Plaintiffs' Failure to Discover Financial Condition of Correct Defendant Results in Loss of Punitive Damages Award


In Soto, et al. v. BorgWarner Morse Tec Inc., No. B252995 (Calif. 2nd Dist. Ct. App., Div. 4), the Court of Appeal reversed an award of $32.5 million in punitive damages in an asbestos case against auto parts supplier, Borg Warner Morse TEC Inc. (“BWMT”), upon finding that plaintiffs failed to offer evidence of BWMT’s financial condition and ability to pay a punitive damage award.

Plaintiffs alleged that decedent Secundino Medina developed mesothelioma as a result of exposure to chrysotile asbestos in clutches while working as a security guard at a General Motors assembly plant. Plaintiffs alleged that Mr. Medina’s exposure occurred while he was walking through the room where damaged clutches were replaced and repaired. Ultimately, the jury awarded plaintiffs more than $2 million in economic damages, $6 million in noneconomic damages, and $32.5 million in punitive damages. BWMT, which was the only remaining defendant, was found 35% liable.

On appeal, BWMT challenged both the noneconomic and punitive damages award. With regard to the punitive damages, BWMT argued that plaintiffs failed to produce sufficient evidence to warrant a $32.5 million in punitive damages. Further, BWMT argued that evidence from plaintiffs’ economist should have been precluded because his testimony regarding the financial condition of BWMT was erroneously based upon information related to BorgWarner Inc. instead of BWMT, a separate business unit of BorgWarner Inc. The Court of Appeal agreed and held that plaintiffs’ evidence of revenue was not enough to show whether BWMT would be able to pay the $32.5 million damages award without bankrupting the company.

According to the Court of Appeal, plaintiffs’ evidence established that “BWMT earned substantial revenues from one of its business lines” but was “silent in all other respects.” Therefore, even construed in the light most favorable to the plaintiffs, the testimony of their expert did not establish current information about BWMT’s overall financial condition. Therefore, there was insufficient evidence of BWMT’s financial condition to enable the jury to make an intelligent assessment of BWMT’s ability to pay a punitive damages award. Indeed, plaintiffs mistakenly relied on publically available information in order to determine BWMT’s financial condition. It was not until shortly before the damages phase of the trial that plaintiffs realized that their economist had analyzed the wrong company.

Although, plaintiffs had a “full and fair opportunity to engage in discovery” and obtain the correct financial information, they instead elected to take the wait-and-see approach. As noted by the Court of Appeals, “plaintiffs did not undertake any effort to obtain the information at an earlier juncture, whether by issuing a subpoena, seeking a stipulation, or a making a motion pursuant to Civil Code section 3925, subdivision (c).” Instead, plaintiffs assumed BWMT would simply provide them with the necessary information. Accordingly, the Court of Appeal determined that plaintiffs should bear the consequences of their failure to diligently engage in evidence.

Hopefully this ruling will serve as reminder to other courts of the necessity of holding plaintiffs to their burden of proving damages through valid financial evidence legitimately obtained through the discovery process.

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