Category Archives: .S. Supreme Court

U.S. Supreme Court holds that bad faith fee sanction under court’s inherent authority is limited to fees incurred solely from the misconduct

Hello everyone and welcome to this Ethics Alert which will discuss the important and very recent United States Supreme Court opinion which held that a bad faith fee sanction based upon a court’s inherent authority is limited to fees incurred solely as a result of the misconduct.  The case is Goodyear Tire & Rubber Co., v. Haeger, 813 F. 3d 1233, No. 15–1406 (Argued January 10, 2017—Decided April 18, 2017).  The United  States Supreme Court opinion is here:  https://www.supremecourt.gov/opinions/16pdf/15-1406_db8e.pdf

According to the opinion, which was delivered by Justice Kagan, the Haegers sued Goodyear Tire & Rubber Company, alleging that the failure of a Goodyear G159 tire caused the family’s motorhome to swerve off the road and flip over.  “After several years of contentious discovery, marked by Goodyear’s slow response to repeated requests for internal G159 test results, the parties settled the case. Some months later, the Haegers’ lawyer learned that, in another lawsuit involving the G159, Goodyear had disclosed test results indicating that the tire got unusually hot at highway speeds. In subsequent correspondence, Goodyear conceded withholding the information from the Haegers, even though they had requested all testing data. The Haegers then sought sanctions for discovery fraud, urging that Goodyear’s misconduct entitled them to attorney’s fees and costs expended in the litigation.

“The District Court found that Goodyear had engaged in an extended course of misconduct. Exercising its inherent power to sanction bad-faith behavior, the court awarded the Haegers $2.7 million—the entire sum they had spent in legal fees and costs since the moment, early in the litigation, when Goodyear made its first dishonest discovery response. The court said that in the usual case, sanctions ordered pursuant to a court’s inherent power to sanction litigation misconduct must be limited to the amount of legal fees caused by that misconduct. But it determined that in cases of particularly egregious behavior, a court can award a party all of the attorney’s fees incurred in a case, without any need to find a “causal link between [the expenses and] the sanctionable conduct.” (citation omitted)

“As further support for its award, the District Court concluded that full and timely disclosure of the test results would likely have led Goodyear to settle the case much earlier. Acknowledging that the Ninth Circuit might require a link between the misconduct and the harm caused, however, the court also made a contingent award of $2 million. That smaller amount, designed to take effect if the Ninth Circuit reversed the larger award, deducted $700,000 in fees the Haegers incurred in developing claims against other defendants and proving their own medical damages. The Ninth Circuit affirmed the full $2.7 million award, concluding that the District Court had properly awarded the Haegers all the fees they incurred during the time when Goodyear was acting in bad faith.

Goodyear argued that, due to the failure of the court to link the fee with the misconduct, the fee award should be reversed and an instruction to the trial court to reconsider the matter. The Haegers argued that the award should be upheld because the lower courts articulated and applied the appropriate but-for causation standard, or, even if they did not, the fee award in fact passes the but-for test.

“The Haegers’ defense of the lower courts’ reasoning is a non-starter: Neither court used the correct legal standard. The District Court specifically disclaimed the need for a causal link on the ground that this was a “truly egregious” case. 906 F. Supp. 2d, at 975. And the Ninth Circuit found that the trial court could grant all attorney’s fees incurred “during the time when [Goodyear was] acting in bad faith,” 813 F. 3d 1233, 1249—a temporal, not causal, limitation. A sanctioning court must determine which fees were incurred because of, and solely because of, the misconduct at issue, and no such finding lies behind the $2.7 million award made and affirmed below. Nor is this Court inclined to fill in the gap, as the Haegers urge. As an initial matter, the Haegers have not shown that this litigation would have settled as soon as Goodyear divulged the heat-test results (a showing that would justify an all-fees award from the moment Goodyear was supposed to disclose). Further, they cannot demonstrate that Goodyear’s non-disclosure so permeated the suit as to make that misconduct a but-for cause of every subsequent legal expense, totaling the full $2.7 million.”

“Although the District Court considered causation in arriving at its back-up award of $2 million, it is unclear whether its understanding of that requirement corresponds to the appropriate standard—an uncertainty pointing toward throwing out the fee award and instructing the trial court to consider the matter anew. However, the Haegers contend that Goodyear has waived any ability to challenge the contingent award since the $2 million sum reflects Goodyear’s own submission that only about $700,000 of the fees sought would have been incurred regardless of the company’s behavior. The Court of Appeals did not address that issue, and this Court declines to decide it in the first instance. The possibility of waiver should therefore be the initial order of business on remand.”

The opinion held that “(w)hen a federal court exercises its inherent authority to sanction bad-faith conduct by ordering a litigant to pay the other side’s legal fees, the award is limited to the fees the innocent party incurred solely because of the misconduct—or put another way, to the fees that party would not have incurred but for the bad faith.”  The case was reversed and remanded.

Bottom line: This U.S. Supreme Court opinion is important since it addresses and resolves (at least in the federal courts) the question of whether a court exercising its inherent authority to sanction bad faith misconduct by awarding fees must limit the fees to those incurred as a direct result of the lawyer’s misconduct.  The opinion found in the affirmative and that the fees awarded must be shown to have been incurred solely as a result of the misconduct.

Be careful out there.

Disclaimer:  this e-mail is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

29605 U.S. Highway 19, N., Suite 150

Clearwater, Florida 33761

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

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Filed under .S. Supreme Court, Attorney Ethics, joe corsmeier, Joseph Corsmeier, Lawyer ethics, Lawyer Ethics and Professionalism, Lawyer sanctions, U.S. Supreme Court

U.S. Supreme Court holds that bad faith fee sanction under court’s inherent authority is limited to fees incurred solely from the misconduct

Hello everyone and welcome to this Ethics Alert which will discuss the important and very recent United States Supreme Court opinion which held that a bad faith fee sanction based upon a court’s inherent authority is limited to fees incurred solely as a result of the misconduct.  The case is Goodyear Tire & Rubber Co., v. Haeger, 813 F. 3d 1233, No. 15–1406 (Argued January 10, 2017—Decided April 18, 2017).  The United States Supreme Court opinion is here:  https://www.supremecourt.gov/opinions/16pdf/15-1406_db8e.pdf

According to the opinion, which was delivered by Justice Kagan, the Haegers sued Goodyear Tire & Rubber Company, alleging that the failure of a Goodyear G159 tire caused the family’s motorhome to swerve off the road and flip over.  “After several years of contentious discovery, marked by Goodyear’s slow response to repeated requests for internal G159 test results, the parties settled the case. Some months later, the Haegers’ lawyer learned that, in another lawsuit involving the G159, Goodyear had disclosed test results indicating that the tire got unusually hot at highway speeds. In subsequent correspondence, Goodyear conceded withholding the information from the Haegers, even though they had requested all testing data. The Haegers then sought sanctions for discovery fraud, urging that Goodyear’s misconduct entitled them to attorney’s fees and costs expended in the litigation.

“The District Court found that Goodyear had engaged in an extended course of misconduct. Exercising its inherent power to sanction bad-faith behavior, the court awarded the Haegers $2.7 million—the entire sum they had spent in legal fees and costs since the moment, early in the litigation, when Goodyear made its first dishonest discovery response. The court said that in the usual case, sanctions ordered pursuant to a court’s inherent power to sanction litigation misconduct must be limited to the amount of legal fees caused by that misconduct. But it determined that in cases of particularly egregious behavior, a court can award a party all of the attorney’s fees incurred in a case, without any need to find a “causal link between [the expenses and] the sanctionable conduct.” (citation omitted)

“As further support for its award, the District Court concluded that full and timely disclosure of the test results would likely have led Goodyear to settle the case much earlier. Acknowledging that the Ninth Circuit might require a link between the misconduct and the harm caused, however, the court also made a contingent award of $2 million. That smaller amount, designed to take effect if the Ninth Circuit reversed the larger award, deducted $700,000 in fees the Haegers incurred in developing claims against other defendants and proving their own medical damages. The Ninth Circuit affirmed the full $2.7 million award, concluding that the District Court had properly awarded the Haegers all the fees they incurred during the time when Goodyear was acting in bad faith.

Goodyear argued that, due to the failure of the court to link the fee with the misconduct, the fee award should be reversed and an instruction to the trial court to reconsider the matter. The Haegers argued that the award should be upheld because the lower courts articulated and applied the appropriate but-for causation standard, or, even if they did not, the fee award in fact passes the but-for test.

“The Haegers’ defense of the lower courts’ reasoning is a non-starter: Neither court used the correct legal standard. The District Court specifically disclaimed the need for a causal link on the ground that this was a “truly egregious” case. 906 F. Supp. 2d, at 975. And the Ninth Circuit found that the trial court could grant all attorney’s fees incurred “during the time when [Goodyear was] acting in bad faith,” 813 F. 3d 1233, 1249—a temporal, not causal, limitation. A sanctioning court must determine which fees were incurred because of, and solely because of, the misconduct at issue, and no such finding lies behind the $2.7 million award made and affirmed below. Nor is this Court inclined to fill in the gap, as the Haegers urge. As an initial matter, the Haegers have not shown that this litigation would have settled as soon as Goodyear divulged the heat-test results (a showing that would justify an all-fees award from the moment Goodyear was supposed to disclose). Further, they cannot demonstrate that Goodyear’s non-disclosure so permeated the suit as to make that misconduct a but-for cause of every subsequent legal expense, totaling the full $2.7 million.”

“Although the District Court considered causation in arriving at its back-up award of $2 million, it is unclear whether its understanding of that requirement corresponds to the appropriate standard—an uncertainty pointing toward throwing out the fee award and instructing the trial court to consider the matter anew. However, the Haegers contend that Goodyear has waived any ability to challenge the contingent award since the $2 million sum reflects Goodyear’s own submission that only about $700,000 of the fees sought would have been incurred regardless of the company’s behavior. The Court of Appeals did not address that issue, and this Court declines to decide it in the first instance. The possibility of waiver should therefore be the initial order of business on remand.”

The opinion held that “(w)hen a federal court exercises its inherent authority to sanction bad-faith conduct by ordering a litigant to pay the other side’s legal fees, the award is limited to the fees the innocent party incurred solely because of the misconduct—or put another way, to the fees that party would not have incurred but for the bad faith.”  The case was reversed and remanded.

Bottom line: This U.S. Supreme Court opinion is important since it addresses and resolves (at least in the federal courts) the question of whether a court exercising its inherent authority to sanction bad faith misconduct by awarding fees must limit the fees to those incurred as a direct result of the lawyer’s misconduct.  The opinion found in the affirmative and that the fees awarded must be shown to have been incurred solely as a result of the misconduct.

Be careful out there.

Disclaimer:  this e-mail is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

29605 U.S. Highway 19, N., Suite 150

Clearwater, Florida 33761

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

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Florida Supreme Court finds that attorney-client privilege prohibits inquiries into lawyer/doctor referral relationships

Hello everyone and welcome to this Ethics Alert which will discuss the important very recent Florida Supreme Court opinion which prohibit inquiries by defense counsel into referral relationships between the plaintiff’s law firm and a physician.  The case is Worley v. Central Florida Young Men’s Christian Ass’n, Inc., No. SC15-1086 (Fla. SC April 13, 2017).  The Florida Supreme Court opinion is here:  http://www.floridasupremecourt.org/decisions/2017/sc15-1086.pdf

The Florida Supreme Court considered the case because of a certified conflict under art. V, § 3(b)(4), Fla. Const. in the opinions of the Fifth District Court of Appeal (in this case) and the Second District Court of Appeal (in Burt v. Government Employees Ins. Co., 603 So. 2d 125 (Fla. 2d DCA 1992).

According to the opinion, Heather Worley was a plaintiff in a lawsuit against YMCA after she allegedly fell in a Florida YMCA parking lot.  Worley was represented by Morgan & Morgan.  At Worley’s depositions, YMCA’s lawyer asked if she was referred to her specialists by her attorneys and Worley’s lawyer objected on the ground that the information was attorney-client privileged.

YMCA then served interrogatories directed to specific doctors employed by three medical providers with whom Worley treated and also served a supplemental request to produce to Morgan & Morgan, to attempt to establish the existence of a referral relationship between Morgan & Morgan and the treating physicians.  The opinion states that “(t)hese efforts were based on YMCA’s suspicions that there was a ‘cozy agreement’ between Morgan & Morgan and the physicians, due to the amounts of Worley’s medical bills.”

Worley objected (through Morgan & Morgan) and stated that the discovery requests were “overbroad, vague, unduly and financially burdensome, irrelevant and in violation [of] allowable discovery pursuant to Florida Rule of Civil Procedure 1.280(b)(4).”  She also contended that Morgan & Morgan does not maintain “information for treating physicians as in this matter, or otherwise.”

At a hearing on Worley’s objections, “the trial court only sustained Worley’s objection to the question regarding whether she was referred to the doctors by her attorneys and ‘did not address Worley’s objections to YMCA’s other outstanding discovery requests at that time.’”  The Fifth DCA upheld the lower court’s order and relied on Florida district court decisions which held that the financial relationship between a law firm and a plaintiff’s treating physician is discoverable if evidence of a referral relationship can be shown.  Those cases relied upon the Florida Supreme Court’s decision in Allstate Ins. Co. v. Boecher, 733 So. 2d 993 (Fla. 1999).

In its 4-3 decision, the Court rejected the application of Boecher and found that the defense attorneys were prohibited from inquiring about the referral relationships between plaintiff’s firm, Morgan & Morgan, and Sea Spine Orthopedic Institute stating that “(a)llowing further discovery into a possible relationship between the physician and the plaintiff’s law firm would only serve to uncover evidence that, even if relevant, would require the production of communications and materials that are protected by attorney-client privilege.”  “We do not agree with the Fifth District’s attempt to circumvent the attorney-client privilege out of perceived necessity. The attorney-client privilege is the oldest confidential communication privilege known in the common law.”

“Even in cases where a plaintiff’s medical bills appear to be inflated for the purposes of litigation, we do not believe that engaging in costly and time-consuming discovery to uncover a “cozy agreement” between the law firm and a treating physician is the appropriate response. We are concerned that this type of discovery would have a chilling effect on doctors who may refuse to treat patients who could end up in litigation out of fear of becoming embroiled in the litigation themselves. Moreover, we worry that discovery orders such as the one in this case will inflate the costs of litigation to the point that some plaintiffs will be denied access to the courts, as attorneys will no longer be willing to advance these types of costs. Finally, attempting to discover this information requires the disclosure of materials that would otherwise be protected under the attorney-client privilege.”

The Supreme Court opinion quashed Fifth DCA’s decision permitting the discovery and approved the decision of the Second DCA.

Bottom line: This case is important since it addresses and appears to settle the question of whether the defense in a personal injury case (or any case) can use discovery to attempt to determine if there is a “cozy” relationship between the plaintiff’s law firm and treating medical providers.  The opinion found that the information sought was protected by the attorney/client privilege, §90.502(2), Fla. Stat., and that the discovery was prohibited.

Disclaimer:  this e-mail is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

29605 U.S. Highway 19, N., Suite 150

Clearwater, Florida 33761

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

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Filed under .S. Supreme Court, attorney/client privilege, Attorney/client privilege and confidentiality, Attorney/client privilege discovery of referral relationships with doctors, Confidentiality and privilege, joe corsmeier, Joseph Corsmeier, Lawyer ethics duties re subpoena for client confidential documents and information, prohibition of inquiries into lawyer/doctor referrals

Washington State Bar suspends some ethics opinions because of antitrust concerns arising from 2015 U.S. Supreme Court opinion

Hello and welcome to this New Year’s Eve 2015 Ethics Alert blog which will discuss the recent decision of the Washington State Bar to suspend some ethics opinions because of antitrust concerns arising out of the U.S. Supreme Court’s February 2015 opinion in North Carolina State Board of Dental Examiners v. Federal Trade Commission.  I previously blogged about the Supreme Court’s decision here: USSC NC dental licensing opinion, the LegalZoom antitrust lawsuit in North Carolina based upon the USSC opinion here: LegalZoom filed antitrust lawsuit against NC Bar and the settlement of that lawsuit here:  LegalZoom settles antitrust lawsuit against NC Bar.

According to a recent ABA Journal article, the Washington State Bar Association has advised its ethics committee to stop issuing ethics opinions which could be interpreted as having the effect of restraining trade in the legal services market.  The bar stated that it suspended the opinions so it could “proceed very deliberately” in the wake of the U.S. Supreme Court’s February 2015 opinion in North Carolina State Board of Dental Examiners v. Federal Trade Commission. 

That U.S. Supreme Court decision permitted an antitrust action against the North Carolina state dentistry board for its decision prohibiting non-dentists from whitening teeth to proceed. The opinion stated that when a state board is controlled by active market participants in the market it regulates, state-action antitrust immunity cannot be applied unless the restraint of trade is affirmatively expressed by state policy and the policy is actively supervised by the state.

Bottom line:  This is more fallout from the 2015 USSC Dental Board decision.  As I have stated in my previous blogs, there have been lawsuits against state Bars in the past attacking the entity’s state action immunity.  The Supreme Court opinion refers to three specific cases and appears to suggest that these cases should be interpreted to mean that only the actions of a state entity which is actively supervised by the state (i.e. the Supreme Court in the case of a state Bar) have antitrust immunity and the rest of the entity’s actions may not have such immunity.

I wish you and yours a very happy and healthy 2016!

Disclaimer:  this e-mail is not an advertisement and does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

2454 McMullen Booth Road, Suite 431

Clearwater, Florida 33759

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

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Filed under .S. Supreme Court, Attorney Ethics, Bar antitrust, BAR UPL antitrust, joe corsmeier, Joseph Corsmeier, Lawyer antitrust, Lawyer ethics, LegalZoom, LegalZoom antitrust, North Carolina Dental Board, Uncategorized