Court Opinion

ID: 9363423
Source: CourtListenerOpinion
Date Created: 2023-01-16 00:10:06.645072+00
Date Added: 2024-06-11T17:15:31.855860
License: Public Domain

NUMBER 13-22-00516-CV

                                   COURT OF APPEALS

                       THIRTEENTH DISTRICT OF TEXAS

                          CORPUS CHRISTI – EDINBURG

               IN RE ECONOMIC DEVELOPMENT CORPORATION
                           OF WESLACO, INC.

                           On Petition for Writ of Mandamus.

                               MEMORANDUM OPINION

      Before Chief Justice Contreras and Justices Tijerina and Silva
           Memorandum Opinion by Chief Justice Contreras1

        Relator Economic Development Corporation of Weslaco, Inc., filed a petition for

writ of mandamus contending that the trial court 2 abused its discretion by: (1) denying

relator’s motion to compel discovery responses and relator’s motion to compel the

        1  See TEX. R. APP. P. 52.8(d) (“When denying relief, the court may hand down an opinion but is not
required to do so. When granting relief, the court must hand down an opinion as in any other case.”); id. R.
47.4 (distinguishing opinions and memorandum opinions).
        2 This original proceeding arises from trial court cause number C-0295-20-L in the 464th District
Court of Hidalgo County, Texas, and the respondent is the Honorable Joe Ramirez. See id. R. 52.2.
production of a privilege log; and (2) granting a stay of discovery or, alternatively, denying

relator’s motion to lift the discovery stay in part. We conditionally grant the petition for writ

of mandamus as stated herein.

                                     I.     BACKGROUND

       The underlying suit involves the alleged breach of a financial incentive contract

between relator and Nolana Self-Storage, LLC (Nolana). According to the allegations in

the record, relator is a non-profit corporation which derives income from sales tax

revenues within the City of Weslaco, Texas. Relator sought to encourage and expand

local economic activity and employment by encouraging commercial improvements.

Relator thus entered into a contract with Nolana to develop a hotel in Weslaco. Relator

ultimately filed suit against Nolana and Sunil Wadhwani, Gerardo Tafolla, Leo Lopez,

Harjinder Singh, and Ricardo Quintanilla, individuals associated with Nolana, for causes

of action including breach of the financial incentive contract, negligence, breach of

fiduciary duty, fraud, and conspiracy. According to relator, some of these individual

defendants have been indicted in federal criminal prosecutions based on some of the

events underlying this lawsuit. Relator alleges that Wadhwani and Tafolla have pleaded

guilty and await sentencing while Quintanilla awaits trial. According to relator, Wadhwani

is Nolana’s “equity owner” and sole member.

       On March 23, 2020, relator propounded its “First Request for Production and

Inspection” to Nolana. Nolana objected to the majority of relator’s requests for production

by asserting: “Based on the advice of counsel, and the Fifth and Fourteenth Amendments

to the U.S. Constitution and the analogous safeguards of the Texas Constitution, I

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respectfully decline to respond further to this request for production on the grounds that

a response may tend to incriminate me.”

       On June 9, 2020, relator requested that Nolana produce a privilege log identifying

the information and materials which it was withholding in reliance on its invocation of the

Fifth Amendment, and to provide the documents which relator had requested in the

requests for production. See TEX. R. CIV. P. 193.3(b) (governing the procedure regarding

a privilege log).

       On June 23, 2020, relator filed a “First Motion to Compel Discovery by [Nolana].”

Relator requested the trial court to require Nolana to respond to relator’s pending

discovery requests, urged that the discovery that it sought was relevant and not

objectionable, and argued that Nolana’s invocation of the Fifth Amendment privilege

against self-incrimination was “entirely baseless.”

       On June 30, 2020, Nolana refused relator’s requests for the production of a

privilege log and for the production of documents. According to Nolana, “Wadhwani

invokes his Fifth Amendment privilege to be free from self-incrimination with respect to all

of the documents and material[s] that were in the possession of the Grand Jury” and “that

formed the basis for the Indictment” in the criminal case against him. Nolana asserted

that “[t]he volume of the documents acquired by the Grand Jury for the Indictment

precludes a more precise description of the material.” Nolana further asserted that the

allegations of the criminal indictment “mirror” the allegations in the civil case:

       Stated otherwise, the matters and things requested involve the
       circumstances and subject matter of the pending Indictment and any
       admission or disclosure will implicate [Wadhwani’s] rights under the Fifth
       Amendment. Because the documents and materials that were the subject

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       of your First Motion for Production likely constitute the basis for the pending
       Indictment, [Wadhwani] would oppose production and ask the court to stay
       discovery until the Indictment is dismissed and the criminal litigation
       resolved.

                [Wadhwani] invokes the Fifth Amendment privilege in good faith.
       [Wadhwani] has entered a guilty plea under the provisions of a plea
       agreement to a charge distinct from that alleged in the Indictment.
       Notwithstanding that plea, the Indictment remains pending until [Wadhwani]
       fulfils his part of the agreement, the federal judge imposes the sentence,
       the government moves for dismissal of the Original Indictment, and the
       judge actually dismisses the Indictment. In Mitchell v. United States, 526
       U.S. 314, 324 (1999), the Supreme Court held that a guilty plea does not
       prevent a defendant from relying on the privilege at sentencing. Here,
       [Wadhwani] may in good faith invoke his Fifth Amendment [P]rivilege
       against self-incrimination and does so.

       On July 6, 2020, Wadhwani filed a “Motion to Stay Discovery” pending the

resolution of United States v. Sunil Wadhwani, case no. 7:19-CR-1995-2, in the United

States District Court for the Southern District of Texas. Wadhwani alleged that a stay was

warranted to avoid prejudice and to preserve his right to be free from self-incrimination.

       On October 6, 2020, the Honorable Ysmael Fonseca, former presiding judge of

the 464th District Court of Hidalgo County, Texas, held a pretrial hearing regarding

relator’s motions to compel discovery and Wadhwani’s motion to stay discovery. The trial

court first considered Wadhwani’s motion to stay. Wadhwani’s counsel asserted that

Wadhwani had entered a guilty plea in federal proceedings as to one count of the charges

filed against him, Tafolla had entered a guilty plea in a separate federal case involving

different facts, and Quintanilla’s federal criminal case was still pending. Wadhwani

asserted that the civil and criminal cases “directly and entirely overlap,” that there are

“troubling issues on the interplay” between civil discovery and the criminal case, that

relator would not be prejudiced by the delay of the civil case because damages would be

                                             4
ultimately available through the civil process, and that the burden on the real parties would

be “severe” if discovery were to proceed. Wadhwani ultimately argued that:

       The—the fair way to resolve this and in the interest of justice and fair
       administration and the public interest is to keep the lines between the
       federal criminal proceedings and the state civil proceedings separate.
       Granting a stay at the end of the day will limit I believe the collateral litigation
       that’s going to arise out of this—out of this situation were this Court to
       proceed to permit discovery in this case. And we think that would be the
       better part of valor, with all due respect at this time.

In response, relator’s counsel asserted that Nolana, as a corporation, had no Fifth

Amendment privilege. Relator’s counsel further explained that Wadhwani is the sole

member of Nolana, Wadhwani had pleaded guilty in the pending federal criminal case,

and the documents sought in discovery had already been produced in the federal criminal

proceedings. Relator further contended that a blanket stay was impermissible and

requested the trial court to review the challenged production.

       In response, the real parties offered to entertain “narrowly tailored” requests for

production and to consider a Rule 11 agreement regarding the production of discovery.

See TEX. R. CIV. P. 11 (governing the enforceability of agreements “touching any suit

pending” in litigation). That same day, the trial court signed an order granting Wadhwani’s

motion to stay discovery.

       On October 28, 2020, relator filed a motion for rehearing, clarification, and

reconsideration of the trial court’s order granting the motion to stay discovery and for a

ruling on its motion to compel discovery from Nolana and also filed a “Rule 193.3 Motion

to Compel [Nolana] to Provide [a] Schedule of Withheld Documents.”

                                                5
       On November 19, 2020, the trial court held a hearing on relator’s motion for

rehearing and motion to compel. Relator requested the trial court to allow discovery, given

the challenges inherent in litigation when time passes, and witnesses move or become

unavailable. In response, the trial court referenced the difficulties caused by the COVID-

19 pandemic, mentioned that there were two hundred and fifty criminal law cases in its

court alone that were waiting to be tried, and stated that all jury trials in the county had

been postponed until April. The trial court took judicial notice of all records that had been

filed, including those admitted at prior hearings, and refused to lift the stay or grant

relator’s motion to compel.

       On November 20, 2020, the trial court issued an order (1) stating that the prior

order “has been clarified on the record” and thus granted, (2) denying reconsideration of

the stay order “without prejudice for partial lifting of the stay upon written motion,” and (3)

deferring ruling on relator’s motion to compel production until the stay was lifted.

       On January 1, 2021, the respondent began serving as the presiding judge of the

464th District Court, replacing Judge Fonseca. Subsequently, on June 8, 2021, the trial

court held a hearing on relator’s motion to compel Nolana to produce a privilege log under

Rule 193.3 and took the matter under consideration. See id. R. 193.3. On June 22, 2021,

the trial court signed an “Order Denying [Relator’s] Rule 193.3 Motion to Compel [Nolana]

to Provide [a] Schedule of Withheld Documents.”

       On or about January 12, 2022, relator propounded a “Second Request for

Production and Inspection” to Nolana, and on February 17, 2022, relator again requested

Nolana to provide a privilege log under Rule 193.3(b) and to produce the documents

                                              6
requested in relator’s first requests for production. Relator asserted:

       I think we differ regarding Judge Fonseca’s consideration and order of
       Plaintiff’s Motion for Clarification and Reconsideration of the Court’s Order
       Granting Defendant Wadhwani’s Motion to Stay Discovery. At the hearing,
       the Court noted that some discovery could continue. The Court’s order also
       noted that it would consider our motion for partial lifting of the stay. In any
       case, my sense is that under the rules, [Nolana] has no discretion but to file
       the discovery log in response to the Plaintiff’s Second Request for
       Production.

       On March 18, 2022, relator filed a “Second Rule 193.3 Motion to Compel Nolana’s

Production of Privilege Log in Connection with [Relator’s] Second Request for

Production,” and on March 21, 2022, relator filed a “Motion Requesting Partial Lifting of

the Stay of Discovery.”

       On August 16, 2022, the trial court held a hearing on relator’s motion for partial

lifting of the discovery stay. According to counsel, the criminal federal case was still

pending and was set for trial in October. Relator asserted that the real parties had

tendered no evidence in support of the Fifth Amendment stay of discovery. Relator

contended that one of the defendants in the case had passed away and another had

suffered a heart attack. The trial court admitted into evidence, inter alia: Nolana’s

responses and objections to relator’s first set of requests for production; an unsigned draft

order granting relator’s motion to partially lift the stay; a transcript from the federal court

re-arraignment dated May 22, 2020, in which the federal court admonished Wadhwani

that if he continued to plead guilty he would give up his right not to testify and not to

incriminate himself; a letter dated June 30, 2020 from Wadhwani’s counsel asserting the

fifth amendment privilege; and the obituary of Leonel “Leo” J. Lopez Jr. On August 29,

2022, the trial court signed an order denying relator’s motion requesting a partial lifting of

                                              7
the discovery stay.

       This original proceeding ensued. This Court requested and received a response

to the petition for writ of mandamus from the real parties in interest, Wadhwani, Nolana,

Singh, Tafolla, and Quintanilla. See TEX. R. APP. P. 52.2, 52.4, 52.8. Relator has further

filed a reply in support of its request for relief by writ of mandamus.

                                II.    STANDARD OF REVIEW

       Mandamus is an extraordinary and discretionary remedy. See In re Allstate Indem.

Co., 622 S.W.3d 870, 883 (Tex. 2021) (orig. proceeding); In re Garza, 544 S.W.3d 836,

840 (Tex. 2018) (orig. proceeding) (per curiam); In re Prudential Ins. Co. of Am., 148

S.W.3d 124, 138 (Tex. 2004) (orig. proceeding). The relator must show that (1) the trial

court abused its discretion, and (2) the relator lacks an adequate remedy on appeal. In re

USAA Gen. Indem. Co., 624 S.W.3d 782, 787 (Tex. 2021) (orig. proceeding); In re

Prudential Ins. Co. of Am., 148 S.W.3d at 135–36; Walker v. Packer, 827 S.W.2d 833,

839–40 (Tex. 1992) (orig. proceeding). “The relator bears the burden of proving these two

requirements.” In re H.E.B. Grocery Co., 492 S.W.3d 300, 302 (Tex. 2016) (orig.

proceeding) (per curiam); Walker, 827 S.W.2d at 840.

                                       III.    DELAY

       The real parties argue that mandamus should not issue because relator waited “as

long as 15 months before pursuing a writ of mandamus related to orders that were issued

by the trial court dating back to as early as June 22, 2021.” In contrast, relator contends:

       [Relator] delayed proceeding earlier to mandamus relief on grounds that it
       believes are reasonable and not dilatory, and which have in no way
       impeded defendants’ work on the case. The record reflects [relator’s]
       numerous discovery motions, including[] motions for reconsideration and

                                              8
       clarification, all intended to call attention to available facts, developments in
       the criminal case and to brief the applicable caselaw. Other developments
       have also delayed an earlier filing, including the [COVID-19] pandemic and
       the court’s own lengthy backlog. As noted by the trial court, the court’s
       docket and schedule and counsel’s regular practice hours have been
       stymied and will continue because of the [COVID-19] pandemic. Judge Joe
       Ramirez succeeded to the court on January 1, 2021. [Relator] renewed
       some of its earlier motions to give Judge Ramirez an opportunity to revisit
       matters which former Judge Ysmael Fonseca had denied or deferred action
       on.

(Footnote omitted).

       Although mandamus is not an equitable remedy, its issuance is controlled largely

by equitable principles. In re Int’l Profit Assocs., Inc., 274 S.W.3d 672, 676 (Tex. 2009)

(orig. proceeding) (per curiam). One such principle is that “[e]quity aids the diligent and

not those who slumber on their rights.” Rivercenter Assocs. v. Rivera, 858 S.W.2d 366,

367 (Tex. 1993) (orig. proceeding) (quoting Callahan v. Giles, 155 S.W.2d 793, 795 (Tex.

1941) (orig. proceeding)). “Thus, a relator who unduly or unreasonably delays filing a

petition for mandamus relief may waive its right to such relief unless the delay is justified.”

In re Am. Airlines, Inc., 634 S.W.3d 38, 43 (Tex. 2021) (orig. proceeding) (per curiam).

Even a “significant” delay may be justified depending on the circumstances. Id.

       To invoke the equitable doctrine of laches, the moving party ordinarily must show

an unreasonable delay by the opposing party in asserting its rights and also the moving

party’s good faith and detrimental change in position because of the opposing party’s

delay. In re Laibe, 307 S.W.3d 314, 318 (Tex. 2010) (orig. proceeding) (per curiam);

Rogers v. Ricane Enters., Inc., 772 S.W.2d 76, 80 (Tex. 1989); see also In re Mabray,

355 S.W.3d 16, 22 (Tex. App.—Houston [1st Dist.] 2010, orig. proceeding [mand. denied])

(explaining that delay alone is insufficient to invoke laches; injury or prejudice must also

                                              9
be established). Whether mandamus is barred by delay is a question of fact that we

determine by considering all the circumstances in each case. In re Mabray, 355 S.W.3d

at 22–23.

       We agree with the real parties that a significant amount of time has elapsed since

some of the rulings challenged in this original proceeding were issued. If we were only

examining the original stay order, signed on October 6, 2020, or the order denying

reconsideration of November 20, 2020, we would not consider mandamus relief to be

appropriate. And, leaving aside the substantial period of time that has elapsed since these

rulings, the respondent in this original proceeding did not issue those orders. See TEX. R.

APP. P. 7.2(b). “[G]enerally a writ will not issue against one judge for what another did.”

In re Blevins, 480 S.W.3d 542, 543 (Tex. 2013) (orig. proceeding) (per curiam).

       However, here we are examining the respondent’s subsequent and more recent

orders of June 22, 2021, denying relator’s motion to compel the production of a schedule

of withheld documents, and of August 29, 2022, denying relator’s request to partially lift

the discovery stay. Examining these orders in conjunction with the applicable law, we

note that relator took multiple affirmative steps during this period to pursue relief by

consultation with opposing counsel and by motion practice. Relator has offered

reasonable explanations for the alleged delay, including the foregoing activities, the

COVID-19 pandemic, the trial court’s backlog, and challenges caused by an intervening

change in the presiding judge of the trial court. See In re Am. Airlines, Inc., 634 S.W.3d

at 43. Thus, relator was not inactive in pursuing its rights. Further, it is indisputable that

the real parties have not suffered prejudice or loss as a result of any delay. See In re

                                             10
Laibe, 307 S.W.3d at 318. Finally, we observe that the circumstances present here, in

which the trial court’s rulings have effectively impaired relator’s ability to timely pursue its

claims in court, weigh in favor of review by mandamus. See In re Mabray, 355 S.W.3d at

22–23 (considering the relevant circumstances in the case). The relator has an interest

in the expeditious resolution of its case, and delayed discovery can result in lost evidence

and adversely affect relator’s ability to present its case. Under these circumstances, we

conclude that delay will not prevent us from considering the merits of the June 22, 2021

and August 29, 2022 rulings.

                                  IV.    FIFTH AMENDMENT

       Parties have a constitutional right under the Fifth Amendment to assert a privilege

to avoid incriminating themselves in both civil and criminal proceedings. Tex. Dep’t of

Pub. Safety Officers Ass’n v. Denton, 897 S.W.2d 757, 760 (Tex. 1995) (applying U.S.

CONST. amend. V). The Fifth Amendment can be asserted in both civil and criminal trials

“wherever the answer might tend to subject to criminal responsibility him who gives it.” Id.

(quoting McCarthy v. Arndstein, 266 U.S. 34, 40 (1924)). “The importance of the freedom

from self-incrimination notwithstanding, the role of the Fifth Amendment in civil cases

when asserted by a plaintiff presents certain problems not found when the privilege is

asserted in a criminal context.” Id. In a civil case, for instance, a fact finder may “draw

negative inferences” from a party’s assertion of the Fifth Amendment privilege against

self-incrimination. Wilz v. Flournoy, 228 S.W.3d 674, 677 (Tex. 2007) (per curiam) (“[T]he

jury in this civil case was free to draw negative inferences from the [appellees’] repeated

invocations of the Fifth Amendment.”); see TEX. R. EVID. 513(c) (allowing the court or

                                              11
counsel in a civil case to comment on a claim of privilege against self-incrimination and

allowing the fact finder to draw an inference from that claim); see also Univ. of the

Incarnate Word v. Redus, 654 S.W.3d 169, 183 (Tex. App.—San Antonio 2022, no pet.);

Doe v. YUM! Brands, Inc., 639 S.W.3d 214, 229 (Tex. App.—Houston [1st Dist.] 2021, no

pet.); Brauss v. Triple M Holding GMBH, 411 S.W.3d 614, 623 (Tex. App.—Dallas 2013,

pet. denied). The rule against penalizing the use of the privilege does not prohibit a trial

court from taking acts to ensure that the civil proceeding remains fair. See Denton, 897

S.W.2d at 760.

                         V.     CONTEMPORANEOUS PROCEEDINGS

       A court is not prohibited from proceeding with a civil matter when there is a

contemporaneous criminal matter pending. See In re Gore, 251 S.W.3d 696, 699 (Tex.

App.—San Antonio 2007, orig. proceeding); McInnis v. State, 618 S.W.2d 389, 393 (Tex.

App.—Beaumont 1981, writ ref’d n.r.e.); see also In re A3H Foods II LP, No. 13-20-00361-

CV, 2020 WL 6158245, at *1 (Tex. App.—Corpus Christi–Edinburg Oct. 19, 2020, orig.

proceeding) (mem. op.). Stated otherwise, “a civil defendant has no right to indefinitely

postpone the adjudication of a civil suit because his conduct may have also implicated a

criminal statute.” In re Becker, 554 S.W.3d 780, 784 (Tex. App.—Amarillo 2018, orig.

proceeding). Further, parties “are entitled to full, fair discovery within a reasonable period

of time, and to have their cases decided on the merits.” Able Supply Co. v. Moye, 898

S.W.2d 766, 773 (Tex. 1995) (orig. proceeding); see State v. Lowry, 802 S.W.2d 669,

671 (Tex. 1991) (“Only in certain narrow circumstances is it appropriate to obstruct the

search for truth by denying discovery.”); see also Ford Motor Co. v. Castillo, 279 S.W.3d

                                             12
656, 663 (Tex. 2009); In re Colonial Pipeline Co., 968 S.W.2d 938, 941 (Tex. 1998) (orig.

proceeding) (per curiam); In re Gore, 251 S.W.3d at 699.

      Thus, the trial court is prohibited from issuing a “blanket” prohibition against

discovery in a civil case. See In re R.R., 26 S.W.3d 569, 574 (Tex. App.—Dallas 2000,

orig. proceeding); see also In re Fontaine, No. 09-17-00423-CV, 2017 WL 6390530, at *1

(Tex. App.—Beaumont Dec. 14, 2017, orig. proceeding) (mem. op.). This is because “it

[is] not good public policy to deny civil litigants their entitlement to a fully authorized

discovery to assist in preparation of the civil lawsuit merely because criminal matters may

be pending against some of the civil litigants.” Tex. Att’y Gen.’s Office v. Adams, 793

S.W.2d 771, 777 (Tex. App.—Fort Worth 1990), subsequent mandamus proceeding sub

nom. Latham v. Thornton, 806 S.W.2d 347 (Tex. App.—Fort Worth 1991, no writ). In

accordance with this precept, blanket assertions of a Fifth Amendment privilege are not

permitted in civil cases. See In re Edge Capital Grp., Inc., 161 S.W.3d 764, 768 (Tex.

App.—Beaumont 2005, orig. proceeding); Gebhardt v. Gallardo, 891 S.W.2d 327, 330

(Tex. App.—San Antonio 1995, orig. proceeding); Burton v. West, 749 S.W.2d 505, 508

(Tex. App.—Houston [1st Dist.] 1988, orig. proceeding); see also In re Lytle, No. 12-15-

00216-CV, 2015 WL 8959428, at *2 (Tex. App.—Tyler Dec. 16, 2015, orig. proceeding)

(mem. op.); In re Alvarez, No. 01-07-00569-CV, 2007 WL 3227654, at *1 (Tex. App.—

Houston [1st Dist.] Oct. 29, 2007, orig. proceeding) (mem. op.).

      However, “the trial court needs to give consideration to the effect of discovery in a

civil case on pending criminal proceedings.” In re R.R., 26 S.W.3d at 574. Thus, instead

of issuing a blanket prohibition against discovery, if a party objects to discovery on

                                            13
grounds of the Fifth Amendment, the trial court may consider the appropriate action on a

question-by-question basis. See In re Edge Capital Grp., Inc., 161 S.W.3d at 767. When

the privilege is asserted, it is the trial court’s duty to consider the evidence and argument

on each individual question to determine whether the privilege against self-incrimination

applies. See id. at 768; Burton, 749 S.W.2d at 508. The trial court should further consider

“whether the privilege is being asserted in a bona fide fear of self-incrimination or merely

to avoid discovery or to create delay.” Denton, 897 S.W.2d at 763.

                                       VI.     ANALYSIS

       By two issues, relator asserts that the trial court erred by: (1) denying its motion to

compel discovery and its motion to compel the production of a privilege log; and

(2) staying discovery and refusing to partially lift the stay. The real parties contend that

the stay is necessary to preserve the full extent of the Fifth Amendment’s protection

against self-incrimination and avoid forcing the real parties to choose between that

privilege and civil liability. Because it is determinative, we address relator’s second issue,

regarding the trial court’s refusal to partially lift the discovery stay, at the inception of our

analysis.

       Under well-established Texas law, as discussed above, a blanket prohibition

against discovery in a civil case is inappropriate to remedy the potential problems caused

by an assertion of the Fifth Amendment right against self-incrimination. See In re Edge

Capital Grp., Inc., 161 S.W.3d at 768; Gebhardt, 891 S.W.2d at 330; Burton, 749 S.W.2d

at 508. Under this law, the trial court abused its discretion by refusing to partially lift the

discovery stay as requested. However, both relator and the real parties assume, in

                                               14
briefing, that the trial court’s actions with regard to the discovery stay are governed by

federal law.

       The federal law regarding staying discovery in a civil case when a criminal case is

pending is not precisely the same as that articulated by Texas state courts. Specifically,

federal law allows the trial court to stay discovery in a civil proceeding pending the

conclusion of a related criminal proceeding; however, there is a “strong presumption in

favor of discovery,” and courts should stay a civil case only if the movant seeking the stay

shows “special circumstances” and the stay is necessary to prevent the movant from

suffering “substantial and irreparable prejudice.” Alcala v. Tex. Webb County, 625

F.Supp.2d 391, 397–98 (S.D. Tex. 2009) (quoting, in part, Sec. & Exch. Comm’n v. First

Fin. Grp. of Tex., Inc., 659 F.2d 660, 668 (5th Cir. 1981)); see U.S. ex rel. Gonzalez v.

Fresenius Med. Care N. Am., 571 F.Supp.2d 758, 761 (W.D. Tex. 2008) (“When a

defendant in a civil case is facing criminal charges, a district court may, in its discretion,

stay the civil action.”); United States v. Little Al, 712 F.2d 133, 136 (5th Cir. 1983)

(“Certainly, a district court may stay a civil proceeding during the pendency of a parallel

criminal proceeding.”). A party to parallel civil and criminal proceedings is excused from

responding to all relevant inquiries on the civil side “[o]nly where the court finds that he

could ‘legitimately refuse to answer essentially all relevant questions’ because of the

threat of incrimination.” First Fin., 659 F.2d at 668–69 (quoting United States v. Gomez-

Rojas, 507 F.2d 1213, 1220 (5th Cir. 1975)). The complete stay of a pending civil action

until the conclusion of a related criminal proceeding is considered to be an “extraordinary

remedy.” In re Piperi, 137 B.R. 644, 646–47 (Bankr. S.D. Tex. 1991). One reason for this

                                             15
is that a complete stay is similar to a “blanket assertion” of the Fifth Amendment, which

is improper under federal law as it is under our state’s law. See Little Al, 712 F.2d at 134–

36. Under federal law, a party is generally required to selectively invoke the privilege

against self-incrimination and object with specificity to the information sought, thus

allowing the trial court to conduct a particularized analysis with regard to each specific

area of discovery. See First Fin., 659 F.2d at 668.

       Under federal law, in determining whether a stay is appropriate, the court considers

and balances multiple factors, including:

       (1) the extent to which the issues in the criminal case overlap with those
       presented in the civil case; (2) the status of the criminal case, including
       whether the defendant has been indicted; (3) the private interests of the
       plaintiff in proceeding expeditiously, weighed against the prejudice to the
       plaintiff caused by a delay; (4) the private interests of and burden on the
       defendant; (5) the interests of the courts; and (6) the public interest.

Alcala, 625 F.Supp.2d at 398–99 (collecting cases).

       In determining whether civil discovery should be allowed to proceed in light of an

impending criminal case, the Fifth Circuit Court of Appeals directs trial courts “to employ

judicial discretion and procedural flexibility to harmonize the conflicting rules and to

prevent the rules and policies applicable to one suit from doing violence to those

pertaining to the other.” In re Grand Jury Subpoena, 866 F.3d 231, 234 (5th Cir. 2017)

(quoting Campbell v. Eastland, 307 F.2d 478, 487 (5th Cir. 1962) (cleaned up)).

       The parties have not cited any Texas cases which have adopted this standard,

and they offer no argument regarding its application in conjunction with the foregoing law

and the open courts provision of the Texas Constitution. See Trapnell v. Hunter, 785

S.W.2d 426, 429 (Tex. App.—Corpus Christi–Edinburg 1990, orig. proceeding)

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(conditionally granting mandamus relief to correct arbitrary abatement in deference to

another forum which also offered no present right to relief). 3 We note that state courts

are not bound by decisions of the lower federal courts. Penrod Drilling Corp. v. Williams,

868 S.W.2d 294, 296 (Tex. 1993) (per curiam) (“While [state] courts may certainly draw

upon the precedents of the Fifth Circuit, or any other federal or state court, in determining

the appropriate federal rule of decision, they are obligated to follow only higher Texas

courts and the United States Supreme Court.”); Johnson v. Nat’l Oilwell Varco, LP, 574

S.W.3d 1, 10 (Tex. App.—Houston [14th Dist.] 2018, no pet.) (“We may consider Fifth

Circuit opinions as persuasive authority but are only bound to follow precedent on federal

matters from the United States and Texas supreme courts.”); Roehrs v. FSI Holdings,

Inc., 246 S.W.3d 796, 803 (Tex. App.—Dallas 2008, pet. denied) (“On issues of federal

law, . . . we must follow the decisions of the United States Supreme Court and the Texas

Supreme Court; the decisions of other federal courts, by contrast, may be persuasive but

are not binding on us.”); see also Fisher v. BNSF Ry. Co., 650 S.W.3d 880, 884 (Tex.

App.—Fort Worth 2022, no pet.).

        Even assuming, without deciding, that the federal balancing test applies to this

case, thus potentially allowing the trial court to continue the blanket stay of all discovery

in the case, we conclude that the record before the Court fails to indicate that the trial

        3  The Texas Constitution provides in part that, “[a]ll courts shall be open, and every person for an
injury done him, in his lands, goods, person or reputation, shall have remedy by due course of law.” TEX.
CONST. art. I, § 13. This “open courts” provision contains three separate constitutional guarantees: (1)
“courts must actually be open and operating”; (2) the legislature cannot impede access to the courts through
“unreasonable financial barriers”; and (3) “meaningful legal remedies must be afforded . . . so that the
legislature may not abrogate the right to assert a well-established common law cause of action unless the
reason for its action outweighs the litigants’ constitutional right of redress.” Tex. Ass’n of Bus. v. Tex. Air
Control Bd., 852 S.W.2d 440, 448 (Tex. 1993).

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court exercised its discretion in applying such a test to determine if the stay should be

partially lifted. See Alcala, 625 F.Supp.2d at 397–98. In fact, there is little to no evidence

in the record with which the trial court could have applied the test. Further, nothing in the

record indicates that the trial court reviewed the relevant discovery and considered the

application of the privilege on a question-by-question basis. See In re Edge Capital Grp.,

Inc., 161 S.W.3d at 767. Accordingly, even if we were to apply federal law as suggested

by the parties, the trial court abused its discretion in maintaining a blanket stay of

discovery. See First Fin., 659 F.2d at 668. And further, relator lacks an adequate remedy

by appeal to correct this abuse of discretion. In re R.R., 26 S.W.3d at 574.

       We sustain relator’s issues concerning the trial court’s orders of June 22, 2021,

and August 29, 2022, on grounds that the trial court erred by continuing to implement a

“blanket” prohibition against discovery.

                                     VII.   CONCLUSION

       The Court, having examined and fully considered the petition for writ of mandamus,

the response filed by the real parties in interest, and relator’s reply, is of the opinion that

relator has met its burden to obtain mandamus relief. We conditionally grant the petition

for writ of mandamus and direct the trial court to vacate its orders of June 22, 2021,

denying relator’s motion to compel the production of a schedule of withheld documents,

and of August 29, 2022, denying relator’s request to partially lift the discovery stay.

       In so ruling, we note that relator requests us to direct the trial court “to vacate the

stay of discovery as to all defendants except [Quintanilla]; alternatively, partially lift the

stay, except as to [Quintanilla], to allow [relator] to proceed with discovery; and still

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alternatively, partially lift the stay as to [Nolana] and direct the trial court to compel

[Nolana] to produce a privilege log.” We decline to direct the trial court specifically how to

rule on each of these matters. Instead, we direct the trial court to exercise its discretion

in accordance with the applicable precedent as described in this memorandum opinion.

Under this procedure: (1) the party to whom discovery has been propounded should

determine whether or not to raise a Fifth Amendment privilege as to each request for

production or other discovery request; (2) if the party determines that privilege should be

asserted, the party should make a selective and particular assertion of the privilege as to

that inquiry, rather than a “blanket” objection, and the party should make a showing

regarding the harm it will suffer without a stay of that discovery request, and explain why

other methods of protecting its interests, such as protective orders or sealing orders, are

insufficient; and (3) the trial court should consider the evidence and argument on each

inquiry and determine whether the privilege applies on a question-by-question basis. See,

e.g., Denton, 897 S.W.2d at 763; In re Edge Capital Grp., Inc., 161 S.W.3d at 768; Burton,

749 S.W.2d at 508. We note, in this regard, that “artificial entities,” such as Nolana, are

not protected by the Fifth Amendment. See In re Russo, 550 S.W.3d 782, 788 (Tex.

App.—Houston [14th Dist.] 2018, orig. proceeding) (citing Braswell v. United States, 487

U.S. 99, 102 (1988)). The parties and the trial court should parse the distinction between

Nolana’s assertion of the privilege and Wadhwani’s. See id. at 788–89 (discussing the

application of the “collective entity” rule regarding the production of corporate documents).

Ultimately, the trial court should utilize its discretion and the procedural tools at its disposal

to balance the public and private interests in the prompt resolution of the civil proceeding

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with the needs and requirements of a party asserting the Fifth Amendment privilege

against self-incrimination. See Gonzalez, 571 F.Supp.2d at 763; Alcala, 625 F.Supp.2d

at 407. If, after utilizing the foregoing procedure, the trial court is of the opinion that this

matter presents “special circumstances” and the stay is necessary to prevent “substantial

and irreparable prejudice,” the trial court should so clarify and ensure that its conclusion

is supported by both state and federal law. See, e.g., Alcala, 625 F.Supp.2d at 397–98.

       In conclusion, we conditionally grant the petition for writ of mandamus as described

herein. The writ will issue only if the trial court fails to promptly comply.

                                                                  DORI CONTRERAS
                                                                  Chief Justice

Delivered and filed on the
13th day of January, 2023.

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