Federal Appeals Court Upholds Goodyear Sanctions

The Safety Record Blog has been most pleased to inform our readership, from time to time, of the skullduggery emanating from the corporate offices of the Goodyear Rubber Company. Goodyear has made quite name for itself as champion discovery hardball player – years-long production delays, withholding relevant documents, offering less-than-truthful testimony from corporate reps and lying repeatedly right to the judge’s face about the evidence in its possession. At last count, we were aware of seven tire cases in which Goodyear’s fine counselors were reprimanded, or ruled against, or sanctioned for playing fast and loose with the rules of evidence.

This week, the tire manufacturer’s dubious legal reputation was further cemented by a U.S. Ninth Circuit Court of Appeals decision affirming a lower federal court decision that imposed some onerous sanctions on Goodyear, led by then in-house litigation chief Deborah Okey, Basil Musnuff, formerly of Roetzel & Andress and formerly Goodyear’s national coordinating counsel, and local counsel Graeme Hancock of Fennemore Craig PC. The three-judge panel voted 2-1 to uphold U. S. District Judge Roslyn O. Silver’s $2.7 million sanction against the trio for months of refusal to acknowledge the existence of and turn over G159 tire testing documents in Haeger v Goodyear, and an order requiring Goodyear to file copy of her order in any G159 case initiated after November 2012.

Judges J. Clifford Wallace and Milan D. Smith, Jr., both Republican appointees, voted to affirm Silver’s order. Obama appointee Paul J. Watford wrote the dissent.

The majority found that it was “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.”

The ruling, filed on Monday, comes a dozen years after the crash that seriously injured Leroy and Donna Haeger, and with their passengers, Barry and Suzanne Haeger, when the right front G159 tire on their Spartan Gulf Stream Coach failed, causing a rollover. In the 1990s and 2000s, Goodyear had specifically marketed the G159 for Class A motorhome applications, even though it knew from testing that the tire design was prone to overheat on RVs that typically travel at greater than 65- mph speeds for extended periods. Predictably, G159 tires on RVs failed, injuring and killing motorhome occupants and taking center stage in the lawsuits that followed. The Haegers filed suit in 2005. Over five years of litigation with more than 1,000 pleadings, they settled the case in 2010. During the litigation, the Haegers’ attorney, David L. Kurtz, asked for all G159 internal testing but Goodyear only turned over compliance tests to the National Highway Traffic Safety Administration, showing that the G159 met federal standards and swore to Judge Silver that there was nothing else.

In June 2010, Kurtz learned from The Safety Record Blog about a $5.7 million plaintiff’s verdict in another G159 case, Schalmo v Goodyear. At trial, the blog reported, Schalmo’s attorneys presented Goodyear documents including internal heat and speed testing and failure rate data showing that Goodyear knew the G159 was improperly approved for 75 mph continuous highway use. Kurtz wrote to Musnuff to determine if Goodyear had withheld those tests in his case. Musnuff admitted that Goodyear had, but argued that it wasn’t obligated to turn over any more than its NHTSA compliance test results.

Silver, the Chief Justice of the Arizona District Federal Court, had a different opinion. In response to Kurtz’s May 2011 motion alleging discovery fraud, she painstakingly re-created the twisted trail of trial tactics going back to November 2006. After two years of litigation over the fraud allegations, with numerous hearings and 14 briefs filed by the Goodyear lawyers, Silver found that Goodyear had deliberately thwarted the discovery while presenting to the court a “dizzying array of misstatements and simple falsehoods” to cover up the existence of Heat Rise, extended DOT, crown durability, and the bead durability tests. She also found that Goodyear, if forced to acknowledge them, lied about what they indicated about the RV application for the G159. She noted that similar behavior had taken place in two other Goodyear G159 cases: Woods and Bogaert.

She ordered Kurtz to tally the value of his time over the five years of trying to get Goodyear to comply with his requests. Hancock, Goodyear’s local counsel, was ordered to pay 20 percent of the total and Musnuff and Goodyear were to split the remaining 80 percent. Silver ordered Goodyear to file a copy of her Order in any G159 case initiated after November 2012, suggested that Kurtz mount a separate legal action against the trio for discovery fraud. and hinted that their behavior would have unfortunate professional consequences.

Judge Silver determined the final amount of the monetary portion of the sanctions order to be $2,741,201.16, with $542,240.83 coming out of Hancock’s personal pocket and $2,192,960.93 from Musnuff and Goodyear. Both Goodyear and Hancock got supersedeas bonds, covering the sanction amounts, plus two years of interest, to obtain a stay of enforcement during appeal.

Kurtz said that the Haeger family has been waiting a long time for justice. Leroy Haeger who passed away in 2008, did not live to see the conclusion of the litigation; Suzanne Haeger who was in her late 60s when the crash occurred is now in her early 80s.

“She is still waiting for her trial,” Kurtz said. “This is all about doing the right thing. The Haegers didn’t understand how justice could be so evaded and they are thrilled to see the system function. After that long wait they are thrilled to see that firm guiding hand and that this conduct won’t be tolerated.”

The hour-plus of oral arguments before the Ninth Circuit, published last March, make for interesting viewing. (Watch  Leroy Haeger v. The Goodyear Tire & Rubber Co before the Ninth Circuit Court of Appeals.) Pierre H. Bergeron representing Goodyear argued that Okey couldn’t be held responsible, because she relied entirely upon Musnuff and Hancock – although her lawyer conceded that she “was not a potted plant” in the process. Hancock’s counsel, Andrew M. Jacobs, argued his client couldn’t be responsible, because he relied on information provided by Goodyear. And, Musnuff’s lawyer, Mark I. Harrison, argued that it was all Kurtz’s fault for not properly asking for the other tests in the first place.

Judge Smith appeared to be mighty disturbed by the record Judge Silver had compiled. Literally 10 seconds into Bergeron’s argument that there was no clear and convincing evidence that Okey acted in enough bad faith to justify those sanctions, Smith said: “Let me just stop you right there last night, I re-read Judge Silver’s documentation, I don’t think I’ve ever seen a more thorough recitation of facts in a contempt situation than what she did… lies, misrepresentations, failures to state, etcetera, etcetera, etcetera. At least speaking for myself, I respectfully suggest if your argument is the sufficiency of evidence you aren’t going to get very far with me.”

He later dismissed some of the defendants’ arguments as “sophistry,” and complained of an “epidemic” of these maneuvers used “by the big guys to beat up on the little guys.”

In Monday’s decision, the Appeals Court rebuffed Goodyear’s attempts to “argue that the district court abused its discretion in preventing Goodyear from passing the blame on to its attorneys,” or to argue the abuse of discretion “in concluding that Goodyear participated directly in the discovery fraud.” The appellate judges reminded Goodyear corporate representative “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.

Similarly, it found no cause to reject Silver’s order that Goodyear disclose its unethical behavior to future G159 litigants and calling her ruling “balanced,” “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.”

Finally, the majority found that Silver had proceeded cautiously and fairly:

“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.”

Kurtz says that the ruling will pave the way for the Haeger’s fraud case against Goodyear, Hancock, Okey and Musnuff. In May 2013, at Judge Silver’s suggestion, the Haegers filed a separate action alleging four counts of fraudulent misrepresentation, nondisclosure, concealment and negligent misrepresentation. Based on the facts of misconduct outlined in Judge Silver’s order, the suit zips right to punitive damages “to punish and deter defendants for their willful, outrageous and evil misconduct.”

Given the stakes – fines, and possible state bar association disciplinary proceedings against the individual lawyers — it seems likely that that the defendants will appeal the panel’s ruling and ask for a full review. Goodyear may have stopped making the G159 a dozen years ago, but the case against it and those employed in its defense, will apparently roll on.   

Prior Safety Record Blog stories on Haeger