Targate’ sanctions on hold over Supreme Court case

By Scott Steepleton, News-Press City Editor

May 12, 2017 5:09 AM

The state’s payment of nearly $1 million in sanctions to a Santa Maria oil company is on hold pending review of the award in light of a recent U.S. Supreme Court decision.

At issue is whether the award ordered by a federal judge in Los Angeles to the company formerly known as Greka Oil & Gas Inc. exceeds the costs incurred by the company solely based on government misconduct.

On April 18, the high court issued an 8-0 decision reversing a lower court’s ruling that Goodyear Tire and Rubber Co. pay $2 million in sanctions for hiding internal documents pertaining to a lawsuit filed by a family who said their Goodyear tire overheated

at highway speed and blew, causing their motor home to overturn.

he question before the Supreme Court: Did the lower court award of sanctions, upheld by the 9th U.S. Circuit Court of Appeals, exceed the costs incurred by the family?

Or, as Justice Elena Kagan pondered in writing for the high court: Were sanctions limited to fees the family “would not have incurred” but for Goodyear’s bad faith?

Seven justices signed the Kagan opinion that found the award excessive and the matter was sent back to the lower court for reconsideration. (Newly appointed Justice Neil Gorsuch took no part in the consideration or decision.)

As the court in Washington, D.C., was considering the Goodyear matter, on the West Coast, a special master appointed by Judge Fernando Olguin of the U.S. District Court for the Central District of California was considering whether the state should pay Greka

successor HVI Cat Canyon nearly $1 million in sanctions for misconduct that another judge equated to the Watergate scandal.

The question was one aspect of a joint state-federal lawsuit against the oil company filed in 2011 that concerns oils spills at its Santa Maria leases that date back to 2005.

A federal magistrate last year recommended the state pay sanctions, and that decision was ordered by a federal judge in November 2016.

But Judge Olguin later reversed the order, and put the decision in the hands of a special master, retired federal Judge William McCurine Jr.

On April 17 – one day before the Supreme Court’s decision – Judge McCurine signed an order awarding sanctions to the oil company. In doing so, he noted “justice delayed is justice denied.”

Judge Olguin approved the recommendation and the state was given a deadline of May 10 to make the bulk of the payment, $764,933.

But instead of paying, the state, through California Attorney General Xavier Becerra, sought to put the funds in escrow, the idea being HVI Cay Canyon is likely to pay millions in fines, so why not simply subtract the state’s sanctions from the company’s fines?

A decision on that request – and on all other matters in the case, including proceeding to trial – was put on hold by Judge Olguin so he could rule on a government motion for partial summary judgment.

With the sanctions deadline a day away, Judge Olguin stayed that order citing the U.S. Supreme Court decision.

“The matter is referred to the special master for a report and recommendation that, at a minimum, addresses the impact, if any, of the (Goodyear) decision on the imposition of sanctions and amount of monetary sanctions.”

Given the order, Judge Olguin denied the state’s escrow request as moot.

In considering a federal court’s inherent authority to sanction a litigant for bad-faith conduct by ordering it to pay the other side’s legal fees, Justice Kagan wrote, “We hold that such an order 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.”

While noting a district court has “broad discretion” to calculate fee awards under that standard, Justice Kagan continues, “because the court here granted legal fees beyond those resulting from the litigation misconduct, its award cannot stand.”

email: ssteepleton@newspress.com