Anthony F. Arguijo
89 Texas L. Rev. 1433
A defendant’s net worth is discoverable under Texas law for purposes of exemplary damages. However, as to what constitutes net worth, the law provides little additional guidance. In this Note, Arguijo addresses the net-worth debate and proposes a solution to some of the problems.
The author first presents the evolution of Texas law in this area, looking at cases such as Lunsford v. Morrisand Sears, Roebuck & Co. v. Ramirez. Initially, courts allowed broad discovery, but they have begun to limit the amount of discoverable information. Indeed, many courts have formulated their own tests regarding net worth. The most common of these relies upon Generally Accepted Accounting Principles (GAAP).
Arguijo next analyzes the GAAP approach to net-worth discovery. GAAP has a number of advantages, including the clarity and consistency of its rules. While at first glance the GAAP approach appears to offer the best solution to the inconsistency in this area of the law, Arguijo finds this approach has shortcomings in light of the policy justifications for net-worth discovery in exemplary-damage cases.
Arguijo then examines the policy justifications and concerns regarding net-worth discovery. It is intrusive, he writes, but concerns about privacy cannot end the discussion. These privacy concerns must instead be balanced against the policy justification for such damages, which is punishment.
Thus, Arguijo offers a solution for the proper standard for net-worth discovery. He argues that in exemplary-damages cases, courts should allow the discovery necessary to give an accurate representation of the defendant’s current net worth. This standard addresses concerns over both timing and materials. Arguijo notes that this is not the only solution to the problem, and the Texas Supreme Court has a number of options to choose from. The important thing, writes Arguijo, is that clarity exists.