Opinion ID: 2168023
Heading Depth: 3
Heading Rank: 3

Heading: Sufficiency of Evidence for Punitive Damages Against Woodner Co. & Laufer

Text: Woodner Co. and Laufer maintain that the punitive damage award is unsupported by the evidence because the tenants failed to prove Woodner Co.'s and Laufer's net worth, and therefore the punitive damage award must be set aside. We agree and therefore hold that a plaintiff seeking to recover punitive damages based upon the wealth of the defendant, as the tenants did here, must establish the defendant's net worth at the time of trial. We also hold that, while the tenants presented barely sufficient evidence to permit the jury to award some punitive damages based upon the defendants' ability to pay, that evidence fell gravely short of supporting the very sizeable punitive damage awards in this case. For these reasons, the issue of punitive damages must be retried. Cf. Finkelstein v. District of Columbia, 593 A.2d 591 (D.C.1991) (en banc). We will consider each holding in turn. First, management contends that punitive damages based on the wealth of the defendants requires proof of a defendant's current net worth ( i.e., at the time of trial). The standard jury instructions in this jurisdiction, and the jury instructions given in this case, support that contention. [18] The trial court instructed the jury: [N]et worth ... is an indicia of the appropriate amount of punitive damages because it is a measure of the current wealth or the current financial situation of a defendant.... [N]et worth [is used] to measure current wealth because it gives an accurate measure of ability to pay. Earnings and/or assets alone as distinguished from net worth do not necessarily show ability to pay. You are also cautioned that earnings or assets in past years do not necessarily show ability to pay.... You consider all of the circumstances, consider net worth, assets, minus liability unless you find a concealment or a diversion which justifies consideration of the assets in determining what amount will punish, but not financially ruin the defendant.... However, in order to award punitive damages against any defendant, you must find that the defendant has a financial ability to pay an award of punitive damages. Evidence of this is in the form of net worth. That is assets which exceed liability. If you are unable to determine a defendant's net worth because of a lack of evidence presented by plaintiffs or if you are not able to otherwise determine financial ability to pay punitive damages without speculating or if you find that a defendant is unable to pay punitive damages because that defendant has a negative or a zero net worth, then the amount of punitive damages would be [zero]. The trial judge also expressly instructed the jury that the burden of proving net worth was on the plaintiff. Consequently, in making its punitive damage award, the jury was clearly instructed to focus upon the net worth of the defendants. Because the purpose of punitive damages is to punish a tortfeasor and deter future conduct, the amount of such damages should be enough to inflict punishment, while not so great as to exceed the boundaries of punishment and lead to bankruptcy. See Arthur Young & Co., supra, 631 A.2d at 372 (purpose of punitive damages is to punish a person for outrageous conduct) (internal citation omitted); Robinson v. Sarisky, 535 A.2d 901, 906 (D.C.1988) (same); see also Wynn Oil Co. v. Purolator Chem. Corp., 403 F.Supp. 226, 232 (M.D.Fla.1974) (purpose of punitive damages is to punish defendants and serve as a deterrent ... the award of punitive damages should only hurt but not bankrupt a defendant). Therefore, since current net worth fairly depicts a tortfeasor's ability to pay punitive damages, the plaintiffs here were required to present sufficient proof of current net worth to support the punitive damages awarded by the jury. [19] See, e.g., Snow v. Capitol Terrace, Inc., 602 A.2d 121, 127 n. 8 (D.C.1992) (question of punitive damages was not permitted to go to jury because, in addition to other reasons, the [trial] judge found insufficient evidence of [defendant's] net worth). See also Dumas v. Stocker, 213 Cal.App.3d 1262, 262 Cal.Rptr. 311, 315 (4th Dist.1989) (We conclude that the absence of any evidence of [defendant's] net worth renders the amount of the award unsupported by the evidence); Welty v. Heggy, 145 Wis.2d 828, 429 N.W.2d 546, 549 (Ct.App. 1988) (any measure of net worth other than the difference between the value of the assets and liabilities of the defendants at a time reasonably close to the date of trial is illusory). Second, the Woodner Co. and Laufer both contend [20] that the tenants failed to meet their burden of establishing their net worth, or at least sufficient net worth to support the verdicts reached by the jury. In the opening statement on punitive damages, tenants' counsel stated that the Woodner Co. was worth in excess of a hundred million dollars and that the primary factor for the jury to consider was evidence of the assets of the Company. Over objection, the tenants presented five exhibits: a draft of a loan application prepared by Woodner Co. three years prior to the trial; a real estate development proposal developed eight years prior to the trial; a 1979 projection of the potential value of Park Tower if the Company incurred the expense of successfully developing the building into condominiums; and two excerpts from the testimony of Jonathan Woodner in other proceedings two years earlier in which he identified the limited properties owned by the Company as of 1980. The Woodner Co. presented testimony that it owned only two properties at the time of trial, and that it managed but did not own most of the rental properties it had developed and maintained in the District. The only evidence presented by the tenants to establish Laufer's net worth, which was admitted over Laufer's objection, were two of Laufer's financial statements, which were five and seven years old, to prove his ability to generate income. [21] Laufer testified that, although the two financial statements accurately reflected his financial circumstances in the two years reported, he had recently suffered substantial financial reverses such that his net worth at the time of trial was in the negative. We agree with management's contention that none of the exhibits presented by the tenants established the net worth of the Woodner Co. at all, much less at the time of trial. Similarly, although the exhibits presented against Laufer showed net worth, the information was not current. See, e.g., Welty, supra, 429 N.W.2d at 549 (measure of net worth is difference between value of assets and liabilities at time close to trial); Fopay v. Noveroske, 31 Ill.App.3d 182, 334 N.E.2d 79, 94 (1975) (desired financial evidence to show tortfeasor's ability to pay is current net worth); Dumas, supra, 262 Cal.Rptr. at 316 (rejected requiring the defendant to affirmatively... prove its penurious financial condition as a precondition to any appellate challenge to the excessiveness of the award). The most that can be said of the evidence presented was that it was not unreasonable for the jury to infer that at the time of trial, both Woodner Co. and Laufer had some resources available to them to support a nominal punitive damage award, but there was no factual basis for the sizable awards actually made. As in Dumas, this record includes various kinds of financial information, none of which firmly established the Woodner Co.'s or Laufer's net worth at the time of trial. For example, in Dumas, the plaintiff introduced evidence of a net gain on the sale of the subject property; the fact that the defendant owned, in prior years, between two and fifteen apartment buildings, without any evidence of any equity interest; and evidence that defendant filed fictitious business name statements, without any evidence of his income or equity interest in these businesses. Dumas, 262 Cal.Rptr. at 315. Despite that evidence, the Dumas court held there was no evidence of [the plaintiff's] net worth at the time of trial, which is the proper measure of net worth, and that the absence of any evidence of net worth renders the amount of the [punitive damage] award unsupported by the evidence. Id. The case was remanded to the trial court for a redetermination based on evidence of defendant's net worth.... Id. 262 Cal.Rptr. at 317. The evidence presented here is similar to that presented in Dumas ; however, we conclude that the tenants' evidence was sufficient to show some current ability of Woodner Co. and Laufer to pay, but that the damages awarded were far in excess of any proof of current net worth. [22] Finally, we think that a ruling by the trial judge, shortly after the trial, convincingly shows that the punitive damage verdicts reached did not properly take into account the net worth of either the Woodner Co. or Laufer. After the punitive damage verdicts were entered the defendants promptly moved to stay the judgments pending the filing of post-trial motions. On May 15, 1989, in a written order, the trial judge granted the motions to stay, finding that if the Woodner Co. were required to pay the punitive damage award of $9 million and the $950,000 in compensatory damages for which it was jointly and severally liable, then the Company's liability will far exceed its assets and it appears that the Company would proceed to bankruptcy. With respect to Laufer, the trial judge observed that satisfying the judgment would require all of [Laufer's] assets and more. Attachment of his assets would deprive him of all his working capital. In short, the trial judge ruled, less than a month after the trial, that payment of the judgments [23] by Woodner Co. and Laufer would essentially bankrupt them. As the Maryland Court of Special Appeals recently observed: when a punitive damage award consumes a defendant's total [net worth], it ceases to serve the societal goal of punishment and cannot stand. Fraidin v. Weitzman, 93 Md. App. 168, 611 A.2d 1046, 1068 (1992). The same can be said with respect to the punitive damage awards made by the jury here.