Discovery Sanctions Must Be Compensatory, Not Designed To Punish, Supreme Court Rules

In a unanimous decision, the U.S. Supreme Court has found that discovery sanctions must be compensatory in nature, and not punitive, overturning a lower court levy of $2.7 million against Goodyear Tire & Rubber Co. for discovery abuses. 

The unanimous opinion (PDF) was issued last week, in the case of Goodyear Tire & Rubber Co. v. Heager, which was originally filed over seious injuries that occurred when a Goodyear tire blew in 2003, causing a motor home to flip over.

The Supreme Court overturned a 2015 decision by the 9th Circuit Court of Appeals, finding that sanctions for abuses during the discovery phase of litigation must be directly linked to the cost incurred by the bad behavior.

In the Goodyear tire case, an attorney for the Haeger family discovered after settlement that the tire manufacturer had produced documents in another case which involved the same kind of tire, indicating that tests showed it could explode when it got extremely hot. The company later admitted that it withheld the information in the Haeger case.

A lower court found the company had committed misconduct, and levied $2.7 million in discovery sanctions against the company. The costs represented all of the family’s legal fees, as opposed to just the extra fees incurred by Goodyear’s bad behavior.

The company appealed the decision all the way to the Supreme Court, which remanded the case to the lower court to set a new, more appropriate penalty.

“This Court has made clear that such a sanction, when imposed pursuant to civil procedures, must be compensatory rather than punitive in nature,” Justice Elena Kagan wrote for the Court. “In other words, the fee award may go no further than to redress the wronged party ‘for losses sustained’: it may not impose an additional amount as punishment for the sanctioned party’s misbehavior.”

The ruling could have an impact on many cases where judges levied heavy penalties against parties for omitting or falsifying discovery information, as the sanctions must be designed to compensate the other party, not to punish the wrong doer or act as a deterrent for misconduct.