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2) According to US case law, Federal courts can punish misconduct before them (1) occurring in the litigation itself, not in the events giving rise to the litigation (for then the punishment would be a product of substantive law--designed, for example, to deter breaches of contract), and (2) not adequately dealt with by other rules, most pertinently here Rules 11 and 37 of the Federal Rules of Civil Procedure. Nevertheless, Lenell did not violate these rules in the procedure before the district court because Lenell’s alleged misconduct in failing to pay undisputed amounts did not occur during the litigation and thus could not serve to invoke the court’s inherent authority to punish misconduct before the court.
3. The reason for remand
1) Based on the reasons mentioned above, the appellate judge alleged that it is useful to remand the case to point out by the district court the exact amount of damage for breach of contract excluding attorney’s fees.
2) Lenell argues that the jury verdict should be set aside because the judge by his comments in open court signaled to the jury his scorn for Lenell’s case. The appellate court held that by signaling to the jury the judge’s opinion as to how the case should be decided, the district judge undermines the authority of the jury. So, the appellate judge thought that it best that the further proceedings be conducted before a different judge.
VI. My Evaluation
I agree with the opinion of Judge Posner. His reasoning within his analysis of whether the damage for breach of contract should include attorney’s fees is so sound and logical that I have no comments on his legal analysis at all.
Nevertheless, I will make a comment on this issue from a point of view of law and economics. Had the winner in a suit been granted the right to be reimbursed for her/his attorney’s fees by the loser, a moral hazard would be produced herein. Under such situation, the attorney’s fees would be totally externalized to the loser. In another word, the winner has no incentive to save his money. Further, according to the theory of prisoner dilemma both parties would prefer to retain the best lawyer, and also the most expensive lawyer, since they are price-insensitive. Another outcome would be that the losing party will appeal again and again as long as the procedural rules allow doing so. Provided she/he won finally, the other party would pay all the bills. Accordingly, they do not need to care about their attorney’s fees. Both outcomes will inevitably lead to considerable loss of social welfare.
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