August 26, 2009

Martin v. Harpaz: $6.6 Million in Punitive Damages Reversed Because of Insufficient Financial Condition Evidence

The California Court of Appeal (Second Appellate District, Division One) issued this unpublished opinion yesterday, reversing a punitive damages award because the plaintiff failed to introduce sufficient evidence of the defendants' financial condition. The punitive damages awards, against 5 different defendants, totaled $6.6 million.

The plaintiff, apparently aware of California's rule requiring plaintiffs to present meaningful evidence of the defendant's financial condition, introduced some evidence of the defendants' finances. The evidence showed the defendants had some large cash receipts for their business operations, but it also showed that the defendants' had massive debts, and that some of the defendants had declared bankruptcy. Apparently, the plaintiffs offered no forensic accountant or other expert to estimate the defendants' net worth.

After a bench trial, the trial court awarded punitive damages awards based on its conclusion that none of the defendants' testimony regarding their net worth was worthy of belief. Thus, the trial court seemed to mistakenly believe that the defendants, rather than the plaintiffs, had the burden of proof on this issue.

The Court of Appeal reversed. It ordered all the punitive damages awards stricken from the judgment because the plaintiffs had failed to present evidence of the defendants' net worth. By my quick count, this is the seventh unpublished California opinion this year reversing a punitive damages award because of the plaintiffs' failure to present meaningful financial condition evidence.