Court Opinion

ID: 4068375
Source: CourtListenerOpinion
Date Created: 2016-09-29 23:56:19.554064+00
Date Added: 2024-06-11T14:32:45.526625
License: Public Domain

Petition for Writ of Mandamus Conditionally Granted and Memorandum
Opinion filed August 27, 2015.

                                        In The

                      Fourteenth Court of Appeals

                                  NO. 14-15-00568-CV

                           IN RE JINSUN LLC, Relator

                           ORIGINAL PROCEEDING
                             WRIT OF MANDAMUS
                                113th District Court
                               Harris County, Texas
                         Trial Court Cause No. 2012-54501

                          MEMORANDUM OPINION

      On July 6, 2015, relator Jinsun LLC filed a petition for writ of mandamus in
this court. See Tex. Gov’t Code Ann. § 22.221 (West 2004); see also Tex. R. App. P.
52. In the petition, relator asks this court to compel the Honorable Michael Landrum,
presiding judge of the 113th District Court of Harris County, to set aside his June 23,
2015 order granting real party in interest’s motion to quash a deposition.
                                  I. BACKGROUND

      Luxeyard, Inc. is an online purveyor of luxury goods. Real party in interest
Khaled Alattar and Amir Mireskandari co-founded LY Retail LLC to own and
operate an e-commerce website through which LY could sell luxury home goods
using the “flash sale” retail model. In August 2011, Alattar and Mireskandari agreed
to seek additional capital to become fully operational and for future growth.

      Mireskandari was put in touch with Kevan Casey, who was represented as
being experienced in raising capital.          However, unbeknownst to Alattar and
Mireskandari, Casey had allegedly been involved in previous plans to artificially
inflate share prices. These plans are commonly called pump-and-dump schemes.
Casey proposed that LY could obtain the needed financing by going public. LY
would be turned into a publicly traded company through a reverse merger. According
to Alattar, a reverse merger is an SEC-authorized means of taking a private company
public in a relatively short period of time and with substantially less hassle than an
initial public offering. A reverse merger occurs when a private operating company
wishing to go public is acquired by a non-operating, public “shell” corporation. The
owners of the private operating company exchange their ownership in the private
company for the outstanding shares of the public company. After the merger, the
public company changes its name to that of the previously held private company and
begins operating as such.

      Here, the private company was LY, and the public shell corporation was Top
Gear, a Delaware corporation. Casey represented that Top Gear would become “a
premier web-based group-buying retailer of luxury products at deep discounts to
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retail prices.”   Initially, Top Gear would acquire a strong subscriber base and
thereafter attract recognizable merchants. Top Gear would offer household goods
and eventually expand its offering to broader scope of products.

      On November 8, 2011, the parties executed the reverse merger, and the entity’s
name was changed to Luxeyard, Inc. According to Alattar, Casey and his affiliates
had already obtained all of the ostensibly unrestricted or free trading stock in Top
Gear, which was to be merged with LY and, therefore, controlled Top Gear prior to
November 8, 2011.

      Casey commenced an aggressive marketing campaign to artificially inflate the
price of Luxeyard stock. Shortly thereafter, Casey and others dumped a large number
of unrestricted shares, and the price of the stock then fell from a high of over $2.00
per share to $.10 per share. Alattar owned restricted shares, which could not be sold
for eighteen months.

      Alattar filed suit in Harris County on September 18, 2012, and has amended his
petition nineteen times, alleging claims against twenty-seven defendants, who had
purportedly participated in the pump-and-dump scheme while he was a shareholder in
Luxeyard. Alattar further alleged that the defendants had participated in at least nine
additional pump-and-dump schemes against other corporations, in which he was not a
shareholder.

      In January 2015, Wayne Doclefino, a former investigative reporter for KTRK
TV in Houston, informed Casey that a law firm, which Dolcefino would not identify,
had hired him “to do a pump-and-dump story” on Casey. Dolcefino asked Casey to
discuss LuxeYard and several other companies Allatar had alleged, in the trial court,
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to have been the subject of pump-and-dump schemes. Casey declined Dolcefino’s
request.

       On June 5, 2015, Dolcefino wrote Mark S. Hellinger, the attorney representing
defendant Jonathan Camarillo. Dolecfino stated his firm, Dolcefino Consulting, is an
investigative communications firm, and he had been researching financial
transactions known or suspected as pump-and-dump schemes. Camarillo’s name had
surfaced during Dolcefino’s investigation, and Docelfino was “especially intrigued
that Mr. Camarillo appears to have been implicated in litigation in these significant
financial transactions, while being employed as a recruiter for the U.S. Marine Corp.”
Dolcefino “was planning on contacting the Pentagon media office in Washington in
the coming days to test their awareness of these civil issues . . . .”

       Jinsun noticed Dolcefino’s deposition for June 26, 2015, serving the notice and
subpoena duces tecum on Dolcefino pursuant to Rule 205.2 of the Texas Rules of
Civil Procedure.1 Tex. R. Civ. P. 205.2. Alattar filed a motion to quash Dolcefino’s

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          In the subpoena duces tecum, Jinsun requested that Dolcefino produce documents
concerning the following: (1) communications with any party (or former party) to this lawsuit; (2)
communications with counsel for any party (or former party) to this lawsuit; (3) communications
with Amir Mireskandari, Alidad Mireskandari, or Yuval Ran; (4) communications with any other
person, entity, or government agency relating to Luxeyard, this lawsuit, or any defendant in this
lawsuit; (5) his retention or engagement by any party (or former party) to this lawsuit, counsel for
any party (or former party) to this lawsuit, Amir Mireskandari, Alidad Mireskandari, or Yuval Ran;
(6) payments made, or due to be made, to him by any party (or former party) to this lawsuit, counsel
for any party (or former party) to this lawsuit, Amir Mireskandari, Alidad Mireskandari, or Yuval
Ran; (7) his review of documents involving litigation relating to Luxeyard; (8) his research into
financial transactions known or suspected to be “pump and dump” schemes; (9) work product
generated by him that relate to Luxeyard, this lawsuit, or any defendant in this lawsuit; and (10)
telephone records reflecting all calls he made relating to Luxeyard, this lawsuit, or any defendant in
this lawsuit.
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deposition, arguing that Dolcefino has a journalistic privilege and the information
sought in the deposition and subpoena duces tecum is neither relevant nor reasonably
calculated to lead to the discovery of admissible evidence. Jinsun responded that the
journalistic privilege does not apply to Dolcefino because he is no longer a reporter.

      In an order signed June 30, 2015, the trial court granted Alattar’s motion to
quash, stating:

      Pursuant to notice dated June 23, 2015, a conference was held by
      telephone on June 29, 2015 concerning a dispute among the parties
      concerning Plaintiff’s Motion to Quash Deposition of Wayne Dolcefino
      and Motion for Protective Order, filed June 19, 2015. The Court
      considered the said Motion, the response thereto filed by Jinsun, LLP on
      June 24, 2015 and its supplement filed on June 29, 2015, as well as the
      argument of counsel and relevant authority. In as much as no party
      asserts that Mr. Dolcefino has personal knowledge of any facts relevant
      to the disputed issues in this case; that it appears whatever relevant
      information Dolcefino may possess is available to the parties from other
      sources through discovery; and, that there is no compelling need for
      Dolcefino’s research or conclusions, the Motion to Quash is granted.

      The trial court’s reasons for quashing Dolcefino’s deposition are as follows: (1)
“no party asserts that Mr. Dolcefino has personal knowledge of any facts relevant to
the disputed issues in this case”; (2) “it appears that whatever relevant information
Dolcefino may possess is available to the parties from other sources through
discovery”; and (3) “there is no compelling need for Dolcefino’s research or
conclusions.”

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      In this mandamus proceeding, Jinsun contends that the trial court abused its
discretion by quashing Dolcefino’s deposition, and it has no adequate remedy by
appeal because the prohibited discovery cannot be made part of the appellate record.

                               II. STANDARD OF REVIEW

      To be entitled to mandamus relief, a relator must demonstrate (1) the trial court
clearly abused its discretion; and (2) the relator has no adequate remedy by appeal. In
re Reece, 341 S.W.3d 360, 364 (Tex. 2011) (orig. proceeding). A trial court clearly
abuses its discretion if it reaches a decision so arbitrary and unreasonable as to
amount to a clear and prejudicial error of law or if it clearly fails to analyze the law
correctly or apply the law correctly to the facts. In re Cerberus Capital Mgmt. L.P.,
164 S.W.3d 379, 382 (Tex. 2005) (orig. proceeding) (per curiam). The relator does
not have an adequate remedy by appeal when the trial court has not allowed
discovery, such discovery cannot be made part of the appellate record, and the
reviewing court is not able to evaluate the effect of the trial court’s error on the record
before it. Walker v. Packer, 827 S.W.2d 833, 843−44 (Tex. 1992) (per curiam).

                              III. ABUSE OF DISCRETION

                        A. Basis for the Trial Court’s Ruling

      The parties dispute the basis on which the trial court granted the motion to
quash. Alattar asserts that the trial court’s order “tacitly recognizes Mr. Dolcefino’s
right to assert journalistic privilege” by its reasoning that (1) the information is
available from other sources; and (2) there is “no compelling need” for Dolcefino’s

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information. Jinsun contends that the trial court did not rule, implicitly or otherwise,
that Dolcefino has a journalistic privilege.

         Section 22.023 of the Texas Civil Practice & Remedies Code provides a
journalistic privilege to discovery. See Tex. Civ. Prac. & Rem. Code Ann. § 22.023
(West 2015). Section 22.024 of the Texas Civil Practice & Remedies Code sets forth
the circumstances under which the journalist may be compelled to disclose certain
information. See Tex. Civ. Prac. & Rem. Code Ann. § 22.024 (West 2015).2 One

2
    Section 22.024 provides:

         After notice and an opportunity to be heard, a court may compel a journalist, a
         journalist’s employer, or a person with an independent contract with a journalist to
         testify regarding or to produce or disclose any information, document, or item or the
         source of any information, document, or item obtained while acting as a journalist, if
         the person seeking the information, document, or item or the source of any
         information, document, or item makes a clear and specific showing that:

         (1) all reasonable efforts have been exhausted to obtain the information from
         alternative sources;

         (2) the subpoena is not overbroad, unreasonable, or oppressive and, when
         appropriate, will be limited to the verification of published information and the
         surrounding circumstances relating to the accuracy of the published information;

         (3) reasonable and timely notice was given of the demand for the information,
         document, or item;

         (4) in this instance, the interest of the party subpoenaing the information outweighs
         the public interest in gathering and dissemination of news, including the concerns of
         the journalist;

         (5) the subpoena or compulsory process is not being used to obtain peripheral,
         nonessential, or speculative information; and

         (6) the information, document, or item is relevant and material to the proper
         administration of the official proceeding for which the testimony, production, or
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requirement that must be met before a journalist may be compelled to testify or
produce information is that “all reasonable efforts have been exhausted to obtain the
information from alternative sources.” Id. § 22.024(1). Although the order states the
information is discoverable from the parties through discovery, the order does not use
the specific language of the statute by finding that “all reasonable efforts have been
exhausted.”

      Another requirement is that “the interest of the party subpoenaing the
information outweighs the public interest in gathering and dissemination of news,
including the concerns of the journalist.” Id. § 22.024(4). Although it may be argued
that this language could be interpreted as requiring a “compelling need,” the trial
court did not use the language contained in the statute. In the absence of any
language in the order tracking the language of the statute, we cannot conclude that the
trial court quashed Dolcefino’s deposition based on the journalistic privilege.

                                 B. Personal Knowledge

      Jinsun contends that the trial court abused its discretion by quashing the
deposition on the ground that “no party asserts that Mr. Dolcefino has personal
knowledge of any facts relevant to the disputed issues in this case.” First, Jinsun
argues that Dolcefino has personal knowledge of relevant facts regarding (1) his
communications with Alattar and Amir Mireskandari; and (2) the basis for, and intent

      disclosure is sought and is essential to the maintenance of a claim or defense of the
      person seeking the testimony, production, or disclosure.

Tex. Civ. Prac. & Rem. Code Ann. § 22.024.

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behind, his “threatening” letter to Camarillo. Jinsun intends to depose Dolcefino on
these matters.

      Second, Jinsun asserts that the Texas Rules of Civil Procedure do not limit
depositions to people with personal knowledge of facts. Rule 192.3 provides that “[a]
person has knowledge of relevant facts when the person has or may have knowledge
of any discoverable matter. The person need not have admissible information or
personal knowledge of the facts.” Tex. R. Civ. P. 192.3(c) (emphasis added); see
also In re Team Transp., Inc., 996 S.W.2d 256, 259 (Tex. App.—Houston [14th
Dist.] 1999, orig. proceeding) (“A person with knowledge of relevant facts need not
have personal knowledge of the facts.” (citing Tex. R. Civ. P. 192.3(c))). Rule
199.1(a) permits the deposition “of any person or entity” without any limitation that
the proposed deponent have personal knowledge of the facts. Rule 205.1(a) permits a
party to compel the deposition of “a nonparty,” without regard to whether the
nonparty has personal knowledge. Jinsun was not required to show that Dolcefino
had “personal knowledge of any facts relevant to the disputed issues in this case.”
The trial court abused its discretion by quashing Dolcefino’s deposition on the ground
of lack of personal knowledge.

                    C. Discovery Available from Other Sources

      Jinsun further contends that the rules do not require it to pursue other methods
of discovery before it may depose Dolcefino. The scope of discovery includes
unprivileged information that is relevant to the subject of the action, even if it would
be inadmissible at trial, so long as the information is reasonably calculated to lead to
the discovery of admissible evidence. Tex. R. Civ. P. 192.3(a); In re CSX Corp., 124
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S.W.3d 149, 152 (Tex. 2003) (orig. proceeding) (per curiam). Discovery may be
limited if (1) it is unreasonably cumulative or duplicative, or is obtainable from some
other source that is more convenient, less burdensome, or less expensive; or (2) the
burden or expense of the proposed discovery outweighs its likely benefit, taking into
account the needs of the case, the amount in controversy, the parties’ resources, the
importance of the issues at stake in the litigation, and the importance of the proposed
discovery in resolving the issues. Tex. R. Civ. P. 192.4.

      The trial court merely found that the information sought from Dolcefino was
available “from other sources through discovery.” It did not find that the discovery
was available from other sources that were “more convenient, less burdensome, or
less expensive.” Id. 192.4(a).

      The party resisting discovery cannot simply make conclusory allegations that
the requested discovery is unduly burdensome or unnecessarily harassing, but must
produce some evidence supporting its request for a protective order. In re Alford
Chevrolet-Geo, 997 S.W.2d 173, 181 (Tex. 1999) (orig. proceeding). Alattar did not
even assert in the trial court that other sources, such as the parties, would be more
convenient, less burdensome, or less expensive than taking Dolcefino’s deposition.
The trial court abused its discretion by granting Alattar’s motion to quash on the basis
that discovery was available “from other sources through discovery.”

                        IV. ADEQUATE REMEDY BY APPEAL

      Concluding that the trial court abused its discretion, we now determine whether
Jinsun has an adequate remedy by appeal. A relator may not have an adequate
remedy by appeal if the trial court prohibits discovery, such discovery cannot be
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made part of the appellate record, and the appellate court cannot evaluate the effect of
the trial court’s error based on the record. Walker, 827 S.W.2d at 843−44. The
appellate court must carefully consider all relevant circumstances, including the
claims and defenses asserted, the type of discovery sought, what it is intended to
prove, and the presence or lack of other discovery, to determine whether mandamus
is appropriate. Id. at 844.

      Jinsun intends to depose Dolcefino about his communications with Alattar and
Amir Mireskandari and the basis for his letter to Camarillo. While Jinsun could
pursue information about their conversations with Dolcefino through discovery,
Jinsun does not have to rely solely on discovery from Alattar and Amir Mireskandari
regarding those conversations. Dolcefino was also hired to prepare a pump-and-
dump story on Casey. There has been no showing that information Dolcefino has
acquired about Casey is available from other sources through discovery. Moreover,
Alattar has made the other alleged pump-and-dump schemes an issue in this case, and
Dolcefino went so far as to request an interview with Casey about those other
schemes. We conclude that Jinsun does not have an adequate remedy by appeal.

                                  IV. CONCLUSION

      In summary, based on the record before us, we conclude that the trial court
abused its discretion by granting Alattar’s motion to quash Dolcefino’s deposition
and Jinsun has no adequate remedy by appeal. Therefore, we conditionally grant
Jinsun’s petition for writ of mandamus and order the trial court to vacate its June 23,
2015 order granting real party in interest’s motion to quash Dolcefino’s deposition.

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The writ will only issue if the trial court does not act in accordance with this opinion.
We also deny relator’s emergency motion for temporary relief as moot.

                                       /s/        Marc W. Brown
                                                  Justice

Panel consists of Justices Christopher, Brown, and Wise.

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