Court Opinion

ID: 3094324
Source: CourtListenerOpinion
Date Created: 2015-10-16 04:21:17.378384+00
Date Added: 2024-06-11T07:38:25.282335
License: Public Domain

Opinion issued November 7, 2014

                                     In The

                             Court of Appeals
                                    For The

                         First District of Texas
                            ————————————
                             NO. 01-14-00704-CV
                           ———————————
    IN RE BAYTOWN NISSAN INC., BURKLEIN FAMILY LIMITED
   PARTNERSHIP, FREDERICK W. BURKLEIN AND J. CARY GRAY,
                          Relators

           Original Proceeding on Petition for Writ of Mandamus

                                 OPINION

      In this mandamus proceeding, we examine whether a discussion between

two lawyers—one representing a trade association and the other representing one

of its members—is subject to an attorney-client or attorney-work-product

privilege. Relators Baytown Nissan, Inc., the Burklein Family Limited Partnership
and Frederick W. Burklein (collectively, “Baytown Nissan”) are defendants in an

action alleging breach of contract and various torts arising from a failed sale of

their Nissan dealership to, BSAG, Inc. Baytown Nissan and their legal counsel, J.

Cary Gray, seek mandamus relief from the trial court’s order overruling their

privilege assertions to the substance of a June 2013 phone conversation between

Gray and Brenda Karen Phillips, the General Counsel of the Texas Automobile

Dealer Association, regarding the dealership sale. The order requires that both

Gray and Phillips answer additional questions about the substance of the

conversation, for which Baytown Nissan has claimed privilege. We conditionally

grant relief as to Gray’s deposition and deny it as to Philips’s. 1

                                     Background

      Baytown Nissan entered into an agreement to sell the assets and the

associated real estate of their Nissan dealership to BSAG, Inc. Pursuant to the

agreement’s terms, the dealership’s sale was subject to the written approval of

Nissan North America, Inc., which also holds a right of first refusal for the sale of

the dealership. Nissan North America never gave its written approval, and it

1
      The underlying case is BSAG, Inc. and Bob Stallings Nissan of Baytown, Inc. v.
      Baytown Nissan, Inc., Burklein Family Limited Partnership, Nissan North
      America, Inc., and Frederick W. Burklein, cause number 2013-38072, pending in
      the 127th District Court of Harris County, Texas, the Honorable R.K. Sandill
      presiding.

                                            2
exercised its right of first refusal; thus, the dealership sale to BSAG failed to close.

Baytown Nissan then agreed to sell the dealership to a third party, who Nissan

North American had approved. BSAG and its assignee under the agreement, Bob

Stallings Nissan of Baytown, Inc. (collectively “BSAG”) have sued the Baytown

Nissan defendants and Nissan North America, seeking damages associated with the

failed transaction.

A.    The Failed Sale Transaction and Right of First Refusal

      In 1989, Nissan North America entered into a sales and service agreement

with Baytown Nissan. Pursuant to the agreement, Baytown Nissan became an

authorized Nissan dealer in Baytown, Texas. In 2005, the parties amended the

agreement to add, among other things, a right of first refusal (“ROFR”) allowing

Nissan North America to match any dealership purchase offer and to step into the

shoes of a potential buyer.

      In March 2013, BSAG offered to purchase the Baytown Nissan dealership

from Baytown Nissan through an asset purchase agreement. In April, Baytown

Nissan notified Nissan North America of the proposed sale. In June, Nissan North

America notified Baytown Nissan that it was exercising its ROFR. Nissan North

America subsequently assigned its rights to purchase Baytown Nissan to Soni

                                           3
Insurgentes, S.A. de C.V. By the end of June, BSAG had filed the underlying

lawsuit, and it moved to enjoin the sale to Soni. In August, the trial court denied

injunctive relief. This original proceeding, as well as two others relating to trade

secret issues, arose during the discovery process. After a failed settlement attempt

(prompting the parties to amend their pleadings to assert additional claims), the

case is set for trial next week.

B.    The Gray-Phillips Conversation

      Before it exercised its ROFR, Nissan North America notified Baytown

Nissan that it was considering invoking it. At the time, Baytown Nissan was a

member of the Texas Automobile Dealer Association (“TADA”). In response to

the notice, Baytown Nissan’s lawyer, Gray, telephoned TADA’s General Counsel,

Phillips, to discuss the transaction. During the discovery process in this suit,

BSAG advised Baytown Nissan that it intended to (1) depose Gray regarding the

substance of the Gray-Phillips Conversation and (2) call Philips as a witness at trial

to testify against Baytown Nissan regarding their conversation.

      1. The Gray Deposition

      Baytown Nissan moved to quash Gray’s deposition, arguing that Gray’s

conversation with Phillips is privileged. The trial court ordered that Gray be

                                          4
deposed in the courtroom so that the court could rule on the privilege assertions in

real time. At Gray’s deposition, Gray’s counsel asserted privilege and instructed

Gray not to answer questions about the substance of the Gray-Phillips

Conversation. The trial court was present for nine of these questions; it overruled

the assertions of privilege and instructed Gray to answer within ten days. BSAG

then posed the following two additional questions, which also evoked privilege

objections and instructions not to answer:

      Q: Okay. And as somebody with experience in the automobile
      dealership business, what she told you was consistent with your
      experience, wasn’t it? (the “First Additional Question”)

      Q: All right. What did you and Ms. Phillips talk about? Tell me from
      the beginning of the conversation to the end of it. (the “Second
      Additional Question”)
The trial court thereafter entered a written order (1) overruling Gray’s objections

and assertions of privilege as to the nine original questions and the First Additional

Question and (2) sustaining the objection to the Second Additional Question. The

order compelled Gray to answer the deposition questions to which objections and

instructions not to answer were overruled. Gray then provided sworn answers to

the original questions and the First Additional Question. BSAG subsequently

moved the court to reconsider its ruling sustaining the privilege objection to the

Second Additional Question.

                                          5
      2. The Phillips Deposition

      During Phillips’s deposition, Baytown Nissan’s counsel similarly objected

to questions regarding the substance of the Gray-Phillips Conversation on the basis

of attorney-client privilege and instructed Phillips not to answer. The parties

contacted the trial court for a ruling. The trial court overruled Baytown Nissan’s

objections, but directed that Phillips not provide answers until ten days after the

court entered a written signed order to allow for further review.

C.    The Order

      On August 12, 2014, the trial court entered a written order, ruling that the

substance of the Gray-Phillips Conversation is not privileged and ordering both

Gray and Phillips to be re-deposed. The trial court also granted BSAG’s motion for

reconsideration of its July 8, 2014 ruling and ordered Gray to answer Second

Additional Question.

                                     Discussion

      Baytown Nissan seeks mandamus relief, requesting that we vacate the

August 12, 2014 order, contending that the Gray-Phillips Conversation is subject to

one or more privileges or exemptions from discovery.

                                          6
      Standard of Review

      Mandamus relief is available to correct a clear abuse of discretion when

there is no adequate remedy by appeal. See Walker v. Packer, 827 S.W.2d 833,

839–40 (Tex. 1992) (orig. proceeding). Generally, the scope of discovery is within

the trial court’s discretion. See In re Colonial Pipeline Co., 968 S.W.2d 938, 941

(Tex. 1998) (orig. proceeding) (citing Dillard Dep’t Stores, Inc. v. Hall, 909
S.W.2d 491, 492 (Tex. 1995) (orig. proceeding)). The burden of establishing a

clear abuse of discretion is on the party resisting discovery. See In re CSX Corp.,

124 S.W.3d 149, 151 (Tex. 2003) (orig. proceeding) (citing Canadian Helicopters

Ltd. v. Wittig, 876 S.W.2d 304, 305 (Tex. 1994) (orig. proceeding)). But a trial

court has no discretion in determining what the law is or in applying the law to the

particular facts. See Walker, 827 S.W.2d at 840.

      In particular, mandamus relief is appropriate to protect confidential and

privileged information from discovery. See In re Living Ctrs. of Tex., Inc., 175
S.W.3d 253, 256 (Tex. 2005) (orig. proceeding); Mem’l Hosp.–The Woodlands v.

McCown, 927 S.W.2d 1, 12 (Tex. 1996). An appeal is inadequate when a trial

court erroneously orders the production of confidential information or privileged

documents. See In re Ford Motor Co., 211 S.W.3d 295, 298 (Tex. 2006); In re E.I.

                                         7
DuPont de Nemours and Co., 136 S.W.3d 218, 223 (Tex. 2004); see also In re BP

Prods. N. Am. Inc., 263 S.W.3d 106, 111 (Tex. App.—Houston [1st Dist.] 2006,

orig. proceeding) (“There is not an adequate remedy by appeal when a trial court

erroneously orders the disclosure of privileged information because the error

cannot be corrected once the benefit of the privilege is lost.”).

      To properly assert a claim of privilege, a party must plead the particular

privilege, produce evidence to support the privilege through affidavits or

testimony, and produce the documents for an in camera inspection, if the trial court

determines review is necessary. See In re ExxonMobil Corp., 97 S.W.3d 353, 357

(Tex. App.—Houston [14th Dist.] 2003, orig. proceeding). The burden to establish

the privilege is on the party seeking to shield information from discovery, and the

party has the obligation to prove, by competent evidence, that the privilege applies

to the information sought. See Arlington Mem’l Hosp. Found., Inc. v. Barton, 952
S.W.2d 927, 929 (Tex. App.—Fort Worth 1997, orig. proceeding).

                                           8
A.    Attorney-Client Privilege

      Texas Rule of Evidence 503 provides that a client has a privilege to refuse to

disclose and to prevent any other person from disclosing confidential

communications made for the purpose of facilitating the rendition of professional

legal services to the client. See TEX. R. EVID. 503(b)(1).

      The attorney-client relationship is a contractual relationship whereby an

attorney agrees to render professional services for a client. See Mellon Serv. Co. v.

Touche Ross & Co., 17 S.W.3d 432, 437 (Tex. App.—Houston [1st Dist.] 2000, no

pet.). Parties may expressly create such a relationship by contract, or it may be

implied from their actions. See Sutton v. Estate of McCormick, 47 S.W.3d 179, 182

(Tex. App.—Corpus Christi 2001, no pet.); Vinson & Elkins v. Moran, 946 S.W.2d
381, 405 (Tex. App.—Houston [14th Dist.] 1997, writ dism’d by agr.).

      Baytown Nissan argues that the Gray-Phillips Conversation is privileged

under Rule 503 because (1) the rule does not require an attorney-client relationship

between two attorneys for it to apply; and (2) in any event, an attorney-client

relationship was implied under these facts.

      1. Rule 503’s Requirement of an Attorney-Client Relationship
      Rule 503 recognizes a privilege for confidential communications when a

lawyer either (1) renders professional legal services to a client or (2) consults with

                                          9
a client who seeks professional legal services from that lawyer. See TEX. R. EVID.

503(a)(1), (b)(1). Baytown Nissan’s first argument, that Phillips’s status as an

attorney—and not necessarily their attorney—is sufficient to attach attorney-client

privilege disregards the purpose of the privilege: to foster open communication

between clients and their attorneys so that the attorneys can best represent their

clients. See In re Union Carbide Corp., 2003 WL 22682301, *4 (Tex. App.—

Houston [1st Dist.] 2003, orig. proceeding) (“The purpose of the attorney-client

privilege is to protect the confidential relationship between attorney and client and

to promote full and open disclosure of facts so that the attorney can best represent

his client.”). It is the relationship with the client that confers the privilege.

Accordingly, we reject Baytown Nissan’s request to expand the attorney-client

privilege to situations outside of an attorney-client relationship. See TEX. R. EVID.

503(b).

      2. Implied Attorney-Client Relationship
      It is undisputed by the parties that there was no express agreement forming

an attorney-client relationship between Phillips and Baytown Nissan. Baytown

Nissan instead argues that an attorney-client relationship existed because Phillips is

an attorney who provides legal services to TADA’s membership and thus, as a

member of TADA, Baytown Nissan numbers among her clients.

                                         10
      In the absence of an express agreement, an attorney-client relationship can

be implied from the actions of the parties. See Span Enters., Inc. v. Wood, 274
S.W.3d 854, 858 (Tex. App.—Houston [1st Dist.] 2008, no pet.). Whether an

attorney-client relationship can be implied depends upon an objective standard,

looking at what the parties said and did to support an agreement to enter into one.

See Span Enters., 274 S.W.3d at 858; Vinson & Elkins, 946 S.W.2d at 405–06. A

court cannot consider a client’s or attorney’s unspoken subjective beliefs about the

parties’ relationship. See Id.

      A federal district court rejected Baytown Nissan’s position in Robinson v.

Tex. Auto. Dealers Ass’n, 214 F.R.D. 432 (E.D. Tex. 2003), vacated in part on

other grounds, In re Tex. Auto. Dealers Ass’n, No. 03-40860, 2003 WL 21911333

(5th Cir. July 25, 2003). In Robinson, the plaintiffs moved to compel production of

documents on a privilege log served by defendants that included communications

between Phillips, on behalf of TADA, and individual members. The district court

concluded that the communications between Phillips and TADA members were

not per se protected by attorney-client privilege. The court observed that “[t]o

invoke the attorney-client privilege, Defendants must show that the asserted

holders of the privilege, here the members of the TADA, were or sought to become

                                        11
clients at the time the allegedly privileged communication was made.” Id. at 451.

In rejecting a blanket rule that communications between a trade association’s

attorney and the association’s members are covered by an attorney-client privilege,

the court held that “while members of a trade association may certainly establish

an attorney-client relationship with the trade association’s attorney(s), it must be

determined on a case-by-case basis whether those members actually took the

necessary action to do so.” Id. at 452.

      We similarly decline to adopt a blanket rule of privilege between a trade

association’s members and the association’s counsel. Consistent with our

precedent, we instead examine the objective evidence in the record supporting an

attorney-client relationship between the association’s counsel and this particular

member. The record cannot support an implied relationship here. In particular:

   • Gray did not ask Phillips to represent him or his clients or tell Phillips that
     he wanted to engage Phillips to provide legal services to him or his clients;
   • Gray did not send Phillips any proposed engagement agreement or
     confidentiality agreement;
   • Gray did not express a belief to Phillips that she was acting as an attorney
     for him or his clients;
   • Gray did not seek, and Phillips did not provide, any agreement or assurances
     that the conversation was privileged and confidential;
   • Phillips did not inform Gray that she had to run a conflicts check before
     providing information to Gray;

                                          12
     • Phillips testified that she only provided general information, not legal
       advice; and
     • Phillips testified that, each day, she receives as few as 10 or as many as 75
       phone calls, emails, or other communications from dealers.

Although Gray provided statements regarding his belief that the conversation was

subject to attorney-client privilege and would be kept confidential, such unstated

subjective beliefs do not give rise to an attorney-client relationship by implication.

See Span Enters., 274 S.W.3d at 858 (“[Appellant’s] unstated, subjective beliefs do

not give rise to an attorney-client relationship by implication.”); Vinson & Elkins,
946 S.W.2d at 405–06 (“Because the attorney-client relationship is contractual, the

determination of the existence of a contract must be, as in any other contract case,

based on an objective standard, and not on what the parties subjectively thought.”).

Accordingly, the trial court acted within its discretion in overruling Baytown

Nissan’s attorney-client privilege objections. We hold that Baytown Nissan has not

shown that it is entitled to mandamus relief based on a claim of attorney-client

privilege.

B.      Work-Product Privilege

        The work product doctrine preserves the rights of attorneys to thoroughly

prepare cases for trial and to investigate both favorable and unfavorable aspects of

their cases, while preventing attorneys from taking advantage of their opposing

                                         13
counsel’s efforts. See In re Union Carbide Corp., 2003 WL 22682301, at *5 (Tex.

App.—Houston [1 Dist.], Nov. 13, 2003). The Texas Rules of Civil Procedure

define “work product” as:

      (1) material prepared or mental impressions developed in anticipation
      of litigation or for trial by or for a party or a party’s representatives,
      including the party’s attorneys, consultants, sureties, indemnitors,
      insurers, employees, or agents; or
      (2) a communication made in anticipation of litigation or for trial
      between a party and the party’s representatives or among a party’s
      representatives, including the party’s attorneys, consultants, sureties,
      indemnitors, insurers, employees, or agents.

TEX. R. CIV. P. 192.5(a). The rule distinguishes between “core work product” and

“non-core work product.” “Core work product” concerns an attorney’s mental

processes and is not discoverable. See TEX. R. CIV. P. 192.5(b)(1). “Other” or

“non-core” work product “is discoverable only upon a showing that the party

seeking discovery has substantial need of the materials in the preparation of the

party’s case and that the party is unable without undue hardship to obtain the

substantial equivalent of the material by other means.” Id. at 192.5(b)(2).

      Thus, our court has held that the work product privilege exempts an

attorney’s documents, reports, communications, memoranda, mental impressions,

conclusions, opinions, or legal theories from discovery if generated in anticipation

of litigation. See Marshall v. Hall, 943 S.W.2d 180, 183 (Tex. App.—Houston [1st

                                         14
Dist.] 1997, no writ). The privilege also protects the mental impressions and

strategy of the attorney. Id. Core work product is the work product of an attorney

or an attorney’s representative that contains the attorney’s or the attorney’s

representative’s mental impression, opinions, conclusions, or legal theories; it is

not discoverable. See TEX. R. CIV. P. 192.5(b)(1). “Any other work product is

discoverable only upon a showing that the party seeking discovery has substantial

need of the materials in the preparation of the party’s case and that the party is

unable without undue hardship to obtain the substantial equivalent of the material

by other means.” TEX. R. CIV. P. 192.5(b)(2). The “anticipation of litigation” test is

met when a reasonable person would have concluded from the totality of the

circumstances that there was a substantial chance that litigation would ensue and

the party asserting the work product privilege subjectively believed in good faith

that there was a substantial chance that litigation would ensue. See Nat’l Tank Co.

v. Brotherton, 851 S.W.2d 193, 204, 207 (Tex. 1993). Whether the Gray-Phillips

Conversation was in anticipation of litigation is not in dispute.

      BASG responds that the work product privilege does not protect facts of the

case from discovery save under exceptional circumstances. See Marshall v. Hall,
943 S.W.2d at 183 (citing Leede Oil & Gas, Inc. v. McCorkle, 789 S.W.2d 686,

                                          15
687 (Tex. App.—Houston [1st Dist.] 1990, orig. proceeding) (interpreting TEX. R.

CIV. P. 166b(3)(a)). “Where relevant and non-privileged facts remain hidden in an

attorney’s file and where production of those facts is essential to the preparation of

one’s case, discovery may properly be had.” Hickman v. Taylor, 329 U.S. 495,

511, 67 S. Ct. 385, 394, 91 L. Ed. 451 (1947). We thus examine whether compelling

either Phillips or Gray to testify about the Gray-Phillips Conversation would

require disclosure of attorney work product and, if so, whether an exception to the

work product privilege applies.

      Discovery from Phillips

      Baytown Nissan notes that Gray sought to investigate the claims of this case

in his discussions with Phillips because (1) “TADA itself openly states that it

represents the Texas automobile dealer body and works on behalf of its members”

and (2) “Phillips testified that TADA’s purpose is to represent the Texas

automobile dealer body before the Texas Legislature, Congress, and regulatory

agencies.” To the extent Baytown Nissan suggests that Phillips was its

representative, we reject this argument for the same reason that an attorney-client

privilege does not attach. The evidentiary record does not conclusively

demonstrate an agreement that Phillips was to serve as either an attorney or any

                                         16
sort of representative acting on behalf of Baytown Nissan. Instead, the record

includes, among other things, an affidavit from Phillips stating that Gray “did not

ask [Phillips] if [she] would be willing to be a consulting or testifying expert in any

matter and did not mention anything about [her] being or potentially being an

expert.”   Phillips herself disavows such a relationship. The trial court thus was

within its discretion in concluding that Phillips’s testimony was not covered by

work product privilege.

      Discovery from Gray

      We reach a different conclusion in the application of the work-product

doctrine to the testimony sought from Gray. The record demonstrates that Gray is

Baytown Nissan’s lawyer. His conversation with Phillips was conducted as part his

examination of the ROFR and the dealership sale that is the subject of the

underlying lawsuit. The deposition questions posed to Gray requested the

disclosure of his thoughts and mental impressions with respect to the claims at

hand. His firm is Baytown Nissan’s counsel of record in this lawsuit. As one of

our sister courts noted in granting mandamus relief in similar circumstances:

      Every attorney of record in a case being litigated, or in a case where
      litigation is anticipated, obtains “factual, relevant information.”
      Performing the function of a lawyer does not preclude a litigation
      attorney from observing, investigating, monitoring, and evaluating the

                                          17
      facts surrounding the matter in controversy. The evidence does not
      show [relator’s attorney] was a fact witness divorced from the
      litigation. His work was reasonably related to and in furtherance of the
      prosecution of [relator’s] case against the defendants, and also related
      to mitigating its damages regarding [real party in interest] and to
      defending against [real party in interest’s] causes of action. We
      conclude his activities fall within the Rule 192.5 work product
      definition.
In re Baptist Hosps. of S.E. Tex., 172 S.W.3d 136, 143 (Tex. App.—Beaumont

2005, orig. proceeding.) “Compelling an attorney of record involved in the

litigation of the case to testify concerning the suit’s subject matter generally

implicates   work   product   concerns”        and   “is   inappropriate   under   most

circumstances.” Id. at 140, 145.

      Deposition questions requesting Gray’s mental impressions regarding his

conversation with Phillips (such as whether Phillips’s statements “were consistent

with [his] experience”) are core work product and not discoverable. Other

questions requesting factual details of Gray’s conversation with Phillips are non-

core work product. With respect to those questions, BASG had the burden of

demonstrating the substantial need and undue hardship requirements for discovery

of non-core work product. See TEX. R. CIV. P. 192.5(b)(2). This is a particularly

heavy burden when a discovery request seeks to compel the deposition of a party’s

attorney:

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      Generally, an attorney of record in litigation is an advocate, not a fact
      witness, in the litigation process. As with compelling production of
      opposing counsel’s litigation file, compelling a deposition of the
      opposing party's attorney of record concerning the subject matter of
      the litigation is inappropriate under most circumstances. Calling
      opposing counsel of record as a witness seriously disrupts the
      counsel’s functioning as an advocate and may create a false
      impression that the advocate was improperly involved in the
      underlying issues in the litigation.

In re Baptist Hosps. of S.E. Tex., 172 S.W.3d at 145.

      Our decision in Marshall v. Hall is instructive in this case. See 943 S.W.2d
180. In Marshall, an employee of the relator’s attorney interviewed a witness to a

car accident over the telephone and took notes of the interview. Id. at 182. In

holding that the interview notes were protected by the attorney work product

privilege, our court reasoned:

      Here, [the attorney’s employee] was acting as an agent of the relators’
      attorney. Her task in interviewing [the witness] was to generate
      information to make the strategic decision of whether to depose [the
      witness]. In accomplishing her task, [the attorney’s employee]
      compiled facts from her conversation with [the witness]. She
      reorganized those facts according to her mental impressions of what
      organization would best help the relators’ attorney decide whether to
      take [the witness’] deposition. She omitted some facts she felt were
      not helpful to the [relators’] case. We believe that not only her
      summaries but her interview notes as well are protected by the
      attorney work product privilege.

Id. at 183. Our court rejected an effort to overcome the privilege based on

hardship, applying the two-part test provided in Hickman for exemption from

                                         19
privilege requiring that (1) the information be “hidden in the attorney’s file” and

(2) the facts sought to be discovered must be “essential to the preparation of one’s

case.” See id. (quoting Hickman, 329 U.S. at 511). As in Marshall, BASG has not

satisfied its burden of demonstrating exemption from privilege. The information it

seeks, far from being hidden, is readily available through Phillips, who already has

disclosed it to third-parties, who in turn at some point disclosed it to BASG. See id.

Given Phillips’s availability, there is no indication in the record of a substantial

need for Gray’s testimony. See id.

      We hold that the trial court erred in compelling Gray to testify about the

Gray-Phillips conversation; mandamus relief is therefore appropriate. See In re

CSX Corp., 124 S.W.3d at 151.

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                                     Conclusion

       We conditionally grant the petition for writ of mandamus, and direct the trial

court to vacate its order compelling Gray’s deposition. We deny further requested

relief. We are confident that the trial court will comply, and the writ will issue only

if it does not.

                                               Jane Bland
                                               Justice

Panel consists of Chief Justice Radack and Justices Bland and Huddle.

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