Court Opinion

ID: 2896199
Source: CourtListenerOpinion
Date Created: 2015-09-08 00:07:09.752209+00
Date Added: 2024-06-11T11:35:00.540183
License: Public Domain

NO. 07-06-0315-CV

                                       IN THE COURT OF APPEALS

                             FOR THE SEVENTH DISTRICT OF TEXAS

                                                 AT AMARILLO

                                                     PANEL E

                                         JANUARY 10, 2007
                                  ______________________________

                  IN RE DIAMOND SHAMROCK REFINING COMPANY, L.P.,

                                                                                            Relator
                                 _______________________________

                                       Memorandum Opinion
                                 _______________________________

Before QUINN, C.J., CAMPBELL, J. and BOYD, S.J.1

         Diamond Shamrock Refining Company, L.P., petitions for a writ of mandamus

asking us to direct the judge of the 69th Judicial District, Moore County, Texas, to rescind

his order of June 21, 2006, compelling the production of various documents. We grant the

petition.

         Background

         The dispute arises from Diamond Shamrock’s contest to the appraisal value

assessed by the Moore County Appraisal District on Diamond Shamrock’s McKee Refinery.

The appraisal covered the years 2002 through 2005. After suit was filed, the District

sought the production of numerous documents to which Diamond Shamrock objected,

contending that the information encompassed privileged trade secrets. After a hearing, the

         1
            John T. B oyd, C hief Justice (R et.), Se venth Court o f Appea ls, sitting by assignm ent. T E X . G O V ’T
C O D E A N N . §75.002 (a)(1 ) (Vernon 2005).
trial court ordered Diamond Shamrock to produce all of the documents. 2 Thereafter,

Diamond Shamrock petitioned for mandamus relief requesting that the order be vacated.

        At the hearing held upon the petition for a writ of mandamus, all counsel were asked

if they disputed whether the discovery sought comprised trade secrets. They informed this

court that, for purposes of the mandamus proceeding, they did not.                                Given this

representation, we need not and do not address whether the items in controversy were or

are indeed such secrets.

        Applicable Law

        To be entitled to a writ of mandamus, there must be proof that the trial court clearly

abused its discretion or violated a duty imposed by law and that review through appeal is

inadequate. Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992). Furthermore, if the

documents involve trade secrets and it is determined that the trial court abused its

discretion in requiring their disclosure, then mandamus is appropriate for the wrong is not

susceptible to correction through appeal. In re Bass, 113 S.W.3d 735, 745 (Tex. 2003).

        Next, whether the trial court abused its discretion in compelling the discovery of

trade secrets depends on whether the party seeking the information established that it was

necessary for a fair adjudication of its claim or defense. In re Continental General Tire,

Inc., 979 S.W.2d 609, 613 (Tex. 1998). In turn, “necessity depends upon whether the

[data] . . . is material and necessary to the litigation.’” In re Bass, 113 S.W.3d at 743,

quoting In re Continental General Tire, Inc., 979 S.W.2d 609 (Tex. 1998). It is not enough

        2
         The trial court ordered that D iam ond Sham rock res pond fully a nd com pletely to Requests for
Production Nos. 6, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31,
32, 33, 34, 35, 36 , 37, 38 , 40, 41 , 42, an d 43 .

                                                       2
to simply state that the information is necessary. Nor do general assertions of unfairness

suffice. In re Bridgestone/Firestone, Inc., 106 S.W.3d 730, 732-33 (Tex. 2003). On the

contrary, the party seeking disclosure “must demonstrate with specificity exactly how the

lack of the information will impair the presentation of the case on the merits to the point that

an unjust result is a real, rather than a merely possible, threat.” Id. In other words, the

litigant must satisfy the test through the presentation of competent evidence. If it does not,

then compelling disclosure amounts to an instance of abused discretion warranting

mandamus relief. See e.g., id. at 734 (so recognizing); In re Continental General Tire, Inc.,
979 S.W.2d at 615 (so recognizing).

       Application of Law

       Again, because neither party disputed that the discovery in question comprised

trade secrets, we do not address that matter. Instead, we turn our attention to whether the

Appraisal District met the test described in Bass, Bridgestone, and Continental.

       According to the record before us, the discovery was allegedly sought to facilitate

the valuation of the McKee refinery. Such a valuation could occur through several ways,

according to the Appraisal District’s expert and sole witness. They include both the income

or cost approaches. And, when asked by the District if the information in general was

“necessary,” its expert generally said “[y]es.” Yet, why it was went unexplained, save for

two instances.    Those two instances concerned information about 1) the refinery’s

workforce and union contracts and 2) Diamond Shamrock’s acquisition of other refineries

located outside Moore County.

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       With regard to the union contracts and workforce data, the expert concluded that

such information when “using the income approach” would “serve to help make . . .

adjustments” for “certain intangibles.” Yet, at no time did he suggest that he could not

complete his appraisal without the information. Nor did he discuss how withholding the

information from him would hamper his task in any way. Instead, he simply said that

having the data would “help.”

        Concerning the matter of other refineries acquired by Diamond Shamrock, the

expert opined that the “information would be used to develop the comparable sales

approach” and that “[i]t’s always necessary to have good information about the comparable

sales in order to apply them.” Previously though, he had told the trial court that “buyers

and sellers both look to the income approach for establishing value.” So too did he later

admit that he also used the cost approach. Given their different names, one could possibly

assume that the income, cost, and comparable sales approaches all differed in some way.

Whether they do, however, went undeveloped. And, with the exception of the broad and

conclusory statements cited, the expert gave no explanation of why the trade secret

information was necessary to his calculation under any valuation method. Nor were we

told how the value of realty sold miles from Moore County has any relevance, much less

is necessary, to the valuation of realty within Moore County. It went unexplained.

       Also of note is the evidence illustrating that the District already had appraised the

McKee refinery during the years in question. Arguably, there existed data upon which

those appraisals were founded for surely an appraisal district would not calculate values

from whole cloth. Yet, the District’s expert and sole witness conceded that the District had

not provided that information to him. Given this, any suggestion that the previously

                                             4
undisclosed trade secrets of Diamond Shamrock were necessary to complete an appraisal

is dubious. Until the extent of that other data, if any, is perused by the expert (and

revealed to the court for assessment), it cannot be determined how withholding the trade

secrets will impair the District’s case on the merits.

       In short, the record before us lacks evidence “demonstrat[ing] with specificity” that

the risk of an “unjust result” is “real” if the trade secrets of Diamond Shamrock remain

secret.   The District failed to prove necessity as required by Bass, Firestone, and

Continental. And, the conclusory statements of the District’s expert to the contrary do not

fill the gap. See Coastal Transp. Co. v. Crown Cent. Petroleum, 136 S.W.3d 227, 232

(Tex. 2004) (holding that conclusory statements are not evidence). Accordingly, we

conditionally grant mandamus relief directing the trial court to vacate its June 21, 2006

“Order to Compel.” We are confident that it will comply and will issue a writ of mandamus

only if does not. Finally, our stay of the trial court’s directive will remain in effect until the

June 21st order is vacated.

                                                    Brian Quinn
                                                    Chief Justice

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