Argument analysis: “The train jumped the track and it went in an entirely wrong direction” — the court considers the causation standard for imposing sanctions

Locomotively questionable train analogies and a bench skeptical of the petitioner’s position marked Tuesday’s argument in Goodyear Tire & Rubber Co. v. Haeger, in which the court considered the validity of a $2.7-million award of attorney’s fees against Goodyear for its bad-faith litigation conduct in failing to produce certain documents relating to a defective tire.

Arguing for Goodyear, Pierre Bergeron argued that sanctions require a showing of “direct causation,” which he treated as synonymous with a “but-for” standard. Under this standard, however phrased, fees are available for excess or incremental costs incurred because of steps taken by the plaintiff that would not have been taken without the misconduct. In this case, that includes the costs to the Haegers from Goodyear’s non-disclosure of a “Heat Rise” test showing that the tire reached temperatures above 200 degrees at highway speeds.

Bergeron argued repeatedly that this standard would never allow a fee award such as the one the district court made here, based on a finding that that the case would have settled earlier had a party produced a particular document and that the opposing party is entitled to all fees incurred after that would-have-settled date. Such a finding would be too speculative and too likely to be used by courts as a shortcut for a causation inquiry. But Bergeron encountered skepticism from Chief Justice John Roberts and Justices Anthony Kennedy, Samuel Alito and Elena Kagan. Kagan reminded Bergeron that “there’s never any certainty” about any finding, which is why judges ask only whether something is more likely than not. Alito rejected the idea that it is impossible to imagine a document so damaging that a party would know it would have to settle should the document be disclosed, while the Chief Justice asked about documents that are “much more dramatic” and thus that might change a party’s strategy. Kennedy suggested that, if fees based on a lost early settlement are categorically excluded, it would mean that “the more egregious … the violation the harder it is to show causation,” which seems “odd.” Kagan echoed that sentiment in wondering whether that would leave victims uncompensated in many cases. She also recalled the court’s prior admonition that district judges are not expected to be “green eye-shade accountants” poring over every hour and item of attorney work, but instead are allowed to award fees based on categories of costs.

Bergeron argued that the district court applied the wrong legal test, thereby abusing its discretion and requiring remand for performance of the proper analysis. He conceded that Goodyear is responsible for the “direct harm flowing from the misconduct” of not disclosing the test and identified for Kagan some items for which fees would be due, although he stated that these totaled less than $2 million. But Kagan and Justice Sonia Sotomayor questioned whether a remand was necessary. In the district court, Goodyear had identified only $700,000 in fees “unrelated to the alleged harm,” such as fees incurred pursuing other defendants and proving medical damages. What, Sotomayor wondered, was left for the district court to do, in light of that acknowledgement? At best, Goodyear could avoid that $700,000, but nothing more. But Bergeron stuck to his point that the district court never conducted the proper legal analysis with respect to any part of the full award.

Arguing for the Haegers, John Egbert encountered a less skeptical bench, although one somewhat confused by what, precisely, the lower courts had found. Egbert agreed that a court must find causation, but insisted that the district court had properly identified a causal relationship between the non-disclosure and the fees awarded. But Alito did not see any language about a causation standard in the court of appeals opinion. Roberts questioned how fees spent pursuing other defendants in the case were causally linked to Goodyear’s failure to disclose the Heat Rise test. And Kagan read the lower-court opinion as simply imposing all costs incurred after Goodyear’s bad-faith conduct.

The key, Egbert responded, was that the bad faith of non-disclosure rendered the entire litigation a sham, because the document would have been so important to the plaintiffs’ claims and so devastating to Goodyear’s defense. Thus, all fees incurred through the entire litigation were “caused” by the non-disclosure. This led Egbert to offer a train analogy: Most sanctionable conduct merely delays the train or causes a detour, although the train still arrives at the intended station. Here, the “train jumped track and it went in an entirely wrong direction,” producing a “completely empty charade” that was litigated, not on the real facts of the case, but only on the facts Goodyear allowed the plaintiffs to have. In such a situation, Egbert argued, a district court properly can award fees to return the party to the position it was in before the train jumped the track.

Justice Stephen Breyer pushed Egbert several times on whether the best course of action would be to remand, given the ambiguity as to what the district judge did, what standard she applied, and whether she stated that she was employing a causation standard. The result might be only one extra proceeding, in which the plaintiffs would make the same argument they made to the justices — that the district judge did apply the proper standard. Egbert replied that that such a remand was unnecessary, because Goodyear had waived a challenge to anything other than the $700,000. Prompted by Sotomayor, he agreed that a remand would merely add costs and delays by requiring the plaintiffs to relitigate issues that had already been resolved.

Egbert instead emphasized the extensive findings the district court made, which were entitled to substantial deference and reversible only if clearly erroneous. Even if there were ambiguities in the lower-court decisions and even if there is evidence supporting Goodyear’s positions, the district court’s factual findings were not so wrong as to warrant reversal. Roberts pointed out that a counter-factual determination that the parties would have settled had the Heat Rise document been disclosed is not a typical finding of fact; although it has factual elements, it is more of a judgment than a finding that something happened. Egbert agreed this was an “unusual” finding, but nevertheless a factual one, based on the judge’s conclusion that the non-disclosure was “pretty monumental” and went to the “very heart of the case.”

During Bergeron’s rebuttal, he returned to his basic point that the district court’s entire determination followed the wrong standard because it did not apply any of the causation formulations Egbert had articulated. Remand of the entire case, he argued, was warranted for application of the correct standard. Sotomayor, seizing on the train analogy, wondered why travel on the “other” route was not compensable. But Bergeron argued that there was more to the case than that one undisclosed test and that, in any event, the district court did not find the entire litigation to be a sham.

Predicting outcomes based on an argument is perilous. But the extent and tenor of the questioning suggests that the Haegers are likely to keep most, if not all, of the attorney’s fees they were awarded.

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