Opinion ID: 2818499
Heading Depth: 2
Heading Rank: 1

Heading: The District Court’s Inherent Power

Text: “It 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 exercise of all others.” Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991) (internal citations and quotation marks omitted). The HAEGER V. GOODYEAR TIRE & RUBBER CO. 19 Supreme Court has specifically recognized that the “inherent power of a federal court to investigate whether a judgment was obtained by fraud, is beyond question.” Universal Oil Prods. Co. v. Root Refining Co., 328 U.S. 575, 580 (1946) (citing Hazel-Atlas Glass Co. v. Hartford Empire Co., 332 U.S. 238 (1944)). This inherent power is not limited by overlapping statutes or rules. The Supreme Court explained “that the inherent power of a court can be invoked even if procedural rules exist which sanction the same conduct.” Chambers, 501 U.S. at 49. Thus, the Sanctionees’ argument that the district court should have relied on Federal Rule of Civil Produce 37 fails.3 While 3 Rule 37 provides that “[o]n notice to other parties and all affected persons, a party may move for an order compelling disclosure or discovery. The motion must include a certification that the movant has in good faith conferred or attempted to confer with the person or party failing to make disclosure or discovery in an effort to obtain it without court action.” If the party fails to comply with a court order, Rule 37 provides the following remedies: Rule 37(b)(2)(A) “If a party . . .fails to obey an order to provide or permit discovery . . . the court where the action is pending may issue further just orders. They may include the following: (i) directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action, as the prevailing party claims; (ii) prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence; (iii) striking pleadings in whole or in part; (iv) staying further proceedings until the order is obeyed; (v) dismissing the action or proceeding in whole or in part; (vi) rendering a default judgment against the disobedient party; or (vii) treating as contempt of court the failure to obey any order except an order to submit to a physical or mental examination”; Rule 37(b)(2)(C) “Instead of or in addition to the orders above, the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney’s fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.” 20 HAEGER V. GOODYEAR TIRE & RUBBER CO. Rule 37 also provides a method to sanction a party for failing to comply with discovery rules, it is not the exclusive means for addressing the adequacy of a discovery response. See id. The Sanctionees also argue that the court cannot impose sanctions in this case because the Haegers failed to move to compel disclosure or discovery under Rule 37, and thus the Sanctionees never violated a district court order compelling disclosure or discovery. More specifically, the Sanctionees contend that absent such a motion to compel or order requiring production, Goodyear and its counsel complied with discovery rules, and thus the district court does not have power to sanction the Sanctionees’ conduct. The Supreme Court has expressly rejected this argument. “[N]either is a federal court forbidden to sanction bad-faith conduct by 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 the Rules are up to the task, the court may safely rely on its inherent power.” Id. at 50. We hold that it was not an abuse of discretion for the district court to rely on its inherent power to sanction the conduct at issue in this case, and to determine that Rule 37 did not provide the appropriate remedy, especially since the discovery fraud was not discovered until after the case had settled. Additionally, if a party fails to disclose or supplement an earlier response, Rule 37(c)(1) states: “If a party fails to provide information . . . the party is not allowed to use that information . . . to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless. In addition to or instead of this sanction, the court, on motion and after giving an opportunity to be heard: (A) may order payment of the reasonable expenses, including attorney’s fees, caused by the failure; (B) may inform the jury of the party’s failure; and (C) may impose other appropriate sanctions . . . .” HAEGER V. GOODYEAR TIRE & RUBBER CO. 21
Before awarding sanctions pursuant to its inherent power, “the court must make an express finding that the sanctioned party’s behavior ‘constituted or was tantamount to bad faith.’” Leon v. IDX Sys. Corp., 464 F.3d 951, 961 (9th Cir. 2006). We have found bad faith in a variety of conduct stemming from “a full range of litigation abuses.” Chambers, 501 U.S. at 47. For example “[a] party ‘demonstrates bad faith by delaying or disrupting the litigation . . . .’ Primus Auto. Fin. Servs., Inc. v. Batarse, 115 F.3d 644, 648 (9th Cir. 1997).” Leon, 464 F.3d at 961 (plaintiff demonstrated bad faith by going to extraordinary 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 faith finding. Chambers, 501 U.S. at 46. For example, in Pumphrey v. K.W. Thompson Tool Company, the decedent’s family brought a wrongful death action against a gun manufacturer after the decedent dropped the manufacturer’s gun with the safety devices engaged and it fired, killing the decedent. 62 F.3d 1128, 1130 (9th Cir. 1995). During trial, the manufacturer introduced tests showing that when the gun was dropped, the safeties performed as designed and the gun never fired. Id. After the trial concluded, Plaintiffs’ attorney learned that in a subsequent, unrelated lawsuit, the manufacturer had produced tests during which the gun had fired when dropped. Id. These tests had not been produced during Plaintiffs’ litigation even though they were available two months before trial, and despite the manufacturer’s assurance that gun tests would be made available upon their discovery. Id. at 1131. The manufacturer also affirmatively mischaracterized the nature of these tests during later discovery, and introduced testimony 22 HAEGER V. GOODYEAR TIRE & RUBBER CO. during trial that it had never seen the gun fire when dropped. Id. at 1132. Plaintiffs moved to set aside the trial verdict, pursuant to Federal Rule of Civil Procedure 60(b). Id. at 1130. We upheld the district court’s grant of a new trial finding that the manufacturer had “engaged in a scheme to defraud the jury, the court, and [the Plaintiffs], through the use of misleading, inaccurate, and incomplete responses to discovery requests, the presentation of fraudulent evidence, and the failure to correct the false impressions created . . . .” Id. at 1132. We further held that the “end result of the scheme was to undermine the judicial process, which amounts to fraud upon the court.” Id. (citing Hazel-Atlas Glass Co. v. Hartford Empire Co., 332 U.S. 238, 245–46, 250 (1944) (deliberately planned scheme to present fraudulent evidence constitutes fraud upon the court); Abatti v. C.I.R., 859 F.2d 115, 118 (9th Cir. 1988) (fraud upon the court involves unconscionable plan or scheme to influence the court improperly)). While the procedural posture of Pumphrey differs from the one in this case, the similarities with this case support the conclusion that the district court did not abuse its discretion in concluding that Sanctionees engaged in fraud upon the court in their scheme to avoid their discovery obligations. In B.K.B. v. Maui Police Department, we found “counsel’s reckless and knowing conduct” to be “tantamount to bad faith and therefore sanctionable under the court’s inherent power.” 276 F.3d 1091, 1108 (9th Cir. 2002) (emphasis in original). B.K.B. was a sexual harassment suit, in which defense counsel introduced testimony in violation of HAEGER V. GOODYEAR TIRE & RUBBER CO. 23 Federal Rule of Evidence 412.4 Defense counsel introduced this testimony after two Rule 412 pre-trial motions had been denied, and after he assured the district judge in a sidebar that the anticipated testimony would not violate Rule 412. Id. at 1107. We concluded that “defense counsel’s introduction of [the] testimony was a knowing and intentional violation of Rule 412” and further held that “[i]f left unsanctioned, defense counsel’s behavior in this case would undermine the very purpose and force of Rule 412’s strictures.” Id. at 1108. In this case, the district court did not abuse its discretion in concluding that the Sanctionees’ failure to produce relevant documents despite their affirmative obligations to do so pursuant to Rules 26 and 34, and their misrepresentations in numerous discovery disputes (which the district court estimated took “approximately sixteen hours in court”), was tantamount to bad faith. The Sanctionees’ conduct in this matter undermines the very purpose of the federal rules requiring disclosure of relevant and responsive documents. It is clear the district court did not abuse its discretion in concluding that Hancock, Musnuff, and Goodyear acted in bad faith in this litigation. The Sanctionees, throughout numerous discovery dispute filings and hearings, convinced the district court that Goodyear had produced all test data relevant to the Haegers’ claims. The district court noted that “[i]n fact, at various points the Court became exasperated with Plaintiffs’ apparently unsubstantiated claims that additional information must exist.” It was not until the 4 Rule 412: “(a) Prohibited Uses. The following evidence is not admissible in a civil or criminal proceeding involving alleged sexual misconduct: (1) evidence offered to prove that a victim engaged in other sexual behavior; or (2) evidence offered to prove a victim’s sexual predisposition.” 24 HAEGER V. GOODYEAR TIRE & RUBBER CO. sanctions proceedings that the district court realized that the Sanctionees had adopted a plan of making discovery as difficult as possible, providing only those documents they wished to provide, timing the production of the small subset of documents they were willing to turn over such that it was inordinately difficult for Plaintiffs to manage their case, and making false statements to the Court in an attempt to hide their behavior. The Haegers served their First Request in September 2006. The Sanctionees merely objected to this request, and did not produce any documents. The Sanctionees then filed supplemental responses in November 2006, which included the production of only one group of tests – the FMVSS119 DOT tests. It was not an abuse of discretion for the district court to find that production of just one group of tests meant that the Sanctionees had failed to search properly for relevant G159 tests in response to the Haegers’ First Request, and had done so in bad faith. The Sanctionees then failed to disclose promptly relevant G159 tests after a proper search had been conducted. Musnuff and Hancock had the High Speed tests in their possession at the latest in February 2007, yet failed to disclose promptly the High Speed tests to the Haegers. Instead, the Sanctionees chose to depose the Haegers’ expert in May 2007, and then produce the High Speed tests in June 2007. Musnuff was next aware of more tests – including the Heat Rise tests, DOT endurance tests, crown durability tests, and bead durability tests — at least by August 2007, and Hancock was aware of these same tests at least by June 2008. However, the HAEGER V. GOODYEAR TIRE & RUBBER CO. 25 Sanctionees again failed to disclose properly these tests upon their discovery. Without producing any of these additional tests, Goodyear settled with the Haegers in April 2010. The district court concluded that the Sanctionees should have turned over the High Speed tests, Heat Rise tests, DOT endurance tests, crown durability tests, and bead durability tests as soon as they were discovered, as they were all responsive to the First Request. The district court did not abuse its discretion in concluding that this decision to withhold documents “was a bad faith attempt to hide responsive documents,” which would not have been uncovered but for the sanctions proceedings. This finding of bad faith is bolstered by Hancock’s repeated representations to the district court that Goodyear was complying with all discovery requests when in fact, Goodyear was withholding relevant and responsive documents. Any attempt by Goodyear to argue that the district court abused its discretion in preventing Goodyear from passing the blame on to its attorneys is unavailing. Goodyear “is deemed bound by the acts of [its lawyers] and is considered to have ‘notice of all facts, notice of which can be charged upon the attorney.’” Link v. Wabash R. Co., 370 U.S. 626, 634 (1962); see also Lockary v. Kayfetz, 974 F.2d 1166, 1169–70 (9th Cir. 1992). Additionally, the district court did not abuse its discretion in concluding that Goodyear participated directly in the discovery fraud: Goodyear’s Rule 30(b)(6) witness, authorized to testify on Goodyear’s behalf, falsely testified during deposition that no additional tests were available beyond the High Speed tests that had been turned over to the Haegers; and Goodyear’s in-house counsel, Okey, maintained responsibility for reviewing and approving all the incomplete and misleading discovery responses. 26 HAEGER V. GOODYEAR TIRE & RUBBER CO. We hold that it was not an abuse of discretion for the district court to find that Hancock, Musnuff and Goodyear each acted in bad faith.
Once a district court makes a finding of bad faith, it has the discretion to “award sanctions in the form of attorneys’ fees against a party or counsel.’” Leon v. IDX Sys. Corp., 464 F.3d 951, 961 (9th Cir. 2006) (quoting Primus Auto. Fin. Servs., Inc. v. Batarse, 115 F.3d 644, 648 (9th Cir. 1997)). “A primary aspect of that discretion is the ability to fashion an appropriate sanction for conduct which abuses the judicial process.” Chambers v. NASCO, 501 U.S. 32, 44–45 (1991). In its analysis of sanctions, the district court noted that due to the extent of the bad faith of the Sanctionees in this case, had the misconduct “come to light while the case was ongoing, entry of default judgment with a trial on damages would have been the obvious solution.” However, since the case was settled and closed before the misconduct was discovered, the court instead was faced with the task of determining the appropriate amount of sanctions to make the Plaintiffs whole in the form of attorneys’ fees and costs. The court found that the Sanctionees had engaged in a “years-long course of misconduct,” which had made it difficult for the court to “separate the fees incurred due to legitimate activity from the fees and costs incurred due to Goodyear’s refusal to abide by clear and simple discovery obligations.” The court explained that “if Goodyear had responded to Plaintiffs’ First Request with all responsive documents, Goodyear might have decided to settle the case immediately,” and thus it was possible to “conclude practically all of Plaintiffs’ fees and costs were due to misconduct.” The district court concluded HAEGER V. GOODYEAR TIRE & RUBBER CO. 27 that “[w]hile there is some uncertainty how the litigation would have proceeded if Goodyear and its attorneys were acting in good faith, based on Goodyear’s pattern and practice in G159 cases, the case more likely than not would have settled much earlier.” Thus the district court was informed in part by past settlement practices of Goodyear in the Other G159 Cases in reaching its determination concerning appropriate compensatory damages in this case. The district court then determined, relying upon the reasoning in Chambers, that while “[i]t is difficult to reconcile Chambers with . . . Miller,” “the most appropriate sanction is to award Plaintiffs all of the attorneys’ fees and costs they incurred after Goodyear served its supplemental responses to Plaintiffs’ First Request” as this “was the first definitive proof that Goodyear was not going to cooperate in the litigation process.” The district court held that “in these unique circumstances, it is inappropriate to limit the award to the fees and costs that could be directly linked to the misconduct; proving that linkage is an almost impossible task given how the misconduct permeated the entirety of this case.” The Sanctionees claim that this determination was made in error because sanctions must be directly linked to damage caused by its bad faith conduct, citing Miller v. City of Los Angeles, 661 F.3d 1024, 1029 (9th Cir. 2011). The Sanctionees’ confidence in Miller is misplaced, for three reasons: (1) Miller itself recognizes that it has limited precedential value; (2) to the degree Miller can be read to require that the specific amount of attorneys’ fees and costs awarded when a court invokes its inherent powers must be directly linked to the bad faith conduct, it flouts controlling United States Supreme Court case law; and (3) under Chambers, the district court did all it was required to do in this case in determining the appropriate amount of fees to 28 HAEGER V. GOODYEAR TIRE & RUBBER CO. award as sanctions to compensate the Plaintiffs for the damages they suffered as a result of Sanctionees’ bad faith. The panel majority’s opening paragraph in Miller appropriately characterized its precedential value: “This is a strange case. Its resolution hinges on the absence, as a factual matter, of something we must accept as a legal matter. There are unlikely to be many more like it, so this opinion’s precedential value is probably limited.” Id. at 1026. What was missing? The answer: bad faith, an essential requirement for invoking the district court’s inherent powers. Miller was a wrongful death suit brought against the City of Los Angeles, its police department, police chief, and a sergeant who shot and killed the decedent. The district court “issued an in limine order precluding defendants from arguing that the decedent was armed when he was shot.” Id. at 1026. The district court found that during the trial’s summation, defense counsel violated its in limine order by stating that before decedent was shot, decedent had shot another man, and awarded sanctions under its inherent power for the entire cost of the trial after the jury hung. Counsel conceded that he had violated the court’s order, and even apologized for his error, but the district court nevertheless construed counsel’s conduct as “tantamount to bad faith,” granted plaintiffs’ motion for sanctions, and sanctioned defendants $63,687.50. Id. 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 done so. That put the majority of our panel into a quandary. What should one do about a lawyer who confesses a non-existent error? In this case, the panel majority concluded that it was bound by what the lawyer had confessed, but that since the lawyer had not conceded bad faith, and clearly had not actually violated the court’s order, there could be no finding of bad faith. Put HAEGER V. GOODYEAR TIRE & RUBBER CO. 29 another way, “you can’t have a bad faith violation without a violation.” Id. at 1029. The case was over, and nothing more needed to be said, since a district court cannot use its inherent power to sanction a party without a finding of bad faith. The balance of the panel’s opinion was dicta. But even the dicta in Miller is of little help to the Sanctionees here. The dicta in Miller addressed whether the district court linked the alleged bad faith conduct to the harm suffered, i.e, whether the district court found that the attorney’s alleged statement caused the jury to hang. The panel concluded that “without a finding that [defense counsel’s violation] caused the first jury to hang, the district court had no power to order defendants to compensate plaintiffs for the attorneys’ fees and costs they spent on the first trial.” Id. Thus, while the dicta in Miller suggests that harm is necessary to compensate a party, Miller makes no holding on the measure of attorneys’ fees allowed once it is clear that the bad faith of a party has actually caused harm. 5 In this case, however, there is no doubt that the Sanctionees’ bad faith conduct caused significant harm in forcing the Haegers to engage in sham litigation, and in their likely foregoing millions of dollars in the settlement they accepted under false pretenses of the Sanctionees, as found by the district court in light of Goodyear’s conduct in the Other G159 Cases. 5 In re Dyer, 322 F. 3d 1178 (9th Cir. 2003), also cited by the panel, involved the violation of an automatic stay in bankruptcy, and a purported sanctions award based on the bankruptcy court’s statutory contempt power, granted by 11 U.S.C. §105(a). Our panel found that a bankruptcy court has no authority to impose a non-compensatory “serious punitive” sanction. Id. at 1195. This holding, of course, has no bearing on this case. B.K.B. v. Maui Police Dep’t, 276 F. 3d 1091, 1109 (9th Cir. 2002) also referenced by the Miller panel, is discussed infra. 30 HAEGER V. GOODYEAR TIRE & RUBBER CO. Even though Miller does not provide an answer, we next consider how close a link is required 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 strongest statement about the use of a court’s inherent power. 501 U.S. 32 (1991). In Chambers, the Supreme Court upheld a district court’s determination that “full attorney’s fees were warranted due to the frequency and severity of [the party]’s abuses of the judicial system.” 501 U.S. at 56. The underlying action in Chambers was a suit by NASCO seeking Chambers’s specific performance of an agreement to sell a television station’s facilities and broadcast license to NASCO. Chambers responded to the suit by attempting to put the properties at issue beyond the reach of the district court through various transfers, ignoring the district court’s preliminary injunction, filing meritless motions and pleadings, attempting to conduct depositions in violation of the Federal Rules of Civil Procedure, and engaging in other behavior aimed at frustrating the possibility of specific performance. The district court found these actions to be “part of a sordid scheme of deliberate misuse of the judicial process designed to defeat NASCO’s claim by harassment, repeated and endless delay, mountainous expense and waste of financial resources.” Id. at 57 (internal quotation marks omitted). The district court then awarded NASCO an amount “which represented the entire amount of NASCO’s litigation costs paid to its attorneys.” Id. at 40. The Supreme Court dismissed Chambers’s argument, which was virtually identical to the causation requirement claim the Sanctionees are making in this case, that “the fact that the entire amount of fees was awarded means that the District Court failed to HAEGER V. GOODYEAR TIRE & RUBBER CO. 31 tailor the sanction to the particular wrong,” and instead upheld the district court’s conclusion “that full attorney’s fees were warranted due to the frequency and severity of Chambers’s abuses of the judicial system and the resulting need to ensure that such abuses were not repeated.” Id. at 57. The Supreme Court further explained that it was within the district court’s discretion to “compensate NASCO by requiring Chambers to pay for all attorney’s fees.” Id. The Supreme Court reasoned that the district court “imposed sanctions for the fraud [Chambers] perpetrated on the court and the bad faith he displayed toward both his adversary and the court throughout the course of litigation.” Id. at 55 (internal 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 for expenses caused by his opponent’s obstinacy.” Id. at 46 (internal citation and quotation marks omitted); see also Hutto v. Finney, 437 U.S. 678, 691 (1978). As a United States Supreme Court case, Chambers clearly trumps Miller, to the degree Miller’s dicta conflicts with Chambers, as well as any other Ninth Circuit case to the contrary. Thus, even though the district court in this case struggled with how to reconcile Miller with Chambers, it appropriately awarded the Haegers all their attorneys’ fees and costs in prosecuting the action once the Sanctionees began flouting their clear discovery obligations and engaging in frequent and severe abuses of the judicial system. Given the teaching of Chambers, the district court’s findings and ruling in this case regarding monetary sanctions fully comply with law. First, the Supreme Court expressly rejected the linkage argument made by the Sanctionees here when it upheld the award for full attorney’s fees “due to the 32 HAEGER V. GOODYEAR TIRE & RUBBER CO. frequency and severity of Chambers’s abuses of the judicial system and the resulting need to ensure that such abuses were not repeated.” Chambers, 501 U.S. at 57. Secondly, it made clear that we review the district court’s determinations in arriving at the proper measure of compensatory damages for abuse of discretion. Id. The district court here used the lodestar method to calculate the appropriate amount of fees incurred as a result of the Sanctionees’ bad faith, and noted that this “method contemplates multiplying the ‘reasonable hourly rate’ by the number of hours ‘reasonably expended.’ Morales v. City of San Rafael, 96 F.3d 359, 363 (9th Cir. 1996).” The district court then went to great lengths in reviewing the “240 pages of time entries” submitted by the Haegers, and the combination of objections by Goodyear and its attorneys to “[a]lmost every time entry” to ensure “the appropriate size of the award.” In a nineteen-page order, the district court addressed each objection made by the Sanctionees to the court’ s proposed award, and made five adjustments based on these objections: 1) “out of an abundance of caution,” the district court imposed a twenty percent reduction of $29,310 for recreation of time entries; 2) the district court held that because some of the time entry descriptions were vague and/or incomplete, it could not conclude that this time was reasonably expended absent the appropriate information, and reduced the award by $32,117; 3) the district court reduced the award by $4,880.73, equaling the costs for which the Haegers did not submit supporting documents; 4) the district court subtracted $50,721 for time entries involving work of a clerical nature; and 5) the district court found that $25,827.50 should be reduced for excessive billing. Applying these adjustments, the district court awarded the amount the court reasonably believed it cost the Haegers to HAEGER V. GOODYEAR TIRE & RUBBER CO. 33 litigate against a party and attorneys during the time when that party and those attorneys were acting in bad faith. Nothing more is required under Chambers or our case law, and, especially given the great care with which the court reviewed the relevant data during its consideration of legal fees, the court clearly did not abuse its discretion. Our dissenting colleague suggests that Chambers’s control over this case was undermined by International Union, United Mine Workers v. Bagwell, 512 U.S. 821(1994), and our own F.J. Hanshaw Enterprises, Inc. v. Emerald River Development, Inc., 244 F. 3d 1128 (9th Cir. 2001). He also suggests that the district court’s sanctions in this case were punitive, not compensatory. With due respect, our colleague is mistaken on both counts. Bagwell involved a criminal contempt proceeding stemming out of a protracted labor strike, in which a union was found to have violated the trial court’s orders hundreds of times, as determined in eight separate contempt hearings. Although the trial court labeled the over $64 million it levied in fines against the union “civil and coercive,” Bagwell, 512 U.S. at 824, once the union and the companies settled their labor dispute, and moved to vacate the contempt fines, the trial judge refused to do so, declaring that they were “payable in effect to the public.” Id. at 825. The Supreme Court appropriately treated the fines as punishment for “criminal contempt,” and required courts to provide additional protections to the defendants in such cases. Id. at 826. However, even though Chambers had been decided only 3 years before by the Supreme Court, Bagwell did not even mention Chambers, let alone overrule or distinguish it. Contrary to the facts in this case, the Court noted: 34 HAEGER V. GOODYEAR TIRE & RUBBER CO. [N]either any party nor any court of the Commonwealth has suggested that the challenged fines are compensatory. At no point did the trial court attempt to calibrate the fines to damages caused by the union’s contumacious activities or indicate that the fines were to compensate the complainant for losses sustained. The nonparty governments, in turn, never requested any compensation or presented any evidence regarding their injuries, never moved to intervene in the suit, and never actively defended the fines imposed. Id. at 834 (internal citation and quotation marks omitted). F.J. Hanshaw, also cited by our dissenting colleague, is extremely helpful in confirming the validity of the compensatory damages awarded in this case. F.J. Hanshaw involved a dispute between two wealthy brothers about a partnership dissolution. 244 F.3d at 1132. Just as a courtappointed receiver was about to render an accounting to the court, one of the brothers, Frederick J. Hanshaw (FJH), allegedly offered the receiver a bribe of $100,000, as well as future business. Id. at 1132–33. When the attempted bribe came to the attention of the district court, the court referred the matter to the FBI, which, after conducting several interviews, decided not to proceed with formal criminal charges against FJH. Id. at 1133. Thereafter, the district court conducted two evidentiary hearings to determine whether FJH had attempted to defraud the court and his brother. Id. at 1133–34. After weighing the evidence, the court concluded that there had been an attempt by FJH to bribe the receiver, and sanctioned FJH and his corporation $500,000, payable to HAEGER V. GOODYEAR TIRE & RUBBER CO. 35 the United States, and imposed a $200,000 sanction against them in favor of his brother, Gordon Hanshaw (GH). Id. at 1135. Relying on Bagwell, our court found that the $500,000 sanction was “clearly punitive and intended to vindicate the court’s authority and the integrity of the judicial process. The sanction was a substantial ‘flat, unconditional fine’; was not intended to compensate [GH] but rather was made payable to the United States . . . .” Id. at 1138. Since the $500,000 sanction was found to be punitive in nature, we reversed the district court because FJH and his corporation did not receive all the procedural 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 FJH’s contention that it too was criminal in nature and should be vacated. Id. at 1142, 1145. We noted that: (a) “[u]nlike a punitive sanction, particularly one that is payable to the government or the court, a compensatory award payable to a party does not place the court in a prosecutorial role”; (b) “[w]hen determining whether and how much to compensate a party, the court sits in the same adjudicatory position it does when it resolves most disputes. Although the court has an institutional interest in the matter, the court in essence is resolving a dispute between litigants: one party claims it was wronged by the other and wants to be reimbursed by the losses it sustained. For these reasons, when the court is adjudicating a compensatory civil sanction, the traditional procedural protections applicable to civil proceedings are sufficient to satisfy the Constitution’s requirement of due process”; (c) in concluding that the $200,000 award to GH was compensatory, we reasoned that “[t]he award was payable to [GH] . . . and was meant to offset the expenses he incurred because of [FJH’s] misconduct. As a result of the 36 HAEGER V. GOODYEAR TIRE & RUBBER CO. bribe attempt, the entire receivership process was delayed by nearly six months and [GH] was forced to incur additional attorney fees. The court had before it the billing reports from [GH’s] attorneys and [GH] had asked the court for $824,000 in compensation . . . . Exercising its discretion, the court awarded $200,000 to [GH]”; and (d) “[b]ased upon this record, we conclude that the $200,000 award was intended to compensate [GH] for losses sustained as a result of [FJH’s] misconduct and is civil in nature.” Id. at 1142 (citing Chambers, 501 U.S. at 56–58). Just like the district court did in F.J. Hanshaw in its $200,000 award to GH, the court here responded to a motion filed by the Plaintiffs seeking damages for the Sanctionees’ bad faith, and awarded as compensatory damages the amount of the attorneys’ fees and costs it carefully determined the Haegers had actually incurred litigating against the Sanctionees, during the time they were acting in bad faith. “[W]hether a contempt is civil or criminal turns on the ‘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, 512 U.S. at 827–28 (internal quotations omitted). A fine is almost always civil it if “compensate[s] the complainant for losses sustained,” Id. at 829 (internal quotations omitted), whereas it is generally punitive in nature when it “was not intended to compensate [the party] but rather [is] made payable to the United States.” F.J. Hanshaw, 244 F.3d at 1138. Other Ninth Circuit cases affirm these points. In B.K.B. v. Maui Police Department, the district court found that the sanctionees had acted in bad faith in violating the Federal Rules of Evidence while questioning a witness about the Plaintiff during trial, and awarded “$5,000 HAEGER V. GOODYEAR TIRE & RUBBER CO. 37 to compensate Plaintiff for the pain and suffering caused by the public embarrassment resulting from [the] testimony.” 276 F.3d 1091, 1099 (9th Cir. 2002). We upheld the sanction, holding that “the amount the court imposed reflected its assessment of the actual harm incurred by Plaintiff . . . [in] emotional and reputational damage.” Id. at 1109. Because the district court imposed the sanctions for the purpose of compensation, they were within its discretion. The district court in Lasar v. Ford Motor Company imposed monetary sanctions to compensate “for unnecessary costs and attorney’s fees.” 399 F.3d 1101, 1111 (9th Cir. 2005). In Lasar, the sanctionees’ attorney violated pretrial orders during his opening statement, and the court granted Lasar’s motion for mistrial and discharged the jury. Id. at 1106. The district court then instructed “Lasar’s attorneys to prepare an affidavit detailing Lasar’s costs and attorney’s fees incurred over the previous two weeks.” Id. While it is unclear why the district court determined that Lasar 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 designed to compensate Lasar for unnecessary costs and attorney’s fees.” Id. at 1111. Thus, it was within the district court’s discretion to determine the time frame in which Lasar sustained “losses.” Collectively, these cases make clear that the sanctions awarded here were entirely lawful and appropriate. Not one dime was awarded to the government or the court. Just like the district court in F.J. Hanshaw, the district court here awarded compensatory damages after the aggrieved party filed a motion, seeking compensation for damages suffered as a result of the bad faith of the opposing party. In awarding 38 HAEGER V. GOODYEAR TIRE & RUBBER CO. compensatory damages, the district court did not act as a prosecutor, but instead allowed the accused and accusing parties to file extensive briefs, and held extensive hearings to determine the truth of what had happened. It took great care in parsing and reducing the attorney fee claims of the Plaintiffs. The accused were granted full due process and afforded all the protections required in civil sanctions hearings. While the district court had an institutional interest in the proceedings (just like the district court did in F.J. Hanshaw), its stated purpose was to properly compensate the Plaintiffs for damages they suffered as the result of the Sanctionees’ fraudulent conduct. In sum, the district court acted well within its discretion in awarding all the attorneys’ fees and costs incurred by the Plaintiffs after Goodyear served its supplemental responses to Plaintiffs’ First Request.
The district court also used its inherent power to order Goodyear to file a copy of the Order in any G159 case initiated after the date of that Order. The district court reasoned that “[b]ased on Goodyear’s history of engaging in serious discovery misconduct in every G159 case brought to this Court’s attention, filing this Order in future G159 cases will alert plaintiffs and the courts that Goodyear has, in the past, not operated in good faith when litigating such cases.” The district court found that this would “serve as a notice of the existence of certain tests Goodyear attempted to conceal in previous cases.” The district court did not limit this requirement in either time or scope. Goodyear argues that this sanction is too severe as it impacts the fairness of unrelated proceedings, and thus should be reversed as an abuse of the district court’s discretion. HAEGER V. GOODYEAR TIRE & RUBBER CO. 39 Courts have the inherent power to impose various nonmonetary sanctions. See Thompson v. Hous. Auth. of Los Angeles, 782 F.2d 829, 831 (9th Cir. 1986) (inherent power includes power to “impose sanctions including, where appropriate, default or dismissal”); Anheuser-Busch, Inc. v. Natural Beverage Distribs., 69 F.3d 337, 348 (9th Cir. 1995) (dismissal pursuant to inherent powers); Hester v. Vision Airlines, Inc., 687 F.3d 1162 (9th Cir. 2012) (affirming order striking answer and entering default judgment). However, even if a given sanction is available, the scope of the sanction must also be appropriate. Lewis v. Tel. Emps. Credit Union, 87 F.3d 1537, 1558 (9th Cir. 1996). A sanction should be “carefully fashioned to deny [the party] the fruits of its misconduct yet not to interfere with [the party’s future rights].” Id. In Hale v. U.S. Trustee, a bankruptcy court imposed a sanction that regulated future conduct “in response to specific and repeated acts of incompetent and irresponsible representation.” 509 F.3d 1139, 1149 (9th Cir. 2007). The court found a bankruptcy attorney to be “[u]nable or unwilling to conform his conduct to the requirements established by the Court’s prior decisions and ruling, and to the standards by which all other debtors’ counsel in the District abide.” Id. at 1145. We upheld the bankruptcy court’s sanction which required that the attorney “not file, nor shall he prepare or cause to be prepared for filing by a debtor, any bankruptcy petitioner unless [the attorney] signs said petition.” Id. Additionally, 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 meet the ethical and professional obligations of a debtor’s attorney and provide the reasonable and necessary services required to properly represent a debtor in a bankruptcy case.” Id. Thus, 40 HAEGER V. GOODYEAR TIRE & RUBBER CO. this chosen sanction regulated the attorney’s practice and specific actions that the attorney was required to take with all future clients. We held that “[u]nder the specific acts of this case, we cannot say that the bankruptcy court abused its inherent power to impose sanctions.” Id. at 1149. We are persuaded by the reasoning of Hale. We are also persuaded by the reasoning of Gallop 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 by the district court as frivolous, and the Second Circuit affirmed the dismissal on appeal. Id. at 228. The Second Circuit then ordered Plaintiff and her counsel, including Dennis Cunningham, to show cause why the Court should not impose sanctions for what it held to be a frivolous appeal. In response, Plaintiff moved to “disqualify the three members of the panel from considering her petition for rehearing and rehearing in banc.” Id. The Court sanctioned Plaintiff’s counsel for filing a frivolous appeal, and then imposed additional sanctions for filing the frivolous motion to disqualify. Id. at 230. The Court held that “Cunningham acted in bad faith in demanding the recusal of the three panel members and any like-minded colleagues,” and ordered Cunningham to “provide notice of the sanctions imposed upon him in this case . . . to any federal court in this Circuit before which he appears or seeks to appear” for a period of one year. Id. The district court here imposed the non-monetary sanction so that future plaintiffs and courts would be alerted that Goodyear had previously not operated in good faith, and so that future plaintiffs would be aware of the types of G159 tests available. We agree with the district court’s reasoning, particularly in light of the fact that it is highly likely that most HAEGER V. GOODYEAR TIRE & RUBBER CO. 41 future G159 litigation will be filed in state courts (see, e.g., the Other G159 Cases), and state court counsel will not necessarily investigate what might be contained in the Federal Reporter about the conduct of Goodyear and its counsel. We note also that the district court provided a form of safety valve in its non-monetary sanctions because “Goodyear may apply to the court hearing the case to be excused from [the requirements of the Order].” We find that the district court’s imposition of nonmonetary sanctions against Goodyear is balanced, is narrowly tailored, and imposes no sanctions beyond what is necessary to remedy what the district court properly perceived as an ongoing problem in Goodyear’s G159 litigation. The district court did not abuse its discretion in imposing non-monetary sanctions on Goodyear.