Lunsford v. Morris

746 S.W.2d 471, 31 Tex. Sup. Ct. J. 207, 1988 Tex. LEXIS 5, 1988 WL 8473

• Court: Texas Supreme Court
• Decided: February 10, 1988
• Docket: C-4407, C-5649
• Status: Published

Opinions

KILGARLIN, Justice.

At issue in this mandamus proceeding is whether a defendant’s net worth is subject to pre-trial discovery. We hold that such information is relevant to the issue of punitive or, as they are sometimes called, exemplary damages and therefore discoverable under Tex.R.Civ.P. 166b(2). Consequently, we conditionally grant relators’ petition for writ of mandamus.

In the underlying case, relators Lunsford and Dail sued their former employer and others alleging conspiracy and malicious defamation. Their suit sought both actual and punitive damages. In connection with the latter claim, Lunsford and Dail requested production of financial statements and other documents bearing on the defendants’ net worth. The trial court denied the requested discovery,¹ and we granted leave to file a petition for writ of mandamus after denial by the court of appeals.

We first consider whether evidence of net worth is discoverable. In Texas, a parly “may obtain discovery regarding any matter which is relevant to the subject matter” of a pending action. Tex.R.Civ.P. 166b(2)(a). Further, the same rule provides “it is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.”

Since the earliest Texas decisions, punitive damages have been allowed, among other things, to punish a wrongdoer. “[Pjunitive damages are justified by [a] blending of the interests of society with those of the aggrieved individual, thus giving damages not only to recompense the sufferer, but to punish the offender.” Graham v. Roder, 5 Tex. 141, 149 (1849). In addition to punishment, punitive damages are allowed to deter the same or similar future conduct. Cole v. Tucker, 6 Tex. 266, 268 (1851). Our recent decisions have continued to recognize punishment and deterrence as co-purposes of punitive damages awards. See, e.g., Hofer v. Lavender, 679 S.W.2d 470, 474-75 (Tex.1984); Pace v. State, 650 S.W.2d 64, 65 (Tex.1983).

At least forty-three states now allow evidence of net worth to be discovered and admitted for the limited purpose of assessing punitive damages.² Substantial federal court authority also supports the proposition that net worth is admissible on punitive damages.³ The United States Supreme Court recognizes and adheres to the majority view. City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 270, 101 S.Ct. 2748, 2761, 69 L.Ed.2d 616 (1981). Also, the Restatement view is in accord: “The wealth of the defendant is also relevant ...; the degree of punishment or deterrence resulting from a judgment is to some extent in proportion to the means of the guilty person.” Restatement (Second) of Torts § 908 (comment e) (1977). See also, Prosser & Keeton, Prosser and Keeton on Torts § 2 at 15 (5th ed. 1984).

Texas has allowed neither discovery nor admission of evidence concerning a defendant’s net worth. One hundred years ago, this court determined that the injury inflicted, rather than the ability of a defendant to pay, was the more important consideration. Young v. Kuhn, 71 Tex. 645, 652, 9 S.W. 860, 862 (1888). This view has persisted to the present day despite overwhelming authority to the contrary. See Murphy v. Waldrip, 692 S.W.2d 584, 588 (Tex.App.—Port Worth 1985, no writ). A defendant’s “ability to pay” bears directly on the question of adequate punishment and deterrence. That which could be an enormous penalty to one may be but a mere annoyance to another. For example, one hundred dollars as a punitive award against a single mother of three small children may be a greater deterrent than one hundred thousand dollars awarded against a major corporation whose directors are shielded from the stark reality of harm done by the paneled walls and plush carpet of the corporate boardroom. We hold that in cases in which punitive or exemplary damages may be awarded, parties may discover and offer evidence of a defendant’s net worth.

Although the issue in this case is one of discovery of net worth, cases involving admissibility of net worth into evidence are instructive. We therefore review briefly the positions taken in this and in other jurisdictions on discoverability and admissibility of net worth evidence. Just recently this court, in Birchfield v. Texarkana Memorial Hospital d/b/a Wadley Hospital, 747 S.W.2d 361 (1987), held admissible evidence of the financial condition of the hospital to demonstrate the hospital’s ability to provide proper facilities. While it is true that this holding went to a gross negligence inquiry, it nevertheless demonstrates that we have previously permitted admission of evidence of the financial condition of a defendant.

Some states allowing discovery of net worth require a prima fade showing of entitlement to punitive damages before information about a defendant’s net worth may be sought. See, e.g., Curtis v. Partain, 272 Ark. 400, 614 S.W.2d 671 (1981). Other courts would make a plaintiff wait until trial, after the jury has heard evidence warranting punitive damages, before evidence of net worth is introduced. Ruiz v. Southern Padfic Transportation Co., 97 N.M. 194, 638 P.2d 406, 414 (N.M.Ct.App.1981). One state subjects a plaintiff to a show-cause hearing in which a prima fade right to punitive damages must be proved. Leidholt v. District Court, 619 P.2d 768, 771 (Colo.1980). In Wyoming, a plaintiff must overcome two hurdles. First, the plaintiff must make a prima fade showing of entitlement to punitive damages before the trial court permits discovery of net worth. Then, a trial involving punitive damages is bifurcated: a jury must again find a plaintiff is entitled to punitive damages; and then the jury may consider evidence of net worth to determine damages. Campen v. Stone, 635 P.2d 1121, 1132 (Wyo.1981); see also Annot., 32 A.L.R.4th 432 (1984).

Our rules of civil procedure and evidence do not require similar practices before net worth may be discovered. Absent a privilege or specifically enumerated exemption, our rules permit discovery of any “relevant” matter; thus, there is no evidentiary threshold a litigant must cross before seeking discovery. Tex.R.Civ.P. 166b(2)(a). Neither do the rules of evidence contemplate exclusion of otherwise relevant proof unless the evidence proffered is unfairly prejudicial, privileged, incompetent, or otherwise legally inadmissible. Tex.R.Civ. Evid. 401, 403, 501-10, 601. Accord, Coy v. Superior Court, 58 Cal.2d 210, 373 P.2d 457, 23 Cal.Rptr. 393 (1962). We do not circumscribe, however, a trial judge’s authority to consider on motion whether a party’s discovery request involves unnecessary harassment or invasion of personal or property rights. See Tex.R.Civ.P. 166b(5) and compare Tex.R.Civ.P. 13.

Young v. Kuhn, 71 Tex. 645, 9 S.W. 860 (1888), predates both our rules of civil procedure and evidence and is no longer controlling. In a suit in which exemplary damages may be recovered, we hold the defendant’s net worth is “relevant” and therefore discoverable under Tex.R.Civ.P. 166b(2)(a).⁴ Because no privilege or other specific exemption has been shown, the trial court abused its discretion by refusing to permit the requested discovery. We are confident the trial judge will withdraw his order disallowing discovery of the defendants’ net worth; the writ of mandamus will issue only if he fails to do so. Relators’ request for a writ of prohibition is conditionally dismissed as moot.

CULVER, J., not sitting.

1 . The order denying discovery was signed by Judge Craig T. Enoch, then judge of the 101st District Court. Relators originally named Judge Enoch as respondent in C-4407. While C-4407 was pending before our court, Judge Joseph B. Morris (the present respondent) succeeded Judge Enoch as judge of the 101st District Court. We abated our proceedings so that Judge Morris would have an opportunity to reconsider Judge Enoch’s order denying discovery. By an order signed on September 8, 1987, Judge Morris "affirmed and adopted" Judge Enoch’s prior order.

In a separate cause numbered C-5649, rela-tors petitioned this court to prohibit Judge Enoch (later Judge Morris) from proceeding to trial pending our disposition of the mandamus requested in C-4407.

2 . Clary Ins. Agcy. v. Doyle, 620 P.2d 194, 205 (Alaska 1980); Grant v. Arizona Public Service Co., 133 Ariz. 434, 652 P.2d 507, 522 (1982); Berkeley Pump Co. v. Reed-Joseph Land Co., 279 Ark. 384, 653 S.W.2d 128, 137 (1983); Coy v. Superior Court, 58 Cal.2d 210, 373 P.2d 457, 23 Cal.Rptr. 393 (1962); Leidholt v. District Court, 619 P.2d 768, 770 (Colo.1980); Bennett v. Hyde, 6 Conn. 24 (1825); Bryan v. Thos. Best & Sons, Inc., 453 A.2d 107, 108 (Del.Super.1982); Rinaldi v. Aaron, 314 So.2d 762, 763 (Fla.1975); Wilson v. McLendon, 225 Ga. 119, 166 S.E.2d 345, 346 (1969); Beerman v. Toro Mfg. Corp., 1 Haw.App. 111, 615 P.2d 749, 755 (1980); Cheney v. Palos Verdes Inv. Corp., 104 Idaho 897, 665 P.2d 661, 666-67 (1983); Moore v. Jewel Tea Co., 116 Ill.App.2d 109, 135, 253 N.E.2d 636, 648 (1969), aff'd, 46 Ill.2d 288, 263 N.E.2d 103 (1970); Hibschman Pontiac, Inc. v. Batchelor, 266 Ind. 310, 362 N.E.2d 845 (1977); Hall v. Montgomery Ward & Co., 252 N.W.2d 421, 424 (Iowa 1977); Ettus v. Orkin Exterminating Co., Inc., 233 Kan. 555, 665 P.2d 730, 738 (1983); Hale v. Aetna Casualty & Surety Co., 273 So.2d 860, 863 (La.App.1973); Hanover Ins. Co. v. Hayward, 464 A.2d 156, 158 (Me.1983); Heinze v. Murphy, 180 Md. 423, 24 A.2d 917 (1942); Pedersen v. Jirsa, 267 Minn. 48, 125 N.W.2d 38, 41 (1963); Hunter v. Williams, 230 Miss. 72, 92 So.2d 367, 369 (1957); Golston v. Lincoln Cemetery, Inc., 573 S.W.2d 700, 708 (Mo.1978); Edquest v. Tripp & Dragstedt Co., 93 Mont. 446, 19 P.2d 637, 640-41 (1933); Southern Pacific Co. v. Watkins, 83 Nev. 471, 435 P.2d 498, 513 (1967); Belknap v. Railroad, 49 N.H. 358 (1870); (Gierman v. Toman, 77 N.J.Super. 18, 185 A.2d 241, 245 (1962); Aragon v. General Electric Credit Corp., 89 N.M. 723, 557 P.2d 572, 575 (Ct.App.1976); Rupert v. Sellers, 48 A.D.2d 265, 368 N.Y.S.2d 904, 910-13 (1975); Harvel’s Inc. v. Eggleston, 268 N.C. 388, 150 S.E.2d 786, 790 (1966); King v. Hanson, 13 N.D. 85, 99 N.W. 1085, 1092 (1904); Wagner v. McDaniels, 9 Ohio St.3d 184, 459 N.E.2d 561, 564 (1984); Smith v. Autry, 69 Okl. 28, 169 P. 623 (1918); Pelton v. General Motors Acceptance Corp., 139 Or. 198, 7 P.2d 263, 266 (1932); Aland v. Pyle, 263 Pa. 254, 106 A. 349 (1919); Hargraves v. Ballou, 47 R.I. 186, 131 A. 643, 646 (1926); Hicks v. Herring, 246 S.C. 429, 144 S.E.2d 151, 154 (1965); Smith v. Weber, 70 S.D. 232, 16 N.W.2d 537, 540 (1944); Odom v. Gray, 508 S.W.2d 526 (Tenn.1974); Wilson v. Oldroyd, 1 Utah 2d 362, 267 P.2d 759, 766 (1954); Parker v. Hoefer, 118 Vt. 1, 100 A.2d 434, 446-47 (1953); Weatherford v. Birchett, 158 Va. 741, 164 S.E. 535, 537 (1932); Riddle v. McGinnis, 22 W.Va. 253 (1883); Wangen v. Ford Motor Co., 97 Wis.2d 260, 294 N.W.2d 437, 447 (1980); Town of Jackson v. Shaw, 569 P.2d 1246, 1255 (Wyo.1977).

3 . Ramsey v. Culpepper, 738 F.2d 1092, 1099 (10th Cir.1984); (New Mexico law); Brink’s Inc. v. City of New York, 717 F.2d 700, 707 (2nd Cir.1983) (New York law); Spaeth v. Union Oil Co. of California, 710 F.2d 1455, 1460 (10th Cir.1983), Malandris v. Merrill Lynch, 703 F.2d 1152, 1177 (10th Cir.1981) (Colorado law); Harris v. Harvey, 605 F.2d 330, 340-41 (7th Cir.1979); Fury Imports, Inc. v. Shakespeare Co., 554 F.2d 1376, 1389 (5th Cir.1977) (New York law); Herman v. Hess Oil Virgin Islands Corp., 524 F.2d 767, 772 (3rd Cir.1975); Clark v. Bunker, 453 F.2d 1006, 1012 (9th Cir.1972).

4 . We view as unnecessary and ill-advised any attempt on the limited record before us to address admissibility concerns raised in the motions for rehearing. This includes matters pertaining to when net worth is admissible, how it will be admitted, or what it means.