March 19, 2009

Red Hill Enterprises v. Gould: Defendant Who Refuses To Turn Over Requested Documents Cannot Challenge Plaintiffs' Failure to Prove Net Worth

Yesterday, the California Court of Appeal (Second District, Division Seven) issued this unpublished opinion reversing a nonsuit order and allowing the plaintiff to proceed with a claim for punitive damages.

This fraud trial was bifurcated into two phases. Before the trial began, the plaintiff asked the defendant to produce certain documents regarding its financial condition, so that the plaintiff could meet its burden of proving the defendant's net worth in the punitive damages phase of the trial. (See our prior posts about other recent opinions apply this unique rule of California appellate procedure.) After the jury ruled for the plaintiff in the first phase, the defendant said it would promptly produce the requested documents for the plaintiff's review. A few days passed and the defendant failed to turn over the documents as promised. Instead, the defendant waited until the morning of the second phase of the trial and then turned over only some of the documents.

The plaintiff tried to establish the defendant's financial condition through other means, such as asking the trial court to take judicial notice of public records. The trial court shot down all of the plaintiff's requests, and then granted nonsuit on the ground that the plaintiff had failed to present sufficient evidence of the defendant's financial condition.

The Court of Appeal reversed, ruling that the defendant, by failing to turn over the requested documents, forfeited its right to complain about the plaintiff's failure of proof. In so doing, the court extended the holding of Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597. That opinion found a forfeiture where the defendant refused to comply with a court order to turn over financial condition documents. The court here extended that ruling to situations where the is no court order, only a request by the plaintiff.

The Court's reasoning makes sense to me, so long as the record established that the defendant actually had additional documents that it failed to turn over. When a defendant turns over all the information in its possession, there should be no forfeiture, even if the defendant's documents are inadequate to establish the defendant's net worth. The defendant should not be required to create documents to satisfy the plaintiff's burden. If the defendant does not have an adequate statement of its net worth, the plaintiff bears the burden of gathering the necessary information, by eliciting testimony from the defendant or through other means. In this case, however, it seems that trial court blocked the plaintiff from pursuing any other means, leaving the plaintiff with no way to meet its burden.