Supreme Court to Clarify Civil-Sanctions Rules

     (CN) — The Supreme Court agreed Thursday to decide whether sanctions imposed by a federal court’s inherent authority must be tailored to harm directly caused by the misconduct at issue.
     Leroy, Donna, Barry and Suzanne Haeger were injured in 2003 when one of the Goodyear tires on their motor home failed, causing their vehicle to swerve off the road and flip over.
     The Haegers sued Goodyear two years later, in a case that was removed to federal court. Goodyear was represented by attorneys Graeme Hancock and Basil Musnuff.
     According to court records, Goodyear, Hancock and Musnuff delayed production of relevant information during discovery, made misleading and false in-court statements, and concealed relevant documents.
     The Arizona district court found that “Mr. Hancock, Mr. Musnuff, and Goodyear engaged in repeated and deliberate attempts to frustrate the resolution of this case on the merits.”
     As a sanction for “remedying a years-long course of misconduct,” the district court awarded the Haegers all attorneys’ fees and costs incurred after Goodyear responded to their first discovery request.
     The sanctions were imposed under the district court’s inherent power, not federal civil procedure rules, because the “fraud and deceit” was not discovered until after the case was closed and the Haegers had settled with Goodyear based on the incomplete information it provided, court records show.
     The district court calculated that the Haegers were owed $2.7 million. Hancock was responsible for 20 percent, or $548,000, and Musnuff and Goodyear were to pay the remaining $2.1 million.
     The Ninth Circuit upheld the sanctions in February, finding that the district court did not abuse its discretion in imposing the sanctions.
     Musnuff and Goodyear each appealed to the U.S. Supreme Court in a petition for a writ of certiorari filed in May.
     “The [Ninth Circuit] majority’s approach disregards the safeguards engrafted on inherent authority sanctions to restrain the unfettered exercise of a court’s inherent authority,” the petition states. “This case presents an ideal vehicle for this Court to examine and clarify the standards that govern the imposition of civil sanctions under inherent powers, particularly in light of how the majority and dissent framed the issue at hand.”
     On Thursday, the high court agreed to decide one question from Musnuff and Goodyear’s petition: Is a federal court required to tailor compensatory civil sanctions imposed under inherent powers to harm directly caused by sanctionable misconduct when the court does not afford sanctioned parties the protections of criminal due process?
     Per its custom, the Supreme Court did not comment on its decision to take up the consolidated cases.

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