Opinion ID: 2455522
Heading Depth: 1
Heading Rank: 1

Heading: kickback investigation

Text: For purposes unrelated to this lawsuit, Apache conducted an internal investigation concerning bribes and kickbacks from suppliers and contractors on a number of wells in western Oklahoma and Texas Panhandle fields. Illegal drug use and prostitution on the job site were also investigated. According to testimony by Apache's general counsel, wells in Oklahoma were the primary focus of the investigation, but Key Well 1-11 and the subsequent Key wells were included. Axelson and USI have tried unsuccessfully to obtain discovery of this investigation. [4] Apache and El Paso resist discovery on the grounds of relevance, attorney-client privilege, attorney work product exemption, and the party communications exemption. The trial court did not conduct an in camera inspection of the investigation results. Instead, the court heard testimony from Apache's general counsel regarding Apache's grounds for resisting discovery of any part of the investigation results. Ultimately, the trial court denied discovery on the basis of relevance, and the court of appeals upheld the denial on this ground. 755 S.W.2d at 178. Generally, discovery is permitted into any matter, not privileged, that is relevant to the subject matter and is reasonably calculated to lead to the discovery of admissible evidence. [5] TEX.R.CIV.P. 166b(2)(a); see also Lindsey v. O'Neill, 689 S.W.2d 400, 402 (Tex.1985, orig. proceeding) (per curiam); Jampole v. Touchy, 673 S.W.2d 569, 573 (Tex.1984, orig. proceeding). This broad grant, however, is limited by the legitimate interests of the opposing party to avoid overly broad requests, harassment, or disclosure of privileged information. Jampole, 673 S.W.2d at 573. Thus the trial court has discretion to narrow the scope of discovery on a case by case basis with a protective order. TEX.R. CIV.P. 166b(5). The relevant to the subject matter and reasonably calculated to lead to admissible evidence tests are liberally construed to allow the litigants to obtain the fullest knowledge of the facts and issues prior to trial. Gutierrez v. Dallas Indep. School Dist., 729 S.W.2d 691, 693 (Tex. 1987). It does not matter that the information sought may be inadmissible at trial if it appears reasonably calculated to lead to the discovery of admissible evidence. TEX. R.Civ.P. 166b(2)(a). Among other reasons, Apache conducted the investigation to determine whether the kickbacks and bribes affected the quality of equipment used. This information might reasonably lead to evidence that Apache's conduct, or that of its suppliers, was a contributing cause of the blowout. Apache also investigated whether this conduct had an inflationary effect on the drilling costs. Since Apache is seeking drilling costs in its suit against Axelson, to be able to defend against these costs, Axelson must be permitted to determine whether they were reasonable. Therefore, portions of the kickback investigation may well be relevant to Axelson's case. Furthermore, Apache's attorney testified that the scope of the investigation included Key Well 1-11, the subsequent Key wells and all suppliers to Apache wells during the time covered by the investigation. The trial court abused its discretion in denying discovery of the investigation results sight unseen. The trial court should have conducted an in camera inspection to determine if any of the kickback investigation was relevant to the subject matter of the litigation and, if it was, whether any part of the investigation is reasonably calculated to lead to the discovery of admissible evidence. [6] Apache also resists discovery based on the attorney-client privilege under Texas Rule of Civil Evidence 503(b) [7] and the work product privilege under Texas Rule of Civil Procedure 166b(3). Since there was evidence that the investigation was disclosed to the FBI, IRS, and the Wall Street Journal, the court of appeals properly held that these privileges had been waived. TEX.R.CIV.EVID. 511. Nor does the party communications privilege apply, because the record shows that these documents were not prepared in anticipation of the litigation in which discovery of the communication was sought.