodyear Tire & Rubber Co. v. Haeger, 137 S.Ct. 1178, 1189 (2017). Having dismissed the entire sanctions award, the Supreme Court deferred on whether to accept the contingent award. The Supreme Court insisted that the District Court “reconsider from scratch which fees to shift” because the uncertainty of the application of the right legal rule “points toward demanding a do-over.” Id. However, the Supreme Court also noted that Goodyear may have “waived any ability to challenge the $2 million [contingent] award.” Id. Therefore, the “possibility of waiver should . . . be the initial order of business below. If a waiver is found, that is the end of this case. If not, the District Court must reassess fees in line with a but-for causation requirement.” Id. at 1190.

         After the Ninth Circuit “remanded to the district court for proceedings consistent with the Supreme Court's opinion, ” Haeger v. Goodyear Tire & Rubber Co., No. 12-17718, Ninth Cir., Doc. 154, the parties appeared before the District Court for a status conference. The District Court requested briefing on two questions: whether Goodyear is vicariously liable for the acts of its ...


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