Opinion ID: 2419858
Heading Depth: 1
Heading Rank: 3

Heading: Bifurcation of Discovery

Text: The other issue in this mandamus proceeding involves discovery. Plaintiffs sent Relators interrogatories and document requests demanding disclosure of a broad range of information. Most of the proposed discovery can be broken down into four general categories: (1) each dealership's full name, dealer's general distinguishing number, any business aliases or physical addresses used and the periods of such use since January 1, 1994, and any automobile trade association memberships and the periods of such memberships since January 1, 1992; (2) every oral and written communication with any purchasers, officers, salespersons, sales managers, finance and insurance workers, and automobile trade associations, regarding the vehicle inventory tax and any transaction in which it was charged; (3) identification of all persons having knowledge of relevant facts and what knowledge they may have; and (4) identification of the statutory or regulatory basis of any contention that the dealer is authorized to collect the vehicle inventory tax from the purchaser. Plaintiffs withdrew interrogatories that sought disclosure of each dealership's net worth and financial statements. Relators refused to answer any of the interrogatories, objecting that before the trial court ruled on various threshold issuessuch as venue, jurisdiction, abatement, special exceptions, and class certificationdiscovery was premature, unduly burdensome, and constituted harassment. Relators also moved for a protective order to abate all discovery on the merits until at least thirty days after class determination. Relators argued that a bifurcation order would expedite class determination, protect Relators from discovery that would be rendered unnecessary if class status were denied, prevent the use of burdensome discovery to extort an unwarranted settlement, and promote judicial economy: In summary, i) Plaintiffs' initial written discovery is premature and ii) ... if unabated, will result in incalculable expense and hardship on, as well as unavoidable and unnecessary harassment of Moving Defendants. Plaintiffs opposed the motion and objections, arguing that such routine questions as state your name and state your address would help organize the pleadings and parties for purposes of the certification process. Plaintiffs contended that interrogatories seeking disclosure of inventory-tax-related communications are necessary to help determine the size and identity of the putative class and to establish prima-facie proof of concerted action and conspiracy. The trial court considered both Relators' objections and their motion for protective order at a hearing. The trial court first issued an order denying Relators' motion for protective order. Later the trial court issued a separate order overruling in part and sustaining in part Relators' general and specific interrogatory objections. We emphasize, as Relators did throughout their briefing before this Court, that in this mandamus proceeding, Relators challenge only the trial court's denial of their motion for protective order. They do not contest the trial court's rulings on their overbreadth and other specific objections to Plaintiffs' discovery requests. Relators contend that as a matter of law, they are entitled to an order bifurcating class and merits discovery.
We begin our analysis by reviewing some basic discovery principles. The primary objective of discovery is to ensure that lawsuits are decided by what the facts reveal, not by what facts are concealed. Jampole v. Touchy, 673 S.W.2d 569, 573 (Tex.1984). As the United States Supreme Court has noted, modern discovery and pretrial procedures serve the useful purpose of [making] a trial less a game of blindman's bluff and more a fair contest with the basic issues and facts disclosed to the fullest practicable extent. United States v. Procter & Gamble Co., 356 U.S. 677, 682, 78 S.Ct. 983, 2 L.Ed.2d 1077 (1958). In practice, however, discovery is not only a tool for uncovering facts essential to accurate adjudication, but also a weapon capable of imposing large and unjustifiable costs on one's adversary. Frank H. Easterbrook, Comment, Discovery as Abuse, 69 B.U.L.Rev. 635, 636 (1989). Discovery is often the most significant cost of litigation. See Wayne D. Brazil, Views From the Front Lines: Observations by Chicago Lawyers About the System of Civil Discovery, 1980 AM. B. FOUND. RES. J. 219, 229. Because the costs of compliance are usually borne solely by the replying party, a requesting party improves its bargaining position by maximizing those costs. See Easterbrook, supra, at 636 (Litigants with weak cases have little use for bringing the facts to light and every reason to heap costs on the adverse party.... The prospect of these higher costs leads the other side to settle on favorable terms.). Both multi-party and class litigation can dramatically magnify those costs by expanding the scope of discovery. See CSR, Ltd. v. Link, 925 S.W.2d 591, 598 (Tex.1996) (Gonzalez, J., concurring) (recognizing that the costs of multi-party litigation can drive defendants to settle regardless of the merits); 7B CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1796.1 (2nd ed.1986) (noting need, in class actions, to protect both absent class members and named representatives from harassing discovery). Recognizing the potential for these and other abuses, this Court and others have articulated principles and adopted procedural devices to curb discovery abuse. First, discovery requests must be reasonably tailored to include only matters relevant to the case. See In re American Optical Corp., 988 S.W.2d 711, 712 (Tex.1998); Texaco, Inc. v. Sanderson, 898 S.W.2d 813, 814 (Tex.1995). [1] Second, discovery may not be used as a fishing expedition or to impose unreasonable discovery expenses on the opposing party. See K Mart Corp. v. Sanderson, 937 S.W.2d 429, 431 (Tex.1996); In re Time Warner Inc. Sec. Litig., 9 F.3d 259, 263 (2d Cir. 1993). Third, a court may in the interest of justice, issue a protective order to protect the movant from undue burden, unnecessary expense, harassment, annoyance, or invasion of personal, constitutional, or property rights. TEX.R. CIV. P. 192.6(b). The new discovery rules explicitly encourage trial courts to limit discovery when the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues. TEX.R. CIV. P. 192.4(b). Although a trial court has broad discretion to schedule and define the scope of discovery, it can abuse its discretion by acting unreasonably. See In re Colonial Pipeline Co., 968 S.W.2d 938, 941 (Tex.1998). A party resisting discovery, however, cannot simply make conclusory allegations that the requested discovery is unduly burdensome or unnecessarily harassing. The party must produce some evidence supporting its request for a protective order. See Garcia v. Peeples, 734 S.W.2d 343, 345 (Tex.1987); Independent Insulating Glass/Southwest, Inc. v. Street, 722 S.W.2d 798, 802 (Tex.App.Fort Worth 1987, writ dism'd). Other principles inform more specific situations. For example, courts may limit discovery pending resolution of threshold issues like venue, jurisdiction, forum non conveniens, and official immunity. See TEX.R. CIV. P. 190.4(b)(2) (contemplating that a Level 3 discovery control plan may phase discovery to resolve discrete issues); see, e.g., USX Corp. v. West, 759 S.W.2d 764, 767 (Tex.App.Houston [1st Dist.] 1988, orig. proceeding) (special appearance). Likewise, courts often limit discovery pending class determination. See, e.g., Washington v. Brown & Williamson Tobacco Corp., 959 F.2d 1566, 1570-71 (11th Cir.1992); Stewart v. Winter, 669 F.2d 328, 331-32 (5th Cir.1982); see also Rodriguez v. Banco Central, 102 F.R.D. 897, 903 (D.P.R.1984); National Org. for Women v. Sperry Rand Corp., 88 F.R.D. 272, 277 (D.Conn.1980). These limitations protect not only class-action defendants but also putative class-action plaintiffs from abusive discovery. See Eggleston v. Chicago Journeymen Plumbers' Local Union No. 130, 657 F.2d 890, 895 (7th Cir.1981); 7B CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 1796.1 (2d ed.1986). Generally, however, a litigant will need some discovery to effectively support or oppose a class-certification motion. See Stewart, 669 F.2d at 331; Chateau de Ville Prods., Inc. v. Tams-Witmark Music Library, Inc., 586 F.2d 962, 966 (2d Cir.1978). Some courts, in fact, have held that denial of discovery critical to class-determination issues is reversible error. See, e.g., In re American Med. Sys., Inc., 75 F.3d 1069, 1086 (6th Cir.1996); Duke v. University of Tex. at El Paso, 729 F.2d 994, 997 (5th Cir.1984); Chateau de Ville, 586 F.2d at 966; Doninger v. Pacific Northwest Bell, Inc., 564 F.2d 1304, 1312 (9th Cir.1977); Dillon v. Bay City Constr. Co., 512 F.2d 801, 804 (5 th Cir.1975); Yaffe v. Powers, 454 F.2d 1362, 1366 (1st Cir.1972). The amount and nature of discovery needed for class determination is case specific and depends on the claims and defenses being made. In some cases, the certification decision can be made primarily on the basis of the pleadings, postponing and potentially eliminating the need for classwide discovery. See, e.g., Commercial Travelers Life Ins. Co. v. Spears, 484 S.W.2d 577, 579 (Tex.1972) (holding that the trial court abused its discretion by ordering discovery of other potential name plaintiffs when plaintiff's pleadings and evidence could not support a class action); Wente v. Georgia-Pacific Corp., 712 S.W.2d 253, 258-59 (Tex.App.Austin 1986, no writ) (holding that when different laws applied to defendant's transactions with various putative class members, precluding plaintiff from establishing a common question of law or fact among the putative class, plaintiff was not entitled to additional classwide discovery); Stewart, 669 F.2d at 332 (holding that certification decision on putative class of inmates in the jails of eighty-two different counties could be made on the basis of the pleadings). In many cases, however, discovery is needed to establish commonality of issues, typicality of claims, or predominance of common questions of law or fact over individual questions. Such discovery will frequently be enmeshed with the merits. See Coopers & Lybrand v. Livesay, 437 U.S. 463, 469, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978); see also David Crump, What Really Happens During Class Certification? A Primer for the First-Time Defense Attorney, 10 REV. LITIG. 1, 7 (1990) ([S]uch issues as commonality, typicality, superiority, and predominance are at least tangentially related to the merits; i.e., one cannot know whether a representative's claim is `typical' of those of the class without knowing something about the merits.). Generally, it is within the trial court's discretion to schedule discovery and decide whether and how much discovery is warranted to determine any certification questions. See In re Colonial Pipeline Co., 968 S.W.2d at 943. Factors in determining the scope of precertification discovery include the importance, benefit, burden, expense, and time needed to produce the proposed discovery. See TEX.R. CIV. P. 192.4; see also Kamm v. California City Dev. Co., 509 F.2d 205, 210 (9th Cir. 1975). Other factors include whether the individual claims are large enough to be worth pursuing if the class is not certified, and if so, whether the proposed discovery would relate to those individual claims. See Duke, 729 F.2d at 997; General Motors Corp. v. City of New York, 501 F.2d 639, 646 (2d Cir.1974).
With these general principles in mind, we address Relators' contention that they are entitled, as a matter of law, to an order bifurcating class and merits discovery. Two considerations inform this determination. First, because the propriety of bifurcating class and merits discovery is case specific, we evaluate whether Relators have shown that the specific claims and pleadings in this case are clearly separable; that is, can it be determined whether the requested discovery is relevant only to the merits and not to the certification issues, or whether the discovery is overly broad. Second, we evaluate whether Relators established their right to bifurcation by showing that Plaintiffs' proposed discovery is unduly burdensome or unnecessarily harassing. Here, Relators failed to show or otherwise explain in their motion to bifurcate that the class and merits issues are clearly separable. In this case, class and merits discovery are likely to be intertwined because the Plaintiffs allege oral and written misrepresentations that vary from one class member to another. Plaintiffs' pleadings indicate that different dealerships have characterized the add-on charge that forms the basis of this suit differently. One dealership characterized it as a value tax, another as an inventory tax, another as a vehicle inventory tax, and still another as a dealer's inventory tax. These characterizations are material to the claim that the dealerships misrepresented what is in fact a property tax the state charges dealerships as a transactional tax the state charges consumers. Because whether a fraud was committed may depend on how the add-on charge was characterized, the variations in those characterizations may undermine the requisite commonality and typicality needed for class certification. See Simon v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 482 F.2d 880, 882 (5th Cir.1973); Life Ins. Co. v. Brister, 722 S.W.2d 764, 774 (Tex.App.Fort Worth 1986, no writ). Classwide discovery may uncover further variations in those representations weighing against class certification. On the other hand, classwide discovery may uncover a common thread of deceit running through the dealerships' various representations weighing in favor of class certification. See Adams v. Reagan, 791 S.W.2d 284, 291 (Tex.App.Fort Worth 1990, no writ). Therefore, although such discovery would be relevant to the merits, we cannot say that Relators' motion to bifurcate shows the discovery is not relevant to the certification issues as well. Moreover, in this case, an order bifurcating class and merits discovery without specifically differentiating the two would serve no constructive purpose. See 5 JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE 3D § 23.61[6][b] (3d ed. 1999) ([B]ecause class certification issues are not always completely separable from the merits of the class claims, bifurcation of discovery may sometimes be counterproductive.). First, a nonspecific bifurcation order would likely precipitate nettlesome disputes about whether a particular interrogatory or document request pertains to certification or merits. See, e.g., Eggleston, 657 F.2d at 893 (illustrating the disputes that can follow an order limiting initial discovery to class-determination issues). Second, such an order could unreasonably interfere with discovery of facts essential to class determination. Relators' motion for protective order insisted that the trial court abate all merits discovery until thirty days after it determined the class. The supporting brief never specifically differentiated class and merits discovery. Moreover, the brief did not give the trial court any practical guidance on how it should make that distinction or efficiently implement the proposed order. Relators' most recent bifurcation proposal, offered to the Plaintiffs as a compromise, is no more specific: Prior to certification, parties may obtain discovery regarding any matter that is reasonably calculated to lead to the discovery of admissible evidence relevant to class certification. Evidence that relates primarily to the proof of liability and damages shall not be discoverable. If the trial court were to implement Relators' most recent bifurcation proposal, the parties would inevitably dispute whether each interrogatory and document request relates primarily to the merits or to class certification. Indeed, Relators' briefs insist that all of Plaintiffs' interrogatories including some as simple as state your full name or state your addressare either exclusively or primarily relevant to liability and damages, not certification. Relators' proposed bifurcation order, therefore, would accomplish nothing. The trial court would still have to rule on the propriety of each contested discovery requestwhich, in this case, means each and every interrogatory and document request. Also, Relators' proposed bifurcation order could prevent Plaintiffs from obtaining facts essential to class determination. One commentator suggests that a defendant's best strategy may be to resist merits discovery while at the same time arguing that plaintiffs have not shown typicality or commonality, which depend somewhat on the merits. See Crump, supra at 7. There are, in fact, hints of such a strategy in Relators' briefs. On the one hand, Relators argue that before class determination, Plaintiffs are not entitled to discover the various representations the dealerships made to their customers in passing on the dealer inventory tax. On the other hand, Relators suggest that they will challenge certification on the ground that the claims depend on oral statements that are case specific and each plaintiff is required to present proof of reliance. An order abating all merits discovery could prevent Plaintiffs from showing a common thread of deceit in Relators' various representations or other elements of commonality and typicality, potentially defeating certification. Moreover, Relators failed to support their complaints of burdensomeness and harassment with anything more than general allegations. Without some more detailed explanation and proof, Relators have simply not met the basic requirements for limiting the scope of discovery under the rules of civil procedure. See TEX.R. CIV. P. 192.4, 192.6. By contrast, a specific discovery order one directly addressing the amount and nature of discovery neededwould provide a more practical and efficient mechanism for limiting precertification discovery than a blanket bifurcation order. When disputes arise about the scope of precertification discovery, the Manual for Complex Litigation suggests that the parties present a specific discovery plan that identifies the contemplated discovery and the subject matter to which it relates: Bifurcating class and merits discovery can at times be more efficient and economical (particularly when the merits discovery would not be used if certification were denied), but can result in duplication and unnecessary disputes among counsel over the scope of discovery. To avoid this, the court should call for a specific discovery plan from the parties, identifying the depositions and other discovery contemplated and the subject matter to be covered. Discovery relating to class issues may overlap substantially with merits discovery. A key question in class certification may be the similarity or dissimilarity between the claims of the representative parties and those of the class membersan inquiry that may require discovery on the merits and development of basic issues. MANUAL FOR COMPLEX LITIGATION, THIRD, § 30.12 (1995). Another commentator, writing for the defense bar, explains the need for meaningful discovery limitations: Divergent views concerning the propriety of what traditionally is understood as bifurcation should be understood to arise from the problem of the distinction between class and merits discovery that defense counsel have typically sought to draw, rather than from any broader notion that all discovery should proceed at once. Accordingly, litigants should always be looking for other distinctions on the basis of which discovery can be segmented to control burden. Timothy K. Beeken, Class Action Discovery: The Defense's Burden, Address at the Meeting of the National Institute on Class Actions: Section of Litigation (June 12, 1998), available in Westlaw, N98CACB ABA-LGLED D-1. Beeken suggests that production obligations be sequenced or phased, postponing production of the most sweeping discovery requests until after the most obviously pertinent sources of information are produced. See id. As with all litigants, we expect class-action litigants to cooperate on discovery plans and make any agreements reasonably necessary for the efficient disposition of the case. See TEX.R. CIV. P. 191.2. In this case, Relators urge that they are entitled, as a matter of law, to abate all merits discovery or all discovery that relates primarily to proof of liability or damages. Under the circumstances, they are not. Here, the merits and class issues are intertwined. Relators did not give the trial court or this Court any guidance on how to distinguish merits and certification discovery, much less how to evaluate to what issue the challenged discovery primarily relates. The relief sought in Relators' motion for protective order, abating of all Plaintiffs' discovery requests, would not give Plaintiffs or the trial court a fair factual sketch of matters related to certification. See Sirota v. Solitron Devices, Inc., 673 F.2d 566, 571-72 (2d Cir.1982) (In making a certification decision, a judge must look somewhere `between the pleadings and the fruits of discovery.... [E]nough must be laid bare to let the judge survey the factual scene on a kind of sketchy relief map, leaving for later review the myriad of details that cover the terrain.' ) (quoting Professional Adjusting Sys. of Am., Inc. v. General Adjustment Bureau, Inc., 64 F.R.D. 35, 38 (S.D.N.Y. 1974)). Rather, Relators' motion failed to clearly identify the specific matters and discovery requests that they contend are irrelevant or overbroad in relation to any threshold issues and explain the basis for those contentions. Finally, Relators did not produce any evidence that their existing discovery obligations are unduly burdensome, but argued only in the most general terms that all merits discovery should be abated until a decision on certification. It is not an abuse of discretion for a trial court to deny a motion for protective order that does not specifically identify the discovery to be limited, or that proposes to overly restrict relevant discovery. On this record, we hold that the denial of Relators' motion for protective order was not an abuse of discretion. See In re Colonial Pipeline Co., 968 S.W.2d at 941.