As anyone who likes to think about words and the English language will agree, “sanction” is an odd word.
It can mean its opposite as in “The N.F.L. sanctioned the Make-a-Wish Foundation event” vs. “The judge sanctioned the N.F.L. lawyers.”
One sentence uses “sanction” to mean “officially permit” or “approve.” The other means a “penalize,” “punish,” or “deter.” (Word nerds call such words “Janus words,” “contronyms,” or “auto antonyms.” Another example is “screen,” which can mean “to show,” “to examine,” or “to conceal”.)
The word “sanction” standing by itself is confusing enough. Now the U.S. Supreme Court tells lawyers that a sanction, as it thinks of the word, at least, is not “punitive in nature.” A court sanction, they say, is compensatory according to Goodyear Tire & Rubber Co. v. Haeger, a unanimous decision of the U.S. Supreme Court last week.
How many ways is the U.S. Supreme Court’s analysis wrong (even if the decision’s outcome might be right)?
First, the holding is contrary to the “plain meaning” of the word, “sanction.” When used in connection with U.S. court rules (such as Rule 11 and Rule 37), it is not possible to argue that “sanction” means anything other than “punishment” or “discipline.”
Second, in the Haeger case the U.S. Supreme Court suggested that “the Haegers had spent $2.7 million in legal fees and costs.” Who, reading this, thinks that Leroy and Donna Haeger ever paid their lawyers $2.7 million? Who thinks the Haegers would ever have been obligated to pay their lawyers fees? The Haegers were personal injury plaintiffs. The suggestion that they paid their lawyers $2.7 million in fees is hard to believe. In all likelihood, their lawyers took the case on a contingent fee agreement, where they, the Haegers, were charged NO attorneys’ fees and, in return, they agreed to give the lawyers a percentage of their recovery. (Even if the Haegers were not typical contingency fee clients, we all know this is a common arrangement.)
Third, the Court held that sanctions must be “causally related” to “a litigant’s misconduct.” That is a silly thing to say because no one ever suggested otherwise. It is obvious that a punishment must be causally related to the misconduct.
Later in the opinion, the Court clarifies that it does not really mean that the sanctions must be “causally related” to a “litigant’s misconduct” though these are the exact words the Court used at the beginning of the opinion. Rather “the fee award may go no further than to redress the wronged party ‘for the losses sustained’; it may not impose an additional amount for the sanctioned party’s misbehavior.” A sanction “is limited to the fees the innocent party incurred solely because of the misconduct.”
To begin to understand the problem with this fourth point, go back to the second one. In contingent fee litigation, how does one measure “the losses sustained”?
Fourth, because of the trial court’s “superior understanding of the litigation,” the Supreme Court held that the trial court’s decision should be given “substantial deference on appeal” and, furthermore, the trial courts should apply “rough justice” rather than “auditing perfection.” (And then the court suggests to the trial court that a “do-over” might be required (or maybe not)).
Fifth, building on the previous point, even putting the complication of contingent fee compensation to the side, how can trial courts tabulate the amount of dollar losses caused by litigation misconduct? Sure, it is easy to imagine scenarios where the calculation might be easy. Here’s one: “Adversary” denied that Tortfeasor was Adversary’s employee, destroyed Tortfeasor’s employment records, and Plaintiff had to marshal all kinds of evidence to prove Adversary employed Tortfeasor. In theory, the cost of having to marshal that evidence could be tallied easily. But, for every scenario we can imagine where the calculation would be relatively easy, there are many where it would be impossible. Here’s one: Adversary is found to have had dozens of draft reports before a final report and Adversary intentionally destroyed all of the drafts to avoid producing them in the litigation. Might a financial sanction be warranted? How is the Plaintiff or the trial court to calculate “the losses sustained”? (Or, a far more common situation: a responsive document was owed at Date 1 but not produced until Date 421 (two months before trial). What are “the losses sustained” by the wronged party?)
Sixth, the U.S. Supreme Court suggests that, if a sanction is a “penalty” (which it obviously is) “a court would need to provide procedural guarantees applicable in criminal cases such as a ‘beyond reasonable doubt’ standard of proof.”
Didn’t the justices just say that “rough justice” would suffice? It is unthinkable that a party is entitled to a jury trial before being sanctioned or is entitled to the ‘beyond reasonable doubt’ standard of proof before a sanction could be imposed.
To us, the frustrating paradox in the Haeger case is that the ultimate decision — that the $2.7 million sanction might be too steep (or maybe not) is not particularly troubling. The basic point that a litigant should rarely get 100 cents on the dollar for all fees and costs incurred in litigation as a sanction sounds right. Furthermore, we can all imagine and appreciate that the penalty for a litigant’s misbehavior must be tied to some degree to the harm caused to the lawsuit (and not to the “costs incurred” or fees paid). If, for example, a products liability defendant intentionally destroyed evidence (say, design drawings) that, as it turned out, were unrelated to the allegedly defective injury-causing product (say, a later model), most would agree that the sanction should be less severe than if the intentional misconduct successfully damaged the ability to litigate the case.
The size of the sanction should be tied to and commensurate with the harm to the adversary, to the lawsuit, and to the justice system, as impossible as it is to quantify that with precision (“rough justice,” by necessity) — not tied to how much money the misconduct cost in lawyering, which may often be both incommensurate and incalculable.
In the end, we will only note that the U.S. Supreme Court seems extremely mindful of the risks of excessive punitive damages or excessive sanctions but the U.S. Supreme Court seems totally indifferent to the risks posed by inadequate punitive damages or insufficient sanctions.