February 1, 2008

Gnesda v. UPS—California Court of Appeal Vacates Punitive Damages Award in Unpublished Opinion

This opinion is unpublished, but notable for a few reasons.

First, the punitive damages verdict was a big one - $20 million. Compared to roughly $750,000 in compensatory damages, that's a ratio of about 27 to one. The trial court reduced the punitive damages to $3.5 million (a ratio of 4.7 to one) and both sides appealed.

Second, the Court of Appeal vacated the punitive damages award in its entirety because the plaintiff failed to meet his burden of proving the defendant's financial condition. California has a unique requirement that a plaintiff must introduce evidence of the defendant's financial condition in order to recover punitives. The evidence must provide meaningful insight on the defendant's ability to pay, as of the time of trial. Evidence of earnings or assets, without evidence of liabilities, is not enough. The California Supreme Court announced this rule in 1991, but every year there are a few appellate decisions reversing a punitive damages award on this basis. Here, plaintiff introduced evidence of the defendant's income a few years before trial, but did not prove the defendant's net worth at the time of trial. Because of that, the plaintiff is out $3.5 million.

Incidentally, this case featured two prominent California appellate lawyers: professor Erwin Chemerinsky for the plaintiff and former appellate justice Dan Kolkey for the defense.