Net Worth Discovery Methods in Texas Altered by Senate Bill

According to the Texas Supreme Court, the net worth of a defendant in an injury claim or civil litigation procedure is both directly related to an exemplary damage award and discoverable. In June of 2015, the enactment of Senate Bill 735 altered how discovering a defendant’s net worth was to be carried out. Before discovery methods can begin, there must be approval from the applicable trial court that has concluded that it is more than likely that discovery methods would be successful based on the original merits of the exemplary damages claim.

Before SB 735 was signed into law, it could be expected that an appellate court would define net worth as the measurable difference between a party’s total assets and any liabilities established in the relevant claim. This general lack of definition created room for interpretation and depended on accounting methods and standards that were widely, but not necessarily universally, accepted. Underlined by a legal statute, net worth now has a definition free of any gray areas. The newly-established definition of net worth is the total assets of a party minus the total liability of that party on a calendar date deemed appropriate by a trial court.

This legal process will not allow the discovery of net worth information if there is no court approval, which would require a formal process complete with an initial motion or petition, a notice sent to the targeted party, and a courtroom hearing that would allow either party to present arguments in their favor. Any evidence applicable to net worth discovery has to be presented officially and submitted with an affidavit. Furthermore, an undefined amount of time must be provided to each party to either complete discovery methods, or to create a “no-evidence motion for summary judgement” in response to discovery methods.

The new statute enacted in SB 735 does not go into depth regarding a plaintiff’s burden to prove that the proposed net worth discovery methods would be “more than likely to succeed.” It can be assumed that this is meant to be a lower evidentiary standard than “clear and convincing” evidence that would be required in other cases. This allows a claimant to merely question the validity of the defendant’s merits in order to petition for, and likely win, the opportunity to start discovery methods. When a discovery method is approved for a defendant’s net worth, the court will hold that any actions taken should be the “least burdensome” and based on current financial situations. Digging deeper or pestering the defendant for more information that is not clearly linked to the net worth in question can constitute an abuse of the court’s authority and work against the plaintiff.

At this time, Senate Bill 735 is only applicable to any net worth discovery cases that began on or after September 1st, 2015, the date the law went into effect. The Texas Supreme Court is expected to soon deliberate whether or not the bill should have retroactive influence.

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