U.S. Supreme Court Draws the Line: Invalidates $2.7 Million Dollar Discovery Sanction Against Manufacturer

05.01.17 | Permalink

On April 18, 2017, the U.S. Supreme Court made a bold and seemingly manufacturer-friendly pronouncement in overturning a federal district court judge’s $2.7 million award in sanctions against manufacturer Goodyear Tire & Rubber Company for a purported discovery violation. See Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178 (Apr. 18, 2017). The decision carries significant implications in the context of discovery violation jurisprudence as well as a curb on a district court’s inherent sanctioning authority.

By way of background, the litigation arose from the Haeger family’s action against Goodyear, alleging the failure of a Goodyear G159 tire caused the family’s motorhome to swerve off the road and flip over. Discovery in the case was contentious and lasted several years. A key issue in the contentious discovery process involved repeated requests for internal G159 tire testing, which Goodyear was persistently slow to respond to. On the first day of trial in April 2010, the parties informed the court that a settlement had been reached. Months after the settlement, the family’s lawyer discovered G159 tire testing from another lawsuit, which had not been produced in the subject litigation. The undisclosed G159 testing revealed the G159 tire “got unusually hot” at highway speeds.  Id. at 1184. Goodyear conceded withholding the information despite a direct request for all testing regarding the subject model tire.  Thereafter, the family sought sanctions (attorney’s fees and costs) for Goodyear’s knowing concealment, discovery fraud and bad faith litigation. 

Arizona Senior District Court Judge Roslyn O. Silver found that Goodyear and its attorneys had “engaged in a ‘years-long course’ of bad-faith behavior.” Id. Exercising its inherent authority to sanction bad faith litigation, the district court awarded the Haeger family $2.7 million. Despite acknowledging that in the “usual case, sanctions ordered pursuant to a court's inherent power to sanction litigation misconduct must be limited to the amount of legal fees caused by that misconduct[,]” Judge Silver nevertheless determined that “the sanctionable conduct r[ose] to a truly egregious level . . . . [a]nd when a litigant behaves that badly . . . all of the attorneys' fees incurred in the case [can] be awarded . . . without any need to find a ‘causal link between [those expenses and] the sanctionable conduct.’” Id. at 1189 (alterations). In support of its award, the district court also concluded that full and timely disclosure of the withheld test results would likely have led Goodyear to settle the case much earlier.     

Writing for a unanimous Court (with the exception of Justice Gorsuch who did not participate), Justice Elena Kagan stated: “A district court has broad discretion to calculate fee awards under [the bad faith litigation] standard. But because the court here granted legal fees beyond those resulting from the litigation misconduct, its award cannot stand.” Id. at 1184 (alteration). The Court emphasized that such sanctions must be compensatory rather than punitive in nature. Id. at 1186. “A sanction counts as compensatory only if it is ‘calibrate[d] to [the] damages caused by’ the bad-faith acts on which it is based. Id. (emphasis added). Not only did the Court find that the district court deviated from established standards and overstepped its inherent authority, but it also found that the Haeger family failed to establish the case would have settled had the testing been provided at the first instance or that Goodyear’s non-disclosure permeated the entire litigation as to justify an all-fees award. 

This case is critically important for several reasons, which extend far beyond the facts of the case. The Supreme Court’s decision clearly delineates limitations on a district court judge’s authority to impose sanctions. The Haeger decision bolsters the causal link or but-for requirement between the alleged misconduct and the legal fees to be paid by an offending party. Moreover, the decision serves as a firm and realistic reminder to manufacturers and their counsel of the importance of carefully collecting, correlating and responding to discovery requests as well as maintaining consistency and uniformity in document production from one case to the next. The continuing duty in federal court to supplement discovery responses is also at the forefront of considerations in analyzing the facts of this case. It also highlights the potential and seemingly continual exposure for alleged discovery violations and/or failure to produce certain testing, documents or other things even post-settlement. Going forward, manufacturers and their counsel may want to consider including a clause/language waiving any post-settlement claims for discovery violations in the release and/or stipulation.  

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Florida Court Extends Privacy Rights to Vehicle Black Box

05.01.17 | Permalink

Posted By: Damien A. Orato

In a case of first impression, the Florida Fourth District Court of Appeal held that police need a warrant to search a vehicle’s black box or event data recorder (EDR). EDRs, which are now present in almost every vehicle on the road, are devices that record technical crash data for a brief period of time before, during and after a crash. After a fatal car crash, police downloaded the data from the impounded car’s EDR without a warrant. The driver of car was later charged with DUI manslaughter and moved to suppress the data downloaded from the EDR. The trial court held that the warrantless search of the EDR violated the Fourth Amendment and granted the driver’s motion to suppress. The state appealed arguing the Fourth Amendment did not apply, because there was no reasonable expectation of privacy in the data from the EDR. 

Affirming the trial court, the appellate court held there is a reasonable expectation of privacy in the data obtained from the EDR. Therefore, a warrant is required to download the data from the EDR absent exigent circumstances. Interestingly, the Court relied on prior decisions recognizing a reasonable expectation of privacy in cell phones, though the Court acknowledged that cell phones contain much more private and personal information than an EDR. The Court equated the difficulty in extracting information from EDRs with cell phones, which enhances the expectation of privacy.   With the ever-expanding use of technology in vehicles, this decision will have a far-reaching impact. The State of Florida will likely appeal the ruling of the appellate court to the Florida Supreme Court, so stay tuned for further developments. The case is Florida v. Worsham, No. 4D15-2733 (Fla. Dist. Ct. App. Mar. 29, 2017).

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Daubert Under the Microscope Again by Florida Courts

02.17.17 | Permalink

Posted By: Lena Mirilovic

In a ruling that raises new issues about the adoption of the Daubert standard for the admissibility of expert opinions in Florida state court, the Florida Supreme Court has declined to adopt, to the extent they are procedural, the 2013 legislative changes the Florida Evidence Code that put the Daubert standard into effect. In Re: Amendments to the Florida Evidence Code, No. SC16-181, February 16, 2017. Although the recent decision does not address the ultimate constitutionality of the Daubert Amendment, it will create confusion in the state courts until further clarity is provided.

The Daubert Amendment, which went into effect in July 2013, dropped the older Frye standard in favor of the more rigorous Daubert standard for admissibility of expert testimony. In declining to adopt the Daubert Amendment to the extent that it is procedural, the Supreme Court’s ruling cites constitutional concerns that adopting Daubert would impede access to the courts and undermine the right to a jury trial. Justice Polston, in a strongly worded dissent, disputes these concerns and notes that federal courts and a clear majority of states have long adhered to Daubert without any such constitutional concerns. The ruling does not reach the constitutionality of the Daubert Amendment, or resolve the extent to which the Amendment is substantive or procedural in nature.

The procedural versus substantive distinction is critical to the analysis and livelihood of Daubert as a matter of Florida law going forward. To the extent that the Daubert Amendment is construed as strictly procedural in nature (i.e. not impacting rights, obligations, causes of actions, etc.), then the Supreme Court ruled the Florida Legislature overstepped its bounds and enacted an unconstitutional law on a matter within the province of the Court. Whether the Daubert Amendment is unconstitutional as a matter of substance—meaning it is entirely unconstitutional—is left to be determined. The Court’s ruling did not address this issue. Not until an actual case and controversy is before the Florida Supreme Court can that discrete and seminal issue be decided. Until then, the Daubert Amendment in the Florida Evidence Code remains a valid and binding law. However, the recent ruling is a clear indication that the Court, as currently comprised, is likely to find the Daubert Amendment unconstitutional when presented with the issue in an appropriate case.

These unresolved issues will certainly create great confusion in state courts. In fact, anecdotal evidence confirms that many judges in South Florida have already refused to hear Daubert challenges until further clarity is provided. The recent ruling will inevitably create procedural delay until the courts put in place some definitive position or action in this regard. Plaintiff’s attorneys will likely seek to continue or stay any Daubert challenges pending a ruling on the substance of the statute. Also likely are expert depositions or other discovery that is more prolonged due to emphasis on both Frye and Daubert until the dilemma is resolved.

Alternatively, plaintiff’s attorneys will be on the hunt to tee up a case for appeal before the Florida Supreme Court on this issue. Opponents of the Daubert standard may be motivated to quickly find a case to get the merits of the Daubert Amendment before the Florida Supreme Court. Three of the four Justices concurring in the recent decision—Pariente, Lewis and Quince—are due for mandatory retirement on January 8, 2019, the same day as Governor Rick Scott’s last day in office. Governor Scott has said he plans to make three replacement appointments on that day. Any such appointees may have a more favorable view of Daubert than the outgoing Justices.

To view the full opinion click here:  http://www.floridasupremecourt.org/decisions/2017/sc16-181.pdf

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Recent Updates

05.01.17  U.S. Supreme Court Draws the Line: Invalidates $2.7 Million Dollar Discovery Sanction Against Manufacturer  Read Article >>

05.01.17  Florida Court Extends Privacy Rights to Vehicle Black Box  Read Article >>

02.17.17  Daubert Under the Microscope Again by Florida Courts  Read Article >>

01.19.17  Defense Verdict for Harley-Davidson  Read Article >>

09.18.16  Autonomous Safety Technologies: Lowering the Bar for the Alert and Safe Driver.  Read Article >>

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