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Donald v. Wexford Health Sources, Inc.

United States District Court, C.D. Illinois, Peoria Division

July 20, 2017

JAMES A. DONALD, Plaintiff,


          Jonathan E. Hawley U.S. Magistrate Judge.

         Before the Court is the Plaintiff's Motion to Compel Production of Documents (D. 27)[1] and the Defendants' response thereto (D. 29). For the reasons stated, infra, the motion is GRANTED.


         The Plaintiff's complaint alleges that while he was an inmate in the Illinois Department of Corrections, the medical negligence and deliberate indifference of Defendant-physicians Carter and Osmundson proximately caused him to incur the loss of his left eye, partial blindness, pain, suffering, and disfigurement. Defendant Wexford, as the employer of the Defendant-physicians, is alleged to be responsible for their acts under a respondeat superior theory. Donald also makes a claim for punitive damages related to his federal, deliberate indifference counts.

         The Plaintiff's request for production of documents numbers 1 and 2 seeks from Wexford: 1) “Any and all audited or unaudited financial statements of Defendant created or relating to Defendants' finances in the last three years” and 2) “Any and all federal tax returns of Defendant from the last three years.” (D. 27 at ECF p. 1). Wexford objected to the requests arguing the information sought was, among other things, irrelevant.

         In Donald's motion to compel the production of the information sought in requests numbers 1 and 2, he argues that information about Wexford's financial condition is relevant to the issue of punitive damages. Wexford, however, argues that it is inappropriate to consider a corporate defendant's wealth or net worth in assessing punitive damages, and, accordingly, the information Donald seeks is irrelevant.



         The initial question presented is whether the financial condition of Wexford is relevant, for Federal Rule of Civil Procedure 26(b) limits discovery to that which is “relevant to any party's claim or defense . . .” If a corporate defendant's wealth may not be considered when assessing punitive damages, it is not “relevant, ” but, if it may be properly considered then, of course, it is.

         The answer to this seemingly simple question is not as simple as it should be because of the Seventh Circuit Court of Appeals' opinion in Zazu Designs v. L'Oreal, S.A., 979 F.2d 499 (7th Cir. 1992), and the subsequent district court cases attempting to interpret it. In Zazu, a case relied upon by Wexford, the court considered the defendant's appeal in a trademark infringement action. The court reversed and remanded, finding that the plaintiff did not have superior rights in trademark to the defendant and, even if it had, the damages award was excessive. Id. Regarding the punitive damages award, the court noted that although courts “take account of a defendant's wealth when ‘[a]n amount sufficient to punish or deter one individual may be trivial to another, '” such may not be the case when the defendant is a corporation. Id. at 508. The court explained:

For natural persons the marginal utility of money decreases as wealth increases, so that higher fines may be needed to deter those possessing great wealth. (“May be” is an important qualifier; the entire penalty includes extra-judicial consequences, such as loss of business and other future income, that is likely to be greater for wealthier defendants.) Corporations, however, are not wealthy in the sense that persons are. Corporations are abstractions; investors own the net worth of the business. These investors pay any punitive awards (the value of their shares decreases), and they may be of average wealth. Pension trusts and mutual funds, aggregating the investments of millions of average persons, own the bulk of many large corporations. Seeing the corporation as wealthy is an illusion, which like other mirages frequently leads people astray.

Id. at 508. This language implies that for a corporate defendant, its financial condition is irrelevant for purposes of calculating punitive damages.

         Some district courts have interpreted Zazu in exactly this way. For example, in Yund v. Covington Foods, Inc., 193 F.R.D. 582 (S.D. Ind; 2000), the court found that Zazu was “controlling precedent” for the proposition that, at least for corporate and institutional entities, “evidence of a defendant's wealth should be irrelevant to the assessment of punitive damages.” Id. at 586. See also Pivot Point Int'l, Inc. v. Charlene Products, Inc., 932 F.Supp. 220, 223 (N.D. Ill. 1996) (excluding evidence of defendant's financial situation as irrelevant to punitive damages claim under federal law). The court noted that in part I of the Zazu opinion, the court ruled that the evidence was insufficient to establish the defendant's liability, “thus rendering all damages improper.”Yund, 193 F.R.D at 586. The court in Yund then noted that, in part II of the Zazu opinion, the court, in what it characterized as a “second, and independently sufficient, error [that] requires us to set aside the judgement, ” made its pronouncement concerning the relevance of a defendant's wealth for purposes of assessing punitive damages. Id.

         The court in Yund found the punitive damages discussion to be precedential because, although the reversal on liability rendered all damages improper, the Zazu court was simultaneously evaluating whether a sanction for litigation misconduct could include a component of punitive damages. Id. That question was ...

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