in Re ClearVision Technologies, Relator ( 2016 )

In The
Court of Appeals
Seventh District of Texas at Amarillo
No. 07-16-00210-CV
IN RE CLEARVISION TECHNOLOGIES, RELATOR
ORIGINAL PROCEEDING
June 21, 2016
MEMORANDUM OPINION
Before QUINN, C.J., and CAMPBELL and HANCOCK, JJ.
Relator ClearVision Technologies filed a petition for writ of mandamus, seeking
relief from the trial court’s order on the Motion to Compel Production of Documents filed
by real parties in interest First State Bank Abernathy and its president Tom E. Turner
(jointly, “the Bank”). Respondent is the Honorable Kregg Hukill, presiding judge of the
242nd District Court of Hale County. We will deny the petition.
Background
ClearVision owns software and a database that it markets to banking institutions.
It brought suit against the Bank, alleging the Bank misappropriated its trade secrets by
granting a third-party contractor, ClearVision’s direct competitor, access to its software
and database.
After ClearVision, in April 2015, served its response to one of the Bank’s
requests for production, the Bank filed a motion to compel production of tax returns and
other documents. ClearVision objected but ultimately the trial court granted the Bank’s
motion in some respects, by an order of May 18, 2016. ClearVision asserts the court’s
order constituted an abuse of its discretion, and challenges the order through its
mandamus petition.
Analysis
Mandamus relief is available when two conditions are met: the trial court abused
its discretion, and there is no adequate remedy at law, such as an appeal. Walker v.
Packer, 827 S.W.2d 833, 839-40 (Tex. 1992) (orig. proceeding); see In re Prudential
Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004) (orig. proceeding). A trial court’s
ruling that requires production of documents beyond what the procedural rules permit is
an abuse of discretion. In re House of Yahweh, 266 S.W.3d 668, 673 (Tex. App.—
Eastland 2008, orig. proceeding) (citing In re Dana Corp., 138 S.W.3d 298, 301 (Tex.
2004) (per curiam) (orig. proceeding)). Mandamus will issue to correct a discovery
order when the mandamus record establishes that the order constitutes a clear abuse of
discretion and that there is no adequate remedy by appeal. In re Colonial Pipeline Co.,
968 S.W.2d 938, 941 (Tex. 1998) (orig. proceeding). Mandamus relief may be justified
when the appellate court would not be able to cure the trial court’s discovery error, such
as when privileged information would be revealed. House of Yahweh, 266 S.W.3d at
2
673 (applying standard to production of tax returns, citing Walker, 827 S.W.2d at 843-
44). There is no adequate appellate remedy for an erroneous order to disclose a trade
secret. In re M-I L.L.C., No. 14-1045, 2016 Tex. LEXIS 389, at *6-7 (Tex. 2016) (orig.
proceeding) (citing In re Colonial Pipeline, Co., 968 S.W.2d at 941). Accordingly, we
limit our review here to a consideration of whether the trial court abused its discretion.
To constitute an abuse of discretion, the trial court's decision must be “so
arbitrary and unreasonable as to amount to a clear and prejudicial error of law.” In re
Bass, 113 S.W.3d 735, 738 (Tex. 2003) (orig. proceeding) (quoting Walker, 827 S.W.2d
at 839). Thus, in an abuse of discretion challenge, “the reviewing court may not
substitute its judgment for that of the trial court,” Walker, 827 S.W.2d at 839, but instead
must consider only whether the trial court “acted without reference to any guiding rules
and principles.” Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.
1985).
Tax Returns
ClearVision first asserts the court abused its discretion by ordering the production
of income tax returns for in camera review.
A party seeking the discovery of income tax returns bears the burden of showing
that the returns are relevant and material to the issues in the case. House of Yahweh,
266 S.W.3d at 674 (citing Hall v. Lawlis, 907 S.W.2d 493, 494 (Tex. 1995) (orig.
proceeding)); In re Brewer Leasing, Inc., 255 S.W.3d 708, 713-14 (Tex. App.—Houston
[1st Dist.] 2008, orig. proceeding); El Centro del Barrio, Inc. v. Barlow, 894 S.W.2d 775,
779 (Tex. App.—San Antonio 1994, orig. proceeding). Tax returns are not material or
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relevant if the same information can be obtained from other sources, such as a financial
statement. In re Brewer Leasing, Inc., 255 S.W.3d at 714; In re Sullivan, 214 S.W.3d
622, 624-25 (Tex. App.—Austin 2006, orig. proceeding). A trial court abuses its
discretion if it requires the production of tax returns without a showing by the requesting
party that the information sought from the returns is not available from other sources. In
re Bullin, No. 10-15-00423-CV, 2016 Tex. App. LEXIS 2604, at *10 (Tex. App.—Waco
Mar. 10, 2016, orig. proceeding) (mem. op.) (citations omitted).
The Eastland court of appeals considered a circumstance similar to that before
us in In re Miller. No. 11-07-00310-CV, 2008 Tex. App. LEXIS 510, at *6-7 (Tex. App.—
Eastland January 24, 2008, orig. proceeding) (mem. op.). There, the appellate court
conditionally granted mandamus against a trial court order that required production of
tax returns for in camera review. The party resisting discovery had argued the
information sought from the returns could be obtained from other sources, and the
movant for discovery, in the trial court, “did not respond to this argument or otherwise
make a showing that the information sought was not available from other sources.” The
court went on to note the requirement of such a showing “is not onerous.” It continued,
“If [the movant for discovery] has been unsuccessful in obtaining the desired information
through other discovery methods, he can easily convey this information to the trial
court.” Id. at *6.
Similarly, the court in In re Bullin held that merely “stating a belief” that the
information being sought through discovery of tax returns cannot be obtained elsewhere
is not adequate to demonstrate that the returns are relevant and material. 2016 Tex.
App. LEXIS 2604 at *11 (citing and quoting In re Miller, 2008 Tex. App. LEXIS, at *7).
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The subject of the Bank’s requested discovery concerns ClearVision’s
development costs for its software and database. “[T]he amount of effort or money
expended in developing the information” is among the recognized factors courts apply
to determine whether particular information constitutes a trade secret. In re Michelin N.
Am., Inc., No. 05-15-01480-CV, 2016 Tex. App. LEXIS 2467, at *11-13 (Tex. App.—
Dallas Mar. 9, 2016, orig. proceeding) (mem. op.) (citing In re Union Pac. R.R., 294
S.W.3d 589, 592 (Tex. 2009) (orig. proceeding) (per curiam)).
The trial court’s May 18 order contains the court’s findings that ClearVision “has
produced no documents or other information regarding the cost of developing its
software and database,” and that its “cost in developing its software and database is
relevant and material to the issues in this lawsuit.” The Bank’s motion to compel
conveyed to the court more than its mere belief the development-cost information could
not be obtained elsewhere; it demonstrated its unsuccessful efforts to obtain the
information from ClearVision. On the record before us, the trial court did not abuse its
discretion by finding present the showing that was missing from the records in In re
Bullin and In re Miller.
Additional Documents
The trial court’s order also required the production of other documents supporting
the amount of time and effort spent developing ClearVision’s software operation at the
Bank, including “any history of the company on what its development costs were . . . .” 1
1
The company’s president testified on deposition that his testimony regarding
such costs “came from looking back at the history of how we developed ClearVision and
5
Without elaboration, ClearVision’s mandamus petition contends the discovery order is
overbroad, requires production of irrelevant or duplicative documents, and requires
production of documents from an unreasonably long time period. Having reviewed the
mandamus record, we cannot conclude it demonstrates an abuse of discretion. See In
re Prudential Ins. Co. of Am., 148 S.W.3d at 135-36 (trial courts have broad discretion
over the discovery process); In re Bass, 113 S.W.3d at 738 (abuse of discretion is
decision “so arbitrary and unreasonable as to amount to a clear and prejudicial error of
law”).
The mandamus petition asserts also the discovery order seeks information
protected by the trade-secret privilege. Texas Rule of Evidence 507 authorizes a party
to refuse to disclose and to prevent others from disclosing trade secrets if it will not tend
to conceal fraud or otherwise work injustice. TEX. R. EVID. 507; In re Michelin N. Am.,
Inc., 2016 Tex. App. LEXIS 2467, at *11-13. Rule 507 requires a party resisting
discovery of trade secrets to first establish that the information sought constitutes a
trade secret. Id. (citing In re Cont'l Gen. Tire, Inc., 979 S.W.2d 609, 610, 613 (Tex.
1998)).2 From the record before us, it does not appear ClearVision has established that
the information ordered to be produced itself constitutes trade secrets.
_______________
what our costs were.” The court’s order compelling production made clear that it does
not require ClearVision to create documents that do not exist.
2
The mandamus petition argues the Bank did not show the trial court how
production of trade secret information was necessary to a fair adjudication of its claim or
defense. But the Bank has no obligation to make such a showing absent a
demonstration by ClearVision that the information sought qualifies as trade secrets. In
re Cont'l Gen. Tire, Inc., 979 S.W.2d at 613; In re Cooper Tire & Rubber Co., 313
S.W.3d 910, 915 (Tex. App.—Houston [14th Dist.] 2010, orig. proceeding).
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For those reasons, we see no abuse of discretion in the court’s order requiring
production of the additional documents.
Conclusion
Based on the foregoing, we deny ClearVision’s petition for writ of mandamus.
On May 26, 2016, we granted ClearVision’s emergency motion in part, staying
the trial court’s order “to the extent that the order require[d] amendment of responses
and production of tax returns and other information by May 31[.]” We now lift the stay
we granted on May 26.
Per Curiam
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