Reliance Steel & Aluminum Co. v. Sevcik

• Decision Date: 26 September 2008
• Docket Number: No. 06-0422.,06-0422.
• Citation: 267 S.W.3d 867
• Parties: RELIANCE STEEL & ALUMINUM CO. and Samuel Alvarado, Petitioners v. Michael SEVCIK and Cathy Loth, Respondents.
• Court: Texas Supreme Court

267 S.W.3d 867

RELIANCE STEEL & ALUMINUM CO. and Samuel Alvarado, Petitioners v. Michael SEVCIK and Cathy Loth, Respondents.

No. 06-0422.

Supreme Court of Texas.

Argued December 4, 2007.

Decided September 26, 2008.

Chad Michael Forbes, Thomas C. Wright, Wright Brown & Close, LLP, Houston TX, Russell H. McMains, Law Offices of Russell H. McMains, Corpus Christi, TX, for Reliance Steel & Aluminum Co. and Samuel Alvarado.

David W. Holman, The Holman Law Firm, P.C., Houston TX, Macklin Keith Johnson, Hallettsville, TX, for Michael Sevcik and Cathy Loth.

Justice BRISTER delivered the opinion of the Court.

Neither a plaintiff's poverty nor a defendant's wealth can help a jury decide whose negligence caused an accident.¹ Even though punitive damages were not at issue in this collision case, the plaintiffs tendered evidence that the defendant's annual revenues were $1.9 billion. Because this evidence was inadmissible, and the record reflects that it probably caused an improper verdict, we reverse and remand for a new trial.

I. Background

Michael Sevcik and Cathy Loth were injured in a highway accident west of Houston when they were hit from behind by a tractor trailer owned by Reliance Steel & Aluminum Co. and driven by Sam Alvarado. Sevcik and Loth filed suit in Waller County, and at trial they offered the following testimony from the deposition of Reliance's corporate representative:

Q: How big a company is Reliance?

A: I believe last year's annual sales approximated $1.9 billion.

Q: About how many employees do they have? Do you know?

A: Just guessing, I think we're close to 3,000 I think, nationwide.

Q: And are the headquarters for Reliance in California? Is that what I—

A: Yes, sir. They're in Los Angeles, California.

Outside the presence of the jury, counsel for the defendants objected to the offer:

Defense counsel: Judge, on this and the next couple pages, [plaintiffs' counsel] is talking to the witness — this is the corporate rep for Reliance Steel & Aluminum. He is talking to him about how big a company it is, how many people do you employ, you're all over the country. And I think that is irrelevant and it is also inflammatory to the jury because that plants a seed in their mind that this is a huge company with huge dollars and they can afford a huge verdict.

The Court: [to plaintiff's counsel] You are not seeking punitives?

Plaintiffs' counsel: No, sir.

The Court: Therefore it becomes less relevant.

Plaintiffs' counsel: Right. The thing is, we are definitely entitled to show they are not a mom and pop operation, and we are going to talk — It says they are a California corporation. Then he says they are a division. I'm entitled to bring all of that in.

Defense counsel: I don't think it is relevant at all. We have the truck driver here, the man who drove the truck who was involved in the accident. Why do we need all this information about the company? That only plants the seed in their mind—

Plaintiffs' counsel: He is asking Mike Sevcik if he bought a new truck. I think everything

Defense counsel: This, I think, only tends to make the jurors start thinking about how much money is behind Mr. Alvarado, which isn't something they need to reach their verdict

Plaintiffs' counsel: Your Honor, some of what we get into in his deposition and then in the testimony of the driver is — part of it is how much — how many hours they have these people riding on the road, 15- and 16-hour days.

The Court: I'm going to overrule the objection

At the end of the four-day trial, the jury awarded the plaintiffs more than $3 million. The defendants appealed, challenging several of the damage awards and the admission of evidence of its $1.9 billion in revenues. After transfer for docket equalization, the court of appeals reduced one damage item by $6,000, affirmed the rest, and held admission of the gross sales evidence was harmless.² The defendants then petitioned this Court for review.

II. Evidence of Wealth

Even when a party's wealth has no logical relevance to a case, the prejudicial effect of such evidence often creates strong temptations to use it. As we have stated before, "highlighting the relative wealth of a defendant has a very real potential for prejudicing the jury's determination of other disputed issues in a tort case."³ To avoid such situations, Texas courts "historically have been extremely cautious in admitting evidence of a party's wealth."⁴ Even when wealth can be used on the issue of punitive damages, we take the unusual step of bifurcating a trial so that it cannot be used for any other purpose.⁵

In this case, plaintiffs' counsel argued the evidence of gross revenues was admissible to show Reliance was "not a mom and pop operation." Yet Reliance had never suggested to the jury that it was "a mom and pop operation" or could only pay a limited judgment;⁶ the plaintiffs' effort to prove otherwise was simply an unsolicited attempt to show Reliance made a lot of money.

Plaintiffs' counsel argued that gross revenues were relevant to show Reliance was negligent in "running its drivers into the ground" even though it was big enough to "place more drivers on the road or have them work fewer hours." But the plaintiffs never pleaded such a theory; their Third Amended Petition alleged only a vicarious liability claim against Reliance for the negligent acts of its driver. Nor was such a claim necessary; if an employee drives when he is too tired, his employer is liable regardless of the reason for his condition.⁷

But even if the plaintiffs had alleged or needed to prove that Reliance was independently negligent, for several reasons its gross sales had no tendency to make that claim more or less probable.⁸ In the first place, the premise behind this argument is faulty because big companies cannot afford to be less efficient than small companies, at least not for long. Second, the negligence standard is an objective one; it does not generally allow smaller companies to do what bigger companies cannot. Third, a company with large revenues may still not be able to afford more drivers doing less work, because "gross sales are only remotely related to its wealth until the company's expenses are subtracted."⁹ Fourth, if a defendant's wealth is admissible to show that it could afford to avoid an accident, then wealth will be admissible in virtually every case, and there would be nothing left of the traditional rule to the contrary.

We also reject the suggestion that evidence of Reliance's wealth was admissible because the defendants' attorneys asked several inappropriate questions about the size and newness of the plaintiffs' cars or home. Each time this occurred and an objection was made, the trial court sustained the objection and excluded the evidence. One party cannot violate the rules of evidence just because the other party tried to do the same, especially if the other party's evidence was excluded.

The plaintiffs here were entitled to argue (and did) that Alvarado's hours were "too long," but it was not Reliance's gross revenues that made them so. The plaintiffs offered no evidence that Reliance pushed its drivers harder than its competitors, or harder than regulations allowed. Reliance is not complaining about evidence that it had a lot of drivers; it only complains about evidence that it had a lot of money. We hold the trial court abused its discretion in allowing admission of Reliance's gross annual sales.¹⁰

III. Harmless Error?

Erroneous admission of evidence is harmless unless the error probably (though not necessarily) caused rendition of an improper judgment.¹¹ We have recognized "the impossibility of prescribing a specific test" for harmless-error review,¹² as the standard "is more a matter of judgment than precise measurement."¹³ A reviewing court must evaluate the whole case from voir dire to closing argument, considering the "state of the evidence, the strength and weakness of the case, and the verdict."¹⁴

A. The Effect

The starting point for harmless-error review is the judgment. Obviously, a party that wins a favorable judgment has usually not suffered harm from any errors during trial. In this case, several parts of the verdict on which the judgment was based show that something beyond the relevant evidence was guiding the jury's deliberations.¹⁵

During trial, plaintiffs' counsel introduced a chart showing that Loth's past medical expenses totaled $33,985.23, and he asked for precisely that amount in closing argument. Nevertheless the jury awarded $40,000. As the court of appeals held, there was no evidence for this amount as "the record is devoid of any testimony or affidavits" supporting it.¹⁶

The same is true of the jury's verdict that Loth's future medical expenses were $250,000. Reliance concedes there was some evidence that she would incur $37,000 for future medications, and there was also some evidence she could incur as much as $90,000 for a six-month rehabilitation program in Houston.¹⁷ But there was no evidence she would incur anything more. To the contrary, her expert testified that "when we see a patient like Cathy, who is several years past their brain injury, all of the healing and recovery that is going to take place has taken place." While there was evidence that Loth would suffer permanent brain damage (for which the jury awarded $1.75 million in future impairment and mental anguish), there was no evidence that further medical treatment could do anything about it. The jury's finding on future medical expenses was simply twice as much as the evidence would support.

The jury's finding of $750,000 for future earning capacity was also surprisingly large given the evidence. Loth's tax returns leading up to the accident showed a total income of $7,562 for all five years combined;¹⁸ at that rate, the future award represented almost 500 years. Similarly, the jury's award for her earning capacity lost in the three years before trial was $15,000; at that rate the...