Section 55 Bad Faith Exception

• Library: Damages 2012

Unlike Missouri courts, federal courts recognize a bad faith exception to the American rule. The bad faith exception arises from the seminal Eighth Circuit case of Guardian Trust Co. v. Kansas City Southern Ry. Co., 28 F.2d 233 (8^th Cir. 1928), rev’d on other grounds, 281 U.S. 1 (1930). The exception is based on what is viewed as the court’s inherent equitable power to punish parties who conduct all or part of an action in bad faith, in a vexatious or wanton manner, or for oppressive reasons. BDT Prods., Inc. v. Lexmark Int’l, Inc., 602 F.3d 742, 752 (6^th Cir. 2010); Int’l Union, United Auto., Aerospace & Agric. Implement Workers of Am. v. United Farm Tools, Inc., Speedy Mfg. Div., 762 F.2d 76 (8^th Cir. 1985); see also First Nat’l Bank in Sioux Falls v. Dunham, 471 F.2d 712 (8^th Cir. 1973) (upholding an award of attorney fees for evasive and dilatory tactics, misleading testimony, attempted bribery, and falsification of records).

The bad faith exception applies with respect to pre-suit conduct, which induces unnecessary litigation. See:

· Vaughan v. Atkinson, 369 U.S. 527 (1962) (a seaman was entitled to reasonable attorney fees as damages for the failure to pay maintenance and cure when he...