The California Court of Appeal (Fourth District, Division Three), in an unpublished opinion, reversed a $50 million punitive damages award on the ground that plaintiff failed to put forward evidence of defendant's net worth. This is a common mistake plaintiff's lawyers make, as seen in our prior post here. The court went on to point out that a plaintiff may be able to get around this failure of proof in situations where "net worth may be subject to manipulation, requiring the court to consider other financial indicators of a defendant's ability to pay." As an example, the court cited Zaxis Wireless Communications, Inc. (2001) 89 Cal.App.4th 577, 582-583 for the proposition that a "$300,000 punitive damage award [can be] upheld despite large negative net worth where defendant had annual gross revenues in excess of $100 million and cash on hand of $19 million." By contrast, the punitive damage award in this case had to be reversed because: "Here, plaintiffs point to the income calculations for [defendant] used in supporting their compensatory damages claim, in which they determined [defendant] earned $8,128,800 per year in net income. Viewed in this light, the $50 million punitive damage award represented approximately six times [defendant's] annual income. Such an award would be ruinous to any company, not to mention its owners."
Will plaintiff's lawyers learn their lessons?
June 25, 2009
Electronic Funds Solutions, LLC v. Murphy: Court of Appeal Reverses Punitive Damage Award That Is Six Times Defendant's Annual Income
Posted by
Jeremy Rosen
at
4:31 PM
Labels: California Court of Appeal, Financial Condition Evidence