California Torts Law
Damages
 

I. Damages

A. Punitive Damages

(1) Health Care Provider-Pleading Punitive Damages

 "Section 425.13, enacted in 1987 as the Brown-Lockyer Civil Liability Reform Act (Stats. 1987, ch. 1498, §§ 1-7, pp. 5777-5782), establishes a "pretrial hearing mechanism" designed "to protect health care providers from the onerous burden of defending against meritless punitive damage claims."  (Central Pathology Service Medical Clinic, Inc. v. Superior Court (1992) 3 Cal.4th 181, 188-189; College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 714.)[4]  It provides as follows:

            "(a)  In any action for damages arising out of the professional negligence of a health care provider, no claim for punitive damages shall be included in a complaint or other pleading unless the court enters an order allowing an amended pleading that includes a claim for punitive damages to be filed.  The court may allow the filing of an amended pleading claiming punitive damages on a motion by the party seeking the amended pleading and on the basis of the supporting and opposing affidavits presented that the plaintiff has established that there is a substantial probability that the plaintiff will prevail on the claim pursuant to Section 3294 of the Civil Code.  The court shall not grant a motion allowing the filing of an amended pleading that includes a claim for punitive damages if the motion for such an order is not filed within two years after the complaint or initial pleading is filed or not less than nine months before the date the matter is first set for trial, whichever is earlier.

            "(b)  For the purposes of this section, 'health care provider' means any person licensed or certified pursuant to [specified sections of the Business and Professions Code or the Health and Safety Code].  'Health care provider' includes the legal representatives of a health care provider."
 DENNIS KANE et al., Petitioners, v.THE SUPERIOR COURT OF
LOS ANGELES COUNTY,       Respondent;LOURDES M. INCLAN et al.,IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIASECOND APPELLATE DISTRICT DIVISION ONE

(2) Ability To Pay-Net Worth

"However, the Supreme Court has expressly declined to adopt net worth as the standard for determining a defendant’s ability to pay in any given situation.  (Adams v. Murakami, supra, 54 Cal.3d at p. 116, fn. 7 [“Various measures of a defendant’s ability to pay a punitive damages award have been suggested.  Defendant in this case contends the best measure of his ability to pay is his net worth. . . .  We decline at present, however, to prescribe any rigid standard for measuring a defendant’s ability to pay.”].) 

     Net worth is too easily subject to manipulation to be the sole standard for measuring a defendant’s ability to pay.  (Lara v. Cadag (1993) 13 Cal.App.4th 1061, 1064-1065 & fn. 3 [“‘Net worth’ is subject to easy manipulation and, in our view, it should not be the only permissible standard.  Indeed, it is likely that blind adherence to any one standard could sometimes result in awards which neither deter nor punish or which deter or punish too much.”]; Michelson v. Hamada, supra, 29 Cal.App.4th at p. 1596; Rufo v. Simpson (2001) 86 Cal.App.4th 573, 624-625.)  

     In this case the jury considered net worth and a variety of other factors included on the financial documents presented by Zaxis to conclude Motor Sound had the ability to pay a punitive damage award of $300,000.  The evidence showed Motor Sound earned hundreds of millions of dollars in 1997 and 1998 but had a net loss.  The financial documents in evidence revealed the net worth calculation included accumulated depreciation of approximately $4.9 million and a note to the sole shareholder of $6 million.  Although this represents a loss for accounting purposes, it did not impact Motor Sound’s ability to pay a damage award as would, for example, salary and wage expenses.  Moreover, at the end of the accounting period at issue, in 1999, Motor Sound had cash on hand and a checking account balance of over $19 million." See The Complete Opinion: See Net Worth - Slip Opinion