Court Opinion

ID: 4527991
Source: CourtListenerOpinion
Date Created: 2020-04-23 10:19:32.851219+00
Date Added: 2024-06-11T08:44:07.648125
License: Public Domain

Denied in part, conditionally granted in part, and Opinion Filed April 22,
2020

                                        In The
                             Court of Appeals
                      Fifth District of Texas at Dallas
                                 No. 05-19-01188-CV

                       IN RE BRIAN POTASHNIK, Relator

           Original Proceeding from the County Court at Law No. 5
                             Dallas County, Texas
                     Trial Court Cause No. CC-08-2072-E

                         MEMORANDUM OPINION
            Before Justices Whitehill, Partida-Kipness, and Pedersen, III
                          Opinion by Justice Pedersen, III
      This original proceeding concerns an order granting a motion to compel

post-judgment discovery related to the setting of a supersedeas bond. Relator

Brian Potashnik complains of the trial court’s September 6, 2019 discovery order

compelling him to respond to net-worth discovery and the summary overruling of

his objections to the discovery. He contends net-worth discovery is not relevant to

his motion to set a lesser bond and that the discovery requests are overbroad. After

reviewing the petition, response, reply, and the mandamus record, we conclude

relator is entitled to some of the relief requested.
          Background

          On December 17, 2018, real party in interest Jeffrey Carpenter obtained a

judgment for $928,020.76 against relator and three other defendants not parties to

this petition. In an attempt to supersede the judgment, relator filed an affidavit of

net worth and a supersedeas bond pursuant to the procedure set forth in rule of

appellate procedure 24.2(c). See TEX. R. APP. P. 24.2(c). He alleged his net worth

was $429,250, and he posted a supersedeas bond in the amount of $214,625. See

TEX. CIV. PRAC. & REM. CODE ANN. § 52.006(b); TEX. R. APP. P. 24.2(a)(1)

(supersedeas bond for money judgment cannot exceed lesser of fifty percent of

judgment debtor’s current net worth or $25,000,000). After real party in interest

filed a contest to relator’s affidavit of net worth, relator filed a “Notice of Filing of

Supplemental Declaration in Lieu of Affidavit of Net Worth” that provided further

detail.

          At the hearing on the contest, the trial court allowed real party in interest to

conduct net worth related discovery.           Rather than respond to the discovery,

however, relator filed a “Motion to Set Lesser, Alternative Supersedeas” pursuant

to the procedure set forth in rule 24.2(b). See TEX. R. APP. P. 24.2(b). In the

motion, relator states that it is filed “in lieu of the net worth procedure.” The trial

court conducted a hearing on relator’s motion to set a lower bond.                At the

conclusion of the hearing, the trial court stated it would not set a lower bond before

the net-worth discovery was completed.
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      After relator refused to answer the discovery, real party in interest filed a

motion to compel. The trial court held a hearing and signed an order overruling

relator’s objections to the requested discovery and granting real party in interest’s

motion to compel. This petition for writ of mandamus followed.

      Standard of Review

      To be entitled to mandamus relief, the relator must show both that the trial

court clearly abused its discretion and that he has no adequate appellate remedy.

See In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex. 2004) (orig.

proceeding). An abuse of discretion occurs when a trial court’s ruling is arbitrary

and unreasonable, made without regard for guiding legal principles or supporting

evidence. In re Nationwide Ins. Co. of Am., 494 S.W.3d 708, 712 (Tex. 2016)

(orig. proceeding). Similarly, a trial court abuses its discretion when it fails to

analyze or apply the law correctly. Id.

      Relator’s Objections to the Discovery

      In the first two issues, relator asserts the trial court abused its discretion in

compelling the net-worth discovery because it is not relevant to his motion to set a

lesser bond. Because net-worth discovery is relevant to relator’s motion to set a

lesser bond and he continued to cite and rely upon his net worth in support of that

motion, we conclude he has not shown he is entitled to mandamus relief and deny

that portion of his petition.

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      Having concluded the net-worth discovery is relevant to his motion to set a

lesser bond, we turn our attention to relator’s third issue complaining of the trial

court’s summary overruling of his objections to the discovery. Under this issue, he

asserts many of the interrogatories and production requests are not relevant to his

net worth and/or are overly broad.

      1.    The Law

      Mandamus provides an appropriate remedy when a trial court abuses its

discretion with respect to a post-judgment discovery order. See Beilamowicz v.

Cedar Hill Indep. Sch. Dist., 136 S.W.3d 718, 723 (Tex. App.—Dallas 2004, pet.

denied). A trial court abuses its discretion if it orders discovery that exceeds the

parameters allowed by the rules of procedure. See In re Nat’l Lloyds Ins. Co., 507
S.W.3d 219, 223 (Tex. 2016) (orig. proceeding) (per curiam). Orders compelling

compliance with overly broad discovery requests are properly the subject of a

petition for writ of mandamus. See In re Graco Children’s Prods., Inc., 210
S.W.3d 598, 600 (Tex. 2006) (orig. proceeding) (per curiam).

      The usual rules governing the scope of pre-trial discovery apply to post-

judgment discovery. See TEX. R. CIV. P. 621a. And, generally, the scope of

discovery is within the trial court’s discretion. See Dillard Dep’t Stores, Inc. v.

Hall, 909 S.W.2d 491, 492 (Tex. 1995) (per curiam). However, discovery may not

be used as a fishing expedition.     See id.    The discovery requested must be

reasonably calculated to lead to the discovery of admissible evidence. See TEX. R.
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CIV. P. 192.3(a). Discovery orders that require document production from an

unreasonably long time period are impermissibly overbroad. See In re CSX Corp.,

124 S.W.3d 149, 152 (Tex. 2003) (orig. proceeding) (per curiam).

      Net worth is calculated as the difference between total assets and total

liabilities as determined by generally accepted accounting principles. See G.M.

Houser, Inc. v. Rodgers, 204 S.W.3d 836, 840 (Tex. App.—Dallas 2006, no pet.).

With respect to net-worth discovery, generally, only financial documents

pertaining to current net worth are relevant. See TEX. R. APP. P. 24.2(a)(1); In re

Jacobs, 300 S.W.3d 35, 44–45 (Tex. App.—Houston [14th Dist.] 2009, orig.

proceeding).   In the context of pretrial net-worth discovery, allowed when

exemplary damages are sought, financial records are generally restricted to a

twelve-month period. See Jacobs, 300 S.W.3d at 44–45 (requests for two years’

worth of documents too broad); In re House of Yahweh, 266 S.W.3d 668, 673

(Tex. App.—Eastland 2008, orig. proceeding) (requests for balance sheets older

than current year not reflective of current net worth and too broad); In re Arpin

Am. Moving Sys., LLC, 416 S.W.3d 927, 929 (Tex. App.—Dallas 2013, orig.

proceeding) (same); In re Ameriplan Corp., No. 05-09-01407-CV, 2010 WL
22825, at *1 (Tex. App.—Dallas Jan. 6, 2010, orig. proceeding) (mem. op.)

(same). When there is an allegation of fraudulent transfers, however, broader

discovery of financial documents may be appropriate to trace the purported moving

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of assets and money to deflate net worth. See In re Williams, 328 S.W.3d 103,

118–119 (Tex. App.—Corpus Christi 2010, orig. proceeding).

      Tax returns are treated differently from other types of financial records.

This is because federal income tax returns are considered private and the protection

of that privacy is of constitutional importance. See Maresca v. Marks, 362 S.W.2d
299, 301 (Tex. 1962). Thus, federal income tax returns are not material if the same

information can be obtained from another source. See In re Sullivan, 214 S.W.3d
622, 624–25 (Tex. App.—Austin 2006, orig. proceeding). And, unlike other types

of financial records, when a party objects to the production of tax returns, the

burden shifts to the party seeking the documents to show relevance and materiality.

See id. at 624.

      2.     Discussion

      At the hearing on the motion to compel, the parties focused their attention on

whether net-worth discovery was proper. The parties did not discuss relator’s

specific objections to the requested discovery. Nor did they discuss allegations of

fraud or hiding of assets. Therefore, relevant financial documents are restricted to

a one-year period. See Williams, 328 S.W.3d at 118–119; Jacobs, 300 S.W.3d at

44–45.

      The requested discovery consists of sixty-seven interrogatories and thirty

requests for production. Relator asserts the trial court abused its discretion by its

summary overruling of all of his objections to the discovery. He asserts the
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discovery is overbroad in seeking multiple years of information when the inquiry is

“current net worth” and some of it is not related to net worth. We agree, in part,

with relator.

      Interrogatories concerning relator’s assets and liabilities seeking information

no further back than twelve months are relevant because they form the basis for

determining his current net worth. See Rodgers, 204 S.W.3d at 840 (net worth is

difference between assets and liabilities); Jacobs, 300 S.W.3d 44–45 (financial

records for net worth purposes generally restricted to twelve-month period);

Yahweh, 266 S.W.3d at 673 (same). We conclude interrogatory numbers 1–3, 5–

12, 16, 17, 20, 22, 25–35, 37, 40, 41, 44, 53, 58, 62, and 64–66 are relevant to

relator’s current net worth because they relate to his current assets and liabilities

and the trial court did not err in overruling his objections to them.

      Conversely, we conclude interrogatory numbers 4, 13–15, 18, 19, 21, 23, 24,

36, 38, 39, 42, 43, 45–52, 54–57, 59–61, 63, and 67 are either not relevant to

relator’s net worth and/or the time frame is too broad in that it exceeds a twelve-

month period. See CSX Corp., 124 S.W.3d at 152; Jacobs, 300 S.W.3d 44–45;

Yahweh, 266 S.W.3d at 673; Rodgers, 204 S.W.3d at 840. We conclude the trial

court abused its discretion in overruling relator’s objections to these

interrogatories.

      Real party in interest also served relator with thirty requests for production.

Relator responded to request for production number 24. As to the remainder of the
                                          –7–
requests, relator objected to them, in part, as not relevant and overly burdensome.

We conclude request for production numbers 21–23 and 25–30 are related to

relator’s net worth as they concern his currently owned assets and liabilities. The

trial court did not abuse its discretion in overruling relator’s objections to these

requests for production. See Rodgers, 204 S.W.3d at 840.

      On the other hand, requests for production numbers 1, 2–11, and 13–20 do

not relate to relator’s current net worth because they seek multiple years of

documentation. See Jacobs, 300 S.W.3d at 44–45. Thus, we conclude the trial

court abused its discretion in overruling relator’s objections to them.

      Request for production number 12 seeks all of relator’s federal and state

income tax returns for the years 2009 to the present. In addition to the too-broad

time frame, as noted above, because relator objected to the discovery of his tax

returns, the burden shifted to real party in interest to show that the tax returns are

both relevant and material to relator’s net worth. See Sullivan, 214 S.W.3d at 624.

Real party in interest did not respond in writing after relator filed his objections.

Moreover, counsel for real party in interest made no mention of the tax returns at

the hearing on the motion to compel the net worth discovery. Thus, we conclude

real party in interest did not meet his burden to show that the tax returns were

relevant and material and the trial court abused its discretion in overruling relator’s

objection to their production. See id.

                                         –8–
      Conclusion

      We deny the petition with respect to the order granting real party in

interest’s motion to compel net worth discovery.              We conditionally grant the

petition with respect to (1) the request to produce tax returns, (2) the

interrogatories and requests for production that do not relate to net worth as

outlined above, and (3) the interrogatories and requests for production that seek

multiple years of information as outlined above. We direct the trial court to

modify its order consistent with this memorandum opinion. The trial court’s

modified order is due within thirty days of the date of this opinion. The writ will

issue only in the event the trial court fails to comply.

                                                /Bill Pedersen, III//
                                                BILL PEDERSEN, III
                                                JUSTICE

191188f.p05

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