April 4, 2011

LeFlore v. MTA: $150,000 in punitive damages vacated due to lack of meaningful financial condition evidence

Here's yet another California appellate opinion reversing a punitive damages award because the plaintiff failed to introduce meaningful evidence of the defendant's financial condition.

The trial proceedings in this case began as an employment discrimination lawsuit against the Los Angeles County Metropolitan Transit Agency by a former employee.  The trial ended with a damages award against the ex-employee, as a result of the MTA's cross-complaint for misappropriation and fraudulent inducement.  The MTA's cross-complaint alleged that the ex-exmployee misrepresented his employment history in his employment application and retained confidential documents belonging to MTA after he was fired.  A jury agreed and awarded the MTA $600,000 in compensatory damages and $150,000 in punitive damages.

On appeal, the California Court of Appeal (Second Appellate District, Division Three) issued an unpublished opinion affirming the liability findings but reversing the punitive damages because the record contained no meaningful evidence of the ex-employee's financial condition.  The record contained evidence of his income after he was fired, but no evidence of his assets or liabilities.

The MTA tried to get around that problem by arguing that the ex-employee provided evasive and inadequate responses to questions regarding his financial condition in discovery and at trial, and thereby waived his right to complain that the record lacked information about his finances.  The Court of Appeal rejected this argument on two grounds.  First, it observed that unlike other cases where a waiver was found (e.g., Mike Davidov v. Issod), this case did not involve a defendant's failure to comply with a court order; the MTA did not request any such order and the trial court never issued one.  Second, the MTA had only requested information about income and tax returns, which even if produced would not have sufficent to establish the ex-employee's financial condition and ability to pay.