The District Court Did Not Have The Benefit Of The Goodyear Tire Decision At The Time It Issued The Sanctions Order So A Remand Was In Order.
America Unites For Kids v. Rousseau, Case No. 16-56390 (9th Cir. January 22, 2021) (published), has a nice discussion on the procedural requirements and substantive limitations that apply when a district court imposes sanctions under its inherent authority, rather than pursuant to any statute or rule.
In this case, two nonprofit environmental organizations sued Santa Monica Malibu Unified School District administrators and board members to enforce the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601-2629. Specifically, they sought remediation of several school buildings containing dangerous levels of polychlorinated biphenyls (PCBs). PCBs, which the EPA concluded to be hazardous in concentrations of 50 parts per million or more, were used prior to 1978 to enhance pliability in products such as caulk, adhesives, and paint.
To resolve a discovery issue between the parties, the district court limited plaintiffs’ testing for PCBs to air and wipe sampling – only allowing testing of caulk or more invasive testing if the air/wipe sampling revealed the necessity. After the first nonprofit disobeyed the orders and conducted unauthorized testing, the district court, under its inherent authority, issued six separate sanctions against first nonprofit and five separate sanctions against second nonprofit for its attempt to profit from the unauthorized testing. One of the imposed sanctions struck both nonprofits’ prayer for attorneys’ fees, expert witness fees, and costs, which otherwise likely would have been allowed under 15 U.S.C. § 2619(c).
After conducting trial, the district court entered judgment in favor of first nonprofit, issued a permanent injunction against the district from using offices/classrooms built before 1979 unless they were remediated, dismissed second nonprofit for lack of standing, and ordered each party to bear its own costs and attorneys’ fees.
The Ninth Circuit, through a 2-0 majority decision by District Judge Simon (District Judge for the District of Oregon, sitting by designation), vacated and remanded the district court’s sanctions order in its entirety and reversed the district court’s dismissal of second nonprofit for lack of standing.
As to the sanctions, the Ninth Circuit – recognizing that the district court did not have the benefit of Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178 (2017) [discussed in our April 23, 2017 post] when it issued its sanctions ruling under its inherent authority – found that the district court failed to apply the “but for” standard directed in Goodyear Tire for any sanctions it imposed as compensatory rather than punitive, failed to provide plaintiffs with the required criminal procedural safeguards for the punitive sanctions imposed, and failed to make explicit findings of either: (1) a willful violation of a court order; or (2) bad faith.
As to the district court’s dismissal of second nonprofit, the Ninth Circuit concluded that although second nonprofit did not have members per se, it had associational standing in the lawsuit. A close connection exists between second nonprofit’s mission and the interests of its non-member teachers – enough to give the nonprofit a personal stake in the outcome of this lawsuit.
Circuit Judge O’Scannlain dissented on the sanctions and lack of standing issues – finding that the Goodyear Tires framework did not apply to the district court’s denial of attorneys’ fees, that the denial was a proper exercise of the district court’s discretion under TSCA, and that other sanctions were not properly challenged by plaintiffs on appeal. As to the lack of standing issue, Judge O’Scannlain found that second nonprofit failed to provide evidence it was an association or that teacher who supported the organization was the functional equivalent of a member.