Must Plaintiff prove Defendant’s wealth to claim punitive damages? Doe v. Lee

By Eric Ganci

If a person has acted improperly (negligently or maybe intentionally) and harmed someone else, sometimes California law allows Plaintiff to seek “punitive damages.” These damages serve to compensate the Plaintiff for injuries…and to punish the Defendant for the wrongful acts.

As personal injury lawyers in San Diego, we see punitive damages in our cases. Although not as often as cases without punitive damages.

The recent decision Doe v. Lee (filed 5/13/22 and cited as 2022 WL 1969685) has good information regarding whether a verdict for punitives is excessive in the eyes of the law.

Our California Supreme Court has given 3 factors to decide if a punies award is excessive:

Factor 1: the reprehensibility of a defendant’s actions: “the more reprehensible the act, the greater the appropriate punishment, assuming all other factors are equal.”

Factor 2: the relationship between the amount of compensatory and punitive damages, because “even an act of considerable reprehensibility will not be seen to justify a proportionally high amount of punitive damages if the actual harm suffered thereby is small.”

Factor 3 (which the Court focuses on in Doe v. Lee case): “the wealth of the particular defendant[.]” Plaintiffs hold the burden to prove this: “the burden is on the plaintiff ‘rather than on the defendant’ to introduce evidence of a defendant’s financial condition in making a punitive damages assessment.”

Focusing on Factor 3: Defendant’s wealth:

Why does the Court focus or care about the Defendant’s wealth? “[W]e consider, ‘the wealth of the particular defendant,’ because ‘obviously, the function of deterrence …, will not be served if the wealth of the defendant allows him to absorb the award with little or no discomfort…. By the same token, of course, the function of punitive damages is not served by an award which, in light of the defendant’s wealth and the gravity of the particular act, exceeds the level necessary to properly punish and deter.’”

Restated: “The ‘purpose of punitive damages is not served by financially destroying a defendant. The purpose is to deter, not to destroy.’”

The issue in Doe was whether the Court had sufficient evidence of Defendant’s wealth status.

Hm, that begs the question: how can we obtain Defendant’s wealth status? “There are mechanisms in place that give plaintiffs the tools they need to ensure they can collect the necessary information to establish a defendant’s financial condition. ‘[U]nder Civil Code section 3295, subdivision (c), the plaintiff is allowed, on a proper showing, to ‘subpoena documents or witnesses to be available at the trial for the purpose of establishing the profits or financial condition’ of the defendant. The plaintiff may also obtain pretrial discovery of that information.’ Additionally, ‘[a] number of cases have held that noncompliance with a court order to disclose financial condition precludes a defendant from challenging the sufficiency of the evidence of a punitive damages award on appeal.’” I removed the internal citations.

Is evidence of Defendant’s earnings or profit alone enough proof?

Nope. “[I]n most cases, evidence of earnings or profit alone are not sufficient ‘without examining the liabilities side of the balance sheet.’” “‘What is required is evidence of the defendant’s ability to pay the damage award.’ Thus, there should be some evidence of the defendant’s actual wealth. Normally, evidence of liabilities should accompany evidence of assets, and evidence of expenses should accompany evidence of income.’”

What happened in this case?

The Court holds Plaintiff did not prove enough evidence of Defendant’s wealth to support the verdict of punitive damages. “[T]he admitted evidence does not support this punitive damages award. The record does not show that appellant has any other assets to his name. It does not contain any record or analysis of his liabilities or expenses–though we know he owes over $800,000 in compensatory damages.”