Can evidence of business closure be admitted to establish witness credibility? Avalos v. TL Custom Explained

In Avalos v. TL Custom, the Utah Court of Appeals addressed whether trial courts may admit evidence that a defendant company had gone out of business when offered to establish witness credibility. The case provides important guidance on balancing the probative value of such evidence against its potential to prejudice jurors regarding the defendant’s ability to pay damages.

Background and Facts

Jose Luis Avalos suffered a workplace injury while delivering granite to TL Custom, LLC (TLC). While helping TLC employees move a granite slab with a forklift, the forklift caught Avalos’s foot, crushing it. Avalos sued TLC for negligence. During trial, TLC’s counsel made references in opening statements to the fact that TLC had gone out of business since the incident. The trial court initially sustained Avalos’s relevance objection but later ruled that TLC could introduce limited evidence of its closure to establish the credibility of its former employees, reasoning they had no motive to protect their former employer.

Key Legal Issues

The case presented two main issues: whether the trial court abused its discretion in admitting evidence of TLC’s closure, and whether sufficient evidence supported the jury’s verdict that TLC was not negligent. Avalos argued the closure evidence was irrelevant and prejudicial because it suggested TLC could not pay damages, potentially eliciting jury sympathy.

Court’s Analysis and Holding

The Court of Appeals concluded that even assuming error in admitting the closure evidence, any error was harmless. The court noted that the trial court gave Instruction 20, which specifically directed jurors that “[a]bility to pay or the possibility of a source for payment of the damages must not play any part in your determination of liability and total damages.” The court presumed the jury followed this instruction and found it effectively cured any potential prejudice from the closure evidence.

Practice Implications

This decision demonstrates that curative jury instructions can remedy potential prejudice from evidence about a party’s financial status or business closure. Practitioners should request specific instructions when such evidence is admitted, emphasizing that ability to pay cannot influence liability determinations. The case also reinforces that sufficiency challenges face a heavy burden—the evidence must so clearly preponderate in appellant’s favor that reasonable people would not differ on the outcome.