News & Events

When in Doubt, Assert a Rule 403 Objection, Lest A Corporate Defendant’s Financial Well-being Come into Evidence Through a Backdoor

Generally, a corporate defendant’s financial well-being is not admissible evidence at trial for concern that such evidence would encourage a jury to find the corporate defendant liable merely because the corporate defendant could well-afford the plaintiff’s demand, regardless of fault.  This rule is rooted in common law and is almost universally recognized.

Recently, however, the Georgia Supreme Court in Chrysler Group LLC n/k/a FCA US LLC v. Walden, et al., __ S.E. 2d ___ (Ga. March 15, 2018) appeared to carve out a loophole to this general rule by affirming a trial court’s decision to allow the salary and additional compensation of a corporate defendant’s CEO, totaling $68 million, to be admitted into evidence at trial.  It is not a stretch to appreciate how the compensation of a corporate defendant’s CEO is a strong indication of the financial well-being of a corporate defendant.

This victory was not lost on plaintiff’s counsel, who used the opportunity during closing to argue that “what [defendant’s counsel] said [decedent’s] life was worth, [defendant’s CEO] made 43 times as much in one year . . . We ask you return a verdict for the full value of [decedent’s] life of at least $120 million . . . That’s less than two years of what [defendant’s CEO] made just last year.”

These remarks apparently resonated with the jury who returned an award in plaintiff’s favor for $120 million in wrongful death damages and $30 million in pain and suffering damages, finding the corporate defendant 99% at fault.

The topic of the CEO’s overall compensation arose during the questioning at trial of the corporation’s COO.  Although the corporate defendant’s counsel made repeated objections, such objections were limited to relevance and wealth-of-a-party.

In analyzing whether the trial court erred in admitting the compensation evidence, the Georgia Supreme Court held that Georgia Evidence Rule 622, which concerns a witness’s bias, “establishes that a witness’s bias is always a legitimate issue to be proved, but not that any evidence offered to show bias is always admissible no matter how prejudicial or irrelevant to the issue being tried.”  The Court further held that a CEO’s compensation did not violate the common law rule that a party’s wealth is not admissible because the CEO was not a party.

The Court thus treated the CEO as an ordinary witness who was subject to the introduction of bias evidence.  But a company’s CEO is not an ordinary witness, and, rather, a direct reflection of the company, which can only speak through its corporate representatives.  If compensation evidence is admitted, then the jury has a strong indication of the wealth of the defendant corporation.  Instead of relying on the facts of the case before it, the jury will likely be tempted to award a plaintiff a higher verdict, especially when the plaintiff is particularly sympathetic as was the case in Chrysler Group LLC n/k/a FCA US LLC v. Walden, et al.

Ultimately, the Georgia Supreme Court held that because the corporate defendant had not made a specific Rule 403 objection or mentioned unfair prejudice in its objections, the analysis of whether compensation evidence was properly admitted should be evaluated under a plain error standard of review – a low standard of review often limited to criminal cases.  The Court found that the actions of the corporate defendant’s CEO were directly relevant to the claims at hand and his credibility (or lack thereof) was central to the question before the jury.

Throughout the opinion, the Georgia Supreme Court cautioned that compensation evidence was not necessarily always admissible but instead was subject to Rule 403 analysis, suggesting that the court would have come to an opposite conclusion should the admissibility have been analyzed under the Rule 403 and abuse of discretion standard.  Despite these cautions, the opinion certainly opens the door to compensation evidence being admitted into evidence.  And no doubt plaintiff attorneys in Georgia will use this opinion to their advantage until clearer, stronger case law disrupts the current precedent set by Walden.

The lesson learned from Walden? when in doubt, raise a Rule 403 objection!

Authored by Margaret Z. Smith

Margaret Smith