September 27, 2011

Two recent unpublished opinions adress the sufficiency of financial condition evidence (Sylester Flowers v. Hillyer and Madriz v. Ochoa)

On Sept. 23 the California Court of Appeal issued two unpublished opinions addressing whether a plaintiff had presented sufficient evidence of the defendant's financial condition to sustain an award of punitive damages.

In Sylester Flowers v. Hillyer, the First Appellate District, Division Five, reversed a $4.8 million punitive damages award because the plaintiff's presentation on the defendant's financial condition was insufficient.  Interestingly, the defendant in that case had repeatedly refused the plaintiff's requests for financial documents, and failed to comply with an initial court order requiring disclosure of financial information.  Other cases have found that a defendant who fails to comply with such an order cannot later complain about the absence of financial condition evidence. (See, e.g., Mike Davidov v. Issod.)  But the court here found no waiver, in part because it was not clear whether the defendant ultimately complied with the trial court's final order compelling discovery of financial records, and also because the plaintiff failed to request the financial condition evidence for the purpose of obtaining punitive damages.  The court noted, “There is no indication that plaintiffs sought — or that the trial court ordered — pretrial discovery of [defendant’s] financial condition pursuant to Civil Code section 3295, subdivision (c),” and there was no indication that plaintiffs served a trial subpoena to bring financial records to court, or sought a court order for discovery regarding finances after the liability finding.  In other words, just asking for the info is not enough; the plaintiff has to explain that the info is needed in connection with punitive damages. 

In Madriz v. Ochoa, the Sixth Appellate District affirms $30,000 in punitive damages, finding that the plaintiff's evidence on financial condition, although not perfect, was good enough.  The evidence established that the defendant earned at least $100,000 per year, owned some real property, had at least $26,000 in cash, and had a history of making large cash deposits to various accounts.  Although the evidence didn't establish the defendant's liabilities, the court said the evidence of income and assets was sufficient to sustain the jury's relatively modest punitive award.