### NUM BER 13-06- 0059 8-CV 

## COURT OF A PP EA LS T H I R T E E N T H D I S T R I C T O F T E X AS C O R P U S C H R IS T I - 

## EDI NBURG
A B N A M R O M OR T GAGE G R OU P, IN C . A /K/A IN TE RF IRST , A pp ellan t,
v . M A RT IN J. R

A BA LA IS, T INA

D . RA BA LA IS, A ND YEL LOW FIN C ONS TR UC TION , L .L.C ., A pp ellees .

On ap pe al f rom th e 2 14t h Dist rict C ou rt of N ue ces Co un ty , T exas . 

## ME MOR A N D U M OP I N I ON B efo re J u st ic es Y añ ez , R o d rig u ez , a n d G arza M emo rand um Opin ion b y Ju stice R od rigu ez Appel l a n t , AB N Amro M ortg ag e Group, Inc . a/ k/a Int er firs t ( “A BN ”) , app eal s a n order impos ing sa nct ion s a g ain st iti n the amount of $100,000. By one is sue, ABN co ntends that the trial court erred in impo sing this sanction beca use it is neith er f air n or ju st. W e af f irm the o rd er

of the t ri al cour

t.M a r tin J . R a b a la is , T in a D . R a b a la is , a n d Y e llo w f in C o n s tr u c tio n , L .L .C ., a r e r e f e r r e d to c o lle c tiv e ly 1 a s "th e R a b a l a i s e s ." 2 I. Bac kg ro und A. Th e La w suit The under ly ing disput e concer ns loan -s er v ic ing and cons tr uct ion probl ems rela ted to the buil din g of

a resi dence

. Ma rt in J. and Ti na D . R abal ais w ere the homeow ners a nd bor ro w ers. Y ell owfin C onst ru cti on, L.L.C ., of w hic h Mar ti n is a pr inc ipa l, w as the g eneral contra ct o r. ABN w as the l ender

. In 20 04, a fter p ro ble ms and del ay s o cc ur re d dur ing

1
co n s t ru c t io n o f

t h e h o m e , two su b c o n t ra c t o rs in it ia t e d li t ig a t io n a ga in s tMartin and Y ellowfin Con str uct ion . In res ponse to the sui ts, Mar ti n and Y ell owfin Const ru cti on f il ed th ird- par ty cl aims ag ain st ABN al leg ing , i nter al ia, thati t fail ed to pay the subc ontract ors a s i t had ag re ed to do and that it s br each of ag re ement an d fraudu len t c onduc t prox imat ely ca used dam ages. ABN den ied l iability, raised af f irmative defense s, and coun terclaim ed a gainst Ma rt in J. and Ti na D . R abal ais for, among othe r thi ng s, breach of th e n o te a n d deed of trust an d inde mn if ication u n d e r certain agreem ent s. Th e sub cont ractor suits w ere cons oli dated and, in June 2005, sev ered from t he unde rl y ing l aw sui t. After thi s mat ter

w as setfor t ri al on more than one occas ion , and after l eng thy and protract ed di sc ov er

y hear ing s, the Rab ala is es and AB N set tl ed th e l aw sui t. The onl y i ss ue subje ct to this ap pea l is the trial court’s im positio n of $ 100 ,00 0 in sanct ions against AB N. B. Th e Pat tern of

Misconduct At i ss ue herein is ABN ’s co nductw it h reg ard to it s respon ses to dis cov er y req uest s prop oun de d to i t by th e R ab al ai s es . The bu l k of th e di s c ov er y r eq ue s ts at i s s ue wereAt t he Apr i l 19 hear i ng, Fre d D r ei l i ng, coun sel f or t he Rabal ai ses, r epr esent ed t o t he t r i al cour t t hat 2 i t w a s h i s "u n d e rs ta n d i n g th a t [ A B N 's c o u n s e l d i d ] n o t h a v e a n y o p p o s i ti o n to [t h e R a b a l a i s e s '] m o ti o n to com pel , [ di d no t ] hav e an y opp osi t i on t o t he co ur t si gn i ng an or der , but t he o nl y i ssue [ was] t he a m ount of ti m e . [ A B N 's c o u n s e l ] w a n t[e d ] m o re ti m e to c o m p l y w i th th e o rd e r th a n w h a t [th e R a b a l a i s e s w e re ] w i l l i n g to gi v e. " T he Rabal ai ses asked f or t en d ay s. ABN r espond ed t hat " t en d ay s i s a c ha l l en ge fo r us. " At t he he ari ng , A B N rai s ed no ot he r co m pl ai nt reg ard i ng D rei l i ng ' s repre s en t ati on s or t he orde r. O n ap peal , ABN now o bj ect s, wi t hout ar gum ent , t o t he rep res en t at i on o ft he Apr i l 19 or der as " ag r ee d. " I t al so co m pl ai ns t ha t t he l i st s of " m i ss i ng " do cu m en t s, at t ac he d t o t he or de r as Ex hi bi t s A a nd B, w e r e n o t r e f e r r e d to a t t h e h e a r in g . T h e r e c o r d s h o w s , h o w e v e r , t h a t A B N d id n o t r a is e th e s e o b j e c tio n s in th e tri a l c o u rt. B y f a i l i n g to r a i s e th e c o m p l a i n ts n o w p re s e n te d , A B N d i d n o t g i v e th e tri a l c o u rt th e o p p o rtu n i ty to c o rr e c t th e a l l e g e d e rr o r. T h u s , A B N h a s w a i v e d i ts c h a l l e n g e s to th e A p ril 1 9 o rd e r. See T EX
. R. A PP
. P. 33

. 1(a )( 1); Scot t Bader , I nc. v. Sandst one Prods. , 248 S

. W

. 3d 802, 817 (T ex. App. –H oust on [ 1st D i st

. ] 200 8, no p et

. ) ( ci t i ng Val dezv. Val dez , 930 S. W

. 2d 7 25, 728 ( T ex. App. –H oust on [ 1st D i st

. ] 1996, no wr i t ) ( appl y i ng r ul e 33

. 1 t o a pa rt y ' s f ai l ur e t o r ai se ob j ect i ons t o san ct i ons i n t he t r i al cour t and hol di ng a ppel l ant wai v ed ob j ec t i on t o s an c t i on s rai s ed for f i rst t i m e o n a pp ea l ))

. 3 ser v ed i n 2004. In re spons e, ABN g enerall y made t he promis e tha t i t “ w il l suppl ement” it s d is cov er

y ans w ers. In March 2005, the Raba laises f iled a mo tion to comp el supp lem ent ation of those discovery

answers. In a w ritten agreem entf iled un der the bindin g aut hority of T exas Rule of Civ il Procedu re 11, AB N negotiate d the Ra bala ises’ p romise t o pass the hea ring on th eir moti on to co mpel in ex chang e for ABN ’s promis e to produce the disput ed di sc ov er y by Apr il 8, 2005. See T EX
. R. C IV
. P. 1 1. Later , i n Apr il 2005, the R abal ais es filed a s econd moti on to co mpel, and the t ri al set ti ng i n J uly

2005 w as pass ed by ag re ement. As par t of thi s a g re ed c onti nuanc e, t he tr ial
cour t ent ered a ru li ng thatthe p a rt ies sh oul d c omplet e al l thei r suppl ementati on of dis cov er y respon ses by

Ju ly 2006. In Feb ruary 200 6, th e Raba laises f iled y et ano the r m otion to com pel, se eking a f irm date for AB N to answ er the lo ng -o uts tandi ng di sc ov er y , muc h of w hic h w as subj ectto the Rule 11 agree m e n t

. A tt h e March 2006 hea ring on th is third mot ion to comp el, the only is sue dis p u ted w as how much ti me ABN w anted to c omplet e s uppl ementati on of the
o u t s t a n d in g d is c o ve ry. 24

After thi s h ear ing , t he tr ial co urt entered an order ov er ru li ng ABN’ s objecti ons to t he
o u t s t a n d in g d is c o ve ry a n d o ve rr u li n g a ll o f A B N’ s cl a im s o f p ri vil e ge e xc e p t fo r i t s a t t o rn e yclient privi lege assertion s. As part of this April 19, 20 06 o rder, the trial court required all
non- attor ney -c li ent i nformati on to be produce d by Ma y 5, 2006, and t he al leg ed pr iv il eg ed docu me nts to be ten dere d for in cam er a re v iew on t hat s ame date

. After ABN fail ed to co mply w it h the tr ial cour

t’ s Apr il 2006 order , des pit e an ag re ed extension of

the de adline w ithin th a torder, the Rabala ises f iled a m otion for sanctio ns. T he e v iden tiaryhea rings on this mo tion for sa nction s was co ndu cted o v er se v en d ate s in June and Au g ust2006. At t he J une 1 hear ing , t he Rab ala is es off ered doc umentati on th at A BN had faile d to c omply

w it h the tr ial co urt’ s A pr il 2006 order and the p ri or

R ule 11 a g re ement. ABN aff ir mati v ely

represent ed to t h e t ria l cour t t hat A BN had been l ooki ng di li g entl y for t he docu me nts. T he trial cou rt fo und thatABN had failed to comp ly w ith the April 2006 order. Af t e r t h e t ri a l co u rt ’s ru li n g, Da n ie l M c Ma h a n , co u n s e l fo r A B N’ s p a re n tco m p a n y,
m a d e a n a p p e a ra n c e b y t e le p h o n e . Mc Ma h a n a d m it t e d t h a t s o m e o f t h e r e s p o n s ive document s may

hav e been dest ro y ed i n 2005, after ABN bec ame a par

ty to the u nder ly ing litig ation and af

ter the disput ed d iscovery r e que sts w ere initially serv ed u pon ABN. Mc Ma han al so admit ted t hat t he remaini ng sup p le m entar y respon ses w ere notse nt t o ABN ’s co unsel for p ro duct ion to the R abal aises u nti l the v er y mor nin g of the s anct ion s hear ing , w eeks after

the deadl ine se t by

the Apr il 2006 order

or by the ag re ed extens ion of thatdea dline. In lig ht of the ad mission thatABN had supp lem ent ed th e discovery
re sp o n se s t h a t m o rn in g, t h e t ria l co u rtres e t t h e m o ti o n fo r sa n ct io n s fo r Ju n e 5. Alt h o u gh5

the t ri al cour

t found t hat A BN had faile d to compl y w it h the Apr il 2006 order at thi s J une 1 hear ing , t he tr ial co urt di d noty et i mpose a s anct ion for t hat v iol ati on. On J une 5, minut es before the resetsa nct ion s h ear ing , AB N tendered anot her box of respon siv e do cum ent s for in cam era re v iew , notw it hst andi ng the pr ior represent ati ons by ABN’s represe nta tiv e tha t all respon siv e do cum ent s, w ith the exception of em ail f iles, h a d a l r e a d yb e e n p re vio u s ly p ro d u c e d

. Att h is h e a ri n g, A B N’ s co u n s e l c la im e d t o h a ve final ly produce d al l of the respon si v e doc uments , butco unsel for t he R abal ais es dis puted thi s c lai m. At thi s h ear ing , t he tr ial co urt hel d ABN i n c ontempt. The t ri al cour t al so w ar ned t h a th e wo u ld im p o s e a $ 1 0 0 , 0 0 0 f in e p lu s a $ 1 0 , 0 0 0 p e r d a y f in e u n t il a ll t h e re s p o n s ive discovery

w as prod uced , butthe trial court carried im positio n of this f ine pe ndin g one last ef fort at com pliance byABN. At t he J une 8 cont inu ati on of the sanc ti ons hear ing s, ABN ’s former couns el tes ti fied that he had been repeated ly tol d byABN that all of

the respon si v e doc uments had been produce d in Apr il 2005. Atthi s h ear ing , AB N cor porate represent ati v es als o tes ti fied th at they as si ste d w it h the di sc ov er y efforts, but thes e ABN represent ati v es admit ted t hat t hey
w er e notco ntac ted t o as si st w it h di sc ov er y and documentproduct ion unti l Ap ril 2 0 0 6, a y ear after ABN promis ed to produce di sc ov er y pursuantto the R ule 11 a g re ement. W il li am Lis nersk i, one of the ABN rep re sent ati v es als o admitted that he had nev er been present ed
w it h a c opy

of the cour

t’ s Apr il 2006 order

or present ed w it h the l is ts of the c ateg or ies of document s o rd ered produce d. L isnersk i als o tes ti fied th at s ome of the i nformati on re q uest ed s houl d hav e been av ail abl e w it hin a w eek of the req uest

. But— cont ra dic ti ng ABN ’s numerous re present ati ons to t he tr ial co urt t hat a ll or mostdoc uments had alreadyAt t or ney ' s f ees i n t he t ot al am ount of $48 , 050 wer e awar ded agai nst ABN ; exp en s es w ere not 3 awar ded. Appel l ant s do not com pl ai n ab out t he a war d of at t or ney ' s f ees. 6 bee n p ro duce d—Lisn erski nevertheless con f irmed thatthe disco v erysearch w as still ong oin g and not y et c omplet ed. Beca use the c or porate represent ati v e tes ti fied that ABN ’s search for th e doc uments
ordered produce d w as inc omplet e, the tr ial jud g e cont inu ed the h ear ing unti l mid- June and
car ri ed th e s anct ion dec is ion unti l then. At t he J une 15 hear ing , the t ri al cour t s ummed up t he ev ide nce and ordered AB N to pa y the Rab alais’ atto rney fee s: Mr . M cM ahan tol d me ov er the phone [at the June 1 hear ing ] t hat [ABN ] had prov ide d ev er

ythi ng . Todayw e find out t hat t here are s ome E- ma il s o ut there, there's some w ire trans fers, there' s some ot her matte rs thatex is t.

. . . [R ic hter 's ] t est imony

tel ls us toda y

thatthere are other matters o ut t here, an d due dil ig ence of his w or k has resul ted i n tho se that are g oin g to be produce d. W hen they're g oing to be prod uced , I don 't kn ow, bu t I can tell y ou th ey w ill be produce d

. T h e re f ore, t he c our t i s g oin g to enforc e i ts sanc ti ons of the $100,00 0 for failu re to compl y , now thatI know

thatthere i s o ther

material out t here, an d tha t w il l g o i nto e ff ectimmediat ely

. How ev er , t he $10, 000 a day sa nct ion w il l not g o i nto e ff ectunti l

. . . the 1 6th o f June . . . at 3 PM

. If the m ate rials are p rodu ced by the n, the n tha t $10 ,00 0 w ill not ; oth erw ise, it will co n ti n ue unt il I am sat is fied th at my order has been compl ied w it h. As far as att or ney 's fees, I agree w it h y ou that there's a lotof w or k t hat h as been done, but t hat w or k w ould n o t hav e been neces sar y had Mr . M cM ahan and /or his client prod uced the docu me nts th at th ey have represe nte d. [AB N’s former co unsel ] t est ified l astw eek, i f I 'm n o t mist aken, thati t w as re p re s e n t e d t o h im t h a t e ve ryt h in g wa s d o n e , a n d h e fe lt , a s m o s ta t t o rn e ys w oul d, "M y

cl ien t is tel li ng me that' s it , and that' s it ," but further i nv est ig ati on has revealed thatnot everything w as do ne. And so, th erefore, th e att orne y 's fees a s requested w ill be p aid ou t as per the af f idavit, and th ose wi ll be paid w it hin fiv e day s o f today 's date .[ ] 3 On June 19, 2006, the t ri al cour t s ig ned an order

g ra nti ng the Rab ala is es' moti on for s anct ion s. F ind ing g ood c ause to s a n ct ion ABN bec ause itfail ed to co mply w it h the Apr il 19, 2006 order , it ord ered ABN to pay$100,000 i nto t he reg is tr y of the c our

t pen din g7

further order of the c our

t. Ital so ordered a $10,000 per di em san cti on to be p aid i nto t he registry of the cou rt beginning at 3:0 0 p.m

. on June 16, 200 6, and rem aining in ef fect un til ABN full y

co mpli ed w it h the co urt' s A pr il 19, 2006 order

. On A ug ust1, 2006, the t ri al cour t hel d y et an other

hear ing wit h reg ard to the $10,000 dai ly

sa nct ion

. At thi s hear ing , ABN admit ted that it did not compl ete p ro duci ng respo nsive discov eryin comp liance wi th the trial court’s order unt il June 30 . Af ter the se re present ati ons, the tr ial co urt ag re ed to recons ide r the d ail y sa nct ion

. At t he final sa nct ion hear ing on Aug ust22, ABN offered furt her tes ti mony

admi tti ng thatso me of the do cument s or ig ina ll y ag re ed to be p ro duced pursuantto the 2005 R ule 11 a g re ement or ordered produce d under

the Apr il 2006 order

w ere notfinal ly

produce d unt il Ju ne 14 throug h J une 26. At t he c oncl usi on of thes e many hear ing s, the tr ial cour t li fted the $10,000 per

di em sanc ti on butl eft the $ 100,000 sa nct ion i n effect

. II. Ana ly sis In one i ssue, ABN cont end s tha t the trial court erred in impo sing sanction s beca use iti s neit her

f air nor jus t for

the follo w ing reaso ns: (1 ) ABN ’s co nductdoes not cons ti tute discovery

abu se or co nte mp t of

co urt; (2) the san ction was not directly relate d to con duct justif y ing the sanct ion an d w as nottailored to reme dy the harm , if any, caused byABN’s condu ct; ( 3) the fine w as e xc ess iv e and w as impos ed w it hout cons ide ra ti on of a l ess er sanc ti on; a nd ( 4) the fine w as based , atl easti n par t, on i nadmis si ble preju dic ial ev ide nce. A. Discov eryAbuse Under Rule 21 5 or Conte mp t of Court ABN co ntends thatthe sanc ti on w as not fai r and jus t becau se it s c onduc t di d not
cons ti tute dis cov er

y abus e or

co ntempt of c our

t. In conne cti on w it h thi s a rg ument, ABN8

es s ent ially

conte nds th at it prod uced all requeste d discovery , even if u ntim ely; tha t it prod uced dup licativ e do cum ent s in v iolation of the trial court’s April 19 order only becau se dup lication w as “inciden t to prov iding the docu me nts as fast as possib le;” t h e p la in tif fs’ amended pl eadi ng s in Ma rc h of 2006 c hang ed th e s cope of ABN’ s d is cov er y respon ses as com pare d to its du ty to respo nd in 20 05; and the plaint if fs w aived their rig ht to comp lain about ABN ’s f ail ure to produce bec ause they fail ed to obta in a r uli ng on A BN ’s obj ect ion s and as ser

ti ons of pri v il eg e. W e f irst consider ABN’s con ten tion th at its c o n d u c td id notconstitu te disco v ery abuse

. A c our

t may i mpose sanc ti ons for th e fail ure to fully and compl etel y

co mplyw it h
a req uestfor d is cov er

y . Se e g e n e ra lly

T EX
. R. C IV
. P. 215 . If the cou rt fin ds a pa rty is abusi ng the d iscov er

y proces s i n s eeki ng , mak ing or resi sti ng di sc ov er

y , t he c our

t may impos e an “a ppropr iat e” sa nct ion

. See T EX
. R. C IV
. P. 215.3 . Th e T exas Suprem e Court has s t a t e d t h a t t h i s r u l e g i v e s “ t r i a l c o u rt s b ro a d a u t h o r i t y t o c u r b [ d i s c o v e r y] abus e.” Br aden v . D owney , 811 S.W .2d 9 22, 9 30 ( Tex . 199 1)

. There are three pur poses for dis cov er y sa nct ion s: (1) t o s e cu re co mpli ance w it h di sc ov er y r ule s; (2 ) to de ter

othe r li ti g ants from si mil ar mis condu ct; and (3 ) to pu nis h v iol ators. Chr ys ler C or p. v . Bl ack m on , 841 S.W .2d 844 , 849 (Tex. 1992 ). The sanct ion s impos ed mus t be appropr iat e or j ust

. Tr ansA m er ic an Natur

al Gas Corp. v. Powell , 811 S.W .2d 9 13, 9 16 (Tex . 199 1) . The s upreme co urt has ar ti cul ated a tw o- par t inq uir y that appel lat e c our

ts must condu ct in maki ng thi s d eter minat ion

. See i d. at 91 7. Fi rs t, w e m u st e n sure tha t t here i s a di re ct re lat ion shi p betw een t he i mprop er condu ct and t he s anct ion i mposed. Id. Sec o n d , w e mu st ma ke certain thatless sev ere sanc ti ons w oul d nothav e been suffici ent t o promote c ompli ance. Id.9

W e recog niz e tha t, in ass ess ing sa nct ion s, the tr ial courtis enti tl ed to con si der the enti re co urse of the l it ig ati on . Scott Ba der , Inc. v. Sands tone Pr

ods ., 248 S. W .3d 8 02, 8 14 (Tex . Ap p.–H ousto n [ 1 st D is t.] 2008, no p et.) ; Br oesche v

. Jacobs on , 218 S.W .3d 2 67, (Tex . Ap p.–H oust on [1 4th D is t.] 2007, pet. deni ed) ; see Be rry- Parks Rental Equ ip. Co. v. Si nshei m er , 8 4 2 S

. W

. 2 d 7 5 4 , 7 5 7 (T e x. A p p . – Ho u s t o n [ 1 s tDi s t

. ] 1 9 9 2 , n o wri t ). Si m il a rl y, in cons ide ring whe th er sa nct ion s a re j ust , w e rev iew the enti re record, i ncl udi ng the
ev ide nce, arg uments of couns el, w ri tten dis cov er y on fil e, an d t h e ci rc umstan ces sur ro undi ng the par

ti es' di sc ov er

y abus e. Hi

ll & G ri ffith C o. v

. Br yant , 139 S.W .3d 6 88, 6 94 (Tex . Ap p.–Ty ler

2004, pet. deni ed) ; Daniel v. Ke lley Oil C orp . , 9 8 1 S

. W

. 2 d 2 3 0 , 2 3 4 (T e x. App .–Hou ston [1st Dist.] 19 98, pet. den ied). W e revi ew the trial court's ruling o n sanct ions for d iscovery abu se un der an abu se of di sc re ti on sta ndard. State F ar mF ir e & Cas . C o. v

. R odr igu ez , 8 8 S

. W

. 3 d 3 1 3 , 3 2 6 (T e x. App.–S an Ant oni o 2002, pet. deni ed)

. W hen rev iew ing a t ri al cour t' s i mp osi ti on of
sa n ct io n s, an y con f lic ts m u stbe vie wed i n t h e ligh t m o stfa vora b le to th e tri a l co u rt 's rul in g, and all inferenc es must be made in fav or of the c our

t' s j udg ment. Herring v. W elbo rn , 27 S.W .3d 132 , 143 (Tex. App. –Sa n Ant onio 200 0, pe t. de nied ). T he d iscovery

at issue w as originally

propo und ed to ABN in Decem ber 20 04. ABN’s
or ig ina l re spons es, w hic h w er e or ig in a lly m a d e i n J anuar y 2005, l arg ely

co nsi ste d of aff ir mati ons that ABN w oul d “sup ple ment” w it h its respo nses . On Apri l 19, 2006, the t ri al
cour t order e d A BN to answ er di sc ov er

y by M ay 5. ABN di d notco ntes t t his order , and , based on o ur

rev iew of the record, ap peared to ag re e to the p ro duct ion of the s peci fied document s. The par

ti es thereafter extended the May 5 deadli ne by

ag re ement un ti l Ma y10

12. ABN nev erthel ess did not meet t he dead li ne i mposed by the tr ial co urt’ s o rd er , and the pla int iffs file d a mot ion for s anct ion s. It is undi spute d t h a t AB N faile d to compl y w it h the tr ial co urt’ s o rd er of Apr il 19, 2006

. It to ok th r ee mo ti on s to c om pe l , a mo ti on for s an c ti on s , an d fi v e he arings bef ore ABN f ully

respon ded to the d iscovery a t issue. During the hea ring proce ss, the trial court
re peatedl y

heard from represent ati v es of A BN that it s employ ees had made all efforts to compl ete dis cov er

y , w hen they cl ear ly

had not, and t hat a ll di sc ov er y had been produce d,
w hen i t c lea rl y

had not. At the J une 1 hear ing , i n- house co unsel M cM ahan s tated that : A nu mb er

o f M r . D r ei l i ng ’ s req ue s ts w ere k i nd o f broa d- ba s ed req uest s, understa ndabl y , w it h respect t o w hether such informat ion ex is ts, and to t he b e s to f o u r

k n o w l e d g e –a n d w e ’ v e g i v e n [ c o u n s e l fo r ABN] ki nd of

a brea kdown – there are no ot her do cum ent s in ex istence w ith respe ct to this re qu e s tb e yo n d wh a twe ’ve p ro d u c e d so fa r . . . . I b e li e ve e ve ryt h in g t h a twe hav e has been produce d .

. . . Cou nsel su bseq uentl y

cl ar ified thatthe one ex cept ion to the d is cov er y w hic h had not b een produce d was c o rpora te emai ls

. Nev erthel ess , AB N subs eq uentl y produce d addi ti onal document s w hic h w er e respon si v e to the o ri g ina l dis cov er y req uest s. F urther , c ounse l for ABN tes ti fied th at A BN ’s represent ati v es had told him rep eatedl y thatthey

had furni shed “e v er ythi ng ,” and he w as “g iv en to understa nd th at an ythi ng that had to do w it h thi s c ase, if i t exist ed,” w oul d hav e been in document s A BN had prev iou sl y produce d i n 2005. M o r e o v e r , a t v a r i o u s s t a g e s i n t h e s a n c t i o n p ro c e s s , i t w a s a p p a r e n t t h a tso me of the
re present ati v es from ABN had nev er seen the o ri g ina l re q uest s for product ion or

the tr ial court’s orde r requiring prod uction . For instance , on Jun e 15, Frederick Richter, in-ho use couns el, w ho w as in charg e of pro d u ct io n , testi fied th at al thoug h he had s een t he tr ial
cour t’ s o rd er req uir ing product ion , he had nev er seen the indiv idu al req uest s for product ion at i ss ue.11

W e con clude thatthe rule 215 .2 prerequisite to imp osing sa nction s, tha t is, a party's failu re to compl y

w it h an order

to prov id e d isc o very , w as sat is fied. See T EX
. R. C IV
. P. 215.2( b) ; Am . F

loo d R esear

ch, Inc . v

. Jones , 1 9 2 S

. W

. 3 d 5 8 1 , 5 8 4 ( Te x . 2 0 0 6 )

. At t he
mo st f und am ent al lev el, ABN failed to comp ly w ith the trial court’s order of April 19, w hich
re q uired product ion by

a date cer

tai n. At the heari ng prece din g the entr y of thi s o rd er , AB N did not arg ue that the tri al cour t’ s orde r w as ov er ly

burdenso me or

othe rw is e c ontend that itsh oul d notbe req uired to respon d to dis cov er y as ordered. Ev en after

ABN fail ed to meet the re qui re d d e adl ine , w hic h w as extended by ag re ement of the par

ti es, the tr ial co urt repeated ly del ay ed th e i mposi ti on of san cti ons to allow ABN ad dition al time to f urthe r respo nd to discovery and presen t w itnesse s to explain it s c onti nued fail ur e to meet t he tr ial co urt’ s o rd er . ABN co ntends thatsa nct ion s are ina ppropr iat e bec ause the d is cov er y respon ses re q uired a “l abor

i ntens iv e, t ime- cons uming, e xpensi v e proces s,” and “e v en th oug h [t he dis cov er y] c oul d not be c omplet ed by the or ig ina l cour

t dea dli ne, i t w as acc ompli shed as soon as possible .” H owev er, ABN’s dif f iculty in respo ndin g to th e discovery w as the direct result of its ow n discretion aryaction s and inaction s, and a c c o rd in gly , shou ld notex cuse ABN ’s di lat or

y efforts. Cf

. In r e Whiteley , 79 S.W .3d 729, 735 (Tex . Ap p.–C or pus Chr is ti 200 2, orig. proceed ing) (“W e also reco gniz e tha t, “[t]o th e extent th at a disco v eryrequest is burdenso me bec ause of the respon din g par ty ’s ow n consc iou s, di sc re ti onar y dec is ion s [for example , the u norganized storage of in active p atien t records], t hatburde nsom ene ss is not prop erly

laid at the feetof

the requestin g party, and cann ot be said to be ‘undu e.’”)M a n y o f A B N ’ s d i ff i c u l ti e s i n p ro d u c i n g th e o rd e re d d i s c o v e ry re s u l te d fro m th e c l o s i n g o f o n e i ts 4 di v i s i on s i n Jun e 20 05. Because ABN had not r espond ed t o t he Rabal ai ses’ di scov er y when i t was f i r st pr opoun ded, and di d no t pr eser v e t he r equest ed docum ent at i on, soft war e, or em ai l pr ogr am s f ol l owi ng t he c l os ure of i t s di vi s i on , A B N ha d t o t ak e t he ad di t i on al step s of re tri e v i ng an d res t ori ng em ai l s an d s oft w are re c o rd s i n o rd e r to c o m p l y w i th th e tri a l c o u rt’ s o rd e r . A lth o u g h A B N c h a ra c te rize s th e e ff o rts i t m a d e to r ecap t ure el ect r oni c docu m ent s whi ch wer e l ost aft er t he i ni t i al di scov er y r esponse s wer e ser v ed a s ext r aor di nar y , t hese eff or t s wer e con si st ent wi t h t he d ut i es no w r out i nel y i m posed by t he cu r r ent f eder al d i s c o v e ry g u i d e l i n e s a p p l i c a b l e to th e d i s c o v e ry a n d d i s c l o s u re o f e l e c tro n i c a l l y s to re d i n fo rm a ti o n . S e e , e .g ., F ED
. R. C IV
. P

. 16 (b)(3)(B)(i i i ), 26 (b)(2)(B), 34 (a)(1)(A). 12 (qu o ti n g ISK Bi

otech C or

p. Li ndsay, 933 S.W .2d 5 65, 569 (Tex . Ap p.–H oust on [1 st Di st. ] 199 6, orig. proceed ing))

. 4 Altho ugh the t rial cou rt’s sanction order could have been prem ised on ABN’s fa ilure to compl y w it h a dis cov er y order under the ru les of c iv il procedu re , w e further co n sider ABN’s cont ent ion th at its cond uct did notco nstitu te cont em pt of co urt. W e const rue this
arg ume nt as a c hal len g e to the t ri al cour t’ s i nherent p ow er

to sanc ti on. The inh erent pow ers o f a cour

t are tho se w hic h it may cal l upon to aid i n the ex er ci se of its j ur is dicti on, in the admini strati on of just ic e, in the pres er

v ati on of its in dependenc e and int eg ri ty , and to prevent a ny significan t interferen ce w ith the tradition al core f unct ions of Te x as cou rts. Publ ic Ut il

. Com m 'n v. Cof

er , 754 S.W .2d 121 , 124 (Tex. 1988 ); Kutch v. Del M ar C ollege , 831 S. W .2d 5 06, 5 10 ( Tex . Ap p.–C or pus Chr is ti 1992, no w ri t)

. “ By ru le, sta tute, and thei r ow n inh erent pow er , tr ial cour ts hav e broad aut hor ity to
sanc ti on l it ig ants for s peci fic mi sc ond uct

. ” In r e D oes 1- 10 , 2 4 2 S

. W

. 3 d 8 0 5 , 8 1 7 (T e x. App.–Tex ar kana 2007, no pet .) ; In re N.R.C. , 94 S.W .3d 799, 807 n. 4 ( Tex . Ap p.–H oust on [14 th Dist.] 20 02, pet. den ied); se e al so Ons tad v

. Wri ght , 5 4 S

. W

. 3 d 7 9 9 , 8 0 4 (T e x. App.–Tex ar kana 2001, pet. deni ed)

. A tr ial cour t has inh erent pow er to sanc ti on to the extent ne cessary to det er, alleviate, and co unt eract bad f aith abu se of the jud icial process

. In r e Benn ett , 9 6 0 S

. W

. 2 d 3 5 , 4 0 ( Te x . 1 9 9 7 ) ( p e r c u r i a m); Da lla sC o unt y Consta ble v.13

Ki ngvi si on Pay -Per -V iew , 21 9 S. W .3 d 60 2, 6 10 ( Tex

. Ap p. –D al l as 2 00 7, n o pe t. )

. To suppo rtthe entr

y of sanc ti o n s u n d e r a co urt' s i nherent p ow ers, the t ri al jud g e mustfind that the party

caused si g nific ant i nter ferenc e w it h the l eg it imat e ex er ci se of the tradi ti onal
core f unct ion s o f the c our t. Eichel ber ger v. Eichel ber ger , 582 S.W .2d 395 , 398 (Tex. 1979 ); IFC Credit Corp. v. Spe cialty Optica l Sys ., 252 S.W .3d 761, 772 (Tex . App.–D all as 2008, pet. filed ). I n oth er w ords, there must be some ev ide nce that the c onduc t c omplai ned of significan tly

interfered w ith the co urt's legitimate ex ercise of one of the en um erate d core functi ons. Kut ch , 832 S.W .2d a t 511

. The core f u n ct ions of the j udi ci ar y are to hear
ev ide nce, dec ide i ss ues of factrais ed by pl eadi ng s, decid e q uest ion s o f law , ent er final jud g ments, and enforc e tho se jud g ments. Ar m adi ll o Bai l Bonds v. St ate , 802 S.W .2d 2 37, 239- 40 ( Tex . C ri m. App. 1990) ; Finlan v. Pe avy , 2 0 5 S

. W

. 3 d 6 4 7 , 6 5 2 -5 3 (T e x. App.–W aco 2006, no pet.)

. Addi ti onal ly , a tr ial co urt’ s “ core functi ons” hav e been found to inc lud e “ the mana g ement of i ts dock et an d the i ss uance and enforc ement of i ts orders.” See In re K.A.R. , 171 S.W .3d 7 05, 7 15 ( Tex . Ap p.–H oust on [1 4th D is t.] 2005, no p et.)

. W e apply

an abuse of

disc re ti on standard to re v iew the tr ial co urt' s a cti ons pursuant to i ts i n herent p ow er . Kut ch , 831 S.W .2d a t 512

. W e rev iew the enti re record and v iew the e vide n ce most fav orabl y to the t ri al cour

t' s r uli ng . Id .; Vaughn v. Tex. Em ploym ent Com m 'n , 792 S.W .2 d 139, 143 ( Tex . Ap p.–H oust on [1 st Di st. ] 199 0, no w ri t) ; see a lso Lawren ce v. Kohl , 853 S .W .2d 6 97, 7 00-7 01 (Te x . App .–Hou ston [ 1st Dist.] 199 3, no pet. ). How ev er , reg ardle ss of the l eg al author ity under w hic h a sanc ti on i s i mposed, a s anct ion
canno t be ex ces si v e and shoul d notbe a ss ess ed w it hout appropr iat e g uid eli nes. See Lo w v. Henry , 221 S.W .3d 6 09, 6 20 ( Tex . 200 7 ) (d is cus si ng l imi tati ons on s anct ion s u nder T ex as Rul e of Ci v il Procedu re 215 and c hapter 10 o f the Tex as Ci v il Pract ic e and14

Remedi es Cod e) ; Gr

ein er v. Ja m eson , 865 S .W .2d 4 93, 4 99 (Te x . App .–Dallas 1 993 , w rit deni ed) ( noti ng thatthe ru le 215 req uirement t hat s anct ion s b e j ustal so appl ies to the
cour t' s i nherent p ow er

to sanc ti on) ; see also Sta te v. PR Invs

. , 1 8 0 S

. W

. 3 d 6 5 4 , 6 7 3 (T e x. App.–H oust on [1 4th D is t.] 2005) , a f f ’d , 251 S.W .3d 4 72 ( Tex . 200 8)

. Rev iew ing the enti re record and cons ide ri ng the ev ide nce most fav orabl y to the t ri al court’s ruling, fo r the reaso ns previously deline ate d here in, w e conclu de tha t the trial court d id n o ta b u s e i t s d is c re t io n i n i m p o s in g s a n c t io n s u n d e r i t s in h e re n tp o we r. Ac c o rd in gl y,
w e reje ct ABN ’s arg uments othe rw is e. B. San ction Must b e Just In i ts sec ond s ubi ss ue, A BN co ntends thatthe sanc ti on w as not d irect ly rela ted t o condu ct jus ti fyi ng the sanc ti on and w as not t ail ored to remedy the har m, i f any , cause d by ABN’s cond uct. ABN con ten ds tha t t h e a wa rd of atto rney’s fees m ore tha n ad equate ly compens ated the p lai nti ffs for any har m caus ed by

the dis cov er

y del ay . As state d previously , in order for a sanct ion to be just, th ere m ust b e a direct
re lat ion shi p betw een t he offensiv e c onduc t and the sanc ti on i mposed; and the s anct ion impos ed mus t notbe e x ces si v e. See Tr ansA m er ic an , 811 S.W .2d at 916. In other w ords, the p uni shmentsh oul d fit the c ri me; th e s anct ion must be direct ed ag ain st the a buse and tow ard remedy ing the pr eju dice c a u se d to the i nnoce nt pa rty . See Thompson v. Davis , 901 S. W .2d 939, 940 (Tex

. 1995)

. Al l of the foreg oin g req uirements al so appl y to a tr ial
cour t' s e x er ci se of its i nherent p ow er to sanc ti on. Gr

ein er , 865 S.W .2d a t 499

. On Jun e 1, th e trial court foun d tha t ABN had failed or ref used to produce discovery
as prev iou sl y

ordered by

the cour t and resetthe hear ing to see w hat A BN w oul d furt her produce

. At the heari ng on June 5, w here it w as apparent that ABN had jus t produce d a15

large box of

docu me nts, th e trial court he ld A B N in contem pt an d asse ssed $ 100 ,00 0 in
sa n c t io n s , p lu s $10 ,00 0 pe r day tha t it fa iled to com ply w ith the trial court’s order. How ev er , t he tr ial co urt del ay ed th e ac tua l impos it ion of sanc ti ons and s tated thatthe
sanc ti ons w oul d beg in at 5: 00 p.m

. o n J u n e 8

. On J une 8, after hear ing tes ti mony

from
re present ati v es of ABN, the cour t ag ain ca rr ied the is sue of sanc ti ons unti l June 16 “w it hout impos ing them at this time.” The tr ial judg e stated that , “I’ m g onna car ry that and
ma ke tha t decision at tha t time . Th at’ll be fair to bot h sides. ” I n s t e a d, th e trial court impos ed a sanc ti on of $28,0 5 0 in att or ney ’s fees. The c our t ag ain ca rr ied the is sues of
sanc ti ons at a hear ing on A ug ust8, w herein the par ti es announc ed th e s ettl ement of the under ly ing di sput e. The cour t spec ific all y re ferenc ed the poss ibl e s anct ion s o f $10,000 p er day , w hic h at that ti me compr is ed approx imat ely $530,00 0 w hic h had not been pai d. The tr ial co urt ag ain ca rr ied the moti on for sanc ti ons unti l the s ettl em e n t was co mplet e and f und ed. On August 22, af ter again he aring from represen tatives f rom AB N, the trial court
ass ess ed addi ti onal att or ney ’s fees, but o ther w is e ex press ly

kept the matter of sanc ti ons under adv is ement. Base d on the reco rd bef o re t h e t ri a l c o u rt , we c o n c lu de th at the sanct ions w ere direct ly rela ted t o ABN ’s mis condu ct and w ere tai lored to remedy the har m caus ed bythat mis condu ct. See T

ra nsAm er

ic an , 811 S.W .2d a t 916

. C. Ex ces si v eness and Less er Sanc ti on In i ts thi rd subis sue, ABN conten ds that the f ine w as ex ces si v e and w as impos ed
w it hout cons ide ra ti on of a l ess er sa nct ion . In this reg ard, a dis cov er y sa nct ion “ shoul d be
no m ore s e v ere tha n ne cessary to satisf y its leg itima te pu rpose s,” and “cou rts must
cons ide r the a v ail abi li ty of less st ri ng ent s anct ion s a nd w hether su ch les ser

sa nct ion s16

w ould f ully

prom ote comp liance. ” PR Inv s. & Specialty Ret

ailer s, Inc

. v. State , 251 S.W .3d 4 7 2 , 4 8 0 (T e x. 20 0 8 ) (qu o ti n g Tr ansA m er ic an , 811 S.W .2d a t 917 ). Base d on the cou rse of litig ation , w hich ind icated a g ene ral and co ntinu ing patte rn of discovery

abu se, a len gthy

delay, a n d atto rney’s fees incu rred by the Rabala ises in pursui ng the dis cov er

y at is sue, w hic h are fir mly su ppor ted b y the re cord, w e hol d the tr ial court did not ab use its discretion in a ssessing $ 100 ,00 0 in sanct ions for discovery abu se or bad faith a buse of the j udi ci al proces s. See, e.g., Spohn Hosp. v. M ayer , 104 S. W .3d 878, 882 ( Tex . 200 3) ; Vel a v . Wagner & Br

own, Ltd. , 203 S.W .3d 3 7, 62 (Tex . Ap p.–San Ant onio 200 6, no pet. ). W e no te, in th is reg ard, that the trial court ref used the Rab alaises’
re q uestfor d eath penal ty sa nct ion s. In t he ins tant cas e, the monetar y sanc ti on compr is ed ro ug hly doubl e the a mount of atto rney’s fees which w ere incurred a n d p aid as a resu lt of the disco v eryproblem s; approx imat ely

one- fifth of the amountof th e l o a n at is sue in the u nder ly ing di sput e, or $520,00 0; an d l ess than one- fifth of the per di em san cti ons w hic h w e re ulti matel y not impos ed by

the tr ial co urt, or

$560, 000. Ac cordin g ly , bas ed on t h e r e cord, the s anct ion
w as no t excessiv e. Moreover, contrary to AB N’s c o n t e ntion s othe rw ise, the trial court imp osed lesser sanctio ns be fore imp osing t he sanct ion at issue herein. The trial court f irst impos ed a sanc ti on of $28,0 5 0 i n a ttor ney ’s fees on June 15, t hen i mposed addi ti onal atto rney’s fees o f

$20 ,00 0 on August 22, 200 8. T he trial court issued an o rder on Au gust 30, referenc ing the $100,00 0 sanct ion , and the final order in the underl y ing matte r w as not si g ned unt il Sept ember 19, 2006. The tr ial co urt notonl y co nsi dered, b ut i mposed les ser sanc ti ons before t he order at is sue herein

. W e reje ct ABN ’s arg uments othe rw is e. D. Evid e n ti a ry Rul in gs17

In its four

th s ubi ss ue, A BN co ntends thatthe fine w as based , atl easti n par t, on inad missible prejudicial evidence . ABN conte nds th at e viden ce, w hich w as expressly admit t e d fo r t h e “ l i mi t e d p u r p o s e ” o f t h e h e a r i n g o n s a n c t i o n s , t h a t A B N had bee n sanc ti oned $4 1,000, 000 by the Uni ted S tates D epartm e n t of H ousi ng and Ur ban Dev elo pment reg ardin g mis re present ati ons on H UD i ss ues and $80 ,000, 000 for money laun dering, w as bo th ina dm issible and und uly prejud icial. In order to ass ess sanc ti ons in thi s c ase, the tr ial co urt w as re q uired to co nductan ev ide nti a ry

hear ing “ to w hic h the r ule s o f ev ide nce neces sar il y appl y .” Kugle v. Dai m ler Chr ysler C or p. , 88 S. W .3d 355 , 364 (Tex. App. –Sa n Ant onio 200 2, pe t. de nied ). A tr ial co urt' s ru lin gs in admitti ng or ex cl udi ng ev ide nce are rev iew ed unde r an abus e of dis creti on standard. Nat 'l Lia b. & F ir e Ins . C o. v

. Al len , 15 S. W .3d 525 , 527 (Tex. 2000 ). This r ule has been appl ied i n the cont ext of sa nct ion hear ing s. See , e.g ., Tranth amv. Isaa cks , 218 S.W .3d 7 50, 7 55 ( Tex . Ap p.–F ort W orth 20 07, p et. deni ed)

. Ass uming , w it hout deci din g , t hat the tr ial co urt er ro neous ly al low ed th e admi ss ion of ev ide nce re g ardin g the unrela ted s anct io n s a gainst ABN , w e c oncl ude t hat t he adm ission of

this evi den ce w as ha rmless. T he e rroneo u s a d m ission of ev iden ce is har m le ss u n less the e rror probabl y , t houg h notnec ess ar il y , c aused rendi ti on of an improper j udg ment. See Reliance Steel & AluminumCo. v. Sevcik , N o. 06 -0 4 22, 2 008 Tex . LE X IS 8 61, a t *8- 9, 51 Tex

. Sup. J. 1437 (S ept. 26, 2 008)

. Fi rs t, the a mount of the
sanc ti on ati ss ue i n thi s c ase w as ex pre ss ly c ontempl ated before t he c omplai ned- of
ev ide nce w as pr esent ed to the tr ial court , and accordin g ly , c oul d nothav e i nfluenc ed th e tr ial co urt’ s d eter minatio n reg ardin g the amount o f the s anct ion

. Seco nd, g iv en th at t he
unrela ted p enal ti es w ere any w here from four hundred to ei g ht hu ndred ti mes t he amount18

of the f ine ulti matel y

i mposed in thi s c ase, i t i s reason abl e to ass ume thatthes e unrela ted pen alties did not af

fect t h e t ri a l c ourt’s de cision. And f inally, the trial court had before it suf f icient evidence regarding ABN’s miscon ductin the un derlyi ng proceed ing from w hich itco uld hav e c oncl uded t hat ABN ’s co nductdur ing the course of the l it ig ati on mer it ed th e sanct i on i mp os ed

. Ac c ordi ng l y , w e r ej ec t AB N ’ s arg um en t th at th e ad mi s s i on of this evidence ca used the ren dition of an imp rope r order. III

. Con cl usi on The tr ial co urt i s e nti tl ed to j udg e the credi bil ity of t he w it ness es and t he w eig ht of thei r tes ti mony

i n the co ntext of a s anct ion s h ear ing

. Scot t Bad er, Inc. , 248 S.W .3d a t 813 ; Dan iel , 981 S. W .2 d a t 2 3 2. In t he i nst ant c ase, the tr ial co urt had before itsu ff ic ien t tes ti mony

from AB N’ s represent ati v es from w hic h i t may hav e c oncl uded t hat A BN sh ow ed flag ra nt ba d faith o r a c all ous dis re g ard for the respon si bil it ies of dis cov er y . The sancti on impos ed i n thi s c ase w as no more sev ere tha n nec ess ar y to sat is fy the l eg it imat e pur poses of secu ri ng co mpli ance w it h the tr ial cour t’ s orders, deter ri ng si mil ar mis condu ct by

othe r li ti g ants , and puni shi ng ABN

. Acc ordin g ly , w e ho ld t hat t he tr ial co urt di d notabus e i ts discretion in assessing $10 0,0 00 in san ctions a gainst ABN. The order

of the t ri al cour

t i s a ff ir med.
NE LDA V. RO DR IGU EZ J u s t i c e Me moran dum Opi nio n del iv ered and filed thi s 1 8th d ay

of Dec ember , 200 8.