in Re National Lloyds Insurance Company, Wardlaw Claims Service, Inc. and Ideal Adjusting, Inc. ( 2015 )

NUMBER 13-15-00219-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
IN RE NATIONAL LLOYDS INSURANCE COMPANY,
WARDLAW CLAIMS SERVICE INC. AND
IDEAL ADJUSTING, INC.
On Petition for Writ of Mandamus.
MEMORANDUM OPINION
Before Justices Garza, Benavides, and Longoria
Memorandum Opinion by Justice Benavides1
Relators, National Lloyds Insurance Company, Wardlaw Claims Service Inc., and
Ideal Adjusting, Inc., filed a petition for writ of mandamus in the above cause on May 12,
2015. Through this original proceeding, relators seek to compel the trial court to vacate
1 See TEX. R. APP. P. 52.8(d) (“When denying relief, the court may hand down an opinion but is not
required to do so.”); TEX. R. APP. P. 47.4 (distinguishing opinions and memorandum opinions).
its April 29, 2015 order compelling relators to respond to discovery requests pertaining to
their attorney’s fees. We deny the petition for writ of mandamus.
I. BACKGROUND
The cases underlying this original proceeding arise from a multidistrict litigation
pretrial court proceeding in the 206th District Court of Hidalgo County concerning all
insurance coverage cases stemming from two severe hail storms that struck Hidalgo
County on or about March 29, 2012 and April 20, 2012 (“MDL”). In the four cases
underlying this petition for writ of mandamus, real parties in interest, Martin Almaguer,
Maricela A. Almaguer, Kelly Dizdar, Mark Dizdar, Dizdar Development, Danny Garcia,
Yvonne S. Garcia, Alfredo Ortiz Rodriguez, and Alicia M. Rodriguez, brought suit against
relators alleging that they were underpaid on their property damage claims following the
hailstorms.
Real parties have asserted claims for attorney’s fees in these cases. In their
“Designation of Experts,” relators have identified Scot Doyen as an expert who “is
expected to testify as to reasonable and necessary attorney fees for a case of such
complexity as this case, pending in Hidalgo County, Texas.” Relators also designated
Doyen as a testifying expert regarding attorney’s fees in a companion case in the MDL,
and he testified in that companion case that the overall fees that the plaintiffs were
seeking were not reasonable and necessary. The plaintiffs in the companion case were
represented by the same counsel representing real parties in this proceeding.
On February 27, 2015, Doyen testified at the trial of the companion case that “the
fees [of] the opposing party to the plaintiffs” are “a factor” and one of the “indicators of a
reasonable fee.” Doyen also compared the fees that his firm charged to the fees sought
2
by real parties to contest the reasonableness of their fees. Specifically, Doyen testified
that his firm pro-rated fees across the cases, and he believed that the real parties’ firm
should do the same.
Real parties thereafter moved for leave to serve additional discovery requests
regarding the amounts of attorney’s fees that relators had accrued in the underlying
cases. Relators objected on grounds that the discovery of their attorney’s fees was
irrelevant and violated the attorney-client and work-product privileges. After hearings and
further briefing by relators and real parties in interest, the special master for discovery
recommended that the trial court grant the real parties’ motion for leave to serve additional
discovery. The special master further recommended that the trial court overrule relators’
objections to the real parties’ discovery requests, but allow relators to make the redactions
necessary to protect any privileged information.
By two separate orders issued on April 29, 2015, the trial court adopted the special
master’s recommendations. This original proceeding ensued. By one issue, relators
contend that the trial court abused its discretion in ordering the production of relators’
“privileged attorney’s fees information” when relators are not currently seeking the
recovery of their fees and “Texas courts have held such information to be patently
irrelevant.” The Court requested and received a response to the petition for writ of
mandamus from the real parties in interest.
II. STANDARD OF REVIEW
To be entitled to the extraordinary relief of a writ of mandamus, the relators must
show that the trial court abused its discretion and that there is no adequate remedy by
appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex. 2004) (orig.
3
proceeding). A trial court clearly abuses its discretion if it reaches a decision that is so
arbitrary and unreasonable that it amounts 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 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); In re Prudential Ins. Co. of Am., 148
S.W.3d at 136. The relators have the burden of establishing both prerequisites to
mandamus relief, and this burden is a heavy one. In re CSX Corp., 124 S.W.3d 149, 151
(Tex. 2003) (orig. proceeding) (per curiam).
A discovery order that compels production beyond the rules of procedure is an
abuse of discretion for which mandamus is the proper remedy. In re Nat’l Lloyds Ins. Co.,
449 S.W.3d 486, 488 (Tex. 2014) (orig. proceeding) (per curiam); In re Deere & Co., 299
S.W.3d 819, 820 (Tex. 2009) (orig. proceeding) (per curiam); In re Weekley Homes, L.P.,
295 S.W.3d 309, 322 (Tex. 2009) (orig. proceeding); In re Am. Optical Corp., 988 S.W.2d
711, 713 (Tex. 1998) (orig. proceeding); Walker v. Packer, 827 S.W.2d 833, 843–44 (Tex.
1992) (orig. proceeding).
III. SCOPE OF DISCOVERY
The scope of discovery includes any unprivileged information that is relevant to the
subject of the action, even if it would be inadmissible at trial, as long as the information is
reasonably calculated to lead to the discovery of admissible evidence. TEX. R. CIV. P.
192.3; In re CSX Corp., 124 S.W.3d at 152; see In re Nat’l Lloyds Ins. Co., 449 S.W.3d
at 488. The phrase “relevant to the subject matter” is to be “liberally construed to allow
4
the litigants to obtain the fullest knowledge of the facts and issues prior to trial.” Ford
Motor Co. v. Castillo, 279 S.W.3d 656, 664 (Tex. 2009); see In re Nat’l Lloyds Ins. Co.,
449 S.W.3d at 488; In re HEB Grocery Co., 375 S.W.3d 497, 500 (Tex. App.—Corpus
Christi 2012, orig. proceeding). Information is relevant if it tends to make the existence
of a fact that is of consequence to the determination of the action more or less probable
than it would be without the information. TEX. R. EVID. 401.
Generally, the scope of discovery is within the trial court’s discretion. In re Graco
Children’s Prods., Inc., 210 S.W.3d 598, 600 (Tex. 2006) (orig. proceeding) (per curiam);
In re CSX Corp., 124 S.W.3d at 152. However, a party’s discovery requests must show
a reasonable expectation of obtaining information that will aid in the resolution of the
dispute. In re CSX Corp., 124 S.W.3d at 152. Therefore, discovery requests must be
reasonably tailored to include only matters relevant to the case. In re Am. Optical Corp.,
988 S.W.2d at 713. Accordingly, discovery requests must not be overbroad. See, e.g.,
In re Allstate Cnty. Mut. Ins. Co., 227 S.W.3d 667, 669–70 (Tex. 2007) (per curiam); In re
CSX Corp., 124 S.W.3d at 153. “A specific request for discovery reasonably tailored to
include only matters relevant to the case is not overbroad merely because the request
may call for some information of doubtful relevance.” Texaco, Inc. v. Sanderson, 898
S.W.2d 813, 815 (Tex. 1995) (orig. proceeding) (per curiam). Significantly, whether a
request for discovery is overbroad is distinct from whether it is burdensome or harassing.
In re Allstate Cnty. Mut. Ins. Co., 227 S.W.3d at 670. “Overbroad requests for irrelevant
information are improper whether they are burdensome or not.” Id.
5
IV. ATTORNEY’S FEES
By one issue, relators contend that the trial court abused its discretion in ordering
them to produce information regarding their attorney’s fees when they are not seeking
recovery of their fees and the fees are irrelevant to the plaintiffs’ claims for attorney’s fees.
Relators further assert that they have not put their attorney’s fees at issue in this case
because testimony in a prior case is irrelevant to attorney’s fees in this case and the
concurrence in El Apple does not justify the discovery ordered here. See El Apple I, Ltd.
v. Olivas, 370 S.W.3d 757, 764 (Tex. 2012) (Hecht, J., concurring).
In the instant cases, real parties seek attorney’s fees under the fee-shifting statutes
contained in the Texas Civil Practice and Remedies Code and the Texas Insurance Code.
See TEX. CIV. PRAC. & REM. CODE ANN. § 38.001(8) (West, Westlaw through Ch. 46 2015
R.S.) (providing for the recovery of attorney’s fees on claims pertaining to oral or written
contracts); TEX. INS. CODE ANN. §§ 541.152, 542.060 (West, Westlaw through Ch. 46 2015
R.S.) (providing for the recovery of attorney’s fees on claims arising under the insurance
code). At the present time, relators do not seek the recovery of their attorney’s fees in
defending the underlying cases; however, they acknowledge that they have made an offer
of settlement “which at some point in the future could prompt the trial court to award
relators their attorney’s fees.”
The Texas Supreme Court has acknowledged that the factors identified by Texas
Disciplinary Rule of Professional Conduct 1.04 are “relevant to the determination of a
reasonable attorney’s fee.” City of Laredo v. Montano, 414 S.W.3d 731, 734 (Tex. 2013);
see TEX. DISCIPLINARY R. PROF’L CONDUCT 1.04(a), reprinted in TEX. GOV’T CODE ANN. tit.
2, subtit. G, app. A (West, Westlaw through 3/15/2015) (TEX. STATE BAR R. art. X, § 9);
6
Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997). These
factors, commonly known as the Arthur Andersen factors, are:
(1) the time and labor required, the novelty and difficulty of the questions
involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the
particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers
performing the services; and
(8) whether the fee is fixed or contingent on results obtained or
uncertainty of collection before the legal services have been
rendered.
TEX. DISCIPLINARY R. PROF’L CONDUCT 1.04(a); see Arthur Andersen & Co., 945 S.W.2d
at 818. Evidence of each of these factors is not required to support an award of attorney's
fees. Arthur J. Gallagher & Co. v. Dieterich, 270 S.W.3d 695, 706 (Tex. App.—Dallas
2008, no pet.). Further, these factors are not exhaustive insofar as Rule 1.04 expressly
states that its factors may be considered in determining the reasonableness of a fee, “but
not to the exclusion of other relevant factors.” TEX. DISCIPLINARY R. PROF’L CONDUCT
1.04(a). The trial court can consider the entire record, the evidence presented on
reasonableness, the amount in controversy, the common knowledge of the participants
as lawyers and judges, and the relative success of the parties. Messier v. Messier, 458
S.W.3d 155, 166–67 (Tex. App.—Houston [14th Dist.] 2015, no pet.); In re Marriage of
C.A.S. & D.P.S., 405 S.W.3d 373, 387 (Tex. App.—Dallas 2013, no pet.); Hagedorn v.
7
Tisdale, 73 S.W.3d 341, 353 (Tex. App.—Amarillo 2002, no pet.). The amount and
reasonableness of attorney's fees is a question of fact involving several “intangible”
factors. Spector Gadon & Rosen, P.C. v. Sw. Sec., Inc., 372 S.W.3d 244, 252 (Tex.
App.—Dallas 2012, no pet.); see Mack v. Moore, 669 S.W.2d 415, 419–20 (Tex. App—
Houston [1st Dist.] 1984, no writ).
Relators contend that the Arthur Andersen factors do not include the fee
arrangement of fees of an opposing party, and thus that information is “not open to
discovery because it is patently irrelevant to the inquiry.” Relators assert that “Texas
courts have consistently and unanimously held that discovery into another party’s
attorney’s fees incurred in the defense of a case is an abuse of discretion because those
fees are ‘patently irrelevant’ to the claimant’s claim for attorney’s fees.” In support of this
contention, relators cite In re Texas Mutual Insurance Co., 358 S.W.3d 869, 872 n.3 (Tex.
App.—Dallas 2012, no pet.); In re AIG Aviation (Texas), Inc., No. 04-04-00291-CV, 2004
WL 1166560, at *1 (Tex. App.—San Antonio May 26, 2004, no pet.) (mem. op.); MCI
Telecommunications Corp. v. Crowley, 899 S.W.2d 399, 403–404 (Tex. App.—Fort Worth
1995, orig. proceeding); and Duininck Brothers, Inc. v. Howe Precast, Inc., No. 4:06-CV-
441, 2008 WL 4411641, at *2 (E.D. Tex. Sept. 23, 2008).
In MCI Telecommunications Corp., the Fort Worth Court of Appeals concluded that
the discovery of the defendants’ attorney’s fees was not relevant in a case where only the
plaintiff was seeking recovery of its attorney’s fees. See 899 S.W.2d at 403–04. The
court considered the factors listed in Rule 1.04 regarding a reasonable attorney’s fee and
stated that “[c]onspicuously absent from these factors is the opposing party's attorneys'
fees incurred in the defense of the case.” Id. In that case, the defendant argued and the
8
plaintiffs conceded “that there is no Texas authority that allows a plaintiff to discover a
defendant's attorneys' fees in a case like this one where only the plaintiff is seeking
recovery of attorneys' fees.” Id. The court thus held that “[b]ased on this absence of
authority, along with clearcut Texas law on what evidence is needed to prove attorneys'
fees and the relevant factors to consider, MCI's attorneys' fees in its defense of this case
are ‘patently irrelevant’ and are not reasonably calculated to lead to the discovery of
admissible evidence.” Id.
We note that the law regarding the evidence necessary to prove attorney’s fees
and the relevant factors to consider has been extensively and thoroughly developed since
MCE Telecommunications was decided. See, e.g., City of Laredo, 414 S.W.3d at 734;
El Apple I, Ltd., 370 S.W.3d at 761; Midland W. Bldg. L.L.C. v. First Serv. Air Conditioning
Contractors, Inc., 300 S.W.3d 738, 739 (Tex. 2009); Arthur Andersen & Co., 945 S.W.2d
at 818. Moreover, in keeping with the express text of Rule 1.04, it is now well-established
that the Arthur Andersen factors are not exclusive. See El Apple I, Ltd., 370 S.W.3d at
761; Rapid Settlements, Ltd. v. Settlement Funding, LLC, 358 S.W.3d 777, 785 (Tex.
App.—Houston [14th Dist.] 2012, no pet.); Haden v. David J. Sacks, P.C., 332 S.W.3d
503, 514 (Tex. App.—Houston [1st Dist.] 2009, pet. denied).
We agree with relators that the information regarding the attorney’s fees of an
opposing party may be irrelevant in a given cause of action. See e.g., MCI Telecomms.
Corp., 899 S.W.2d at 403–04.2 However, based on the specific facts underlying this
original proceeding, we conclude the trial court acted within its discretion in concluding
that the fees were relevant and discoverable. Specifically, relators’ designated testifying
2 There is nation-wide disagreement regarding this issue. See, e.g., Marks Constr. Co., v.
Huntington Nat’l Bank, No. 1:05CV73, 2010 WL 1836785 (N.D. Va. 2010) (collecting authorities).
9
expert has stated that the opposing party’s attorney’s fees are a factor in determining
whether real parties’ claimed attorney’s fees are reasonable. Doyen expressly based his
opinion as to the reasonableness of the fees sought by the other plaintiffs in the MDL,
represented by the same counsel, on his own personal experience in defending the case.
In short, relators’ own designated expert has utilized this data in deriving his opinion. This
is not an anomalous proposition. See, e.g., El Apple I, Ltd., 370 S.W.3d at 765 (Hecht,
J., concurring) (considering evidence of the other party’s attorney’s fees as an “indicator”
of a reasonable fee).
Expert testimony is required to support an award of attorney’s fees. Woodhaven
Partners, Ltd. v. Shamoun & Norman, L.L.P., 422 S.W.3d 821, 830 (Tex. App.—Dallas
2014, no pet.); Woollett v. Matyastik, 23 S.W.3d 48, 52 (Tex. App.—Austin 2000, pet.
denied). An attorney's testimony about the reasonableness of his or her own fees is not
like other expert witness testimony. Garcia v. Gomez, 319 S.W.3d 638, 641 (Tex. 2010).
“Although rooted in the attorney's experience and expertise, it also consists of the
attorney's personal knowledge about the underlying work and its particular value to the
client.” Id. In this regard, an opposing party’s legal fees may be relevant to prove factors
one and three from the Arthur Andersen factors—that is, the time and labor required, the
novelty and difficulty of the questions involved, and the skill requisite to perform the legal
service properly, and the fee customarily charged in the locality for similar legal services.
See TEX. DISCIPLINARY R. PROF’L CONDUCT 1.04(a)(1)(3); Arthur Andersen & Co., 945
S.W.2d at 818.
The Rules of Civil Procedure define the scope and methods of discovery about
testifying expert witnesses. Rule 192.3(e) sets forth the scope of information that parties
10
may discover about a testifying expert, which includes “the facts known by the expert that
relate to or form the basis of the expert’s mental impressions and opinions formed or
made in connection with the case in which the discovery is sought, regardless of when
and how the factual information was acquired,” and “the expert’s mental impressions and
opinions formed or made in connection with the case in which discovery is sought, and
any methods used to derive them.” TEX. R. CIV. P. 192.3(e)(3),(4). We note that this rule
applies equally to each side in a case. See Aluminum Co. of Am. v. Bullock, 870 S.W.2d
2, 4 (Tex. 1994). The requested attorney’s fees data clearly pertains to the facts known
by Doyen that relate to and form his opinions, and the methods used to derive his
opinions, and is therefore discoverable. See TEX. R. CIV. P. 192.3(e)(3),(4). Accordingly,
based on the specific facts of this case, we conclude that the trial court did not abuse its
discretion in concluding that the discovery at issue was relevant.
Relators further assert that the ordered discovery violates their attorney-client and
work-product privileges. 3 Pleading and producing evidence establishing the existence of
a privilege is the burden of the party seeking to avoid discovery. In re Mem'l Hermann
Hosp. Sys., No. 14-0171, __ S.W.3d __, 2015 WL 2438752, at *3 (Tex. May 22, 2015);
State v. Lowry, 802 S.W.2d 669, 671 (Tex. 1991). The party asserting the privilege must
establish by testimony or affidavit a prima facie case for the privilege. In re Mem'l
Hermann Hosp. Sys., 2015 WL 2438752, at *3; In re Living Ctrs. of Tex., Inc., 175 S.W.3d
3 Stated generally, Texas Rule of Evidence 503 (“the attorney-client privilege”) protects from
disclosure confidential communications made for the purpose of facilitating the rendition of legal services
between the client and the client’s lawyer. TEX. R. EVID. 503. Texas Rule of Civil Procedure 192.5 (“the
work product privilege”) protects from disclosure “material prepared or mental impressions developed in
anticipation of litigation or for trial by or for a party, or a party’s representatives,” and “a communication
made in anticipation of litigation or for trial between a party and the party’s representatives or among the
party’s representatives.” TEX. R. CIV. P. 192.5. An assertion that material or information is work product is
an assertion of privilege. Id. 192.5(d).
11
253, 258 (Tex. 2005) (orig. proceeding). To the extent that relators contend that the trial
court’s order infringes on its attorney-client and work-product privileges, the order at issue
specifically states that “[s]pecific records may be redacted for content protected by an
appropriate privilege.” Relators make no showing herein that redaction of the records at
issue would be insufficient to protect their alleged privileges. See TEX. R. CIV. P. 193.4(a).
We note that attorney’s billing statements are routinely redacted to protect the attorney-
client and work-product privileges but nevertheless produced to prove attorney’s fees.
See, e.g., Sentinel Integrity Solutions, Inc. v. Mistras Grp., Inc., 414 S.W.3d 911, 922
(Tex. App.—Houston [1st Dist.] 2013, pet. denied); Air Routing Int’l Corp. (Can.) v.
Britannia Airways, Ltd., 150 S.W.3d 682, 694 (Tex. App.—Houston [14th Dist.] 2004, no
pet.). Moreover, to the extent that relators contend that the discovery is harassing, a party
resisting discovery “cannot simply make conclusory allegations that the requested
discovery is unduly burdensome or unnecessarily harassing,” but must instead produce
some evidence supporting its claims. See In re Alford Chevrolet-Geo, 997 S.W.2d 173,
181 (Tex. 1999) (orig. proceeding); Garcia v. Peeples, 734 S.W.2d 343, 345 (Tex. 1987)
(orig. proceeding). Based on the foregoing, we conclude that relators have not met their
burden to show that the requested discovery is invasive of the attorney-client or work-
product privileges.
We overrule relators’ sole issue presented in this original proceeding.
V. CONCLUSION
The Court, having examined and fully considered the petition for writ of mandamus,
the response, and the applicable law, is of the opinion that relators have not met their
burden to obtain mandamus relief. See In re Prudential Ins. Co. of Am., 148 S.W.3d at
12
135–36. Accordingly, the petition for writ of mandamus is DENIED. See TEX. R. APP. P.
52.8(a).
GINA M. BENAVIDES,
Justice
Delivered and filed the
14th day of July, 2015.
13