By Amanda M. Collura

In cases where punitive damages have been claimed and could potentially be awarded defendants should be aware of whether, and to what extent, their wealth and financial data is subject to discovery. Louisiana courts seem to be in agreement that when punitive or exemplary damages are claimed, a defendant’s financial status is discoverable since such information is relevant to the subject matter of the action. See Lacoste v. Crochet, 99-0602 (La. App. 4 Cir. 1/5/00), 751 So.2d 998, 1005. However, it is not clear as to the extent to which a party may conduct discovery into the wealth and financial matters of a defendant when dealing with a potentially viable punitive damages claim.

While both the First and Fourth Circuit Courts of Appeal of Louisiana have stated that the financial situation of the defendant is a relevant factor in determining the amount of punitive damages, the Louisiana Supreme Court has mostly remained silent as to the extent to which a party is then able to delve into the financial background of a particular defendant. Id. at 1006-07. Notwithstanding, a defendant seeking to prevent its sensitive financial information from being released during discovery would be well advised to request a limitation from the court as to what must be produced through a protective order. Louisiana courts have wide flexibility in issuing orders related to challenges to discovery:

A. Upon motion by a party or by the person from whom discovery is sought, and for good cause shown, the court in which the action is pending or alternatively, on matters relating to a deposition, the court in the district where the deposition is to be taken may make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including one or more of the following:

(1) That the discovery not be had.
(2) That the discovery may be had only on specified terms and conditions, including a designation of the time or place.
(3) That the discovery may be had only by a method of discovery other than that selected by the party seeking discovery.
(4) That certain matters not be inquired into, or that the scope of the discovery be limited to certain matters.
(5) That discovery be conducted with no one present except persons designated by the court.

(6) That a deposition after being sealed be opened only by order of the court.
(7) That a trade secret or other confidential research, development, or commercial information not be disclosed or be disclosed only in a designated way.
(8) That the parties simultaneously file specified documents or information enclosed in sealed envelopes to be opened as directed by the courts. (emphasis added).
La. C.C. P. art. 1426.

Even though there is no Louisiana state court jurisprudence on point, one can analogize as to what a proper result would be based on what the Louisiana federal courts have held. In U.S. E.E.O.C. v. Denham Springs Pub. Co., Inc., CIV.A. 10-614, 2012 WL 262268 (M.D. La. Jan. 27, 2012), the court imposed limitations on producing financial information in the punitive damages context. Here, the EEOC argued that several of its Requests for Production seeking an extremely broad range and variety of materials relating to defendant’s financial status and operations were relevant to its punitive damages claim. Under federal law, evidence of a defendant’s financial worth and ability to pay may be admissible for the purpose of evaluating the amount of punitive damages that should be awarded. Id. at *2 (internal citations omitted).

However, the court recognized this discovery is subject to limitations, including the proportionality provisions, of Fed. R .Civ. P. 26(b)(2)(C)(i) and (iii).(1)   Applying those standards, and considering the limited purposes for which this information may be relevant, the Magistrate Judge found that the wide range and scope of financial materials sought in the EEOC’s Requests were overly broad, unduly burdensome, unreasonably cumulative and/or duplicative, and that the burden of the discovery outweighed its likely benefit to the punitive damages claim, the sole aspect of the case to which it is relevant, considering all of the factors in Rule 26(b)(2)(C)(iii). Id. at *3. Accordingly, the Magistrate Judge required only that the defendant produce in response to one of the Requests its annual reports, financial statements, and federal income tax returns for the years 2007-2010. The court went on to note that because of the commercial and competitive sensitivity of the materials, they were to be produced by defendant, at its option and upon its designation, pursuant to the protective order. (2)

Article 1426 empowers the court to limit the discovery to certain matters and to issue protective orders, thus shielding the defendant from any unnecessary exposure of its sensitive financial information. Thus, although a defendant in a Louisiana state court might currently be unsuccessful in arguing that its financial data is irrelevant and not subject to discovery, it may be successful in obtaining an order limiting the scope of production pursuant to Louisiana Code of Civil Procedure article 1426.

[1] As for Louisiana state law, the appropriate provisions would be La. C.C.P. art. 1422 and 1426. 

[2] Protective Order stated: All information produced in accordance with this order must be marked and kept confidential and used only for purposes of this litigation and must not be disclosed to any one except parties to this litigation, the parties’ counsel of record and experts retained in connection with this litigation. All persons to whom such information is disclosed must sign an affidavit that must be filed into the record, agreeing to the terms of the protective order and submitting to the jurisdiction of this court for enforcement of those terms. If any party seeks to add other terms to this protective order, counsel must confer immediately and submit by motion any proposed protective order.