February 9, 2012

Unpublished opinion vacates $1 million punitive damages award because plaintiff failed to introduce meaingful evidence of defendant's financial condition (Nesbitt v. Emmanuel)

Here's yet another unpublished opinion in which the California Court of Appeal (Second District, Division Four) reversed a punitive damages award because the plaintiff failed to introduce meaningful evidence of the defendant's financial condition.

The defendant in this case did not file a new trial motion in the trial court challenging the damages award.  Ordinarily, defendants must file a new trial motion in order to preserve the right to attack the amount of damages on appeal.  But the Court of Appeal permitted the defendant to challenge the punitive damages for the first time on appeal, citing footnote five of Adams v. Murakami, which held that defendants cannot waive a challenge to the sufficiency of the evidence regarding their financial condition, because such arguments are rooted in public policy.

Turning to the merits, the court described the evidence of the defendant's financial condition as follows:

  • he had an annual income of $201,600
  • he had a tenant, but there was no evidence of the amount of his rental income
  • he was licensed as a real estate agent, but there was no evidence regarding his ability to operate a profitable real estate practice
  • he owned a condominium, but there was no evidence of his equity
  • he had recently purchased several pieces of real property, but there was no evidence of whether he still owned these properties at the time of trial and, if so, whether they were encumbered by debts
  • his liabilities were unknown  
The court concluded this evidence was not sufficient to establish that he could pay a $1 million punitive damages award without being financially destroyed.  Accordingly, the court vacated the punitive damages award.