Opinion ID: 2441435
Heading Depth: 2
Heading Rank: 1

Heading: OCF's EVIDENCE IN MITIGATION OF PUNITIVE DAMAGES

Text: In an attempt to introduce mitigating evidence for the jury's consideration, OCF offered evidence from Peter Frank, a certified public accountant, about how much profit it earned from sales of Kaylo (an asbestos-containing insulation product), the adverse economic impact asbestos litigation has had on OCF, its past and future insurance coverage, OCF's out-of-pocket litigation costs, and the total amount of punitive damages awarded against OCF in asbestos litigation. After the trial court decided, over the plaintiffs' objections [1] , that it would only allow Frank to testify about OCF's current net worth, OCF made an offer of proof for a bill of exception. For its offer of proof, OCF tendered the transcript of Frank's previous testimony and certain exhibits, that OCF stated that Frank would use if he were allowed to testify about matters beyond OCF's net worth. The thrust of Frank's prior testimony and accompanying exhibits about punitive damages against OCF was that enough is enough. The court of appeals held that the trial court did not abuse its discretion when it sustained, in part, the plaintiffs' objections and excluded all but the net worth evidence. Frank's prior testimony reflects that: OCF had received about 186,000 Kaylo-related asbestos claims; that about 62,000 of those claims were unresolved; that in 1992 alone, OCF received 27,000 claims, the highest annual number yet; that claims were resolved for about $10,000 on average; that OCF's net profit [2] from Kaylo sales totaled about $1.5 million; that OCF's total costs to date due to Kaylo litigation exceeded $1 billion; that these costs have been covered, predominantly, by insurance; that $540 million to $675 million in available insurance remained for unresolved pending and future claims; that OCF's out-of-pocket costs to date for indemnity payments to plaintiffs and litigation expenses was about $20 million; that OCF's financial statements disclosed a $950 million accounting reserve to pay future uninsured Kaylo-related claims; that OCF predicted it would be able to fund this reserve with future earnings; that future unreserved and uninsured costs arising out of asbestos claims would not have a material adverse effect on OCF's financial position; that OCF was solvent, but had a negative net worth; that the original cause of OCF's negative net worth was fending off a hostile takeover bid by the Wicks Corporation; and that, if OCF's earnings trend continued, OCF could work out its negative net worth posture over the next fifteen years. The Frank transcript does not include testimony about prior punitive damage awards against OCF. Instead, OCF offered an affidavit with attached exhibits from Robert McOmber, a former OCF lawyer, that included this information. OCF offered the McOmber affidavit with attached exhibits (cumulatively the McOmber affidavit) along with the Frank transcript as its complete offer of proof. In its briefing, OCF asserts that if the trial court had allowed Frank to testify about matters beyond net worth, Frank's testimony, including the McOmber affidavit, would have established that twenty-eight prior Kaylo-related punitive damage judgments totaling $51,710,200 had been awarded against OCF. However, the enough is enough evidence shows, and OCF's counsel conceded in oral argument before this Court, that OCF has only paid about $3 million in punitive damages for Kaylo-related claims. OCF argues that the excluded evidence is relevant to the punitive damages determination consistent with the purposes of punishment and deterrence. OCF also argues that the excluded evidence is relevant to the factors that the trial court instructed the jury to consider in determining punitive damages: (1) the nature of the wrong; (2) the character of the conduct involved; (3) the culpability of the wrongdoer; (4) the situation and sensibilities of the parties; and (5) the extent to which the defendant's conduct offends the public's sense of justice and propriety. See Alamo Nat'l Bank v. Kraus, 616 S.W.2d 908, 910 (Tex.1981)(the Kraus factors); see also TEX. CIV. PRAC. & REM.CODE § 41.011(statutory adoption of Kraus factors for trier of fact's consideration).