F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

L E R O Y H A E G E R ; D O N

N A H A E G E R , husband and wife; B A R R Y H A E G E R ; S U Z A N N E H A E G E R , husband and wife, Plaintiffs-Appellees

,

v

.

T H E G O O D Y E A R T I R

E & R U B B E R C O M P A N Y , an Ohio corporation, Defendant-Appellant

,

and

S P A R T A N M O T O R S , I

N C ., a Michig an corporation; G U L F S T R E A M C O A C H , I N C ., an I ndiana corporation,

Defendants

,

v

.

R O E T Z E L & A

N D R E S S , L PA; B A S I L J

. M U S N U F F , Movants

. N o. 12-17718

D.C. No. 2:05-cv-02046- ROSH A E G E R V

. G O O D Y E A R T I R E & R U B B E R C O

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L E R O Y H A E G E R ; D O N

N A H A E G E R , husband and wife; B A R R Y H A E G E R ; S U Z A N N E H A E G E R , husband and wife, Plaintiffs-Appellees

,

v

.

T H E G O O D Y E A R T I R

E & R U B B E R C O M P A N Y , an Ohio corporation, Defendant-Appellant

. N o. 13-16801

D.C. No. 2:05-cv-02046- ROS

L E R O Y H A E G E R ; D O N

N A H A E G E R , husband and wife; B A R R Y H A E G E R ; S U Z A N N E H A E G E R , husband and wife, Plaintiffs-Appellees

,

v

.

T H E G O O D Y E A R T I R

E & R U B B E R C O M P A N Y , an Ohio corporation; S P A R T A N M O T O R S , I

N C ., a Michig an corporation; G U L F S T R E A M C O A C H , I N C ., an I ndiana corporation,

Defendants

,

v

.

B A S I L J

. M U S N

U F F , Movant-Appellant

. N o. 13-16861

D.C. No. 2:05-cv-02046- ROSH A E G E R V

. G O O D Y E A R T I R E & R U B B E R C O

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L E R O Y H A E G E R ; D O N

N A H A E G E R , husband and wife; B A R R Y H A E G E R ; S U Z A N N E H A E G E R , husband and wife, Plaintiffs-Appellees

,

v

.

T H E G O O D Y E A R T I R

E & R U B B E R C O M P A N Y , an Ohio corporation; S P A R T A N M O T O R S , I

N C ., a Michig an corporation; G U L F S T R E A M C O A C H , I N C ., an I ndiana corporation,

Defendants

,

v

.

F E N N E M O R E C R A I G , P.C.; G R

A E M E H A N C O C K , M

ovants-Appellants

. N o. 13-16862

D.C. No. 2:05-cv-02046- ROS

ORDER AND AMENDED OPI NI ON

A ppeal from the United States District Court for the District of Ariz o na Rosly n O. Silver, Senior District J udg e, Presiding

Arg ued and Submitted March 10, 2015—San F rancisco, California

F iled J uly 20, 2015 Amended F ebruary

16, 2016

B e fore: J . Clifford W allace, Milan D. Smith, J r., and Paul J . W atford, Circuit J udg es.H A E G E R V

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Order;

Opinion by

J udg e Milan D. Smith, J r.; Dissent by

J udg e W atford

SUMMARY *

Sanctions

The pa n e l affirmed the district court’s order imposing monetary sanc t i o ns ag ainst attorney s B asil Musnuff a nd Gr aeme Hancock a

nd The G oody ear Tire & Rubber Company , and non-monetary sanctions ag ainst Goody ear.

The p anel held that it w as not an abuse of discret i o n f o r the district c ourt to rely o n its inherent power to sanction the conduct a t issue in this case, a nd to d etermine that F ed. R. Civ. P. 37 did not provide the appropriate remedy

, especially

s i nce the discovery fraud w as not discovered until after t h e cases had settled.

The panel held that it was not abuse of discretion to find that the Sanctionees each a cted in bad f aith. The panel also held that the d istrict co u r t a c ted well within its discretion in awarding all the a ttorney s’ fees and costs incu r r e d by the Plaintiffs after Goody ear served i t s supplemental responses to Plaintiffs’ F irst Request.

The panel held that the distric t c ourt did not a buse its discretion in imposing non-monetary sanctions on Goody ear.

* T h is su m m ary co n stitu

tes n o p art o f t

h e o p in io n of th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.H A E G E R V

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The panel held that the distr i c t court’s imposition o f non-monetary sanctions ag a inst Goody ear was balanced, narrowly tailored, a

n d imposed no sanctions bey o nd what

was necessary to remedy

what the district court p e rceived a s an ong oing problem in Goody ear’s litig ation.

J u d ge W a tford dissented. He ag reed with the majorit y that the district c ourt’s misconduct f indi n g s were supported by the r ecord, but he would n o n e t h eless conclude that the $2.7 million san ct i o n s award must b e vacated because Goody ear a

nd its lawy e rs were not af f o r ded heig htened procedural protections before punitive sanct i o ns were imposed.

COUNSEL

Pierre H. B erg eron ( arg ued), Squire Sanders L L P, Cincinnati, Ohio; G eorg e B randon, Squire Sanders L L P, Ph o e n ix

, Ariz ona; J ill G. Okun, Squire Sanders L L P, Cleveland, Ohio, for Defendant-Appellant/De fendant The Goody e ar Tire & Rubber Company

.

M a r k I

. Harrison (arg

u ed), J e ffrey B

. Molinar, O sborn Maledon, PA, Ph o enix

, Ariz ona, for Movant/MovantAppellant B asil J . Musnuff.

Andrew M. J acobs, (arg ued), Katherine V. F oss, Snell & W ilmer L L P, Tucson, Ariz ona; J ames R. Condo, L isa M. Coulter, Snell & W ilmer L L P, Phoenix

, Ariz ona, for MovantAppellant Graeme Hancock.H A E G E R V

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J ohn J

. Eg bert (arg

ued), J enning s Strouss & Salmon, PL C, Phoenix

, Ariz ona; D avid L

. Kurtz
, The Kurtz L aw F irm, Scottsdale, Ariz ona, for Plaintiffs-Appellees.

ORDER

The opinion and dissent filed on J uly 2 0, 2015 a nd published at 793 F .3d 1122 are hereby amended. The amended opinion and dissent are filed concurrently w ith this order.

W ith these amend m e n ts, J udg e M. Smith voted to deny the petitions for rehearing en banc, and J udg e W a llace so recommends. J udg e W atford voted to g rant the petitions.

The f ull court was advised of the p etitions f o r r e h earing

en banc. A judg e requested a vote on whether t o rehear the
matter en banc, a

nd the matter failed to receive a majority o f the votes of the nonrecused active judg es in favor of en banc consideration. F ed. R. App. P. 35.

The petitions for rehearing en banc are DENIED

.

F uture petitions for panel rehearing and petition s f o r rehearing en banc will not be entertained.H A E G E R V

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OP INION

M. SMI TH, Circuit J udg e :

On November 8
, 2012, after a six -hour evidentiary hearing

, a

nd after consid e r i n g t he record in the case a nd fifteen briefs f

i l e d by the p otentially -sanctionable parties, then-Chief United States District J udg e Rosly n O

. Silver, o f th e United States District Court for the District of Ariz ona, handed down a six ty -six -pag e order (Order) imposing sanctions ultimately calculated in the sum of $ 5 48,240
ag ainst a ttorney Graeme Hancock ( H a ncock), and $2,192,961 j o i n tly ag ainst attorney B asil J

. Musnuff (Musnuff) and The Goody ear Tire & Rubber Company ( Goody ear) ( collectively the Sanctionees). I n the Order, w h i c h included forty -nine
pag es of finding s of fact a n d s e v enteen pag es of leg al analy sis, J udg e Silver found that “t h ere is clear a nd

c o n v incing evidence that sanctions are required to be imposed
ag ainst [ ] Hancock, [ ] Musnuff, and Goody ear. The Court is

aware o f the unfortunate p rofessional consequences that may flow f rom this Order. Those consequences, how e v e r , are a direct r esult of repeated, deliberate decisions by [ ] Hancock, [ ] Musnuff, and G oody ear to delay the production of relevant information, make misleading and false in-court statements, and conceal relevant documents. [ ] Hancock, [ ] Musnuff, a nd Good y e a r will surely be disappointed, but they cannot be surprised.” 1

1 T h e d istrict co u r t b eg an its o rd er w ith th e f o llo w in g po w erf

u l d eclaratio n , w

h ich w arran t s th e atten tio n o f all m em b ers o f th e b ar:

“ L itig a t i o n is n ot a g am e. It is t h e tim e- h o n ored m eth o d o f seek in g th e tru t h

, f in d in g th e tru th

, an d do i n g j u stice. W h en a co rp oratio n an d its

co u n sel ref

u se t o pro d u ce d irectly relev an t i n f o rm atio n an o p p o sin g p arty is en titled to receiv e, th ey h av e ab an do n ed th ese b asic p rin cip l es in f av orH A E G E R V

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B e cause the fraud and deceit p r a cticed on the district
court and the Plaintiffs by the S an c t ionees was not discovered until after the underly ing litig ation h ad been closed and Plaintiffs had settled with Goody ear based u pon the incomplete information provided by the Sanctionees, the district court imposed th e s anctions in reliance upon its inherent power, and not under F ederal Rule of Civil Procedure 11, or 28 U.S.C. § 1927.

The Sanctionees appeal from the judg ment awarding the sanctions, arg u ing that the district court a bused its discretion in rely ing upon its inherent power to impose sanctions, and in deter m i n ing the amount a n d the nature of the sanctions imposed.

W e affirm both the d istrict court’s monetary and nonmonetary sanctions imposed ag ainst the Sanctionees.

F ACTUAL AND P ROCEDURAL BACK G ROUND

I n J u ne 2003, L eroy and D onna Haeg er, and B arry a n d Suz anne Haeg er (collectively the Haeg ers, or Plaintiffs) were all seriously injured when one of the Goody ear G159 tires on the front o f their motor home failed while they were driving

on a hig hway

, which caused their v e h i cl e to swerve off the road and o verturn. Th e Haeg ers retained attorney David Kurtz ( K urtz ), who filed suit ag ainst Goody ear in 2005 in Ariz ona state court. The c a se was quickly removed to federal
court by Goody ear. G oody ear was repre s e nted b y Musnuff, who serve d as Goody e ar’s “national coordinating counsel” on all G159 cases, and Hancock, who served as Goody ear’s local

o f th eir o w

n in terests.[] T h e little v o ice i n ev ery atto rn ey ’ s co n scien ce th at

m u rm u rs tu rn o ver a ll ma teria l in fo rma tio n w as ig n o red .”H A E G E R V

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counsel in Ariz ona. Musnuff and Goody ear’s i n

- h ouse counsel, Deborah O key (Okey ), we r e responsible for reviewing and approving a ll discovery responses in the c ase.

B e fore r eleasing its G159 t i r e , Goody ear performed F MVSS119 Department of T r ansportation (DOT ) tests, electronic post-production W 8 4 hig h speed test data (Hig h Speed tests), L 04 heat rise test r esults (Heat Rise tests), DOT endurance tests, crown durability tes ts, and b e ad durability
tests o n the tir e. Throug hout discovery

, the Haeg ers repeatedly soug ht the results of Goody e a r’s tests on the G159 tire. However, as d e t a iled below, Goody ear, Musnuff, a nd Hancock failed to s e a r ch for, and/or withheld these relevant and r esponsive G159 testing documents in violation of their discovery oblig ations t o produce requested relevant documents, a

nd to supplement prior disclosures. See F ed. R. Civ. Pro. 26, 34.

Goody ear served its I nitial Disclosure Sta t ement on the Plaintiffs on D ecember 1 5, 2005, pursua n t to Rule 26. The initial disclosures did not include t e s t i n g information, a nd Kurtz promptly requested that Goody ear pr oduce “[ t] esting documentation reg ardi ng the G159 tires.” Nevertheless, Goody ear did not supplement the di s c l o sures in its I nitial Disclosure Statement. Goody ear propounded interrog atories aski n g for, among other thing s, “each leg al theory under which y ou b e lieve Goody ear is liable.” I n respons e , on Au gust 18, 2006, the Haeg ers articulated their theory o f the

case: “ Prolo n ge d heat causes d eg r adation of the tire which, under appropriate circumstances, can l e ad to tire failure a nd tread separation even when t h e tire is properly inflated.” Additionally

, the Haeg e rs stated that w hen the G159 tire was used on motor homes, the t i r e produced a level of heat a ndH A E G E R V

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deg radation “ which the tire w as not d esig ned to endure, leading to its premature failure.”

The Haeg ers served their F irst Request for Production o f Documents (F irst Request), p u rsuant to Rule 34, in September 2006. “Request for Production N u m ber 1 4” requested “[ a] ll test records for the G 159 tires, including

, but no[ t] limited to, road tests, w heel te s t s , hig h speed testing

, and durability testing .” Goody ear objected to thi s request with a series of boi lerplate o b jections, a

nd failed to produce
any documents. Howeve r, on November 1, 2006, in its supplemental response to “Request for Production Number 14,” Goody ear ag

reed to produce the F MVSS119 D OT tests for the G 1 5 9 t i r e. On December 20, 2006, K u rtz sent Hancock a letter clarify

ing what had been requested:

Request for Production No. 1 4

. W e asked for
t e s t records for the G159 275/70R 22.5, including road tests, wheel tests, hig h speed testing

, and durabilit y testing

. You objected,
sug g esting the test records were overly broad and undu l y burdensome. Y ou have only produced the DOT test data showing the tires

were tested at 3 0 mph. My interest is in finding the r est of the test data. I f there is any , it is y our oblig ation to disclose it.

On J anuary 2, 2007, Hancock wrote an email to Musnuff
reg arding “Request for Production Number 14,” stating :

W e should either respon d t o any portions o f Kurtz ’ 12.20 letter or f

ig ure o ut that we have

a f ig ht o n our h ands on these points a nd
prepare a counter arg ument

. . . RTP 14. [

. . . ]H A E G E R V

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[ t] est records for all testing on this siz e G159 tire. Ag ain, was the only testing at 30 mph or less? W hat speed testing /fleet testing did Goody ear rely on? Can/should we supplement since his theory is that this tire can’t operate at 75 mph in the southwest for long periods?

On J anuary 5, 2007, the Haeg ers’s ex pert witness, David Osborne (Osborne), identified speed as a contributing factor in the G159 tire’s failure in his e x pert report. I n response to Osborne’s report, Musnuff wrote to Hancock:

Osborne appears t o d

raw the conclusion that the subject tire was only tested at speeds up to 30 mph from the fact that the only test data we produced is the DOT test data. Of course, our discovery response w as limited to DOT t e st data be cause plaintiff h ad not y et identified their defect theo r y at that time. Now that plaintiffs are pinpointing speed as an issue, perhaps we need to supplement our discovery
responses to show t h e testing of this tire at various speeds. Thoug hts?

M u s n uff also forwarded this email to Goody ear’s in-house

c o u n s e l

, O k e y, c o n c l u d i n g “ w e s h o u l d c o n s i d e r supplementing our discovery responses to show the testing o f this tire at various hig her spee ds.” D espite Goody ear’s understanding of its oblig a ti on to supplement its previous discovery responses, they

were not supplemented.

Also in J a

nuary 2007, one of G o o d y e a r’s tire eng ineers located the G159 tire’s Hig h Speed tests and Heat Rise tests. I t is clear that the eng ineer delivered at least the Hig h SpeedH A E G E R V

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tests to Musnuff because on Fe b r u a r y 12, 2007, Musnuff emailed the Hig h Speed tests to Hancock. Nei ther Musnuff

nor Hancock produced these tests to the Haeg ers. I nstead, on April 6, 2007, when J udg e Silver asked Hancock “is there any int e r n a l documentation that is available that has been requested that y our

. . . clients have not provided,” Hancock responded that Goody ear ha d “ r esponded to a ll outstanding discovery

. . . if a document shows up, we ’ll of course produce i t and supplement o ur answers.” This response to J udg e Silver was false. A t the time of this statement, Hancock had been sent the Hig h Speed tests and had stated to Musnuff that they should b e produced promptly “g iven the a ccusation of no hig h speed testing in the J a nuary report that put that at iss u e in the c ase”; it was thus a false representation to state that Goody ear had responded to all outstanding discovery

. Additionally

, as a follow up to h i s receipt of the Hig h Speed tests, Musnuff emailed Goody ear’s tire e n g ineer requesting a dditional data, ex plaining “if we disclose any o f the [ Hig h Speed] testing

– which is in our best interest – then

we need to produce all o f it.” Despite the fact that these Hig h Sp e e d t esting documents were responsive to the Haeg ers’ discovery request, Musnuff w a s s t i ll undecided about whether they were g oing to be produced.

On May 8, 2007, the Haeg ers served a Third Request for Product i o n of Documents (Third Request) requesting tests related to whether the G159 ti r e was suitable for use at a speed o f 75 mph. At a d iscovery dispute hearing on May 17, 2007, Hancock ad m i t t e d that there w ere tests available showing that the tire w as tested for speeds above 30 mph, but did not mention that Goody ear had been withholding these
tests from the Haeg er s f o r approx imately four months. I nstead, Hancock rep r esented that G oody ear would n owH A E G E R V

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produce these tests b e c au se o f the new oblig ation a rising f r o m t h e H a e g e r s ’ T h i r d R e q u e s t

. T h i s w a s a misrepresentation to the c ourt as Hancock had k n own that these Hig h Speed tests were r es p o nsive to the F irst Request since F ebruary

2007.

On May 2 1, 2007, Good y e a r deposed Osborne, the Haeg er s ’ ex pert witness. Osborne was deposed while under the impression that no h ig h speed testing of the tire had been done. Neither Hancock nor Musnuff disclosed that Goody e ar

was withholding t h e H ig h Speed tests. The district court found that taking O s b o r ne’s deposition “knowing that Mr. Osborne was operating under incorrect assumptions and an incomplete record

, ” could only have been done “to delay production o f the t e sts in hopes o f g aining a tactical advantag e.”

Goody ear finally

produced the Hig h Speed tests on J u ne 21, 2007, ag ain r epresenting that the prod u c t i on was in
response to the Third Request, when these tests were actually responsive to the F irst Request.

On September 1 3
, 2 007, Richard Olsen (Olsen), Goody ear’s Rul e 3 0(b)(6) witness, testified during a deposition that while additional tests had been undertaken to determine if Goody e ar could justify a speed r a t i n g of the G159 tire at 75 mph, none o f t h ese additional tests was available. Such tests were cle a rly in addition to the Hig h Speed tests that had been turned over to the Haeg ers. Shortly after Olsen’s de p o sition, on October 19, 2007, Hancock assured the court that there we r e n o o t her tests in ex istence bey ond those already produced to the Haeg ers. Despi t e the Haeg ers’ demands f

or p roduction, during pre-trial discovery

,H A E G E R V

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Goody ear disclosed o nly the FM V S S 1 19 DOT tests and the Hig h Speed tests.

On A pril 14, 2010, the first day of trial, the Haeg ers a nd Goody ear informed the court that they had r e a ch e d a settlement, and the court c losed t h e case. B ased on the information derived f

r o m the results of at least o ne of the Other G 159 Cases (discussed below), without having the relevant information in their possession d ue to the Sanctionees’ deceit, the Haeg ers a p parently settled for a small fraction of what they

mig ht otherwise have done.

Some time after the case had settled, Kurtz saw an article stating that Goody ear had produced internal h e a t and speed testing in a separate case involving the G1 5 9 tire, and he realiz e d that Goody ear had withheld evidence it was r equired
to produce d

uring discovery

. Kurtz f i l e d a motion for sanctions o n May 3 1, 2011. The motion for sanctions a rg u ed that Goody ear had eng a g ed in discovery fraud b y “knowing ly conceal[ ing ] c rucial ‘internal heat test’ r ecords related to the defective desig n of the G159.” Goody ear’s opposition to the motion arg ued that it “never represe n t ed that the DOT test data comprised the totality of testing with reg ard to the G159 tire.” Goody ear further arg ued:

N o r did Goody ear ever state or imply that it would produce “all t es t records for the G159 tires” or identify all tests per f o r m e d on the G159 ti r e s as soug ht in p laintiffs’ initial d i s c o v e r y requests. Rather, Goody ear o b j e c t e d
to these r equests a

nd stated precisely w hich
t e s t r e c o r d s i t a g r e e d t o p r o d u c e , unambig uously indicating that i t w o uld not produce a ll

test data.H A E G E R V

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This arg u ment came as a surprise to the district court and it admitted that it “was under the impression that Goody e ar h ad produced all

test data relevant to Plaintiffs’ claims.”

On October 5, 2 0 1 1
, finding that there were “serious questions reg arding [ G oody ear’s] conduct in this case,” the district c ourt ordered Goody ear to produce “the test results at issue.” Goody e ar produced the Heat Rise tests, but d i d n ot mention any

additional tests.

On F ebruary 24, 2012, the district c ourt issued a proposed order sanctioning Goody ear base d on G oody ear’s failure to produce the H eat Rise tests and the r epeated representations made b y H ancock to the district c o u r t that all responsive documents had been produced. The d istrict court’s proposed order c oncluded that the H eat Rise t e s t s should h ave been produced in response to the F irst Request. I n responding to this proposed order, Goody e ar, apparentl y by accident

, disclosed the e x istence of additional G159 tests – the crown durability

, bead durability

, and DOT e n d urance tests

– none of which had b een mentioned or produced in the litig ation. The court a lso discovered th at Olsen, Goody ear’s Rule 30(b)(6) witness, knew about, b ut failed to mention, these additional tests at h is deposition. T he district court held that these tests should a lso h ave been produced a s responsive to the Haeg ers’ F irst Request.

The district court held an evide n tiary hearing on March 22, 2012, at which both Musnu f f a n d Hancock testified that they had n ot knowing ly eng a g ed in discovery f raud. The distri ct c ourt found their testimonies to be untruthful a nd unreliable, and held that “Mr. Hancock, Mr. Musnuff, a nd Go o d y ear eng ag ed in repeated and deliberate attempts to frustrate the resolution of this case on the merits.”H A E G E R V

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I n its Order, the district court reviewed Goody ear’s discovery r esponses in certain other G159 tire failure actions (collectively the Other G159 Cases) ag ainst Goody ear in order to compare what the Sanctionees knew, and when they knew it, w ith r eg ards to th e G 1 5 9 tests. 2 I n W oods v

. Goodyear

, No. CV 0 4-45 ( Circuit Court of Ha l e County
, Alabama), in Aug u s t 2007, a G oody ear employ ee informed Musnuff that in a d d ition to the Hig h Speed tests, the tests

us e d t o d etermine the suitability of the G159 to be driven at 65 mph included F MVSS119 DOT tests, Heat Rise tests, bead durability tests, crown durability tests, W 16 tests, W64 tests, G09 tests, and L 04 tests. I n Sc halmo v. Goodyear

, N o. 51- 2006-CA-2064-W S ( F la. Cir. Ct., 6 th Cir., Pasco County ), in April 2008, Musnu f

f and G oody ear produced the Heat Rise
tests in response to a request to produce tests associated with speed rating

. Musnuff wrote an e m ai l in May 2009 stating that the Schalmo plaintiffs “hig hlig hted the Heat Rise testing taken during the durability testing of the G1 5 9

. ” T h is case ended in a p laintiff’s verdict of $5.6 mil l i o n

. Finally

, in Bogaert v. Goodyear

, N o

. C V 2005-051486 (Sup. Ct. o f Maricopa County
, Ariz ona), in response to an o rder from the
court to produce testing o f the G159 t i r e’s suitability at 65 mph, Musnuff e mailed H ancock in J u ne 2008 stating that the whole su itability testing packag e included: (1) the

ex tended DOT tests, (2) the Heat Rise tests, ( 3 ) t h e bead durability tests, a nd (4) the crown durability tests. As in this
case, in e ach of the Other G159 Cases, Goody ear eng ag e d in leng thy discovery b attles with t h e plaintiffs before it produced the requested documents. W o ods and Bogaert were

2 T h e d i s trict co u rt co n sid ered H an co ck

, Mu sn u f f

, an d G o o d y ear’ s

co n d u ct in th e O th er G1 5 9 Cases f o r th e p u rp ose o f assessin g cred ib ility

, an d d eterm in in g th e acto rs’ state of m in d

. It ex p ressly did n o t b ase its

san ctio n s o n

th e San ctio n ees’ co n du ct in th e Oth er G1 5 9 Cases.H A E G E R V

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ultimately settled, but the a mount of the settlements is either held under seal, or not reflected in the record of those cases. As stated above, presumably with the benefit of the Heat Rise tests, Schalmo y ielded a $5.6 million verdict to the plaintiffs.

The d istri c t court considered each of the Sanctionees’ conduct in the Other G159 Cases in lig ht of their conduct in the present case, and co n cluded that “Goody ear and its counsel took positions in o ther G159 cases directly contrary t o t h e positions they now ask this Court to accept. T h e positio n s taken in these other c a ses, when Goody ear and its counsel w ere not attempting to avoid sanctions, are reliable.”

The district cour t concluded that sanctions under 28 U.S.C. § 1927 could not r e a ch Goody ear’s conduct, a nd that sanctions pursuant to Rule 1 1 w ere unavailable as they should be imposed before a case i s closed. A c cording ly

, rely ing upon its inherent power, the d istrict court determined that the most appropriate sanction for “ r e m e d y ing a y earslong course of misconduct” w ould be “to award Plaintiffs all of the attorney s’ fees and costs they incurred after Goody e ar served its sup plemental responses to Plaintiffs’ F irst Request

. ” The district court held that the supplemental
responses, in which Goody ear only produced the F MVSS119 DOT tests, “was the first definitive proof that G oody ear was not g oing to c o operate in the litig ation process.” The court also noted that while it would be impossible to determine h ow the litig a t i on would have proceeded if Goody ear had made the proper d i s c l o sures, the case more likely than not would have settled much earlier, and the Haeg ers b e l i e ve, for considerably

more money

.

The d istrict court then conducted an ex haustive analy sis of the d ocumentation submitted by Plaintiffs concerning theH A E G E R V

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time entries of its attorney s a f ter Goody ear served its supplemental r esponses to Plaintiffs’ F irst Request, a nd the

ex tensive o bjections made by Goody ear and its c o u n s el to these time e ntries. The district c ourt “spent considerable time reviewing each time entry and its a ssociated objections in an attempt to ensure the appropriate siz e of the award,” and with painstaking attention to d etail, made adjustments b a s e d on Goody ear’ s o b

j e c t i o n s

. U l t i mately

, using the lodestar method, the d istrict court found that the Haeg ers should be reimbursed $2,741,201.16 in attorney s’ fees and costs. The district court de t e r mined that Hancock would be responsible for twenty percent of these fees and costs “[ b] ased o n hi s r e l atively limited involvement, but in lig ht of his repeated

m isstatements and his failure to c orrect the record once h e learned h is represe n t a tions w ere false.” Musnuff a nd Goody ear were held jointly res p o nsible for the remaining eig hty percent of the fees and costs.

The district court also ordered G oody ear “to file a copy o f this Order in any G159 case initiated after the date of this Order,” with a footnote indicating that “Goody ear may a pply
to the court hearing the cas e to be ex cused from this requirement.” The district c o urt concluded that such filing s

were n ecessary based on Goody ear’s history o f eng ag ing in discovery misconduct during every G159 case that had been broug ht to t h e c o u r

t’s attention. The court reasoned that b y filing the Order in future G159 cases, Goody ear would “alert plaintiffs and the courts” that it h as n o t a cted “in g ood faith in the past when litig ating such cases,” and g ive notice of the
tests Goody ear had “attempted to conceal in previous cases.”H A E G E R V

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STANDARD OF REVIEW AND JURISDICTION

“The district court’s award of sanctions and the amount of the award are reviewed for abuse of discretion.” B.K.B. v. Mau i Police Dep’t
, 276 F .3d 1091, 1108 (9th Cir. 2 002) (citing Chambers v. NASCO

, I nc. , 5 01 U.S. 3 2
, 55 (1991)). Since imposing a sanction under its inherent author i t y “ i s within the sound discretion o f the dis t r i c t court, we will not overturn its d ecision unless the c our t c o m m itted an error o f law or the court’s f

a c tual determinations were clearly erroneous.” Las a r v. Ford Motor Co.
, 399 F .3d 1101, 1109 (9th Cir. 2005).

W e need not resolve whether a bad faith finding must be supported by clear and c onv i n c i n g evidence, or whether a lesser quantum of e v idence suffices, because the district court did not abuse its discretion in finding clear and convinc i n g evidence of bad faith by the Sanctionees i n this case. See Lahiri v

. Universal Music and Video Distrib. Corp.
, 606 F .3d 1216, 1219 (9th Cir. 2010).

W e have jurisdiction over the Sa n c t i onees’ appeals pursuant to 28 U.S.C. § 1291.

D ISCUSSION

I. The District Court’s Inherent P ow er

“I t has long been understood that [ c] ertain implied powers must necessarily result to our Courts of justice from the nature of their institution, power which cannot be dispensed with in a Court, because they are necessary to the ex ercise o f all others.” Chambers v. NASCO, Inc.
, 501 U.S. 32, 4 3 (1991) (internal citations and quotation marks omitted). TheH A E G E R V

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Supreme Court has specifically r e c og n iz ed that the “inherent
p ower of a federal court to investig ate whether a judg me n t

was obtained by fraud, is bey o nd question.” U niversal Oil Prods. Co. v. Root Refi ning Co

. , 328 U.S. 575, 580 (1946) (citing Hazel-Atlas Glass Co. v

. H a r t f o rd Empire Co.
, 332 U.S. 238 (1944)).

This inherent power is not limited by overlapping statutes

or rules. The Supreme Court ex plained “that the inherent
power of a court can b e invoked even if procedural rules ex ist which sanction the same conduct.” Chambers

, 501 U.S. at 49. Thus, the Sanctionees’ arg ument that the district court should have relied on F ederal Rule of Civil Produce 37 fails. 3 W hile

3 Ru l e 3 7 p ro v id es th at “[ o ] n no t i c e to o th er p arties an d all af f ected
p erso n s , a p arty m ay m o v e f o r a n o rd er co m

p ellin g d i sclo su

re or d isco v ery

. T h e m o tio n m

u st in clu de a certif

icatio n th at th e m o v an t h as in
g o o d f aith co n f erred o r attem

p ted to co n f

er w i th th e p erso n o r p arty f ailin g to m ak e d i sclo su

re o r d isco v ery in an ef

f o rt to o b tain it w ith ou t co u rt actio n .” If th e p arty f

ails to co m

p ly w ith a co u rt o rd er, Ru le 3 7 p ro v i des th e f o llo w i n g rem ed ies: Ru l e 3 7 (b )(2 )(A ) “ If a party

. . .f ails to o bey an

o rd er to pro v id e o r p e r m it d isco v ery

. . . t h e co u rt w

h ere th e actio n is
p en d i ng m ay issu e f

u rth er j u st o rd ers. T h ey m ay in clu d e th e f o llo w in g : (i) d irectin g th at th e m atters em b raced i n th e o rd er o r o th er d esig n ated f acts b e tak en as estab lish ed f o r p u rp o ses o f

th e actio n , as th e p rev ailin g p arty claim s; (ii) p ro hi b itin g th e d iso bed ien t party f ro m su pp o rtin g or

o p p o sin g d esig n ated claim s o r d ef en s e s , o r f

ro m in tro d u cin g d esig n ated

m atters i n ev i d en ce; (iii) strik in g p l ead in g s in w h o le o r in p art; (iv ) s tay in g f u rth er p ro ceed in g s u n til th e o rd er is o b ey ed ; (v ) d ism issin g t h e actio n or p ro ceed in g in w

h o le o r in p art; (v i) ren d erin g a d ef au l t j u d g m en t ag ain st th e d iso b ed ien t party ; o r (v ii) treatin g as co n tem p t o f co u rt th e f

ailu re to

o b ey an y o rd er ex cep t an o rd er to s u b m i t t o a p h y sical or m en t al

ex am in atio n ”; Ru le 3 7 (b )(2 )(C) “ In stead o f o r in ad d i t i o n t o th e ord ers ab o v e, th e c o u rt m

u st ord er t

h e d i so b ed ien t p arty , th e atto rn ey ad v isin g th at p arty , or b o th to pay th e re a s o n ab le ex p en ses, in clu d in g atto rn ey ’ s f ees, cau sed by th e f

ailu re, u n less th e f

ailu re w as su

b stan tially j u s tif

ied or

o th er circu m stan ces m ak e an aw ard o f ex p en ses u

n j u st.”H A E G E R V

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Rule 37 also provides a method to sanction a party f or failing
to comply with discovery rules, it is not the ex clusive means for a dd r essing the adequacy of a discovery response. See id.

The Sanctionees also arg

ue that the court cannot impose sanctions in this case because the Haeg ers failed to m o v e to compel disclosure or discovery under Rule 37, a nd t h u s t h e Sanctionees never violated a district c our t o r der compelling disclosure or d iscovery

. More specifically

, the Sanctionees contend that abs e n t s u c h a motion to compel or order requiring production, Goody e a r a n d i t s c o unsel complied with discovery rules, and thus the district court d o e s not have
power to san c t i o n the Sanctionees’ c onduct. The Supreme Court h as ex pressly rejected this arg ument. “[ N] either is a federal court forbidden to s an ction bad-faith conduct b y

means of the inherent power simply because that conduct could also be sanctioned under the statute or the Rules . . . if in the informed discretion of the court, neither the statute nor t he Rules a

re up to the task, the court may safely rely o n its inherent power.” Id

. at 50. W e hold that i t w a s n o t an abuse of d iscretion for the district court to rely on its inherent power to sanction the conduct at issue in this case, and to determine tha t R u l e 3 7 did not provide the appropriate remedy

, especially since the discovery fraud w as not discovered until after the case had settled.

Ad d i t i o n ally

, if a p arty f ails to d isclo se or su

p p lem en t an earlier
resp on s e, Ru le 3 7 (c)(1 ) states: “ If a party f ails to p ro v id e in f

o rm atio n

. . . th e p arty is n o t allo w ed t o u s e th at in f o rm atio n

. . . to su

p p ly ev id en ce on

a m o tio n , at a h earin g , o r at a trial, u n less th e f ailu re w as su

bsta n tially j u stif i ed o r i s h arm less. In ad d itio n to o r in stead o f th is san ctio n , t h e co u rt,

o n m o t i o n an d af

ter g iv i n g an o p p o rtu n ity to b e h eard : (A ) m ay o rd er p ay m en t o f th e reaso n ab le ex p en ses, in clu d in g atto rn ey ’ s f ees, cau sed b y th e f ailu re; (B ) m ay in f

o rm th e j u ry o f t

h e p arty ’ s f

ailu r e ; an d (C) m ay im p o s e o th er ap p ro p riate san ctio n s . . . .”H A E G E R V

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A. Bad F aith

B e fore awarding sanctions pursuant to its inherent power, “the court must make an ex pr e s s finding that the sanctioned
par t y ’s behavior ‘constituted or was tantamount to b ad faith.’” Leon v. I

DX Sys. Corp. , 464 F .3d 951, 961 (9th Cir. 2006). We h ave found bad faith in a variety o f conduct stemming f

rom “a full rang e of litig ation abuses.” Chambers

, 501 U.S. a t 47. F or ex ample “[ a] party ‘demonstrates b ad faith by delay

ing or disrupting the litig ation

. . . .’ Primus Auto. Fin. Servs., Inc. v. B atarse , 115 F

. 3d 644, 648 (9th Cir. 1997).” Leon
, 464 F .3d at 961 ( p l a intiff demonstrated b ad faith by g oing to ex traordinary measures to destroy evidence).

Actions constituting a fraud upon the court or actions that

cause “the very temple of justice [ to be] defiled” are also sufficient to support a bad f aith f inding

. Chambers

, 501 U.S.
at 46. F or ex ample, in Pumphrey v. K.W

. Thomp s o n Tool Company
, the decedent’s family broug ht a w r o n gf ul death action ag ainst a g un manufacturer after the decedent dropped the manufacturer’s g u n with the safet y devices eng ag ed a nd it fired, k illing the decedent. 62 F .3d 1128, 1130 (9th Cir. 1995). During trial, t he manufacturer introduced tests showing that when the g un was dropped

, the safeties performed a s desig ned and the g un never fired. Id

. After the trial concluded, Plain t i f fs’ attorney learned that in a subsequ e n t , u

n r e l a t ed lawsuit, the manufacturer had produced
tests during which the g un had fired w hen dropped. Id

. These
tests had not been produced during Plaintiffs’ litig a tion even thoug h they were available two months befo r e trial, a nd despite the manufacturer’s assurance that g un tests would be made availab l e u p o n their discovery

. Id

. at 1131. The

m a nufacturer also affirmatively mischaracteriz ed the nature of these tests during later discovery

, and introduced testimonyH A E G E R V

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during trial that it had never seen the g un fire when dropped. Id

. at 1132. Plaintiffs moved to set aside the tria l v e r d ict, pursuant to F ederal Ru l e of Civil Procedure 60(b). Id

. at 1130. W e u

pheld the dis t r i c t c o urt’s g rant of a n ew trial finding that the manufac t u r e r had “eng ag ed in a scheme to defraud the jury

, the court, and [ the Plaintiffs]

, throu gh the

use of misleading

, inaccurate, and incomplete respo n ses to discovery requests, the presentation of fr audulent evidence, and the failure to correct the false impressions created . . . .” Id

. at 1132. W e further held that the “end result of the scheme

wa s t o u ndermine the judicial process, which amounts to fraud u pon the court.” Id

. (citing Hazel-Atlas Glass Co. v

. H a rtford Empire Co.
, 332 U.S. 238, 245–46, 250 (1944) (deliberately planned scheme to present fraudulent evidence constitutes fraud upo n t h e c o urt); Abatti v. C.I.R.
, 8 59 F .2d 115, 118 (9th Cir. 1988) ( f r au d upon the court involves unconscionable plan or scheme to influenc e the court improperly

) ). W hile the procedural posture of Pumphrey differs from the one in this c ase, the similarities with this case support the conclusion that the district court did not abuse its discretion in concluding that Sanctio n ees eng ag ed in fraud
up o n the court in their scheme to avoid their discovery oblig ations.

I n B.K.B. v. Maui Police Department
, we f ound “counsel’s reckless and knowing conduct” to b e “ tantamount to bad faith and therefore sanctionable under t h e c o urt’s inhere n t p ower.” 276 F .3d 1091, 1108 (9th Cir. 2 002) (emphasis in orig inal). B.K.B. was a sex ual harassment su i t , in which defense counsel introduced testimony in violation o fH A E G E R V

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F ederal Rule of Evidence 4 12. 4 Defense counsel introduced this testimony after two Rule 412 pre-trial motions had been denied, and after he assured the district judg e in a sidebar that th e anticipated testimony would not violate Rule 4 12. Id

. at 1107. W e concluded that “defense counsel’s introduction o f [ the] testimony w as a knowing a n d intentional violat i o n o f Rul e 4 1 2 ” and further held that “[ i] f left unsanctioned, defense c ounsel’s behavior in this case w ould u ndermine the
very purpose and force of Rule 412’s strictures.” Id

. at 1108. I n this case , t he district c o u rt did not abuse its discretion in concluding that the Sanctio n e e s ’ f ailure to produce relevant documents d espite t h e ir affirmative oblig ations to do so pursuant to Rules 26 and 34, and their misrepresentations in

numerous d i scovery disputes (which the district court estimated took “approx imately six teen hours in court”), was
tantamount to bad faith. The Sancti o n ees’ conduct in this
matter u ndermines the v ery purpose o f the federal rules requiring disclosure of relevant and responsive documents.

I t is clear the district court did not abuse its discretion in

c o n cluding that Hancock, Musnuff, and Goody ear acted i n bad faith in this litig ation. T h e Sanctio n e e s , throug hout

numerous d iscovery dispute filing s an d hearing s, convinced the district court that G oo d y ear h ad produced all test data relevant to the Haeg ers’ claims. The district court noted that “[ i] n fact, at various points th e C o u rt became ex asperated with Plaintiffs’ apparently unsubstantiated claims that additional information must ex ist.” I t was not u ntil the

4 Ru le 4 12 : “ (a) P ro h ib ited Uses. T h e f o llo w in g e v i d e n c e i s n o t ad m i ssib le in a civ il o r crim in al p ro ceed in g in v o lv in g alleg ed sex u al

m isco n d u ct: (1 ) ev id en ce o f f ered to p ro v e th at a v ictim en g ag ed in o th er

sex u al beh av io r; o r (2 ) ev id en ce o f f ered to p ro v e a v ictim ’ s sex u al
p red isp o sitio n .”H A E G E R V

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sanctions proceeding s that the district court realiz ed that the Sanctionees had

adopted a p lan of making discovery a s d i fficult as possible, providing only thos e documents they wished to p rovide, timing the production of t h e small subset of documents they were willing to turn over such that it was inordinately

difficult for Plaintiffs to manag e their case, a

nd making false statements to the Court in an attempt to hide their behavior.

The Haeg ers served their F irst Request in Septe m ber 2006. The Sanctionees merely objected to thi s request, a nd did not produce any documents. The S an ctionees then filed supplemental responses in N o v e m ber 2006, which included the production of o nly one g roup of tests – the F MVSS119 D O T t ests. I t was not an abuse of discretion for the district
court to find that production of just one g roup of tests meant that the Sanctionees had failed to search properly for relevant G159 tests in response to the Haeg ers’ F irst Request, a nd h ad done so in bad faith.

The Sanctionees then failed to disclose promptly relevant G159 tests after a proper search h a d been conducted. Musnuff and Hancock had the Hig h Speed tests in their possession at the latest in F ebruary 2007, y et failed to disclose promptly the Hig h Speed tests to the Haeg ers. I nstead, the S a n c t i o nees chose to depose the Haeg ers’ ex pert in May 2007, a n d t h e n produce the Hig h Speed tests in J une 2007. Musnuff w as nex t

aware of more tests

– including the H eat Rise tests, DOT endurance tests, crown durability tests, a nd b e ad durability
tests — at least by Aug ust 2007, and H ancock was a ware of these same tests a t l e as t b y J une 2008. H owever, theH A E G E R V

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Sanctionees ag ain failed to disclose p roperly these tests upon their discovery

. W ithout p roducing any of these additional tests, Goody ear settled with the Haeg ers in April 2010.

T he d istrict court concluded that the Sanctionees sho u l d have turned over the Hig h Speed tests, Heat Rise tests, DOT endurance tests, crown durability tests, and be ad durability
tests as soon as they w ere discovered, as t h ey were all responsive to t h e First Request. The district court d id not abuse its di scretion in concluding that this decision to withhold documents “w a s a bad f aith attempt to h ide responsive documents,” which w ould n o t have been uncovered but for the sanctions proceeding s. This finding o f bad faith is b olstered by

Hancock’s repeated representations
to the d istrict court that Goody ear w as com p l y i ng with all discovery requests when in f act, G o o d y ear was withholding relevant and responsive documents.

Any a ttempt by Goody ear to arg u e that t h e d i s trict court abused its discretion in preventing Goody ear from passing the blame on to its attorney s is unavailing

. Goody ear “is deemed bound by the acts of [ its lawy er s ] a n d is considered to have ‘notice of all facts, noti c e of which c an be charg ed upon the attorney .’” Link v. W

abash R. Co.
, 370 U .S. 626, 634 ( 1 962);

see also Lockary v. Kayfetz

, 974 F .2d 1166, 1169–70 (9th Cir. 1992). Additionally

, the district court did n o t a b u se its discret i o n in concluding that Goody ear participated directly in the discovery fraud: Goody ear’s Rule 30(b)(6 ) witness, authoriz ed to testify on Goody ear’s behalf, f alsely testified during deposition that n o a dditional tests w ere a v ai l a ble bey ond the Hig h Speed tests that had been turned over to the Haeg ers; and Goody ear’s in

- h o u se c o unsel, Okey

, maintained responsibility for reviewing and approving all the incomplete and misleading discovery responses.H A E G E R V

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W e h old that it w as not an ab use of discretion for the district court to fin d t h a t H ancock, Musnuff and Goody e ar each acted in bad faith.

B. Monetary Sanctions

Once a district court makes a finding of bad f ai t h, it has the discretion to “award sanctions in the f o r m of attorney s’ fees ag ainst a party or counsel.’” Leon v. IDX Sy s

. Corp.
, 464 F .3d 951, 9 61 (9th Cir. 2006) (quoting P rimus Auto. Fin. Servs., Inc. v. Batarse
, 1 15 F

. 3d 644, 648 (9th Cir. 1997)). “A
pr i m ary aspect of that discretion is the ability to fashion an appropriate sanction for conduct which abuses t h e judicial
process .” Chambers v. NASCO

, 501 U.S. 32, 44–45 (1991).

I n its analy sis of sanctions, the district c ourt no ted that due to t he ex tent o f the bad faith of the Sanctionees in this
case, had the misconduct “come to lig ht w h i l e the case was ong oing

, entry of default judg ment with a trial on damag e s would have been the obvious solution.” H owever, since the

case w as settled an d c l o sed b efore the misconduct was discovered, the court instead was faced with the t a s k o f determining the appropriate amount of sanctions to make the Plaintiffs whole in the form o f attorney s’ fees a nd costs. The
court f ound that the Sanctionees had eng a g ed in a “y e ars-long

course of misconduct,” which had made it difficult for the
court to “separate the fees incurred due to leg itimate activity from the fees and costs incurred due to Goody ear’s refusal to abide by cle ar and simple d iscovery oblig ations.” The court

ex p lained that “if Goody ear had responded to Plaintiffs’ F irst Request with all responsive documents, G oody ear mig ht have decided to settle the c a s e immediately ,” and thus it was possible to “ conc l u d e practically all o f Plaintiffs’ fees a nd
costs were due to misconduct.” The district court concludedH A E G E R V

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t hat “[ w] hile there is some uncertainty how the litig atio n would have p r o ceeded if Goody e ar and its attorney s were acting in g ood faith, based on Goody ear’s pattern and practice in G159 cases, the cas e m ore likely than n ot would have settled much earlier.” Thus the district court was informed in
p art by past settlement practices of Goody ear in the O t h e r G159 Cases in reachi ng its determination concerning appropriate compensatory d amag es in this case. The district
court then determined, r ely ing upon the reasoning in Chambers

, that while “ [ i] t is difficult to reconcile Chambers with

. . . M

i l l er ,” “the most a

p p ropriate sanction is to award Plaintiffs all of the attorney s’ fees and c o sts they incurred after Goody ear served its supplemental responses to Plaintiffs’ F irst Request” as this “was the first definitive proof that Goody ear was not g oing to cooperate in the litig ation process.” The district c our t held that “in these unique

c i r c umstances, it is inappropriate to limit the award to t h e fees and costs that could be directly linked to the misconduct; proving that linkag e is an almost impossible task g iven how the misconduct permeated the entirety of this case.”

The Sanctionees claim that this determination was made in error because sanctions must b e directly linked to damag e caused by its bad fa i th conduct, citing M iller v. City of Los Angeles

, 6 61 F .3d 1024, 1029 (9th Cir. 2011). The Sanctionees’ confidence in Miller is misplaced, for at least
two reasons: (1) to the deg ree Miller can be read to require that the specific amount of attorney s’ fees and costs awarded when a court invokes its inherent powers must be d i r e c t ly linked to the bad faith conduct, it flouts controlling United States Supreme Court case law; a n d (2) under Chambers

, the district court did a ll it was required to d o in this case in determining the appropriate amount of f ees to award a sH A E G E R V

. G O O D Y E A R T I R E & R U B B E R C O

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sanctions to compensate the Plaintiff s for the damag es they suffered as a result of Sanctionees’ bad faith.

The panel majority ’s openi n g p arag raph in Miller characteriz ed the case as follows: “This is a strang e case. I ts resolution hing es on the a b sence, as a factual matter, o f

s o m et h ing we must accept as a leg al matter. There ar e unlikely to be many more like it, s o t his opinion’s precedential value is p robably limited.” Id. at 1026. W h at was missing ? The answer: b ad faith, an essential requirement for invokin g t h e district court’s inherent powers. Miller w as a wrong ful death suit broug h t a g ainst the City of L os Ang eles, its police department, police chief, a nd a serg eant who shot and killed the decedent. The district court “issued an in limine order precluding defendants from arg uing th a t t h e decedent

was armed when he was shot.” Id. at 1026. The district court found that during the trial’s sum mation, defense counsel violated its in limine order by stating that b efore d e cedent

was shot, d e cedent had shot another man, a nd awarded sanctions u nder its inherent power for the enti r e c o s t of the trial after the jury hung

. Counsel conceded that he h ad violated the court’s order, and even apolog iz ed for his error, but the district court neverth e l e s s c o n s t r ued counsel’s conduct

as “tantamount to b ad faith,” g ranted plaintiffs’ motion for sanctions, and sanctioned d efenda n t s $63,687.50. I d

. There

was just one problem. A careful review of the record showed that counsel hadn’ t actually violated the court’s in limine order, despite his confession that he had d one so. That put the majority o f our panel into a quandary

. What shou ld one do about a lawy er who confesses a non-ex istent error? I n this
case, the panel majority concluded that it was bound by what the l awy er had confessed, but that since the lawy er had not conceded bad faith, and c learly had n ot actually violated the court’s order, there cou l d b e no finding of bad f aith. PutH A E G E R V

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another way , “y ou can’t have a bad f aith violation without a violation.” Id. at 1029. The c ase was over, since a district
court c annot use its inherent power to sanction a party without a finding of bad faith.

B u t even the subsequent analy sis in M iller is of little h elp
to the Sanctionees here. Miller addressed whether the district
court linked the alleg ed bad faith conduct to the harm suffered, i.e, whether the district court found that the attorney ’s alleg ed statement c a u sed the jury to hang

. The panel concluded that “without a fin d i n g that [ defense counsel’s violation] caused the first jury to hang , the district
court had no power to o rder defendants to compens ate plaintiffs for the attorney s’ fees and costs t h e y s p e n t on the first trial.” I

d

. T hus, while Miller sug g es t s that harm is
necessary to compensate a party , Miller makes no holding on the measure of attorney s’ fees allowed once it is clear that the bad faith of a party has a ctually ca u s e d h a r m. 5 I n this c ase, however, there is no doubt that the San c t i o nees’ bad faith conduct caused sig nificant h arm in forc ing the Haeg ers to eng ag e in sham litig a tion, and in their likel y f o reg oing millions of dollars in the settlement they accepted u nder false pretenses of the Sanctionees, as f ound by the district court in lig ht of Goody ear’s conduct in the Other G159 Cases.

5 I n re D y er , 3 2 2 F. 3 d 1 1 7 8 (9 th Cir. 2 0 0 3), also cited b y th e p an el

, in v o lv ed th e v io l atio n of an au to m atic s tay in b an k ru p tcy , an d a p u rp orted

san ctio n s aw ard b ased o n t h e b an k ru p tcy co u rt’ s statu to ry co n tem p t p o w er, g ran t ed by 1 1 U.S.C. § 1 05 (a). O u r p an el f o u n d t h at a b an k

ru p tcy

co u r t h a s n o au th o rity to im p o se a n on

- co m

p en sato ry “ serio u s pu n itiv e”

san ctio n

. Id

. at 1 1 9 5

. T h is h o ld in g , o f co u rse, h as n o b earin g o n th i s case. B.K.B. v. Ma u i Po lice Dep ’t
, 2 7 6 F. 3 d 1 0 9 1
, 1 1 0 9 (9 th C i r

. 2 0 0 2 ) also ref eren ced b y

th e Miller p an el, is d i scu ssed in fra

.H A E G E R V

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Even thoug h Miller d oes not provide an a nswer, we nex t consider how c l o s e a link is r equired between the harm caused and the compensatory sanctions awarded when a court invokes its inherent power. The question is squarely answered by Chambers v. NASCO, Inc.
, the Supreme Court’s strong e st statement about the use of a court’s inherent p ower. 501 U.S. 32 (1991). I n Chambers

, the Supreme Court upheld a district court’s determination that “full a ttorney ’s f ees were warranted due to the frequency and se v e r i t y of [ the p arty ] ’s abuses of the judicial sy stem.” 5 01 U.S. at 56. The underly ing action in Chambers wa s a s u it by NASCO seeking Chambers’s specific performance of a n ag reement to sell a television station’s fa cilities and b roadcast license to NASCO. Chambers responded to the suit by attempting to put the properties at issue bey ond the re ach of the district court throug h v arious transfers, ig noring the district court’s preliminary injunction, filing meritless m otions a nd pleading s, attempting to conduct depositions in viol a t ion o f the F ederal Rules of Civil Procedure, and e n ga ging in other behavior aimed at frustrating the p ossi b i l i ty o f specific performance. The d istrict court found these actions to be “part of a s o rdid scheme of deliberate misuse o f the judicial
process d e s ig n ed to defeat NASCO’s claim by harassment, repeated and endless delay , mountainous ex pense and waste of financial reso u r ces.” Id

. a t 57 (internal quotation marks omitted).

T h e district court then awarded NASCO a n amou n t “which represented the entire amount o f NASCO’s litig ation
costs paid to its attorney s.” Id

. at 40. The Supreme Court dismissed Chamber s ’s arg ument, which w as v irtually identical to the causation requirement claim the Sanctionees

are making in this c ase, that “the f act that the entire amount

o f fees was awarded means that the District Court failed t oH A E G E R V

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tailor the sanction t o the particular wrong ,” and instead upheld the district c o urt’s conclusion “that full attorney ’s fees

were warranted due t o the frequency and severity o f C h ambers’s abuses o f the judicial sy stem and the resul t i n g need to ensure that such abuses were not repeated.” Id

. a t 57. The Supreme Court further ex plained that it was with i n the district court’s dis c retion to “compensate NASCO b y requiring Chambe rs to pay f or a ll attorney ’s fees.” Id

. The Supreme Court reasoned that the district court “ i mposed sanctions f

or the fraud [ Chambers] perpetrated on the court and the bad faith he display e d toward b oth his adversary a nd the court throug hout the course of litig ation.” Id

. a t 55 ( i n ternal citations and quotation marks omitted). And, such sanctions both “vindicat[ e] judicial authority without resort to the more drastic sanctions available for contempt of court and mak[ e ] the prevailing party whole f or ex penses caused b y his opponent’s obstinacy .” I d

. at 46 (internal citation a nd quotation marks omitted); see also Hutto v. Finney
, 437 U.S. 678, 691 (1978). A s a United States Suprem e C o u r t c ase, Chambers clearly trumps M iller

, to the deg ree Miller ’s dicta conflicts w ith Chambers

, as well a s any other Ninth Circuit

case to the contrary

. Thus, even tho u g h the district court in this case strug g led w ith how to reconcile Miller with Chamber

s , it a ppropriately awarded the Haeg e rs all their attorney s’ fees and costs in prosecuting the action

once the Sanctionees beg an flouting their cle ar d iscovery oblig ations and eng ag ing in frequent and severe abuses of the judicial sy stem.

Given the teaching of Chambe rs , the district court’s finding s and ruling in this c ase reg arding monetary sanctions fully comply with law. F irst, the Supreme Court ex p r essly rejected the linkag e arg u m e n t made by the Sanctionees here when it up h el d the award for full attorney ’s fees “due to theH A E G E R V

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frequency and severity of Chambers’s abuses of the judicial
sy stem and the resulting need to e n sure that such abuses were

n o t repeated.” Chambers

, 501 U.S. at 57. Secondly

, it m a d e clear that we review the dis trict court’s determinations in arriving a t the proper measure of compensatory damag e s for abuse of discretion. Id.

The district court here used the l odestar method to

ca l c ulate the appropriate amount of fees incurred as a result of the Sanctionees’ bad faith, and noted that th i s “method contemplates multiply ing the ‘reasonable hourly rate’ by the number of h ours ‘reasonably ex pended.’ Morales v. City of San Rafael

, 96 F .3d 3 59, 3 63 (9th Cir. 1996).” The district court then went to g reat leng ths in reviewing the “240 pag e s of time entries” submitted b y t h e Haeg ers, and the combination o f objections by Goody ear and i t s a t torney s to “[ a] lmost every time entry ” to e nsure “the appropriate siz e o f the award.” I n a nineteen-pag e order

, the district court addressed each o b

jection made by the Sanct i o n e es to the court’ s proposed award, and made five adjustments b a sed on these objections: 1) “out of an abund a n c e of caution,” the district court imposed a twenty percent reduction of $29,310 for recreation of time e ntries ; 2) the district court held that because some of the time entry descriptions were v ag ue and/or incomplete, it co u l d not conclude that this time was reasonably e x pended absent the appropriate information, a nd reduced the a

ward b y $ 3 2,117; 3) the district court reduced the award b y $ 4 ,880.73, e qualing the costs for which the Haeg ers did not submit supporting d o cuments; 4) the district
court sub t r a c ted $50,721 for time entries involving work o f

a clerical nature; and 5) the district court fo u n d that $25,827.50 should be reduced for ex c ess i v e billing

. Apply ing these adjustment s , the district court awarded the
amount the court reasonably believed it cost the Haeg ers t oH A E G E R V

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litig ate ag ainst a party and a ttorney s d u r ing the time when that party a

nd those attorney s were a cting i n b a d faith. Nothing more is required u nder Chambers or our c a s e law, and, especially g iven t h e g reat care with which the court reviewed the r elevant data d uring its consideration of le g al fees, the court clearly

did not abuse its discretion.

Our d issentin g c olleag ue sug g ests that Chambers ’s control over this case was unde r m ined by International Union, United Mine W

orkers v. Bagwell

, 512 U.S. 821(1994), and our own F.J. Hanshaw Enterprises, Inc. v

. E m e r ald River Development, I

nc ., 244 F

. 3d 1128 (9th Cir. 2001). He also sug g ests that the district court’s sanctions in th i s case

were punitiv e, not compensatory

. W ith due respect, our colleag ue is mistaken on bo th c ounts. Bagwell involved a criminal contempt proceeding stemmi n g out of a protracted labor strike, in which a union w as found to have violated the trial court’s orders hundreds of times, as determined in eig ht separate contempt hearing s. Althoug h the trial c o u r t labeled the over $64 million it levied in fines ag ainst the union “civil and coercive,” Bagwell

, 512 U.S. a t 824, once the union a nd the companies settled their labor dispute, and moved to vacate the contempt fines, the trial judg e refused to do so, d eclaring that they were “pay a b l e i n effect to the public.” Id

. at 825. The Supreme Court appropr iately treated the fines a s punishment f

or “criminal c ontemp t , ” and required courts to provide a dditional protections to the d efendants in such cases. Id

. at 826. However, e v e n t h oug h Chambers h ad been decided only 3 y ears before by the Supreme Court
, B a g well did not even mention Chamber s , l et alone overrule o r disting uish it. Contrary to the facts in this case, the Court noted:H A E G E R V

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[ N] either any party n or any court of the Commonwealth has sug g ested that the challeng ed fines are c o mpen s atory

. At no point did the trial co u r t attempt to calibrate the fines to damag es c a

used by the union’s contumacious activities o r indicate that the fines w ere to compensate the complainant for losses sustained. The nonparty g overnments, in turn, never requested a n y compensation or presented any evidence reg arding their injuries, never moved to intervene in the suit, and nev er actively defended the f ines imposed.

Id . at 834 (internal citation and quotation marks omitted).

F.J. Hanshaw

, also cited by our d i s s e nting colleag ue, is

ex tremely h elpful in confirming the v alidity of the compensatory damag es a

warded in this case. F.J. Hanshaw involved a dispute between two wealthy b r o t h e rs about a partnership dissolution. 244 F .3d at 1 1 32. J ust as a courtappointed receiver was about to r e n der an accounting to the court, o ne of the brothers, F rederick J

. Hanshaw (F J H), alleg edly offered the receiver a bribe of $ 100,000, as well a s future business. Id

. at 1132–33. When the at t e mpted bribe

c a m e to the attention of the district court, the court refer r e d
t he matter to the F B I
, which, after conducting se v e ra l interviews, decided not to proce ed with formal criminal charg es ag ainst F J H. Id

. at 1133. Thereafter, the district court conducted two e videntiary hearing s to dete rmine whether F J H h ad attempted to defraud the court and his brother. Id

. at 1133–34. After weig hing the evidence, the court con c l u d ed that there had been an a ttempt by F J H t o bribe the r e ceiver, and sanctioned F J H and his corporation $ 500,000, pay able toH A E G E R V

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the United States, and imposed a $ 200,000 sanction ag ains t them in f avor of his b r o t h e r , G ordon Hanshaw (GH). Id

. at 1135. Rely ing on Bagwell

, our court found that the $500,000

sa n ction was “clearly punitive and intended to vindicate the court’s a uthority and the integ rity of the judicial process. The sanction was a substantial ‘flat, unconditional fine’; was not intended to compensate [ GH] but rather was made pay able to the United States

. . . .” Id

. at 1138. Since the $ 5 0 0
, 0 00 sanction was found to be punitive in nature, we reversed the district c ourt because F J H and his corporation did n ot receive all the p rocedural protections to which they were entitled. Id

. at 1139–40, 1145.

However, we upheld the district court’s $200,000 sanction in favor of GH, despite F J H’s c ontention that it too

was c riminal in nature and should be vacat e d

. I d

. at 1142, 1145. W e noted that: (a) “[ u] nli k e a punitive sanction, particularly one that is p ay able to t h e go v ernment or the court, a compensatory a

ward pay able to a p a r t y does not place the c o u r t in a prosecutorial role”; (b) “[ w] h en d e t e r mining whether a

nd how much to compensate a par t y , the court sits in the same adjudicatory position it does when it r esolves most disputes. A lthoug h the court h as an institutional inter e st in the matter, the court in essence is resolving a dispute between litig ants: o ne party claims it was wrong ed by the other and w ants to be reimb ursed by the losses it sustained. F or these reasons, when t h e c o u r t is adjudicating a c o mpensatory civil sanction, the traditional procedural protections applic ab l e to civil proceeding s a re sufficien t to satisfy the Constitution’s requirement of d ue process”; (c) in c oncluding that the $200,000 awar d t o GH

was compensatory , we r easoned that “[ t] h e award was pay able to [ GH]

. . . and was meant to offset the ex p enses he incurred because of [F J H ’ s ] m i sconduct. As a result o f theH A E G E R V

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bribe attempt, the entire receivership process was delay ed b y nearly six months and [ G H ] was forced to incur additional attorney fees. The court had before it the billing reports from [ GH’s] attorney s and [ G H] had asked the court for $824,000 i n c o m pensation

. . . . Ex ercising its discretion, the co u r t awarded $200,000 to [ GH] ”; and (d) “[ b] ased u p o n this record, we conclude that the $200,000 award was intended to compensate [ GH] f

o r l o s ses sustained as a result of [ F J H’s] misconduc t a nd is civil in nature.” Id

. at 1142 (citing Chambers , 501 U.S. at 56–58).

J ust li k e t h e district court d id in F.J. Hanshaw in its $200,000 award to GH, the court here responded to a complaint f

iled by the Plaintiffs s ee king d amag es for the Sanctionees’ bad faith

, and awarded as c ompensatory damag es the amount of the attorney s’ fees and c osts it carefully determined the H aeg ers h a d actually incurred l i t ig ating ag a inst the Sanctionees, during the time they were acting in bad faith.

“ [ W ] hether a contempt is civil or criminal turns o n t h e ‘character and purpose’ of the sanction involved,” meaning

a civil sanction is “for the benefit of the complainant,” while

a criminal sanction is “punitive, to vindicate the authority of the court.” Bagwell

, 5 12 U.S. at 827–28 (internal quotations omitt e d )

. A fine is almost alway s civil it if “compensate[ s] the complainant for losses sustained,” Id. at 829 (internal quotations omitted), whereas it is g enerally punitive in nature when it “was not intended to compensa te [ the p arty ] but rather [is] made p ay able to the United States.” F.J. Hanshaw

, 244 F .3d at 1138. O t h e r Ninth Circuit cases affirm these points. I n B.K.B. v. Maui P o l i ce Department
, the district
court found that the sanc t i o nees had acted in bad faith in violating the F ederal Rules o f Evidence while questionin g aH A E G E R V

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witness about the Plaintiff during trial, and awarded “$5,000
to compensat e P l a i n tiff for the pain and suffering caused b y the public e mbarrassme n t resulting from [ the] testimony

. ” 276 F .3d 1 091, 1099 ( 9th Cir. 2002). W e upheld the sanction, holding that “the amount the court imposed reflected i ts assessment of the actual harm incurred by Plaintiff

. . . [ in] emotional and reputational damag e .” Id

. at 1109. B ecause the district court imposed the sanctions for t h e p u r pose o f compensation, they

were within its discretion.

The district co u r t i n Lasar v

. Ford M otor Company imposed monetary sanctions to compensate “for unnecessary costs and attorney ’s fees.” 399 F.3d 1101, 1111 (9th Cir. 2005). I n La sar , the sanctionees’ attorney v iolated pretrial orders during his o pening statement, and th e c ourt g ranted L asar’s motion for mistrial and discharg ed the jury

. Id

. at 1106. The district court then instructed “L asar’s attorney s to prepare an affidavit detailing L asar’s costs and attorney ’s fees incurred over the previous two weeks.” I d

. W hile it is unclear

w h y t h e d istrict court determined that L a sar should be compensated for two weeks of attorney ’ s fees, the sanctions

were upheld as we determined that “[ t] he monetary sanctions imposed

. . . were compensatory in nature because they were desig ned to compensate L asar f o r unnecessary costs a

nd attorney ’ s f

e e s .” Id

. at 1111. Thus, it w as within the district court’s d iscretion to d etermine the time frame in which L asar sustained “losses.”

Collectively

, these cases make clear t h at the sanctions awarded here w ere entirely l awful and a ppropriate. N ot o ne dime w as a

warded to the g overnment or the c ourt. J ust like the d i s trict c ourt in F.J. H anshaw

, the district court here awarded compensatory damag es after th e ag g r ieved party filed s u i t , o r filed a motion, seeking compensation forH A E G E R V

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damag es suffered as a result of the b ad faith of the opposing party

. I n awarding compensatory d a m a ge s, the district court did not act as a prosecutor, but instead allowed the accused and accusing parties t o f i le ex tensive briefs, and h eld

ex tensive hearing s to determine th e t ruth of w hat h ad h a ppened. I t took g reat care in parsing and reducing the attorney fee claims of the Plaintiffs

. The accused were g ranted full d

ue process an d af

forded all the p rotections required in civil sanctions h e a r ing s. W hile the district court had an institutional interest in the proceedings ( j u st like the district court did in F.J. Hanshaw ) , its stated purpose w as to properly compensate the Plaintiffs for d amag es they suffered

as the r esult of the Sanctionees’ fraudulent conduct. I n sum, the district court acted well w ithin its d iscretion in awarding all the attorney s’ fees and costs incurred by the Plaintiffs a fter Goody ear served its supplemental re s p o nses to Plaintiffs’ F irst Request.

C. Non-Monetary Sanction s

The d istrict court also used its inhere n t power to order Goody ear to file a copy of t h e O rd e r in any G159 case initiated after the date of that Or d e r

. The district court reasoned that “[ b] a sed on Goody ear’s history of eng a g ing in serious discovery misconduct in every G159 case broug ht to
t h i s Court’s attention, filing this O rder in future G159 cases will alert plaintiffs and the courts that G oody ear ha s , i n t he past, not operated in g ood faith when litig ating suc h cases.” The district court found that this would “serve as a notice of the ex istence of certain tests Goody ear attempted to conceal in previous cases.” The district court did n ot lim i t this requirement in either time or scope. Goody ear arg ues that this

s anction is too severe as it impacts the fairness of unrelate dH A E G E R V

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proceeding s, and thus should be rever s e d a s a n abuse of the district court’s discretion.

Courts h ave the inherent p o w e r to impose v arious nonmon e t a r y sanctions. See Thompson v

. Hous. Auth. of Los Angeles

, 782 F .2d 829, 831 (9th Cir. 1986) (inherent p o w er includes power to “impose sanctions including

, where appropriate, default or dismissal”); Anheu s e r-Busch, Inc. v

. Natural Beverage Distribs.

, 69 F .3d 337, 348 (9th Cir. 1 995) (dismissal pursuant to inhere n t powers); Hester v. Vision Airlines, Inc.
, 687 F .3d 1162 (9th Cir. 2012) (affirming order striking a nswer an d entering default judg ment). However,

even if a g iven sanction is available, the scope of the sanction

m ust a lso be a

ppropriate. Lewis v. Tel. Emps. Credit Unio n , 87 F .3d 1537, 1558 (9th Cir

. 1 9 9 6 ). A sanction should be “carefully fashioned to deny [ the party ] t h e fruits of its misconduct y et not to interfere w i t h [ t he party ’s future rig hts] .” Id

.

I n Hale v. U

. S

. Trustee
, a bankruptcy court imposed a sanction that r eg ulated future conduct “in response to specific and repeated acts of incompetent a n d irresponsible representation.” 509 F .3d 1139, 1149 ( 9th C i r

. 2 007). The
court found a b a nkruptcy attorney to be “[ u] nable o r unwilling to conform his c o n d u ct to the requirements estab l i s h e d by the Court’s prior decisions a nd ruling

, and to the standards by which all other debtors’ counsel in the District abide.” Id

. at 1145. W e u p h e l d the bankruptcy court’s sanction which required that the attorney “not f ile, nor shall he prepare or cause to be prepared for filing by a debtor,
any bankruptcy petitioner u n l e s s [ the attorney ] sig ns said petition.” I

d

. Additiona l l y , the attorney was directed not to file, nor assist a debtor as counsel in filing

, “any bankruptcy petition unless [ the attorney ] commits to such debtor to meetH A E G E R V

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the ethical and professional oblig ations of a debtor’s attorney and provide the reasonable and necessary services required to properl y re p r e sent a debtor in a bankruptcy case.” Id

. Thus, this chosen sanction reg ulated the attorney ’s practice a n d specific actions that the attorney w as required to take w ith all future c lients. W e held that “[ u ] n der the specific acts of this

cas e, we c annot say that the bankruptcy court abused its inherent power to impose sanctions.” Id . at 1149.

W e are persuaded by the reasoning of Hale

. W e are also persuaded by th e reasoning of G allop v. Cheney

, a Second Circuit case addressing the same issue. 667 F .3d 226 (2d Cir. 2012). The Plaintiff’s claims in Gallop were dismissed b y the district court a s frivolous, and the Second Circuit affirmed the dismissal on appeal. Id

. at 228. The Second Circuit then ordered Plaintiff and her counsel, i n cluding Dennis Cunning ham, to show cause why the Court should not impose sanctions for what it held to be a fr i v o l o u s a ppeal. I n response, Plaintiff moved to “disqualify the three members o f the panel f

rom considering her petition f o r r ehearing a

nd rehearing in banc.” Id

. The Court sanctioned Plaintiff’s

co u nsel for filing a frivolous appeal, and then imposed additio n a l sanctions f

or filing the frivolous motion to disqualify

. Id

. at 230. The Court h eld that “Cunning ham acted in bad faith in demanding the recusal of the three panel members a

nd any like-minded colleag u e s , ” and ordered Cunning ham to “provide notice of the sanctions im p o sed
upon him in this case

. . . to any f e d e r al court in this Circuit before which h e appears or seeks to a ppear” for a period o f
one y e ar. Id

.

The district court here impose d the n on-monetary sanction so that future plaintiffs and courts would be alerted that Goody e ar had previously not operated in g ood faith, a ndH A E G E R V

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so that future plaintiffs would b e aware of the ty pes of G159
tests available. W e ag ree with the district court’s reasoning

, particularly in lig ht of the fact that it is hig hly likely that most future G159 litig ation wil l b e f iled in state courts ( see, e.g. , the Other G 159 Cases), a n d s t ate court counsel will not necessarily investig ate what mig ht be contained in the F ederal Reporter a

bout the conduct of G oody e ar and its counsel. W e note also that t he district court provided a form of safety valve in its non-monetary sanctions because “Goody ear may apply to the court hearing the case to be ex cused from [ the requirements of the Order] .”

W e find that the district court’s imposition o f n o n

monetary sanctions ag ainst Goody ear is balanced, is narrowly tailored, and imposes no sanctions bey ond what is necessary to remedy what the district court properly p e rceived as an ong oing problem in Goody ear’s G159 litig ation. The district
court did not abuse its discretion in imposing n on-monetary sanctions on Goody ear.

CONCLUSION

F or the r e a s o n s noted in this opinion, we hold that the district c ou r t d i d not a b use its discretion in imposing

sa n c t i o ns in the sum of $548,240 ag a inst Hancock, a nd $2,192,961 jointly ag ainst Musnuff a n d Goody e ar. The district also did not abuse it d i s c re t ion in imposing nonmonetary sanctions ag a inst Goody ear.H A E G E R V

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W e affirm the monetary and non-monetary sanctions set forth in the district court’s Order.

The Sanctionees shall bear all costs in this appeal.

AF F IRMED.

W A TF ORD, Circuit J udg e, dissenting :

Goody e a r a nd its lawy ers were accused in this case o f perpetrating a fraud o n t h e H aeg ers and the court. I f sustained, those charg es could o f course severely damag e the professional reputations o f the lawy ers involved. The district
court according ly a

p p r oached the task o f determining whether the charg es were true with g reat thoroug hness and care. After

c onducting a leng thy evidentiary hearing and reviewing multiple rounds of briefing

, the court concluded that Goody ear a

nd its lawy ers a cted in bad faith when they failed
to produce test results that were responsive to the H a eg ers’ document requests. I ag r ee with the majority that the district court’s misconduct finding s are supported by the record, but I nevertheless conclude that the $2.7 million sanctions award must be vacated.

The district court’s finding of bad faith auth o r i z e d it to levy sanctions under its inherent power. Chambers v

. NASCO, Inc.
, 501 U .S. 32, 50 (1991). Those sanctions could have taken one of two forms: punitive sanct i o n s , which a re criminal in nature and intended to vindicate t h e authority o f the c ourt; or compensatory sanctions, w hich are civil in
nature and desig n e d t o compensate the injured party for losses sustained a s a result of the misconduct. Miller v. CityH A E G E R V

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of Los A ngeles

, 661 F .3d 1024, 1 0 29–30 (9th Cir. 2011); F.J. Hanshaw Enterprises, Inc. v. Emerald River Development, Inc. , 244 F .3d 1128, 1136–42 (9th Cir. 2001). 1

The d istrict court chose not to impose punitive sanctions. Doing so would have required the court to follow procedures applicable in c rimin al cases, such as appointing an independent p rosecutor, a f fording the accu s e d the rig ht to a jury trial, and demanding proof o f m isconduct bey ond a reasonable doubt. Miller

, 6 61 F .3d a t 1030. Co m p e n satory sanctions, by contrast, may be imposed by the c o u r t a c ting alon e a fter providing a dequate notice and an o pportunity to be heard. Lasar v. Ford Motor Co.
, 399 F .3d 1101, 1110 (9th Cir. 2005). That is the r oute the district court c hose to f ollow here. The question for us is whet h e r t h e court correctly labeled the sanctions compensatory

. I f i t did not—if the sanctions are instead punitive—th e y cannot stand. See Miller

, 661 F

. 3d at 1029–30; F.J. Hansha w , 2 4 4 F .3d at 1141–42.

I n my v i ew, the $2.7 million sanctions award cannot be deemed compensatory

. The aw a r d c ould be c ompensatory only if the record reveals a causal c o n n ection between the misconduct the c ourt f

ound and the amount it awarded. See Miller

, 661 F .3d at 1 029– 3 0

. T h e $2.7 million award
repre s en t s all of the a ttorney ’s f ees incurred by the Haeg ers after Goody ear breached its d iscovery oblig ations, including fees f or the y e ars of litig ation that e nsued before the parties settled on the f

irst day of t r i a l

. T h e court purported to find

1 San ctio n s m ay also b e civ i l i n n atu re if th ey are “ desig n ed to co m p el f u tu re co m p lian ce w ith a co u rt ord er.” In tern a tio n a l Un io n, Un ited Min e W o rkers v. Ba g well

, 5 1 2 U.S. 8 2 1
, 8 2 7 (1 99 4 ). T h e san ctio n s im po s ed h ere co u l d n o t serv e th at f u n ctio n b ecau se th e litig atio n b etw een th e Haeg ers an d Go o d y ear h ad lo n g sin ce en d ed

.H A E G E R V

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the n e cessary causal link b etween the misconduct and the fees awarded on the theory that, if Goody ear had p roduced the test results when it was supposed to , “ t h e c ase more likely than

n o t would h ave settled much earlier.” I do not think t h at finding is supported by

the record.

Our decision in Miller v. City of Los A n geles

, 661 F .3d 1024 (9th Cir. 2011), illustrates the deficiency . I n that case, the district court found that defense c ounsel violated an in limine order by sug g esting during closing arg uments that the decedent was armed when the de f e ndant police officer shot him. Id. at 1026. The trial ended in a hung jury

. The district
court awarded t h e p laintiffs all fees incurred d uring the trial

as a compensatory sanction, presu m a b l y on the theory that defense counsel’s improper c losing arg ument caused the jury
to hang

, thus necessitating a r etrial and rendering all of the fees incurred during the first trial a waste. W e concluded that the award could not be deemed compens a t o ry

. Id. at 1030. The record d id not establish a causal connection between the lawy er’s misconduct and the jury ’s inability to r each a verdict. I t was simply impossible to k n o w , o n t he record compiled in that case, why the jury could not reach a verdict, and the limited e vidence av a i lable sug g ested that it was not because of defense counsel’s improper remarks. I d.

The record in this cas e is similarly devoid of evidence establi s h ing a causal link between Goody ear’s misconduct and the fees awarded. I

t’s any o ne’s g uess how the litig ation would have proceeded if G oody ear had d i sclosed all responsive test results from the start. T he case mi gh t have settle d r i ght away , as the d istrict court assumed, but that

seems unlikely

. The test results did not p rovide conclusive proof that the H aeg ers’ tire failed d ue to its defective desig n. To be sure, the test results were favorable to the Haeg e rs:H A E G E R V

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The results supported the Haeg ers’ theory that Goody ear sold tires that w ere prone to failure when used on motor homes at hig hway speeds, especi al l y in hot driving conditions like
t h ose prevailing at the time of the Haeg ers’ accid e n t i n A r iz ona. B ut even if those test results had been put b ef o r e the jury

, G oody ear sti l l planned to arg ue that the Haeg ers’

own tire, which h ad endured more than 4 0,000 miles of wear and tear, failed because it struck road debris, not because the tire was defective. A nd G oody ear has c o n s istently

m aintained (whether rig htly or wrong ly ) that the test re s u l t s it concealed do not accurately predict tire behav i o r in r ealworld driving conditions.

I f any thing

, it s e e m s m o re plausible to a ssume that the

case wo u l d h a v e proceeded to trial had the test results been timely disclosed. The Hae g ers’ g r ievance is that they accepted a low-ball settlement f rom Goody ea r on the e ve o f trial unde r false pretenses. The c oncealed test results, they contend, would have sig nificantly stren gt h ened their h and. That sug g e sts the Haeg ers would have be en willing to take their case to the jury if Goody ear had refuse d t o increase its of f e r , but it does not sug g est that G oody ear would have thrown in the towel a

nd met the Haeg ers’ demands. I n fact, the only r elevant data point in the record supports the opposite conclusion. I n t h e Schalmo case, o ne of the other
motor home accident suits involving the sa me alleg edly defective tire, Goody ear produced the test results at issue, but the p laintiffs and Goody ear elected to take the case t o trial (with the jury return ing a siz eable verdict for the plaintiffs). Goody ear did not settle that case immediately upon disclosure of the test results, as the d istrict court assumed would have happened here.H A E G E R V

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I n short, we simply don’t know—and have n o w a y o f reliably fig uring out—what would have happen e d i f timely d isclosure of the test results had occurred. Thus, I think t h e district court clearly erred in finding that “the case more likely than not would have settled much earlier” h ad Goody ear disclosed the test results when it should have.

The majority does not co n t end that a causal connection between G oody ear’s misconduct a n d the fees awarded has been shown here, as required for the sanctions to be deemed compensatory

. The majority instead contends that M iller ’s causation r equirement “flouts controlling United States Supreme Court case law.” Maj. op. at 30. I don’t think that’s
true. M iller ’s discussion of causation did not break new g round; it simply reflects the well-established principle, f ully consistent w ith Supreme Court precedent, that a sanction can be deemed compensatory only if it compensates the injured party for losses sustained a s a result of the sanctionable

m i s c o n d uct. See, e

. g. , Lasar
, 399 F .3d at 1111; F.J. Hanshaw

, 244 F .3d a t 1142. W hat we said a b o u t c ausation in M iller merely illustrates why the fees awarded in this case were not sustained as a result of Goody ear’s misconduct.

The majority r e a d s Chambers v. NASCO, Inc.
, 501 U.S. 32 (1991), as est a b l i s h ing a competing principle: that a f ee award may b e deemed compensatory even if the fees were not incurred as a result o f the sanctionable misconduct, so long a s the misconduct involves “frequ e nt and severe abuses of the judicial sy stem.” Maj. op. at 32. The majority assumes that principle must be valid because, in its view, not all of the fees awarded to N ASCO were incurred as a dir e c t result o f Chambers’ misconduct.H A E G E R V

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I see two problems with the majority ’s re ading o f C hambers

. F irst, it is b y n o means clear as a fact u a l m a t t e r that the majority ’s r e a d i n g is correct. The district court in Chambers ex pressly held that Chambers’ misconduct b eg an

eve n b e f ore NASCO f

ormally filed suit. After Chambers informed NASCO that he would not honor the ag reement to sell his local te l evision station, NASCO g ave Chambers notice on a F riday that it intended to fi l e s u it the following Monday seeking specific performance. That advance notice

was required by court rules because NASCO also intended to seek a temporary restraining order preventing Chambers from disposing of the s tation pending resolution of the suit. 501 U.S. a t 36. Rather than acknowledg e that h e h ad no valid defense to the suit, and that he therefore h a d n o business putting NASCO to the e x p e n s e of filing it, Chambers embarked on what turned out to b e a y ears-long campaig n o f bad-faith litig ation misconduct, b eg inning with his efforts

over the weekend to fraudulently transfe r ownership o f the station in o rder to deprive the district court of jurisdiction. Id.
at 36–37. B ecause the district court f o u n d that Chambers

never had a g ood-faith basis for res i s t i n g the relief NASCO
soug h t, and that all of the actions he took in “defending ” the suit were aimed solel y a t o bstructing and delay ing the inevitable sale of t h e t e l e vision station, it seems fair to say that all of NASCO’s attorney ’s fees w ere incurred as a direct result of Chambers’ misconduct. See id. at 50–51.

Second, even if some portion of NASCO’s attorney ’s fees

were not incurred as a direct result of Chambers’ misconduct, the majority incorrectly assumes that the S u preme Court upheld the a

ward as p ur e l y c ompensatory

. T he sanction imposed there was n ot purely compensatory ; it served the

“ d u a l purpose” of (1) v indicating the court’s own a uthority and (2) “mak[ ing ] the prevailing party whole for ex pensesH A E G E R V

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caused by his oppone n t ’ s o b stinacy .” Id. at 4 6 (internal
q u o t at ion marks omitted). T h e first of these p u rposes, w e have subsequently

held, is the domain of punitive sanctions, and the Court in Chambers left no doubt that punishment was indeed a key purpose of t h e sanctions imposed in that c ase. See id. at 55 n.17 (“the sanctions imposed on Chambers were aimed at punishing not only the harm d o n e to NASCO, but also the harm done to the court itself”). B ecause it was partly punitive, the sanctions award did not need to be limited to fees directly

caused by

Chambers’ misconduct.

I concede that the district court imposed the sanctions in Chambers without apply ing the h e ig htened proced u ral protections we have subsequently held are ne c es s ary before punitive sanctions may b e i mposed, and that the Supreme Court nonetheless affirmed

. I don’t think we can read
any thing into that fact. The defendants in Chambers did not raise any d

ue process a

rg uments, and the S u

preme Court therefore did n ot address whether the p r o c e ss a fforded the defendants was adequate. Moreover, the law has c h a n g ed since Chambers was decided. A few y ears late r t h e C o u rt issued International Union, United Mine W orkers v. Bagwell

, 512 U.S. 821 (1994), the case from which we first derived the rule that im p o s i t ion of punitive sanctions must be accompanied by th e procedural protections applicable in criminal cases. S

ee F

. J

. H a n shaw

, 244 F .3d at 1137–38. I f
any doubts ling ered about whether Chambers a uthoriz e s imposition o f so-called “dual purpose” sanctions without following the procedures applicable in criminal cases, we put those to rest in Miller

. The dissent in Miller made that very arg ument, 661 F .3d at 1039 (I k uta, J
., dissenting ), but the panel majority

implicitly

rejected it. See id. at 1030.H A E G E R V

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None o f this is to sug g est th a t compensatory sanctions can’t b e fashioned at all. T h ere m a y w e l l be other way s to calculate the losses sustained by the Haeg ers as a result of the misconduct. F or ex ample, the most direct loss the Hae ge rs sustained is that they probably settled their case for less than it was r eally worth. I t m ig ht be possible to use the Schalmo
case, and others like it if they ex ist, to calculate the difference between what the Haeg ers actually received in settlement a nd what they likely would have received—whether th r oug h an enhanced settlement or a jury verdict—if the test results had been disclosed in a timely manner. B ut g oing down that p ath would obviously

be fraught with proof problems of its own.

Alternativel y , instead of attempting to calculate lost settlement value, the district cou r t co uld ag ain focus on attorney ’s fees incurred by the H aeg ers, limiting the award to fees that can be linked in a n on -speculative way to the misconduct. The fees that most readily s p r i n g to mind a re those wasted on ex pert discovery that t o ok place under the mistaken assumption that k ey test results supporting the Haeg ers’ liability theory did not ex ist. T hose and other fees similarly traceable to the misco n d u ct are no doubt comparatively small, but I don’t think the district court was rig ht in sug g esting that calculating them woul d b e an impossibl e t a s k

. Those fees can b e calculated; it’s just that they may produce a sanction smaller than seems warranted
g iven the severity o f the misconduct the district court found.

I f the sanctions that can properly be deemed compensatory seem too p altry under the circumstan c e s, the district court could still fashion an award of p u n i t ive sanctions, so long as it applies the corresponding heig htened procedural protections. See Miller

, 661 F .3d at 1030–31; F.J. Hanshaw

, 2 4 4 F.3d at 1141–42. B ecause Goody ear and itsH A E G E R V

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lawy ers were not afforded those prote c tions before punitive sanctio n s were imposed, I dissent f rom the majority ’s affirmance of the $2.7 million award.