The inherent authority of judges to issue sanctions for discovery failures or misconduct became a hot topic in the industry after the implementation of the December 2015 Amendments to the Federal Rules of Civil Procedure. A central goal of those revisions was an increase in the consistency and predictability of when and what spoliation sanctions are awarded. Amended Rule 37(e) attempted to resolve a major circuit split and other jurisdictional variations in spoliation sanctions analysis in favor of a new, clarified rule.
In order to achieve this goal of nationwide standardization, the Rules Advisory Committee intended for that new version of the rule to preclude the use of inherent authority to assess spoliation sanctions. The Advisory Committee Notes to the 2015 Amendments state explicitly: “It therefore forecloses reliance on inherent authority or state law to determine when certain measures should be used.”
Advisory notes are only advisory, however, and in the following year, some judges issued decisions expressing a willingness to still fall back on inherent authority for spoliation sanctions, if they deemed it necessary:
- For example, in the CAT3, LLC v. Black Lineage Inc., 164 F.Supp.3d 488 (S.D.N.Y. Jan. 12, 2016) and the DVComm, LLC v. Hotwire Communications, LLC, 2016 WL 6246824 (E.D. Pa. Feb. 3, 2016) cases, the judges imposed sanctions under amended Rule 37(e) but asserted explicitly that inherent authority would still have been an option for spoliation sanctions if the result provided by the amended rule was inadequate
- In Hsueh v. N.Y. State Dep’t of Fin. Servs., 2017 WL 1194706 (S.D.N.Y. Mar. 31, 2017), the judge went even further, declaring intentional spoliation beyond the scope of the amended rule and relying on inherent authority for sanctions (“Because Rule 37(e) does not apply, the Court may rely on its inherent power to control litigation in imposing spoliation sanctions”)
- In contrast, in FiTeq Inc. v. Venture Corp., 2016 WL 1701794 (N.D. Cal. Apr. 28, 2016), the judge declined a request to rely on inherent authority for spoliation sanctions, citing to the Advisory Committee Notes and finding that amended Rule 37(e) is the exclusive source of authority available
With this new uncertainty growing about the exclusivity of the newly amended rules and when inherent authority to sanction may come into play, practitioners were eager for any guidance on the subject from a higher authority. In 2017, in a “rare” discovery-related opinion, the Supreme Court weighed in on the limits of inherent authority to award attorney’s fees and costs as a sanction for discovery misconduct.
Goodyear Tire & Rubber Co. v. Haeger, 137 S.Ct. 1178 (2017)
This case concerned a motorhome accident allegedly caused by the failure of a Goodyear tire. During the original proceeding, Goodyear inappropriately withheld from production certain internal testing records related to the tire. The matter was eventually settled. The plaintiffs later discovered the existence of the withheld testing records through coverage of another lawsuit in which they were produced.
The plaintiffs returned to court seeking sanctions against Goodyear for having withheld the testing records – which would likely have been beneficial to the plaintiffs – from production during discovery. Relying on its inherent authority, the District Court ultimately awarded all attorney’s fees and costs incurred by the plaintiffs from the date of the initial withholding by Goodyear forward. The award was affirmed on appeal to the Ninth Circuit, but reversed and remanded by the Supreme Court.
The Supreme Court’s concern was not with the District Court’s reliance on inherent authority to apply the discovery sanctions, nor was it with the selection of a fee award as the mechanism of redress. Rather, the Supreme Court reversed and remanded to correct the standard applied with regard to what amount of fees should be awarded for the sanction. When awarding attorney’s fees on the basis of inherent authority, courts are limited to compensatory amounts rather than punitive ones. To ensure this, the specific fees awarded must be causally linked to the specific misconduct being addressed.
Because the District Court had allowed all of the fees beyond the specified date to be awarded on a blanket basis, without more granular analysis, the Supreme Court reversed and remanded for a re-analysis of which of the plaintiffs’ attorney’s fees and costs were causally linked with Goodyear’s misconduct in withholding the testing records.
Connection to Spoliation Sanctions Cases
This case is valuable for its clarification of the limits on awarding attorney’s fees based on inherent authority as a sanction for general discovery misconduct. And, although this decision does not directly discuss amended Rule 37(e), it is also relevant to the question of whether, when, and to what degree a litigant may be subjected to spoliation sanctions based on inherent authority.
Much as was asserted in CAT3 and DVComm, the decision explicitly reaffirms courts’ inherent authority to sanction misconduct during discovery:
Federal courts possess certain “inherent powers,” not conferred by rule or statute, “to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.” That authority includes “the ability to fashion an appropriate sanction for conduct which abuses the judicial process.” [internal citations omitted]
It seems likely that this strong reaffirmation of inherent authority for discovery sanctions will encourage those judges that continue to view it as an option for circumstances not well-addressed by amended Rule 37(e). And, in those instances, it seems likely that the same fundamental limitation on fee awards (compensatory not punitive) will apply.