in Re RH White Oak, LLC, Brian Hardy, Colin Zak, Entex Partners, Ltd. and Entex Management Services, L.L.C. ( 2016 )

Memorandum Opinion Dated February 25, 2016 Withdrawn, Petition for Writ of
Mandamus Conditionally Granted, in Part, and Denied, in Part, and
Memorandum Opinion filed June 9, 2016.
In The
Fourteenth Court of Appeals
NO. 14-15-00789-CV
IN RE RH WHITE OAK, LLC, BRIAN HARDY, COLIN ZAK, ENTEX
PARTNERS, LTD., AND ENTEX MANAGEMENT SERVICES, L.L.C., Relators
ORIGINAL PROCEEDING
WRIT OF MANDAMUS
125th District Court
Harris County, Texas
Trial Court Cause No. 2010-81470
MEMORANDUM OPINION ON REHEARING1
This is the second time these parties have been before this court on a discovery
sanctions order. Relators, RH White Oak, LLC, Brian Hardy, Colin Zak, Entex Partners,
1
We issued our original opinion on February 25, 2016. Relators filed a motion for rehearing.
We overrule the motion for rehearing, withdraw our prior opinion issued on February 25, 2016, issue
this opinion on rehearing, and deny the motion for rehearing en banc as moot.
Ltd., and Entex Management Services, L.L.C., previously sought mandamus relief for
the October 25, 2013 sanctions order signed by the Honorable Kyle Carter, presiding
judge of the 125th District Court of Harris County. See In re RH White Oak, LLC, 442
S.W.3d 492 (Tex. App.—Houston [14th Dist.] 2014, orig. proceeding) (“RH White Oak
I”). We conditionally granted the petition, in part, as to evidentiary sanctions and
denied it, in part, as to monetary sanctions. Id. at 504.
On August 10, 2015, Judge Carter signed an order reforming the first sanctions
order. Relators bring the current petition for writ of mandamus to compel Judge Carter
to set aside his August 10, 2015 order reforming the October 25, 2013 order granting
sanctions for discovery abuse. We conditionally grant the petition, in part, and deny it,
in part.
I. BACKGROUND
On September 30, 2008, relators executed a note and other related documents for
a construction loan from real party in interest Lone Star Bank. On October 6, 2008, a
letter, purportedly signed by Colin Zak and Brian Hardy, was presented to a Lone Star
loan officer, real party in interest Rick Hajdik, authorizing J.R. Reuther of Reuther
Homes, LLC to make draws on behalf RH White Oak. The October 6, 2008 letter
states:
Please accept this letter as my authorization to allow JR Reuther of Reuther
Homes to make draw requests on behalf of RH White Oak, LLC for the
construction/development of the aforementioned project. This shall pertain
to both construction and soft cost draw requests.
It is my understanding that draws are paid per the Bank mandated Draw
Schedule upon completion of each construction phase.
2
I also authorize for all draws approved by the bank inspector to be funded
into the bank account of Reuther Homes.
I further understand that Lone Star Bank will require lien waivers/affidavits
of bill paid once each draw has been funded.
Relators defaulted on the note, and a non-judicial foreclosure sale was held on
January 4, 2011. Lone Star sued relators for the remaining balance of the note, interest,
and attorney’s fees.
Relators filed counterclaims against Lone Star for fraud in a real estate
transaction, common law fraud, DTPA violations, breach of contract, constructive trust,
equitable lien, declaratory judgment, and attorney’s fees. Relators alleged Reuther’s
withdrawals were unauthorized because Zak’s and Hardy’s signatures on the October 6,
2008 letter presented to Lone Star had been forged. Relators also filed a third-party
petition against Rick Hajdik, alleging claims for fraud in a real estate transaction,
common law fraud, breach of fiduciary duty, conspiracy, and attorney’s fees. Lone Star
and Hajdik subsequently obtained a copy of the October 6, 2008 letter with Zak’s and
Hardy’s genuine signatures from Reuther in response to a subpoena.
The trial court signed a twenty-three-page sanctions order on October 25, 2013,
finding that relators had the October 6, 2008 letter with genuine signature in their
possession, but deliberately failed to produce it. Pursuant to the order, relators were
prohibited from introducing any contrary evidence, conducting further discovery, filing
further pleadings, and introducing evidence of their claims and defenses against Lone
Star and Hajdik. The trial court also awarded Lone Star and Hajdik attorney’s fees and
monetary sanctions.
3
Relators filed an original proceeding in this court. We held that there was no
direct relationship between relators’ failure to produce the October 6, 2008 letter with
their genuine signature and foreclosing their claims and defenses. Id. at 502−03.
Subsequent to our opinion, Lone Star and Hajdik and relators filed their respective
motions to reform the October 25, 2013 order. The trial court held a hearing and signed
the reformed sanctions order on August 10, 2015.
The new forty-six-page sanctions order is now based on “Concealed Documents,”
which relators did not produce, consisting of not only the October 6, 2008 letter with the
genuine signatures but also a wire transfer agreement with genuine signatures, a wire
transfer form with genuine signatures, and emails concerning the authorization of
Reuther to make draws. The order makes thirty-five fact findings that are established as
a matter of law for purposes of this suit and prohibits relators from introducing any
evidence to the contrary to inoculate the jury regarding those facts. The order further
reassesses the same monetary sanctions as in the October 25, 2013 order.
In this original proceeding, relators assert that the August 10, 2015 order suffers
from many of the same deficiencies as the October 25, 2013 order.
II. MANDAMUS 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
4
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 adequacy of an appellate remedy must be determined by balancing the
benefits of mandamus review against the detriments. In re Team Rocket, L.P., 256
S.W.3d 257, 262 (Tex. 2008) (orig. proceeding). Because this balance depends heavily
on circumstances, it must be guided by analysis of principles rather than simple rules
that treat cases as categories. In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 464 (Tex.
2008) (orig. proceeding). In evaluating benefits and detriments, we consider whether
mandamus will preserve important substantive and procedural rights from impairment
or loss. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 136 (Tex. 2004) (orig.
proceeding). We also consider whether mandamus will “allow the appellate courts to
give needed and helpful direction to the law that would otherwise prove elusive in
appeals from final judgments.” Id. Finally, we consider whether mandamus will spare
the litigants and the public “the time and money utterly wasted enduring eventual
reversal of improperly conducted proceedings.” Id.
III. ANALYSIS
A. Abuse of Discretion
Relators contend that the sanctions are not “just.” Discovery sanctions serve
three purposes: (1) to secure the parties’ compliance with the discovery rules; (2) to
deter other litigants from violating the discovery rules; and (3) to punish parties who
violate the discovery rules. Spohn Hosp. v. Mayer, 104 S.W.3d 878, 882 (Tex. 2003)
(per curiam). Any sanction must be “just”; that is: (1) a direct relationship must exist
between the offensive conduct and sanction imposed; and (2) a sanction must not be
5
excessive. TransAmerican Nat. Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex. 1991)
(orig. proceeding).
1. Direct Relationship
Under the first prong, a direct relationship exists if a trial court directs the
sanction against the abuse found and it remedies the prejudice caused to the innocent
party. Id. The trial court found a direct nexus between the evidentiary sanctions and
relators’ perjury and misconduct regarding the (1) failure to produce the Concealed
Documents; (2) existence of the Concealed Documents; (3) signing of the Concealed
Documents; and (4) circumstances surrounding the signing of the documents.
Relators contend that the order fails the direct relationship test because it is not
directed against the abuse or toward remedying the purported prejudice caused by the
discovery abuse. Relators complain that the additional findings go beyond their claims
that the signatures on the subject documents are forgeries. Lone Star and Hajdik
respond that the evidentiary findings are just because they are derived directly from the
Concealed Documents, which correct the record in the trial court. We consider these
arguments in addressing whether there is a direct relationship between the thirty-five
fact findings and the misconduct found by the trial court.
Findings i−v: These findings establish that Zak and Hardy signed the October 6,
2008 letter and other documents authorizing Reuther to make draw requests and deposit
the funds into Reuther Homes’ bank account. We conclude that these findings have a
direct relationship to the discovery abuse because the Concealed Documents, which
authorized Reuther to make the subject draw requests and deposit the funds into Reuther
6
Homes’ account, contained Zak’s and Hardy’s genuine signatures and the emails
between them and Reuther show they returned the signed documents to him. 2
Findings vi−ix: These findings establish that, six days after the loan closed, Zak,
in his individual capacity and as sole managing member of RH White Oak, and Hardy,
in his individual capacity, appointed Reuther agent and authorized him to make draws
on the loan. We conclude that these findings have a direct relationship to the discovery
abuse because the concealed October 6, 2008 letter states the capacity in which Zak and
Hardy signed the letter. Although relators argue that the findings improperly declare
Reuther an agent irrespective of the limitations in the letter, we see nothing in the
findings that would alter the scope of the agency as defined in the letter. Moreover,
even though the Concealed Documents do not establish that the loan closed on
September 30, 2008, the closing date of the loan is not disputed.
Finding x: This finding establishes that relators authorized Lone Star and Hajdik
to fund Reuther’s draw requests and deposit the funds into Reuther Homes’ account.
We conclude that this finding has a direct relationship to the discovery abuse because
the concealed October 6, 2008 letter gave Reuther authority to make draw requests and
deposit those funds into Reuther Homes’ account.
Finding xi: This finding establishes that Hardy knew Lone Star required his
personal guaranty. A June 1, 2008 email from Reuther to Zak and Hardy, discussing the
White Oak project, stated “Both of the deals do not require any cash out of pocket to
close on the deal — we will get 100% financing from the banks on these (except White
2
Relators do not challenge these findings in this proceeding.
7
Oak that will have the land equity in the deal). I only need your additional guarantees.”
We conclude that there is a direct relationship between the finding and the discovery
abuse because it is taken from the concealed email.
Findings xii and xiii: These findings establish that relators authorized Reuther to
make draw requests for construction, development, and soft costs. We conclude that
this finding has a direct relationship to the discovery abuse because the concealed
October 6, 2008 letter gave Reuther authority to make draw requests for construction,
development, and soft costs.
Finding xiv: This finding establishes that relators authorized that draws be
deposited into Reuther Homes’ bank account. We conclude that there is a direct
relationship between the finding and the discovery abuse because the concealed October
6, 2008 letter authorized “all draws approved by the bank inspector to be funded into the
bank account of Reuther Homes.”
Findings xv−xviii: These findings establish that the October 6, 2008 letter does
not require Lone Star to pay draws pursuant to the bank’s mandated draw schedule,
limit Reuther’s authority to draws paid pursuant to the bank’s mandated draw schedule,
or obligate Lone Star to obtain lien waivers or affidavits of bills paid. Although labeled
as findings, these portions of the order are legal interpretations of the October 6, 2008
letter. We conclude that there is no direct relationship between these findings and the
discovery abuse because they are not consistent with the October 6, 2008 letter, which
provides it was Zak’s and Hardy’s understanding that (1) “draws are paid per the Bank
mandated Draw Schedule upon completion of each construction phase”; and (2) “Lone
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Star Bank will require lien waivers / affidavits of bill paid once each draw has been
funded.”
Finding xix: This finding establishes that relators informed Reuther, in an email
on December 2, 2008, of their desire to place the project on hold and requested that he
advise them of all costs associated with the project and redraft the letter to the bank,
which he “had [them] sign allowing draws to be paid into the Reuther Homes account.”
Because this finding is taken directly from the concealed email, we conclude that there
is a direct relationship between it and the discovery abuse.3
Findings xx and xxi: These findings establish that Zak signed a blank Lone Star
wire transfer agreement and request form with full knowledge that Reuther would fill in
the blanks. We conclude that there is a direct relationship between these findings and
the discovery abuse because one of the concealed emails shows that Reuther asked Zak,
on October 6, 2008, to sign the wire transfer agreement and form and to “send back the
signature pages for both and I will fill in the rest.”
Findings xxii and xxiii: These findings establish that Zak signed the wire
transfer agreement and request form with full knowledge and expectation that Reuther
would use it. We conclude that these findings regarding Zak’s full knowledge and
expectation have no direct relationship to the discovery abuse because the concealed
email does not address Zak’s expectations.
Finding xxiv: This finding establishes that Lone Star did not fund any draws to
Reuther until after October 6, 2008. The Concealed Documents do not establish the
3
Relators do not challenge this finding in this proceeding.
9
time of the first funded draw request. However, because this fact is not in dispute, we
conclude that there is no abuse of discretion.
Finding xxv: This finding establishes that Reuther was relators’ “authorized
representative” to initiate wire transfers of funds from the loan. We conclude that there
is a direct relationship between this finding and the discovery abuse because the October
6, 2008 letter authorized Reuther to make draw requests and the signed blank wire
transfer agreement provides for the designation of an “authorized representative.”
Findings xxvi−xxviii: These findings establish that, pursuant to the wire transfer
agreement, relators were responsible for the accuracy of the wire transfer instructions
provided by the customer’s authorized representative and would not request a wire
transfer that violated federal or state law. Because these findings are taken directly from
the wire transfer agreement, the genuine version of which was concealed, we conclude
that there is a direct relationship to the discovery abuse.
Finding xxix: This finding establishes that relators had the opportunity to limit
Reuther’s authority and ability to effectuate wire transfers but did not do so; instead,
they chose to sign a blank wire transfer agreement and give it to Reuther. We conclude
that there is no direct relationship between this finding and the discovery abuse because
it goes beyond the information contained the wire transfer agreement and the other
Concealed Documents.
Findings xxx and xxxi: These findings quote the wire transfer agreement
regarding the relators’ responsibility to verify executed transactions on statements and
to provide notice of erroneous or unauthorized transactions to Lone Star to mitigate
damages and the circumstances under which Lone Star has no liability. Because these
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findings are taken directly from the wire transfer agreement, the genuine version of
which was concealed, we conclude that they are directly related to the discovery abuse.
Finding xxxii: This finding establishes that relators did not communicate with
Lone Star or Hajdik until January 20, 2009. We conclude that there is a direct
relationship between this finding and the discovery abuse because a concealed January
20, 2009 email from Hardy to Reuther shows that there had been no communication
with Lone Star and Hajdik up to that date.
Finding xxxiii: This finding establishes that relators did not report errors to Lone
Star within sixty days of any draw Lone Star wired to Reuther. We conclude that there
is no direct relationship between this finding and the discovery abuse because it is not
addressed in the Concealed Documents.
Finding xxxiv: This finding establishes that relators or Lone Star could terminate
the wire transfer agreement upon ten days’ written notice. Because this finding is taken
from the wire transfer agreement, the genuine version of which was concealed, we
conclude that it has a direct relationship to the abuse.
Finding xxxv: This finding establishes that all signatures on the Concealed
Documents, including letters authorizing Reuther to make draws on behalf of RH White
Oak, are genuine, not forged. We conclude that a direct relationship exists between this
finding and the discovery abuse because relators denied the existence of the Concealed
Documents with the genuine signatures.
In summary, we hold that findings i−xiv, xix−xxi, xxiv−xxviii, xxx, xxxi, xxxii,
xxxiv, and xxxv have a direct relationship to the discovery abuse. The remaining
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findings, xv−xviii, xxii, xxiii, xxix, and xxxiii, have no direct relationship to the
discovery abuse.
2. Excessive Sanctions
Under the second prong, just sanctions must not be excessive. TransAmerican
Nat. Gas Corp., 811 S.W.2d at 917. The discovery sanction imposed should be no more
severe than necessary to serve its legitimate purposes. Id. A sanction is excessive if
lesser sanctions would have served the purposes of compliance, deterrence, and
punishment. 5 Star Diamond, LLC v. Singh, 369 S.W.3d 572, 579 (Tex. App.—Dallas
2012, no pet.). Generally, before a sanction that prevents a decision on the merits is
justified, lesser sanctions must first be tested to determine their efficacy. Cire v.
Cummings, 134 S.W.3d 835, 840 (Tex. 2004).
We assume, without deciding, that the findings imposed as sanctions are death
penalty sanctions. In all but the most exceptional cases, the trial court must actually test
the lesser sanctions before imposing death penalty sanctions. See id. at 842 (“[I]n all
but the most exceptional cases, the trial court must actually test the lesser sanctions
before striking the pleadings.”) In all cases, the record must reflect that the trial court
considered the availability of appropriate lesser sanctions and must contain an
explanation of the appropriateness of the sanction imposed. Id. “[T]he trial court need
not test the effectiveness of each available lesser sanction by actually imposing the
lesser sanction on the party before issuing the death penalty; rather, the trial court must
analyze the available sanctions and offer a reasoned explanation as to the
appropriateness of the sanction imposed.” Id. at 840. The trial court is not required “to
list each possible lesser sanction in its order and then explain why each would be
12
ineffective.” Id. at 842; see also id. (disagreeing with the court of appeals’ holding that
the death penalty sanctions order was insufficient because the trial court was required to
address each of the lesser sanctions available and explain why they would not be
effective).
Relators contend that the trial court’s explanation in the sanctions order for why it
did not impose lesser sanctions is merely unsupported ipse dixit. The trial court
explained in the August 10, 2015 order that it considered lesser sanctions but rejected
them:
The Court further finds that Defendants’ perjury and misconduct to be so
egregious and so abusive so as to constitute an exceptional case, justifying
severe sanctions; . . . though all possible lesser sanctions have been
considered by the Court, no lesser sanctions will properly and fully punish
Defendants’ perjury and misconduct while concomitantly addressing
Defendants’ perjury, false claims and allegations which permeate the
record in this case.
Considering the above statement and the entire order, we hold that the trial court
offered a reasoned explanation for not imposing lesser sanctions. Cf. GTE Commc’ns
Sys. Corp. v. Tanner, 856 S.W.2d 725, 729 (Tex. 1993) (orig. proceeding) (giving no
deference to unsupported conclusions in the trial court’s order, which stated without
explanation that lesser sanctions would have been ineffective); Associated Air Ctr. LP v.
Tary Network Ltd., No. 05-13-00685-CV, 2015 WL 970664, at *6 (Tex. App.—Dallas
Mar. 4, 2015, no pet.) (mem. op.) (“[T]he sanctions order simply recites, without any
further explanation or analysis, that lesser sanctions were considered but ‘would not
promote compliance with the Texas Rules of Civil Procedure.’ Beyond this general
13
statement and description of the offensive conduct, the trial court in this case offered no
reasoned explanation of the appropriateness of the sanctions imposed.”).
Turning to whether the sanctions were excessive, we observe that the trial court
may not use discovery sanctions to adjudicate the merits of a party’s claims unless the
party’s hindrance of the discovery process justifies a presumption that its claims lack
merit. Cire, 134 S.W.3d at 841. “Sanctions which are so severe as to preclude
presentation of the merits of the case should not be assessed absent a party’s flagrant
bad faith or counsel’s callous disregard for the responsibilities of discovery under the
rules.” TransAmerican Natural Gas Corp., 811 S.W.2d at 918. Thus, a trial court may
abuse its discretion by imposing death penalty sanctions in the first instance when the
court has not yet attempted to compel compliance with the discovery rules. See
Associated Air Ctr. LP, 2015 WL 970664, at *7 (holding that case determinative
sanctions were not warranted in the first instance as would be permitted in an
“exceptional case” because the record did not show repeated efforts by the trial court to
obtain appellants’ compliance with their discovery obligations or evidence of repeated
violations of court orders); In re Farmers Tex. Cty. Mut. Ins. Co., No. 04-13-00644-CV,
2013 WL 6730094, at *3 (Tex. App.—San Antonio Dec. 20, 2013, orig. proceeding)
(mem. op.) (holding that the record did not reflect conduct justifying a presumption that
the relator’s claims or defenses lacked merit: no party had refused to produce material
evidence in the face of lesser sanctions; the trial court had not previously imposed any
lesser sanctions in an effort to gain the compliance of a party who refused or objected to
producing the statement; and the record did not show that the aggrieved party was
unable to prepare for trial as a result of the late production); In re M.J.M., 406 S.W.3d
14
292, 298 (Tex. App.—San Antonio 2013, no pet.) (holding that the record did not
support a presumption that claims or defenses lacked merit because it neither contained
previous orders sanctioning the father for discovery abuse nor showed that the trial court
had attempted to obtain compliance with the discovery rules by imposing a less
stringent sanction before imposing death penalty sanctions, and the trial court failed to
explain the appropriateness of imposing death penalty sanctions).
On the other hand, in a case involving the fabrication of evidence or the giving of
false and misleading testimony, it may not be possible to cure the misconduct with
lesser sanctions. For example, the Dallas Court of Appeals agreed with the following
discussion from a trial court order imposing death penalty sanctions:
Defendants’ demonstrated willingness to testify falsely and misleadingly,
to fabricate claims, defenses and evidence, to present false arguments and
evidence to the Court, and to violate the Injunction Order, have completely
undermined Defendants’ credibility and have permeated and compromised
the integrity of this entire proceeding to an extent that cannot be cured
through the imposition of lesser sanctions than those imposed herein.
Because of the extent and nature of Defendants’ fabrication of evidence
and intent to deceive the Court and Movants, and the aggressive use of
threats, motions and obstructionist tactics by Defendants to conceal their
wrongdoing, the Court finds that the sanctions ordered herein are not
excessive and that the imposition of lesser sanctions is not appropriate or
required.
Response Time, Inc. v. Sterling Commerce (N. Am.), Inc., 95 S.W.3d 656, 662 (Tex.
App.—Dallas 2002, no pet.).
15
Similarly, the Austin Court of Appeals has provided a thorough analysis for the
imposition of death penalty sanctions when a party fabricates documents and lies about
those documents:
Producing false documents in discovery and then lying about those
documents in deposition undoubtedly qualifies as an abuse—flagrant, in
fact—of the discovery process, whose ultimate goal is, after all, a search
for the truth. . . . While it may be true that death-penalty sanctions cases in
Texas usually involve discovery orders under rule 215, the absence of such
orders does not necessarily preclude the imposition of death-penalty
sanctions where, as here, the objectionable discovery conduct is fabricating
evidence and lying about that evidence in deposition. In most discovery
disputes, the objectionable conduct is something that can be corrected
using a court order—e.g., ordering a party to appear for a deposition, to
respond to written discovery, or to produce certain documents. But when a
party fabricates evidence and lies about that evidence in deposition, these
typical discovery orders would be ineffective in addressing or punishing
the objectionable discovery conduct. Courts cannot effectively order
someone to take back fabricating the evidence or lying in deposition; nor
would it make sense to compel a party to refrain from fabricating evidence
or lying in the future when that type of conduct is already prohibited.
Likewise, simply excluding the fabricated evidence would be no
punishment and, in fact, would fail to address the inherent problem.
Accordingly, when the objectionable discovery conduct is fabricating
evidence and lying about it in deposition, it is both logical and reasonable
that there were no underlying discovery orders. We are not inclined to hold
that, as a matter of law, there must be underlying orders that gradually lead
up to the death-penalty sanction.
JNS Enter., Inc. v. Dixie Demolition, LLC, 430 S.W.3d 444, 453 (Tex. App.—Austin
2013, no pet.) (citations omitted); see also Daniel v. Kelley Oil Corp., 981 S.W.2d 230,
235 (Tex. App.—Houston [1st Dist.] 1998, pet. denied) (holding that the fabrication of a
tape recording by the plaintiff in a sexual harassment suit warranted death penalty
16
sanctions because (1) the “very act of fabricating evidence strongly suggests that a party
has no legitimate evidence to support her claims”; (2) “[m]eritless claims impose a
terrible hardship on opponents, and it is unjust to allow such claims to be presented”;
and (3) a less stringent sanction such as the exclusion of the audio would not have been
effective because it would merely put the plaintiff in the position she would have been
had she not manufactured the tape).
Relators complain that the death penalty sanctions are based on the trial court’s
mere belief that they had falsely denied the existence of the October 6, 2008 letter with
genuine signatures and the wire transfer agreement and wire transfer form with genuine
signatures. “‘[W]hen a motion for sanctions asserts that a respondent to a discovery
request has failed to produce a document within its possession, custody or control, the
movant has the burden to prove the assertion.’” Global Servs., Inc. v. Bianchi, 901
S.W.2d 934, 937 (Tex.1995) (orig. proceeding) (quoting GTE Commc’ns Sys. Corp.,
856 S.W.2d at 732). Because direct evidence is rarely available, it may be necessary for
the movant rely entirely on circumstantial evidence. See id. at 938 (“We recognize that
it is often difficult to prove that a party has withheld documents from discovery. Direct
evidence of such conduct is seldom available, and it may be necessary to rely entirely
upon circumstantial evidence.”). The court’s imposition of sanctions cannot be based
merely on a party’s bald assertions, however. Id. Instead, “[t]here must be some
evidence to show an abuse of discovery before sanctions can be imposed.” Id.
The trial court found relators had lied and given false testimony about the
existence of the documents and lied about signing them, falsely claiming that they were
forged. In RH White Oak I, we detailed the “circumstantial evidence showing that
17
relators had actually signed a copy of the October 6, 2008 letter but later denied its
existence and failed to produce it, which is sufficient to support a finding of
sanctionable conduct.” 442 S.W.3d at 500 (citing Bianchi, 901 S.W.2d at 938). Among
other evidence, an email sent from Zak’s email account showed that he was sending the
signed letter to Reuther. Relators contend that there is also contrary evidence, but any
such evidence would merely create a factual dispute. The trial court resolved that
dispute with its finding that relators had engaged in false and misleading conduct, and
we may not second-guess that resolution in a mandamus proceeding. See In re Angelini,
186 S.W.3d 558, 560 (Tex. 2006) (orig. proceeding) (“It is well established Texas law
that an appellate court may not deal with disputed areas of fact in an original mandamus
proceeding.’” (quoting Brady v. Fourteenth Court of Appeals, 795 S.W.2d 712, 714
(Tex. 1990))).
Given its finding of false and misleading conduct, the trial court explained that
“no lesser sanctions will properly and fully punish Defendants’ perjury and misconduct
while concomitantly addressing Defendants’ perjury, false claims and allegations which
permeate the record in this case.” The reasoning in Response Time, JNS Enterprise, and
Daniel supports the trial court’s conclusion that the sanctions imposed are not excessive.
Although those cases involved the fabrication of evidence, they also involved false
testimony and concealment of wrong-doing. The trial court cannot effectively order
someone to take back lies told under oath; “nor would it make sense to compel a party
to refrain from . . . lying in the future when that type of conduct is already prohibited.”
JNS Enter., Inc., 430 S.W.3d at 453.
18
Relators compare this case with another recent opinion from this court involving
death penalty sanctions. See Primo v. Rothenberg, Nos. 14-13-00794-CV & 14-13-
00997-CV, 2015 WL 3799763 (Tex. App.—Houston [14th Dist.] June 18, 2015, pet.
denied) (mem. op.). In that case, Primo repeatedly and intentionally failed to comply
with discovery requests. The trial court granted Rothenberg’s motion for death penalty
sanctions against Primo. Id. at *1. This court, not condoning Primo’s conduct, held that
the trial court abused its discretion by imposing death penalty sanctions in the first
instance without considering or testing lesser sanctions for failure to comply with
discovery requests. Id. at *22. Rothenberg had not cited, and we had not found, any
case in which similar conduct warranted death penalty sanctions without first
considering or testing lesser sanctions. Id. at *23. We concluded the circumstances in
Primo were more like cases in which death penalty sanctions were inappropriate
because lesser sanctions were not first considered or tested; they did not involve the
deliberate destruction of dispositive evidence. Id. at *24 (citing Cire, 134 S.W.3d at
840–42).
The trial court in Primo signed a second order reaffirming the first sanctions order
and adding findings regarding conduct after the first sanctions order. Id. at *23. But, as
with the first order, the trial court did not analyze the available sanctions in the second
order or offer a reasoned explanation as to the appropriateness of the sanction imposed.
Id. at *23–24. “Re-hanging an already-hung litigant does not fix procedural flaws
preceding the first trip to the gallows and does not comply with TransAmerican.” Id. at
*23.
19
This case is different from Primo. Here, the trial court explained that this was an
exceptional case because of relators’ perjury in denying the existence of the signed
October 6, 2008 letter and false claims that the letter was forged. As Response Time,
JNS Enterprise, and Daniel recognize, this conduct is more like the deliberate
destruction of evidence in that lesser sanctions may not cure it. In addition, the trial
court explained that it had considered all possible lesser sanctions. The specific
language quoted above and the forty-six-page order as a whole sufficiently demonstrate
that the trial court offered a reasoned explanation for not imposing lesser sanctions.
This is not a case in which the sanction order contained no explanation beyond a general
statement that lesser sanctions were considered but would not promote compliance. The
trial court was not required “to list each possible lesser sanction in its order and then
explain why each would be ineffective.” Cire, 134 S.W.3d at 842.
Relying on an en banc opinion from this court, relators also contend that death
penalty sanctions are excessive in light of the monetary sanctions assessed in the order. 4
See State v. PR Invs. & Specialty Retailers, Inc., 180 S.W.3d 654 (Tex. App.—Houston
[14th Dist.] 2005), aff’d, 251 S.W.3d 472 (Tex. 2008). Relators did not make this
argument in their first mandamus petition challenging the trial court’s sanctions order,
so we did not address it in our RH White Oak I opinion. Nor did relators raise this
argument in the subsequent trial court proceedings, which focused on how to reform the
trial court’s sanctions order to comply with our opinion in RH White Oak I.
4
As we explained in RH White Oak I, relators have not shown the lack of an adequate remedy
by appeal regarding the monetary sanctions, so those sanctions are not reviewable by mandamus. 442
S.W.3d at 504. Thus, we do not know whether or to what extent the monetary sanctions will remain in
place following any appeal.
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Accordingly, we do not consider relators’ argument. See In re Advance Payroll
Funding, Ltd., 254 S.W.3d 710, 714 (Tex. App.—Dallas 2008, orig. proceeding)
(“Neither of these arguments were presented to the trial court. It is well established that
arguments not presented to the trial court will not be considered in a petition for writ of
mandamus.”).
For these reasons, we hold the sanctions imposed in the August 10, 2015 order
that are directly related to the discovery abuse are not excessive.
B. Inadequate Remedy by Appeal
A party does not have an adequate remedy by appeal when the trial court imposes
sanctions that have the effect of adjudicating a dispute but do not result in the rendition
of an appealable judgment. TransAmerican Nat. Gas Corp., 811 S.W.2d at 919.
Because the trial court’s findings adjudicate certain portions of this dispute but there has
been no rendition of a final judgment, relators do not have an adequate remedy by
appeal.
IV. CONCLUSION
We hold that (1) the trial court abused its discretion by making the following
findings in its August 10, 2015 sanctions order: xv−xviii, xxii, xxiii, xxix, and xxxiii;
and (2) relators do not have an adequate remedy by appeal. We therefore conditionally
grant relators’ petition for writ of mandamus, in part, and order the trial court to vacate
those portions of August 10, 2015 sanctions order as to those findings. The writ will
issue only if the trial court fails to act in accordance with this opinion. We deny the
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remainder of the petition as to findings i−xiv, xix−xxi, xxiv−xxviii, xxx, xxxi, xxxii,
xxxiv, and xxxv.
/s/ John Donovan
Justice
Panel consists of Justices Busby, Donovan, and Wise.
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