When is Wealth Admissible?
Reasonable minds can differ, but I tend to think that “relevance” and “prejudice” are profoundly undertheorized as evidentiary concepts. The goal seems reasonable – let’s not waste time at trial on things that don’t matter or seem calculated to appeal to some known form of bias. But as applied, it’s difficult to examine the corpus of law concerning Fed. R. Evid. 402 and 403 (or their state equivalents) without detecting traces of fear and contempt for the truth-finding function of the trial jury.
A normal person attempting to learn the truth about a situation strives to learn as many facts as possible and to situate every piece of information within its proper context. A smattering of isolated facts without context are often worse than nothing, whether you’re a parent trying to resolve a dispute between children, a doctor attempting to diagnose an illness, or an intelligence analyst trying to understand geopolitical actions. But jurors are not normal people, at least within the confines of the courtroom. In service of “relevance,” all too often a jury is told a “story with holes” in which key ancillary or contextual information has been torn out and thrown away.
Exclusion of such evidence can benefit the weaker party or guard against miscarriages of justice. For example, the rules limiting the use of prior convictions in federal court are arguably in place to prevent ex-convict criminal defendants from being carelessly locked away for crimes they did not commit. But all-too-often, “relevance” exclusions are done for fear that a jury will be so outraged by corporate malfeasance that they become unwilling to hew too closely to a court’s definition of justice. And no matter who benefits from an exclusion, the notion that a jury can effectively figure out which side is telling the truth about what happened in the past when key contextual details are removed is pedagogically and epistemologically dubious. In essentially no other field of historical inquiry, from academic research to congressional oversight, do we assume that a researcher who knows less will come to more accurate conclusions. In studying the past, a person may not benefit from “irrelevant” facts. But it’s strange to assume that they’re actively harmed by them.
One classically “irrelevant” or “prejudicial” fact is the wealth of the parties. It is black letter law in virtually every jurisdiction that the wealth or poverty of a party is not normally relevant and should not be brought into evidence. But how firm is that rule? And even when you can introduce evidence of wealth, should you?
The general prohibition on wealth evidence is long established. Over 125 years ago, the New York Court of Appeals held that “evidence of the wealth of a party is never admissible, directly or otherwise, unless in the exceptional cases where position or wealth is necessarily involved in determining the damages sustained.” [1] The federal courts are similarly clear in their distaste for such evidence. For example, the Court of Appeals for the Second Circuit has held that “evidence of wealth” is “generally inadmissible” [2] and even that “remarks which can be taken as suggesting that the defendant should respond in damages because he is rich and the plaintiff is poor, are grounds for a new trial.” [3] While it comes up less frequently, evidence of a defendant’s poverty is sometimes excluded as well, particularly in the criminal context when it is offered as evidence of a motivation to commit theft. As the Supreme Court of Michigan put it:
Evidence of poverty, dependence on public welfare, unemployment, underemployment, low paying or marginal employment, is not ordinarily admissible to show motive. The probative value of such evidence is diminished because it applies to too large a segment of the total population. Its prejudicial impact, though, is high. There is a risk that it will cause jurors to view a defendant as a “bad man” a poor provider, a worthless individual.
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As the Court of Appeals observed in the instant case, “the motive for a theft offense seldom requires explanation.” [4]
But there are exceptions. The best known is the exception for cases involving punitive damages. New York law in particular “permits the fact finder to consider evidence of a defendant’s wealth when setting the amount of punitive damages, in order to determine what amount would be sufficient to punish that particular defendant and deter “others of similar mind.” [5]
Other jurisdictions have similar rules. [6] Despite this, the extraordinary concern that the courts have for anything that looks like prejudice against the wealthy requires that this evidence be treated gingerly even when it is admissible. As such, many courts will go so far as to bifurcate a trial and require a jury verdict in favor of punitive damages before allowing any evidence of wealth into evidence. [7] But others will not, as bifurcation represents the sort of logistical hassle that trial court judges try to avoid. So, if your case involves punitive damages, there is a credible argument that wealth evidence must be a part of it.
Another exception concerns “spendthrift” or “unexplained wealth” cases. [8] There, evidence of a defendant’s financial condition is sometimes offered as proof of criminality (i.e. the defendant rolls around in sports cars or wears fancy watches but doesn’t have any lawful source of income, suggesting that he’s probably a criminal of some kind). In other cases it is offered as motive (i.e. the defendant was living above his means and dodging creditors, so that’s why he embezzled from the company). These later cases are in real tension with the general rule that you can’t argue that a person is inclined to steal just because he or she is poor. The proffered distinction seems to be something akin to “well, just being poor doesn’t make you a thief, but if you’re poor and like money, then maybe that’s evidence of guilt.” Once could quibble with the logic of course – the whole reason that money is desirable is that you can trade it for whatever it is that you do happen to like. But in any event, the decisions exist and so if the wealth of a party could arguably show motive or unexplained income in your case, evidence of wealth may be admissible.
A third exception has largely fallen out of favor but may find traction with some courts or in some jurisdictions. There are older authorities that hold that evidence of the wealth of a defendant is always admissible in defamation cases, even absent punitive damages. The theory is that a defendant’s wealth is evidence of their “social rank and influence and therefore tends to show the extent of injury suffered from defendant’s words.” [9]
This is not inherently crazy. Being libeled by a billionaire on Twitter is doubtlessly more harmful than being cursed out by a random lunatic on the street. But most jurisdictions today are uncomfortable holding that money is synonymous with “social rank” as a matter of law. And to the extent that courts still feel that the wealthy are “social betters,” they express that notion in other ways – like allowing wealthy folks not to turn over financial information – rather than by forcing financial disclosures.
But assume that you are permitted to introduce evidence of a defendant’s wealth. Should you? Is that evidence necessarily helpful to a plaintiff? It certainly can be, but it’s a line of attack that you need to approach with caution. Some members of your jury may be eager to hit a wealthy defendant with damages, particularly if the plaintiff is sympathetic. But others may viscerally recoil from the suggestion, particularly if they themselves are financially well off. And still others may view the suggestion as a sign of weakness, a desperate argument that a plaintiff would never make unless they did not have a good case to begin with.
You also need to be wary of the impact that wealth evidence may have on issues like credibility. If you introduce evidence that a defendant is successful, you may make him or her seem more credible or more likeable to some jurors, particularly those who are ambitious themselves. Entrepreneurship has a powerful following in America, and you would be well served not a cast your wicked defendant as the hero of a rags-to-riches story that the jury has heard many times before.
This isn’t to say that you shouldn’t push for the ability or the opportunity to introduce evidence of wealth. But you should do so carefully and, where possible, do so after having focus grouped or otherwise tested the impact of the evidence on the overall success of your case.
[1] Laidlaw v. Sage, 158 N.Y. 73, 103 (1899).
[2] Reilly v. Natwest Markets Grp. Inc., 181 F.3d 253, 256 (2d Cir. 1999).
[3] Koufakis v. Carvel, 425 F.2d 892, 902 (2d Cir. 1970).
[4] People v. Henderson, 408 Mich. 56, 66 (1980).
[5] Wright v. Musanti, 887 F.3d 577, 588 (2d Cir. 2018).
[6] See Rufo v. Simpson, 86 Cal. App. 4th 573 (Cal. App. 2001); Lunsford v. Morris, 746 S.W. 2d 471 (TX 1988).
[7] See Smith v. Lightning Bolt Productions, Inc., 861 F.2d 363, 373-4 (2d Cir. 1988) (calling bifurcation “the preferred method” for handling the issue).
[8] See, e.g., United States v. Jackson-Randolph, 282 F.3d 369 (6th Cir. 2002); United States v. Mitchell, 31 F.3d 628, 631 (8th Cir.1994); United States v. Bailie, 1996 WL 580350, at *7 (9th Cir. Oct. 8, 1996).
[9] Barkly v. Copeland, 74 Cal. 1, 7 (1887).
