Diamonds are a girl's best friend

Posted on May 6, 2010 by Hilaree Casada

 When Leland Dykes proposed to his girlfriend, Pepper Lee, he did so with a $26,000 diamond engagement ring in tow. He also bought a house for Pepper and put it in Pepper’s name. Leland protected his interest in the house through a Property Agreement with Pepper, but did not get a pre-nup covering that pricey ring. So, when the couple split and Pepper kept the ring, Leland sued…. and won. 

The jury awarded Leland $110,000 for the real property and $13,000 as conversion damages for the ring.  But Pepper appealed, asserting that Leland’s testimony that he paid $26,000 for the ring was legally and factually insufficient to support the jury’s finding that the reasonable cash value of the ring at the time of conversion was $13,000. The Fourteenth Court of Appeals agreed with Pepper, holding that evidence of purchase price constituted no evidence of fair market value at the time of conversion and rendering a take nothing judgment against Leland on the conversion claim. 

To reach this conclusion, the court rejected contrary rulings from other intermediate appellate courts, construed the Texas Supreme Court’s opinion in Redman Homes, Inc. v. Ivy as authority for their holding, and determined that Pepper’s failure to object to the evidence of purchase price did not convert otherwise inadmissible evidence into sufficient evidence to support the verdict. The court also opined that Leland could have presented sufficient evidence if he had simply testified to what he considered to be the value of the ring at the time of conversion. 

So, what’s the bottom line? Take some time on the front end to decide what evidence you need to present to a jury to support your damages.   Although Leland won the case, he didn’t give the jury the evidence it needed to support all of its answers. By spending time on the front end figuring out what the value truly was at the time of the conversion, he could have won it all.  Instead, Leland is out the money he paid for the ring, and Pepper walks away a partial winner with a sparkly diamond as proof.  The court's opinion can be found at this link.

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Is There a Right to Recovery for Negative Tax Consequences?

Posted on February 19, 2009 by Mike Northrup

I ran across this interesting opinion from the Federal Third Circuit Court of Appeals.  I am reporting on it because the Fifth Circuit apparently has not yet commented on this damage recovery and the issue could impact Texas state law.

In Eshelman v. Agere Systems, Inc., No. 05-4895, the Third Circuit Court of Appeals holds that a plaintiff in a disability discrimination case may recover an additional sum of money to pay for taxes that the plaintiff might be subject to as a result of receiving an award for back pay.  Back pay awards are taxable in the year paid.  To the extent such an award might push the plaintiff into a higher tax bracket causing the plaintiff to pay additional taxes, the Court holds that the plaintiff can recover an additional sum to compensate her for that additional tax burden.  In arriving at this result, the Court joins the Tenth Circuit in that result.  The District of Columbia Circuit reached a contrary result.

As part of its reasoning, the Third Circuit Court observes that the Americans with Disabilities Act  gives the courts broad equitable powers to effectuate the purpose of making the plaintiff whole.  This reasoning may be critical to the Court's logic and to its power to fashion this remedy.  Given that the Texas Commission on Human Rights Act is largely patterned after federal law, it is conceivable that a similar argument might find its way into Texas courtrooms.  The opinion may be found at this link.

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Tax Returns Not Relevant to Net Worth

Posted on October 17, 2008 by Byron Henry

In this mandamus action, the Eastland Court of Appeals held that federal tax returns are not relevant or material to the issue of the defendant's net worth.  While the court of appeals held that a plaintiff seeking exemplary damages need not make a prima facie showing of entitlement of exemplary damages in order to obtain discovery on net worth, it held that tax returns do not reflect net worth.  The court also held the trial court abused its discretion by ordering production of  "all documents that evidence or reflect net worth" because it was overbroad.   The court of appeals' opinion in In re House of Yahweh can be found at this link. 

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Evidence of Defendant's Wealth Held Harmful

Posted on October 1, 2008 by Tory Regas

The Texas Supreme Court recently reversed a decision by the Houston Fourteenth District Court of Appeals, which held harmless the trial court’s admission of evidence related to the defendant’s wealth.  Reliance Steel & Aluminum Co. v. Sevcik, No. 06-0422, 2008 Tex. LEXIS 861 (Tex. Sept. 26, 2008). 

In Reliance, a truck driven by a Reliance employee rear-ended the plaintiffs’ vehicle resulting in severe injuries to the plaintiffs.  During trial, the plaintiffs offered deposition testimony approximating Reliance’s annual sales at $1.9 billion.  After a four-day trial, the jury awarded the plaintiffs over $3 million in compensatory damages. 

 

On appeal, the Supreme Court found that the jury’s award of damages substantially exceeded the amount supported by the evidence adduced at trial.  Accordingly, the Court determined that the admission of evidence of Reliance’s wealth was harmful error. 

 

In reaching its decision, the Court rejected the following arguments presented by the plaintiffs: (1) the verdict was not inflated because the jury awarded them only half of what they requested in closing argument; and (2) evidence of Reliance’s wealth was harmless because it was mentioned only once.  In addition, the Court made the following findings in support of its decision: (1) the impressive amount of the wealth made harm more likely to occur than would a substantially lesser amount; and (2) the admission of the evidence was not inadvertent, but an intentional offering by the plaintiffs.  With respect to the latter issue, the Court implied in dicta that an inquiry into the offeror’s intent will be subject to stricter scrutiny when the evidence involves issues like race, religion, gender, and wealth.

 

The Court ultimately reversed the decision of the court of appeals and remanded the case for a new trial.

 
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