May 25, 2018

Court of Appeal reverses $300,000 punitive damages award for lack of financial condition evidence (B.C. v. Cottone)

This unpublished opinion is the latest in the long line of California decisions reversing a punitive damages award because the plaintiff failed to present meaningful evidence of the defendant's financial condition.

The plaintiff here presented evidence of the defendant's assets, but no evidence of debts or liabilities. Although the assets included real estate with a value exceeding $3.4 million, the jury could not determine the defendant's financial condition (and ability to pay punitive damages) without knowing the other side of the balance sheet.  Accordingly, the Court of Appeal (Fourth District, Division Three) reversed the jury's award of $300,000 in punitive damages.

The plaintiff argued that once she presented evidence of the defendant's assets, the burden shifted to the defendant to prove his inability to pay.  The Court of Appeal disagreed, explaining that when a plaintiff presents a complete picture of the defendant's financial condition, only then does the burden shifts to the defendant to show an inability to pay.  But when a plaintiff presents only information about assets, the burden does not shift to the defendant or present evidence of liabilities.

The plaintiff also tried to blame the defendant for the lack of evidence.  She said he was evasive and nonresponsive when answering questions about his financial condition during trial. The Court of Appeal, however, blamed the plaintiff for not introducing into evidence the financial documents she received from the defendant.  The court also noted that the plaintiff failed to call other available witnesses (like the defendant's wife), and did not object in the trial court that the defendant failed to produce information that was requested. 

Ordinarily, when a plaintiff fails to meet his or her burden of proof on this issue, the appropriate remedy is to enter judgment for the defendant on the issue of punitive damages.  The plaintiff does not get a second bite at the apple.  But in this case, the Court of Appeal took the unusual step of ordering a new trial on punitive damages, based on the following considerations: (1) the defendant "bears some responsibility for the evidentiary shortcomings" due to his evasive and nonresponsive answers, (2) the evidence in the record shows that the defendant possessed substantial assets, and (3) the conduct that led to the punitive damages award was extremely reprehensible.