Court Opinion

ID: 3128945
Source: CourtListenerOpinion
Date Created: 2015-10-16 16:12:53.6741+00
Date Added: 2024-06-11T11:53:40.065049
License: Public Domain

COURT OF APPEALS
                             SECOND DISTRICT OF TEXAS
                                  FORT WORTH

                                     NO. 2-09-351-CV

IN RE HARCO NATIONAL                                                           RELATOR
INSURANCE COMPANY
                                         ------------

                                ORIGINAL PROCEEDING

                                         ------------

                            MEMORANDUM OPINION 1

                                         ------------

       Relator, Harco National Insurance Company, seeks a writ of mandamus against

Respondent, the Honorable Jeff Walker, Judge of the 96th District Court of Tarrant County.

For the reasons that follow, we conditionally grant relief.

Factual Background

       On October 3, 2007, Real Party in Interest Debra Fisher brought suit against Harco

and several other defendants for fraud and fraudulent inducement arising out of the

nondisclosure of insurance coverage in a prior negligence case between Fisher and

Southwest International Trucks, Inc. and its employee/driver Clifford George Steece, Sr.

In her suit, Fisher asserted that the defendants fraudulently induced her to enter into a

settlement agreement settling all her claims for damage in the prior suit. On May 5, 2008,

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            See Tex. R. App. P. 47.4.
Fisher served Harco with a notice of intention to take oral deposition of the corporate

representative of Harco, which included a document request seeking the production of:

       [a]ny writings, letter, memorandums, emails, or other documents whether
       manually created or electronically created, in your possession, from any
       source, including but not limited to, Southwest International Trucks, Inc.,
       Charles Shriver, II, Hermes Sargent Bates, L.L.P., Harco National Insurance
       Company, Southern County Mutual Insurance Company, and Republic
       Lloyds, Inc., relating to the claim of Debra Fisher for injuries and damages
       against Southwest International Trucks, Inc., or other insurers to include
       documents whether generated by you or received by you, from any source,
       including electronic or email communications that refer, mentions, states, or
       otherwise alleges to insurance coverage of Southwest International Trucks,
       Inc., resulting from an automobile accident, whether the source be primary,
       secondary, umbrella or any other insurance coverage.

       On May 12, 2008, Harco filed a motion to quash the deposition notice, and the

deposition was automatically stayed. On May 27, 2008, Fisher rescheduled the deposition

and again included the document request. On June 2, 2008, Harco filed a motion for

protective order, contending that the document requests were overly broad and that they

sought to invade the attorney-client and attorney work product privileges. The trial court

conducted an evidentiary hearing on the motion for protective order on October 2, 2008.

At the conclusion of the evidentiary hearing, Harco submitted the documents listed on its

privilege log to the trial court for an in camera inspection.

       On March 11, 2009, the trial court sent the parties correspondence, stating that

Harco’s documents generally fell within the attorney-client and work product privileges;

however, it had determined that a large number of the documents fell within exceptions

found within Rule 503(d)(1), (3), and (5) of the rules of evidence. See Tex. R. Evid.

503(d)(1), (3), (5). On March 25, 2009, Harco’s counsel sent correspondence to the trial

court asking the court to refrain from producing the documents to Fisher until Harco had

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an opportunity to consider its options. On April 27, 2009, Harco’s counsel received

correspondence from Fisher’s counsel forwarding a proposed order to the trial court. On

May 1, 2009, Harco’s counsel sent Fisher’s counsel correspondence objecting to the

proposed order.     On September 2, 2009, Harco’s counsel received a copy of

correspondence from Fisher’s counsel submitting a proposed order to the trial court. On

that same day, Harco’s counsel sent correspondence to the trial court objecting to the form

of the proposed order and asking the trial court to refrain from signing the order or

producing the documents until the matter could be heard by the trial court.

       On September 10, 2009, the trial court signed and entered an order in which it found

that all of the documents that had been presented by Harco were discoverable except

those specifically enumerated in the order. Upon receipt of the trial court’s order on

September 14, 2009, Harco sent correspondence to the trial court asking the court to

refrain from producing the documents to allow Harco the opportunity to preserve the court’s

record and protect its rights by filing a petition for writ of mandamus. On September 17,

2009, the trial court released documents to the parties.

       On September 25, 2009, the trial court sent the parties correspondence stating that

two additional documents (Harco 00264 and Harco 00442) were also discoverable and

providing copies of those two documents to Fisher’s counsel. Harco then filed this

mandamus proceeding.

Standard of Review

       Mandamus will issue to correct a discovery order if the order constitutes a clear

abuse of discretion and there is no adequate remedy by appeal. In re Colonial Pipeline

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Co., 968 S.W.2d 938, 941 (Tex. 1998) (orig. proceeding); Walker v. Packer, 827 S.W.2d
833, 839 (Tex. 1992) (orig. proceeding). When determining whether the trial court abused

its discretion, we are mindful that the purpose of discovery is to seek the truth so that

disputes may be decided by what the facts reveal, not by what facts are concealed.

Colonial Pipeline, 968 S.W.2d at 941. The rules governing discovery do not require as a

prerequisite to discovery that the information sought be admissible evidence; it is enough

that the information appears reasonably calculated to lead to the discovery of admissible

evidence. See Tex. R. Civ. P. 192.3(a). But this broad grant is limited by the legitimate

interests of the opposing party to avoid overly broad requests, harassment, or disclosure

of privileged information. In re Am. Optical Corp., 988 S.W.2d 711, 713 (Tex. 1998) (orig.

proceeding).

       Appellate courts will not intervene to control incidental trial court rulings when an

adequate remedy by appeal exists. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 136

(Tex. 2004) (orig. proceeding); Walker, 827 S.W.2d at 840. A party will not have an

adequate remedy by appeal (1) when the appellate court would not be able to cure the trial

court’s discovery error, (2) when the party’s ability to present a viable claim or defense at

trial is vitiated or severely compromised by the trial court’s discovery error, or (3) when the

trial court disallows discovery and the missing discovery cannot be made a part of the

appellate record or the trial court, after proper request, refuses to make it part of the

record. In re Ford Motor Co., 988 S.W.2d 714, 721 (Tex. 1998) (orig. proceeding); Walker,
827 S.W.2d at 843. Appellate courts must consider whether the benefits of mandamus

review outweigh the detriments when determining whether appeal is an adequate remedy.

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In re BP Prods. N. Am., Inc., 244 S.W.3d 840, 845 (Tex. 2008) (orig. proceeding). If a trial

court erroneously orders privileged matters to be disclosed, there is no adequate remedy

at law, and mandamus is the proper remedy. See Dillard Dep’t Stores, Inc. v. Hall, 909
S.W.2d 491, 492 (Tex. 1995); Walker, 827 S.W.2d at 843.

Privileges

       Harco asserts that the trial court clearly abused its discretion by finding that its

documents were discoverable pursuant to the exceptions to the attorney-client and work

product privileges enumerated within Texas Rules of Evidence Rule 503(d)(1), (3), and (5).

See Tex. R. Evid. 503(d)(1), (3), (5). Fisher, on the other hand, contends that the trial court

did not abuse its discretion by determining the documents were discoverable or by

producing the documents to her.

       To establish a privilege, a party must plead the particular privilege, produce

evidence to support the privilege through affidavits or testimony, and produce the

documents themselves if the trial court determines an in camera review is necessary. See

Tex. R. Civ. P. 193.3(a); Peeples v. Hon. Fourth Supreme Judicial Dist., 701 S.W.2d 635,

637 (Tex. 1985) (orig. proceeding). Once the party resisting discovery establishes a prima

facie case that the documents are privileged, the burden shifts to the discovering party to

refute the privilege claim. See Marathon Oil Co. v. Moye, 893 S.W.2d 585, 591 (Tex.

App.—Dallas 1994, orig. proceeding).

A. Attorney-Client Privilege

       The attorney-client privilege protects from disclosure confidential communications

between client and counsel made for the purpose of facilitating the rendition of legal

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services. See Tex. R. Evid. 503(b); Huie v. DeShazo, 922 S.W.2d 920, 922 (Tex. 1996);

Arkla, Inc. v. Harris, 846 S.W.2d 623, 629 (Tex. App.—Houston [14th Dist.] 1993, orig.

proceeding). This privilege attaches to the complete communication between attorney and

client, including legal advice and facts therein. Marathon Oil Co., 893 S.W.2d at 589. The

subject matter of the information communicated is irrelevant when determining whether the

privilege applies. Id.

       The attorney-client privilege applies only to communications intended to be

confidential between the attorney and the client and made for the purpose of facilitating the

rendition of legal services for the client. See Tex. R. Evid. 503(b); Arkla, Inc., 846 S.W.2d

at 629. A communication is “confidential” if it is not intended to be disclosed to third

persons other than those persons to whom disclosure is made “in furtherance of the

rendition of professional legal services to the client or those reasonably necessary for the

transmission of the communication.” Tex. R. Evid. 503(a)(5). If a matter for which a

privilege has been asserted has been disclosed to a third party, the party asserting the

privilege has the burden to prove that no waiver occurred. Arkla, Inc., 846 S.W.2d at 630.

B. Work product privilege

       Rule 192.5 defines 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.

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Tex. R. Civ. P. 192.5(a).

       Rule 192.5 encompasses different levels of protection for two types of work product.

First, core work product is defined as “the work product of an attorney or an attorney’s

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

impressions, opinions, conclusions, or legal theories,” and it is not discoverable. See Tex.

R. Civ. P. 192.5(b)(1). Second, 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).

       Rule 192.5(b)(2) precludes discovery of an attorney’s work product. Id. The work

product exemption protects the attorney’s mental processes, conclusions, and legal

theories from discovery by another party, thereby providing a privileged area where the

attorney can analyze and prepare the case. Marathon Oil Co., 893 S.W.2d at 589. The

work product exemption extends both to documents actually created by the attorney and

memoranda, reports, notes, or summaries of interviews prepared by other individuals for

the attorney’s use. Id.

C. Discussion

       Fisher contends that Harco failed to present sufficient prima facie proof of privilege;

therefore, the burden never shifted to her to prove an exception to the work product or

attorney-client privileges. However, at the evidentiary hearing on Harco’s motion for a

protective order, Harco offered affidavits by Charles Shriver, II and Craig Kennedy along

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with other exhibits in support of its assertion of privilege. The prima facie standard requires

only the minimum quantum of evidence necessary to support a rational inference that the

allegation of facts are true. See In re E.I. DuPont de Nemours & Co., 136 S.W.3d 218, 225

(Tex. 2004) (orig. proceeding); Humphreys v. Caldwell, 888 S.W.2d 469, 470 (Tex. 1994)

(orig. proceeding); In re Maher, 143 S.W.3d 907, 913 (Tex. App.—Fort Worth 2004, orig.

proceeding).

       Additionally, a review of the documents themselves may constitute sufficient

evidence to make a prima facie showing of attorney-client or work product privilege. See

E.I. DuPont, 136 S.W.3d at 223; Humphreys, 888 S.W.2d at 470. We have reviewed the

documents and have determined that Harco 00066 and Harco 00548–00551,

correspondence between Harco and its reinsurer American Re-Insurance Co., do not fall

within any of the discovery privileges asserted by Harco. Accordingly, the trial court did not

abuse its discretion by ordering the production of Harco 00066 and Harco 00548, and any

relief requested as to these documents is denied.

       But, it is evident from our review of Harco 00024, Harco 00057, Harco

00058–00065, Harco 00069-00081, Harco 00083, Harco 00096–00097, Harco

00098–00099, Harco 00143, Harco 00197–00200, Harco 00264, Harco 00442, Harco

00451–00454, Harco 00457–00480, Harco 00522–00531, Harco 00549–00551, Harco

00576–00577, Harco 00639, Harco 00657, and Harco 00664–00673 that these

documents, which are primarily comprised of memoranda, claims and damages

summaries, and case evaluations, meet all the requirements of the attorney-client or

attorney work product privileges. See Tex. R. Evid. 503(b); Arkla, Inc., 846 S.W.2d at 629;

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see also Nat’l Tank Co. v. Brotherton, 851 S.W.2d 193, 200 (Tex. 1993) (orig. proceeding);

Nat’l Union Fire Ins. Co. v. Valdez, 863 S.W.2d 458, 460 (Tex. 1993) (orig. proceeding);

Coats v. Ruiz, 198 S.W.3d 863, 875–76 (Tex. App.—Dallas 2006, no pet.). It is irrelevant

that many of these documents were prepared in connection with the suit between

Southwest International and Fisher rather than the underlying suit, since the work product

privilege is of continuing duration. See Owens-Corning Fiberglas Corp. v. Caldwell, 818
S.W.2d 749, 751–52 (Tex. 1991) (orig. proceeding).

       Once a party demonstrates the privilege applies, the burden then shifts to the party

seeking production to prove that an exception exists. See In re AEP Tex. Cent. Co, 128
S.W.3d 687, 692 (Tex. App.—San Antonio 2003, orig. proceeding); In re Monsanto, 998
S.W.2d 917, 933–34 (Tex. App.—Waco 1999, orig. proceeding); Marathon Oil, 893 S.W.2d

at 589–90; Cigna Corp. v. Spears, 838 S.W.2d 561, 569 (Tex. App.—San Antonio 1992,

orig. proceeding); Freeman v. Bianchi, 820 S.W.2d 853, 861 (Tex. App.—Houston [1st

Dist.] 1991, orig. proceeding). Accordingly, because the documents listed above are

privileged, Fisher was required to prove the existence of an exception to the privilege. See

In re AEP Tex. Cent. Co, 128 S.W.3d at 692; In re Monsanto, 998 S.W.2d at 933–34;

Marathon Oil, 893 S.W.2d at 589–90; Cigna Corp., 838 S.W.2d at 569; Freeman, 820
S.W.2d at 861.

503(d) Exceptions

       Fisher argues that, even if Harco met its burden of proof regarding the asserted

privileges, the documents fall within the crime-fraud or breach of duty exceptions and,

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therefore, the documents are discoverable. See Tex. R. Evid. 503(d)(1), (3) (explaining

crime fraud and breach of duty exceptions).

A. Crime-Fraud Exception

       Fisher first contends that the documents fall within the crime-fraud exception. See

id.

       Texas Rule of Evidence 503(d)(1) provides that material otherwise protected by the

attorney-client privilege is discoverable if the services of the lawyer were sought or

obtained to enable or aid anyone to commit or plan to commit what the client knew or

reasonably should have known to be a crime or fraud. See id.; see also Granada Corp.

v. First Court of Appeals, 844 S.W.2d 223, 227 (Tex. 1992) (orig. proceeding). The crime-

fraud exception applies only if (1) the party asserting it establishes a prima facie case of

contemplated fraud and (2) there is a relationship between the document for which the

privilege is challenged and the prima facie proof offered. See Granada, 844 S.W.2d at

227; Warrantech Corp. v. Computer Adapters Servs., Inc., 134 S.W.3d 516, 527 (Tex.

App.—Fort Worth 2004, no pet.).

       The prima facie requirement is met when the proponent offers evidence establishing

the elements of fraud and that the fraud was ongoing, or about to be committed at the time

the document was prepared. See In re AEP Texas Central Co., 128 S.W.3d at 692; Cigna

Corp., 838 S.W.2d at 569. Mere allegations of fraud are not sufficient. In re AEP Texas

Central Co., 128 S.W.3d at 692; Cigna Corp., 838 S.W.2d at 569; In re Monsanto Co., 998
S.W.2d at 933–34. Similarly, the fact that the plaintiff’s cause of action involves fraudulent

conduct is also insufficient. Cigna Corp., 838 S.W.2d at 569. The fraud alleged to have

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occurred must have happened at or during the time the document was prepared, and the

document must have been created as part of perpetrating the fraud. Id. The trial court

must make findings both that the prima facie case has been established and that a nexus

exists between the document at issue and the alleged fraud. See Granada Corp., 844
S.W.2d at 227; Freeman, 820 S.W.2d at 861–62. The nexus must be established for each

privileged document. See Freeman, 820 S.W.2d at 861.

      Fisher contends that she established a prima facie case of fraud because the

evidence clearly establishes that adjuster David Leary attempted to fraudulently conceal

the existence of the $10,000,000 umbrella policy. Specifically, Fisher argues that the

evidence establishes that Leary did not disclose the existence of the umbrella policy to

Charles Shriver, the attorney Harco retained to represent Southwest International Trucking

in the suit brought by Fisher.     Fisher notes that although Southwest International

supplemented its disclosure responses five times, the disclosure responses never

disclosed the existence of the umbrella policy, and Leary never corrected Southwest

International’s responses to the disclosure requests. Fisher also states that Leary had an

opportunity but nonetheless failed to disclose the umbrella policy during mediation when

she demanded $900,000, which was clearly in excess of the $500,000 primary limits.

      Fisher claims that, to the extent that any of the documents at issue here relate to

Leary’s valuation of the underlying case or the basis of his valuation, the documents were

part of the ongoing fraudulent concealment. However, neither the mere allegation of fraud,

nor the fact that a party’s cause of action includes fraudulent conduct is sufficient to

establish a prima facie case of contemplated fraud. See Cigna Corp., 838 S.W.2d at 569;

                                           11
In re Monsanto Co., 998 S.W.2d at 933–34. Fisher’s “evidence” demonstrating that

Harco’s adjuster failed to advise Shriver of the existence of the umbrella policy is primarily

Fisher’s own allegations of fraud against Harco, which serve as the basis of her lawsuit.

Such a demonstration will not serve as a basis for the application of the crime-fraud

exception. See Cigna Corp., 838 S.W.2d at 569. Further, even if we were to take Fisher’s

evidence into consideration, it does not show that Shriver’s services were sought to aid

Leary in committing or planning to commit a crime. See Granada Corp., 844 S.W.2d at

227. In fact, Fisher herself stated that Leary had never informed Shriver of the umbrella

policy.

          The crime-fraud exception requires the discovering party to establish a connection

between the particular documents sought and the fraud alleged. See Granada Corp., 844
S.W.2d at 227; Freeman, 820 S.W.2d at 861–62. Moreover, the fraud alleged to have

occurred must have occurred at or during the time the document was prepared and in

order to perpetuate the fraud. See Coats, 198 S.W.3d at 876; Cigna Corp., 838 S.W.2d

at 569. As Fisher has not established a prima facie case that the crime-fraud exception

applies to the documents protected by the attorney-client privilege, we conclude that the

trial court abused its discretion by ordering Harco to produce them on the basis of this

exception.

B. Breach of Duty Exception

          Fisher generally contends that any documents Harco, through Leary, had the

opportunity to disclose to attorney Shriver about the existence of the umbrella policy would

fall within the breach of duty exception. Texas Rule of Evidence 503(d)(3) provides that

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a communication, otherwise protected by the attorney-client privilege, is discoverable if the

communication is relevant to an issue of breach of duty by a lawyer to the client or by a

client to the lawyer. See Tex. R. Evid. 503(d)(3); Brown v. Green, 302 S.W.3d 1, 9 (Tex.

App.—Houston [14th Dist.] 2009, no pet.); Vinson & Elkins v. Mornan, 946 S.W.2d 381,

394 (Tex. App.—Houston [14th Dist.] 1997, writ dism’d). Nothing in the record before us

indicates that Fisher was ever represented by any of Southwest International’s or Harco’s

attorneys. Thus, we agree with Relator that the breach of duty exception found in rule

503(d)(3) does not apply in this case. Accordingly, the trial court abused its discretion by

ordering Harco to produce the documents pursuant to this exception.

C. Joint Defense Exception

       Fisher does not argue, and the record does not indicate, that Harco’s documents

were discoverable pursuant to the joint defense exception. See Tex. R. Evid. 503(d)(5)

(“As to a communication relevant to a matter of common interest between or among two

or more clients if the communication was made by any of them to a lawyer retained or

consulted in common, when offered in an action between or among any of the clients.”).

Thus, we conclude that this exception does not apply. See Marathon Oil Co., 893 S.W.2d

at 592. Accordingly, to the extent the trial court ordered Harco to produce the documents

pursuant to this exception, the trial court abused its discretion.

Conclusion

       Because the documents do not fall within any of the exceptions, we hold that the

trial court clearly abused its discretion by ordering the production of the following

documents protected by the attorney-client or work product privileges: Harco 00024, Harco

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00057, Harco 00058–00065, Harco 00069-00081, Harco 00083, Harco 00096–00097,

Harco 00098–00099, Harco 00143, Harco 00197–00200, Harco 00264, Harco 00442,

Harco 00451–00454, Harco 00457–00480, Harco 00522–00531, Harco 00549–00551,

Harco 00576–00577, Harco 00639, 00657, and Harco 00664–00673. We conditionally

grant mandamus relief as to the documents listed above. The writ will issue only if the trial

court fails to (1) vacate its September 10, 2009 order and its September 25, 2009 letter

ruling as to the documents listed above, (2) order the return of all originals and copies of

the privileged documents provided to Debra Fisher by the trial court, and (3) issue such

orders as necessary to prevent the use and dissemination of the privileged documents and

information contained therein. We have reviewed the remaining documents, Harco 00066

and Harco 00548–00551, and have determined that they do not fall within any of the

discovery privileges asserted by Harco. Accordingly, the trial court did not abuse its

discretion by ordering the production of Harco 00066 and Harco 00548–00551. As to

these documents, this court’s October 9, 2009 stay is hereby lifted and any relief requested

is denied.

                                                  BOB MCCOY
                                                  JUSTICE

PANEL: LIVINGSTON, C.J.; MCCOY and MEIER, JJ.

DELIVERED: June 24, 2010

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