Opinion ID: 3049898
Heading Depth: 4
Heading Rank: 3

Heading: Evidence of Ford’s Financial Condition

Text: To help the jury in imposing an appropriate punitive award, the district court admitted into evidence a redacted, one-page version of Ford’s 2003 consolidated balance sheet, which revealed Ford’s “[t]otal stockholders’ equity,” or net worth, to be $11,651,000,000.9 Ford raises a variety of objections to the district court’s admission of this financial document. [13] First, Ford argues that the district court erred by admitting the balance sheet at all because such evidence is irrelevant to the setting of a punitive damages award. See Fed. R. Evid. 402. But under Nevada law, a defendant’s wealth is relevant to a jury’s determination of punitive damages. In Dillard Department Stores, Inc. v. Beckwith, 989 P.2d 882 (Nev. 1999), the Nevada Supreme Court noted its consistent recognition that “[t]he wealth of a defendant is directly relevant to the size of [a punitive damages] award, which is meant to deter the defendant from repeating his misconduct as well as punish him for his past behavior.” Id. at 887 (quoting Ainsworth v. Combined Ins. Co., 763 P.2d 673, 677 (Nev. 1988)); see also United Fire Ins. Co. v. McClelland, 780 P.2d 193, 199 (Nev. 1989) (recognizing “the financial position of the defendant” as a factor in assessing a punitive damages award). To that end, the Nevada pattern jury instructions expressly require that “[i]n arriving at any award of punitive damages,” the jury consider “the amount of punitive damages which will 9 Like net worth, stockholders’ equity is calculated as the difference between a business entity’s assets and its liabilities. See Black’s Law Dictionary 1138, 1639 (8th ed. 2004). 11016 WHITE v. FORD MOTOR CO. have a deterrent effect on the defendant in light of the defendant’s financial condition.” Nev. J.I. 10.20 (emphasis added). [14] Nevada law on this matter is consistent with the Supreme Court’s and this circuit’s longstanding recognition of the admissibility of net worth evidence.10 See TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 462 n.28 (1993) (noting that it is “well-settled” that a defendant’s “net worth” is a factor that is “typically considered in assessing punitive damages”); Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 21-22 (1991) (approving, among other factors used to determine a punitive damage award, the “financial position” of the defendant); Bains, 405 F.3d at 777 (“A punitive damages award is supposed to sting so as to deter a defendant’s reprehensible conduct, and juries have traditionally been permitted to consider a defendant’s assets in determining an award that will carry the right degree of sting.”). Thus, Ford’s argument that evidence of a defendant’s financial condition is irrelevant to the setting of a punitive damages award is meritless. [15] Second, Ford argues that even if evidence of financial condition is relevant, the district court violated Federal Rule of Evidence 403 because the consolidated balance sheet’s pro10 In State Farm Mutual Automobile Insurance Co. v. Campbell, the Utah Supreme Court sought to justify an excessive punitive damages award on, inter alia, the defendant’s “enormous wealth.” 538 U.S. at 426. The Supreme Court explained that “[t]he wealth of a defendant cannot justify an otherwise unconstitutional punitive damages award.” Id. at 427 (emphasis added). However, we are concerned here with an altogether different question, namely whether a jury can consider a defendant’s financial condition when determining an appropriate punitive damages award. As is clear from State Farm itself, the jury’s use of wealth in imposing punitive damages is both lawful and appropriate. Id. at 427-28 (“[Wealth] provides an open-ended basis for inflating awards when the defendant is wealthy . . . . That does not make its use unlawful or inappropriate; it simply means that this factor cannot make up for the failure of other factors, such as ‘reprehensibility,’ to constrain significantly an award that purports to punish a defendant’s conduct.” (emphasis added) (quoting BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 591 (1996) (Breyer, J. concurring))). WHITE v. FORD MOTOR CO. 11017 bative value was substantially outweighed by the danger of unfair prejudice. Reviewing the district court’s decision to admit the balance sheet for an abuse of discretion, see United States v. Allen, 341 F.3d 870, 886 (9th Cir. 2003), we conclude that admission of the 2003 balance sheet was proper because the evidence was not unfairly prejudicial. Unfair prejudice means “an undue tendency to suggest decision on an improper basis, commonly, though not necessarily, an emotional one.” Fed. R. Evid. 403, advisory committee’s note. Because evidence of Ford’s financial condition was probative and a proper factor in the jury’s analysis, any “prejudice” experienced by Ford was not “unfair” as that term is used in Rule 403. See United States v. Bailleaux, 685 F.2d 1105, 1111 n.2 (9th Cir. 1982) (“ ‘[U]nfair prejudice’ means that the evidence not only has a significant impact on the defendant’s case . . . but that its admission results in some unfairness to the defendant because of its non-probative aspect.”). Third, Ford argues that even if the district court properly admitted the consolidated balance sheet, it should also have allowed the jury to consider the company’s full 2002-03 Financial Statement and 2002 Annual Report. Ford also challenges the court’s denial of Ford’s request to argue to the jury its interpretation of the figures within those documents. Ford suggests that its financial statement and annual report had to be admitted also, so that it could argue to the jury that its net worth was due to factors unrelated to F-series pickup trucks. Apparently, Ford believes that a defendant’s net worth is relevant only insofar as it is derived from the defendant’s wrongdoing. This “disgorgement” theory of punitive damages misunderstands the relevance of net worth. Determining what amount of punitive damages will “sting” the defendant requires consideration of its total wealth, not merely wealth derived from wrongdoing. Nonetheless, because we are reversing and remanding for a new trial on punitive damages, we decline to decide whether the district court abused its discretion by excluding the financial statement and annual report. The district court should have another opportunity to 11018 WHITE v. FORD MOTOR CO. determine on remand, and within the context of the new trial as it develops, whether to admit — subject to normal evidentiary rules such as relevance, hearsay and cumulativeness — additional documents that might shed light on Ford’s financial condition.